Mind the Gap - It's where the magic happens

Last week I published a piece on my blog titled Mind the Gap - It's where the magic happens .  I thought some of you here might be interested in it.  

I don't know that anything in it is startling new information.  I mostly just wanted to share an insight that hit me one day that either increasing income or reducing spending mean nothing in themselves.  It's only in relation to each other that they matter.  It's the gap between earning and spending where wealth and security lay.  

A problem I've noticed with myself is that when I focus my efforts on increasing income I achieve this, but also seem to increase my spending.  When I focus on reducing my cost of living, cutting spending way back, I seem to fall into a poverty mindset where I begin to feel I can't earn much money and somehow that manifests itself.  What I've never really done is try to fully focus my attention on increasing the gap, my savings rate.  So now in my end of the month tabulations in addition to tallying up and analyzing all my income and expenses I'm going also be calculating my savings rate, trying to focus on getting that to consistently be in the 60% to 80% rate.  (Sadly last month was abysmal for me at -22%, such is the life of variable income as an artist.)

Does anyone else here focus their attention not on increasing income or reducing expenses, but rather on the space between the two?

In brevity? No...I do not. I focus my efforts on not spending money because by doing so I get to keep 100% of that money in my pocket. I do not get that when I try to increase my income.

I am a sheep farmer, so lets say I focus my farming efforts on reducing my costs to farm. One of my greatest efforts ws reducing electrical consumption during the winter months. I found out, I could see how much water the sheep drank per day, only put in that much water into the water troughs, and thus saved over $350 per month by not having to run electric stock water tank heaters. So by doing that I got 100% of the savings because the money never left my pocket in the first place.

In contrast...

If I was to try and increase production, say going from 100 to 200 sheep, the income of my farm could never double. That is becaue I would having more lambing costs, more fencing to put up, increased veterniarian bills, etc. So it is not 100%. It may be worth doing, but it would be not be 100%.

The same could be said even if I was to try and get a better market for my lamb sales. Lets say I went to retail sales instead of wholesale. That would mean I would get more money without the added costs of increasing my flock size. Yet to do that I would still have added costs because when you take away the middleman, you now have to do their job. That means advertising, transporting sheep, etc. Again it will not be an increase of 100%. It may be worth doing, but will not be 100% more income.

This even happens for a surburbanite working a blue collar job, and this is where most American's go wrong. Instead of reducing their living expenses, they instead try to make more income. At the shipyard where I used to work, most of the time it was in the form of working overtime. In fact 75% of the shipyard was incensed when they did not get it...because they relied upon it. Yet despite being paid double-time for overtime pay, the income amount was not 100% more per day, because they still had commuting costs, increased income taxes, and all the rest that takes small bites out of a paycheck.

The best financial advice is to live a Minimalist Lifestyle. That is, REDUCE EXPENSES AS MUCH AS POSSIBLE BECAUSE IT IS A ONE TO ONE SAVINGS DOLLAR PER DOLLAR.

Some call this "Lean Farming", or "Lean manufacturing", but companies are always looking to reduce costs simply because it is so effective.

You are not wrong; there is significant savings by increasing your income, and reducing your costs, but that amount will not be as good as it would be if you kept yourself at the same size flock and reduced all possible costs, or worked 40 hours per week, and live a minimal lifestyle.

There are times when increasing the flock size, or working overtime does make sense, BUT I propose it should only be after all possible extra costs are reduced. There is such a thing as the Law of Economy of Scale, and such a thing as False Economy, which is where reducing costs actually hurts you; like say starving my sheep over the winter. Yes that would save me a pile of money, but it would hurt weight gain more, and increase my mortality rate and increase my veterinarian costs too. So starving my sheep would be an obvious false economy. Economy of Scale means I might need a tractor to feed 100 sheep, but that same tractor can feed 200 sheep: I certainly do not need (2) tractors just because I go to 200 sheep. That makes having 200 sheep more economic then 100 sheep.

There is a saying in business: If You are Not Growing, You are Dying!, but that is just a stupid statement. The more a person works on being effecient, the more money they will save, and savings is 100% profit.

Lean farming, Minimalist Living...it all boils down to one thing. CONTENTMENT.

It is a struggle for anyone, but if a person can be content with what they have, they will save a lot of money.

The real problem is, we are bombarded every day by advertisements that try and convince us we are not content, and that we want this latest, greatest widget. Or we feel we deserve a better lifestyle.

I just had this conversation with a friend, and I truly feel bad for him. They currently live in a camper that is tucked inside a building making for a sizable living arrangement. They are warm, dry, and not hungry. Unfortunately they are also living on land that is owner financed. Yet his wife wants to live in a "real house", and not in "some camper." Because she has a strong personality, and he does not, he is trying to placate her.

That is too bad.

If she would just be content, instead of trying to build a house on land they do not even own, they should buckle down and make do with their living arrangment for a few more years, pay off their land so they have a clear deed to it, and THEN build their home. It is bad enough to build a home using a traditional mortgage because a person is then indebted to the lender, but at least there is some consumer protections there. With owner financing there is NONE for neither the buyer or seller.

My wife's Grandparents ran into this back in the 1960's. They bought a house on owner financing, and then the woman suddenly died. Since she held the deed, her kids wanted their money, and wanted it now. Luckily they could get a mortgage from a bank so got to keep their home, but when I mention this to my friends, they say the guy they bought from, "well he is a nice guy". While I do not doubt that he is, he still has the deed, and no one can predict the future.

Incidentally, owner-financing is bad for the seller too though because, if my friends decide to find a new place, the deeded landowner is left trying to sell the land again with junk all over it. If the man was to die, and the kids get the land, they are stuck trying to legally remove my friends from THEIR land. In either situation, it is lawyers and courts...YUCK.

And while this is a rather radical example I admit of lack of contentment, it happens all the time in homesteading. Instead of people being content where they are, "if they only had so and so farm, they would be so much better off", so they move, and when they start seeing the flaws that every farm has, they see another farm and move again. They just keep moving, and moving, and are never content, and have a list of places "they had". And for surburbanites it might be getting a new car...the list of non-contentment goes on and on.

The point of all this is; the more content people can be, the better. And it will save people, a lot of money.

Considering that income is taxed at both the federal and state level (unless you luckily live in a state that doesn't have a state income tax), when you spend a dollar, you're actually spending $1.40 or more, depending upon your income level.  

Where the magic happens is when you go off the taxation grid and don't allow the government to take its cut.  Every carrot, cabbage, egg, lemon and jar of honey that I produce, is a carrot/cabbage/egg/lemon/honey that I will not purchase at a store.  They can't tax me on what I don't buy.  

For the VAST majority of people in America who have minimal savings, the issue isn't that they don't make enough money.  It's that they spent too much, and don't have the discipline to reduce that with simple means (like eating leftovers, changing their own oil, taking a lunch to work rather than buying it, etc.).  I've known people who earn $200,000 a year who have credit card debt that they just can't figure out how to pay off, while I know others who make $50K a year but who have hundreds of thousands of dollars (even millions) in investments by carefully saving every month.

If your income is less than your outflow, your upkeep will be your downfall.

Simplicity and discipline.

The older I get, the more I realize how debt is so evil.

This was never so. While debt has always been around, up until the 1930's, debt was really looked down upon. Not now, you have 5 aspects of credit, and it is all based on debt, and yet people BRAG about how great their credit is. It is absolutely INSANE. People now bragging about how indebted they are, and how indebted they could be! Do these people look around and see that the best building in every town is probably the bank!

And here is the thing; every time a person makes a payment on a loan, they are getting themselves out of debt. The problem is, once something is paid off, they get right back into debt again. This is where contentment comes into play. They are no longer content with their paid off car, NO they realize they are free to go out and get a new car and keep making that same monthly payment.

Paul mentioned this in his Story of Gert.

I certainly agree with all you both wrote Travis and Marco!  Most of my life I've really focused on reducing my cost of living.  Of the two approaches to increasing your savings rate it is the most powerful one as I noted in the blog post.  I'm also completely with you Marco on shifting to other forms of capital that bypass the whole tax system such as the living capital of edible plants.  I touched briefly on that in the post too, trying to explore how the gap might related to these other forms of capital.  

What I'm thinking I wasn't clear enough about in my synopsis post here is that I'm thinking there can be a benefit to shifting the mindset from focusing on either reducing spending or increasing earning to instead focus directly on increasing ones savings rate.  In terms of achieving financial independence/early retirement it's all about the savings rate, not how little you spend or how much you earn.  Focusing on the saving rate is harder to do I think because it's a bit more abstract, needing to be calculated from the data sets of how much you spend and earn over a period of time.  I guess I was wondering if there are others here who have tried shifting their mindset to directly focus on the percentage of their income they save rather than just looking at one side or the other of the equation?

I kind of do David...

I obviously budget, and track my expenses on an Excel Spreadsheet, but this year I added four columns to my daily financial tracking. Two are based on avoiding temptations, and two are based on wasteful spending.

As an example: lets say today is a busy day and we just want to go out for diner instead of making it at home. IF we decide, "No. We are going to be frugal" and not go to a restraunt. I write that down in the first two columns. I name the temptation "Diner at Chinese Restaurant", and then estimate what the costs would have been. For this family of six, probably $42.00.

But lets say we give in to temptation, then I post that in the third and fourth columns as "Diner at Chinese Restaurant", and then the true costs, say $42.00.

All month long those two items are added up, and then the Wasteful subtracted from the frugal. By seeing this everday, it encourages me to stay frugal becaue I can see in accurate dollar amounts what denying myself instant gratification adds up too. This is tracked per month, then on a seperate Excel Spreadsheet page, it charts in line graph form, where I have done well, and where I have had lapses in judgement.

Now I call this "Reducing Expenses", because that is the ultimate goal, but I can see too where it really is focusing on "Finding the gap where the magic happens." It really is just putting an accurate number on what temptation would cost, and tracking it. By constantly comparing wins to lapes in judgement, I can see how I am doing. In this month, I saved myself $108.78, but gave in to temptation $61.45 worth. Had I been a really good boy and had total instant gratification, I could have saved $170.23 for the month! So I did okay, but I could have done $61.45 better!

Now I used a bigger item like going to a restaurant as an example, but I put down the small stuff too. Like yesterday I was coming back from a trip to the hspital and really wanted a soda, but I just went home instead. So when I got home I put the $1.39 down. All those little "denials" really add up over a years time.

...

As a side note: I retired at age 42 years old. 3 years ago now.

You will note in the example above that there is one labeled "Travis" but it shows $5 in each column. That is NOT a mistake. I really wanted a $10 meal as I was hungry, but while I did buy some food, I did not buy all the food I wanted. So I spent $5, but I also saved $5, so both are charted so I get accurate numbers.

I can't remember who said it but my husband is constantly quoting this, "Most people are 3 decisions away from eating out of a garbage can".

I think it's true for a lot of people. Our goal is to increase the number of bad decisions we can make before we are destitute.

For example we recently lost 2 of our cars. My husband went immediately to the old panic mindset. I must get a job and make money because of this. I felt much more secure in our situation as we had already budgeted cash for a new car. Not many people could handle the loss of 2 cars and 10k for a new one without worry. I feel good knowing it was possible for us. Mostly thanks to my husband who has pestered me through 15 years of marriage into saving and rejecting debt.

I don't hugely keep track of spending but my husband realized he was spending a lot of money on energy drinks. He decided that every time he wanted and energy drink he would put the same money into a stock account. He ended up with enough money there to pay for a certification he wanted to get.

These are my people.  This is why I love this forum.

Do you all realize how completely counter-cultural this kind of thinking is?  Weirdos.   All of you -- weirdos.  And I count it an honor to be a counter-cultural weirdo too.

Frugality.
Discipline.
Simplicity.

These are the attributes that will make you all wealthy.

I haven't read your blog post, but I think I know what you mean. I do the same thing.

I have a somewhat seasonal job. For a few months of the year I work as many hours as my employer can squeeze out of me. For those few months 90% of my income is put into savings. The rest of the year, I'm mostly part time so I can't put as much aside. But when I'm working less I have time to grow food and cook from scratch, fix and build stuff, etc. All money savers.

Of course, when I do nothing but work I have no time to spend money, so I guess I reduce expenses both ways :)

I love how in this pursuit of financial freedom we get to customize our own ways of tracking and decide what to focus on.  That is a new one for me Travis, but I can certainly see the worth of it.  The practice focuses you on what you want to attend to.  I don't track spending that didn't happen, but do have those experiences.  Just today I was in a discount goods store since I was biking in the area, seeing if there were any good deals.  Last week I got a big bag of fresh grapes for $1!  I will admit this week I was kinda thinking if I saw M&Ms or some other junk food I really shouldn't be eating for a good price I'd probably buy some.  No good deals on healthy food today and while there was plenty of junk food I was able to resist it all and walked out empty handed, saving me money and health.  :)  That's certainly a win for me today!  I bet if I did deliberately track that I'd be more inclined to resist the urges more often.  I sort of am in that I'm tracking what I eat each day, working from a checklist of things I feel I should be eating, so many servings of fruit, so may of vegetables, etc.  I decided to also add a box for "no junk food" I'd get to check off each day if I am good.  It's a daily opportunity to give myself a pat on the back for a job well done.

Jan, yes, that is what I'm talking about, tracking the percentage of income saved!  In my blog post I reference a chart from another blogger, Mr. Money Mustache, who based on some investment parameters simply did the math.  If you were able to maintain that awesome 90% savings rate and invested the extra money then in under 3 years you could be financially independent, able to retire and live the same lifestyle off the interest from the investments.  Alas, with that being a seasonal savings rate things will be longer.  For myself last year I managed a 65% savings rate.  If I was starting from zero then it would take me 10.5 years to reach independence if I maintained that rate.  Fortunately I'm not starting from zero, not that roughly 10 years is that long.  My goal is to get there within the next 3, in other words by the time I'm 50 years old.  I envy you Travis retiring at 42.  I probably should have been able to by then.  I got debt free, including owning my home free and clear by about 34.  However, then I sort of drifted until last year.  I still saved quite a bit, but didn't really invest it, and I could have done SO much better if I had focused on the task and got in the mindset of attaining the early retirement goal.

Because I've worked so hard reducing my expenses though, happily living a frugal, simple life, it's a comfort to know I could semi retire anytime I want since my actual income needs are so long they are easy to meet with minimal work.  That wouldn't boost my invested savings though, so I'm trying to find ways to focus on the gap and increase that savings rate.

Marco Banks wrote:These are my people.  This is why I love this forum.

Do you all realize how completely counter-cultural this kind of thinking is?  Weirdos.   All of you -- weirdos.  And I count it an honor to be a counter-cultural weirdo too.

Frugality.
Discipline.
Simplicity.

These are the attributes that will make you all wealthy.

Dave Ramey says, "Normal people are boring". I agree with that.

David Huang wrote:I certainly agree with all you both wrote Travis and Marco!  Most of my life I've really focused on reducing my cost of living.  Of the two approaches to increasing your savings rate it is the most powerful one as I noted in the blog post.  I'm also completely with you Marco on shifting to other forms of capital that bypass the whole tax system such as the living capital of edible plants.  I touched briefly on that in the post too, trying to explore how the gap might related to these other forms of capital.  

What I'm thinking I wasn't clear enough about in my synopsis post here is that I'm thinking there can be a benefit to shifting the mindset from focusing on either reducing spending or increasing earning to instead focus directly on increasing ones savings rate.  In terms of achieving financial independence/early retirement it's all about the savings rate, not how little you spend or how much you earn.  Focusing on the saving rate is harder to do I think because it's a bit more abstract, needing to be calculated from the data sets of how much you spend and earn over a period of time.  I guess I was wondering if there are others here who have tried shifting their mindset to directly focus on the percentage of their income they save rather than just looking at one side or the other of the equation?

I like the early retirement extreme way of viewing the percentage.

Rule of thumb for financial investments being 3-4% max withdrawal rate to maintain the value of the capital, ie it will grow in $ terms enough to counter inflation.

So, your investments must equal 25x your annual expenditures to live off them indefinitely and exclusively.


If you live on 50% of your income, and save 50%, it would take a nominal 25 years to get there. Save 25%, it will take 50 years. But save 66.6% and it only take 12.5 years. At 80% savings rate you'd be there in just 6.25 years.

Of course the longer it takes the more compound interest will help you out, but as a really simple visualization method it works well.

I guess for me I have always tracked money not spent simply because it keeps me motivated to do the right thing.

An example of this is a joke I often use regarding how “I always win $104 in the lottery every year.” When people ask why such a specific amount, I simply say, “Because I never play.” Here the megabucks is played twice a week, so by not spending the $1 for a ticket, I thus save $104 per year. Considering I have never played, that means I have not spent $2834. That motivates me to keep on NOT buying lottery tickets.

And sometimes tracking money not spent allows for better planning. For example, I do not have insurance on my homes. I have a farm, so I cannot have cheap homeowners’ insurance, I have to have farm insurance. That is $1400 a year, so for three homes, that would be $4200 per year. Because I have not had insurance in over ten years, I have saved a whopping $42,000. Considering a person can buy kit houses here for $30,000; I have saved enough by not paying insurance premiums to have a replacement home. It makes me self-insured in other words, which of course saves money.

While I can go on with other examples, tracking money not spent is just a different way of looking at money, because for me, money is far more dynamic then what most people give it credit for. It is based on far more than “if you have it, or you do not have it.” That is very limited thinking.

People have mentioned savings and investments, but that is just simple talk for Immediate Assets and Long-Term Assets. The heart of the matter is CASH FLOW which takes into the fluidity of intermixing Immediate, Intermediate and Long-term assets so that a person can live. Most business and families fail because of cash flow. As an example, they might lose their job (an immediate asset) and yet own a home that has $50,000 in equity (a long-term asset). Why? Because they cannot sell their house quick enough to pay for the immediate cash short-fall they have from losing their job.

Traditional retirement is silly because it relies upon the thought that having enough in savings will ensure that enough cash is available for any unforeseen needs. The key word is ENSURE, and while that is one way to retire granted, it is also the slowest way. I retired early because I took on far more risk, which traditional retirement does not accept.

I retied early because my “portfolio” is based upon immediate and long-term assets…natural resources in other words. My woodlot has incredible value, and while it is an immediate asset and not cash, I know its something I can always tap into if I need money really bad. The same thing can be said for gravel, and while that is seasonal, even at a mere $2 a cubic yard, the sheer volume of it makes it extremely valuable (an 8 acre gravel pit, 32 feet deep=$815,000). I do not even count the zinc, gold or palladium that is here, because it would be hard to calculate the volume, and I have no plans to mine it.

Money is not about “do I have it, or do I not”, but also includes, “Can I get it?” And, “How fast can I get it.” Moving money from Immediate, Intermediate and Long-Term as needs arise is what matters.

The latter question really depends upon humility. My neighbor is struggling financially and yet just told me, he was NOT going to work at some $12 an hour job. I told him I would. And I would. I would gladly work at Tractor Supply for 6 months saving up so I can buy a new tractor or something. I have no issues doing that. And in fact, I think it is smart in the long term. I keep my trees growing, and my gravel in the ground which keeps my net worth intact. Some say that is not retirement, but I attest it is not TRADIONAL RETIREMENT. But of course, because I am content with my current tractor, and because my expenses are low due to being a minimalist, I do not need to do either.

I think there is benefit to "watching the gap", but after reflection, believe the real magic occurs within cash flow. Specifically the ability to shuffle money between immediate, intermediate and long-term assets.

Another thing not mentioned here is time. That too is truly magical.

Last year, through the magic of retirement-time, I was able to take a vacant house my Grandparents lived in, and fix it up. In five weeks time, and $1700 later, I was able to take a house that was worth $40,000 to $80,000. I could do that because I used my own logs, my own sawmill, and did all the carpentry myself. In the end, my net worth went up by $40,000 because the house had been improved. But let me ask this; where could I ever work where I would make $40,000 in five weeks time?

Now granted it is not immediate cash, it is a long-term asset, but because of that investment of money ($1700, and time) I was able to move my family into the house, and put my other house up for sale. Since I owned that other house outright (a house I made myself) upon its sale, that will lead to immediate cash.

A lot of people say, “I cannot afford to leave my job”, but for me, it is the opposite. Because of my available time, I could not afford to work a real job.

The difference of course is that they are working to pound money into a retirement fund so they have immediate cash in which to draw from, and I have such low living expenses that I can live meagerly and focus my time on long-term assets. For instance, I worked on my Late-Grandmother’s house last fall, but it will not be until next month that I realize the true money from that endeavor, a 10 month lag. So, in this case, I spent $1700, and ten months later netted $174,000?

But the greater the risk, the greater the reward, and the longer the wait, the better the return.

Being content with what I have plays into that. And so does have low living expenses so I do not have to exploit the natural resources I have now.

50 years ago, my grandfather sold gravel out of our pit for 10 cents a cubic yard. Today it is worth $2 a cubic yard. At the steady rate of 3.8 cents more per year, in twenty years my gravel will be worth almost 1/3 more. Most likely, more than that because area gravel pits will be depleted. Still, by waiting until I am 65 years old, instead of being worth $815,000 at age 45, my gravel will be worth just over 1 million dollars. That is an increase of $13,400 per year, just by waiting to dig it up. (If I ever dig it up).

The key here is I am not getting and younger or healthier, so by retiring early, I am putting all my efforts into long term invests for me…NOW. It can be a struggle day to day due to cash flow, but down the road Katie and I will be so much better off. I know that because it is guaranteed.

That is just how life works; with all good things, you do the hard work first, do the self-denials, and then reap the benefits forever later. With the bad things of the world, you get the reward up front, and regret it the rest of your life.


I am adamant about this stuff because I want other people to know, by thinking outside the box, applying some real life principals, they can do it too. This is NOT boasting, its encouraging others to get out there and make their dreams happen. You do NOT, NOT, NOT need 1 million dollars in a bank account to retire early!

Dillon, essentially the approach I am trying to take!  I haven't yet read Early Retirement Extreme, but should be in the running for the book as a reward from Paul's Kickstarter campaign for the Building a Better World book.  From what I've read or heard about Jacobs approach I think I'm similar.  My goal is to get expenses consistently down to $500 or less a month, or $6000 a year.  If I can do that, and I do seem to be right on track, then $150,000 invested in a way that brings in a cash flow of 4% would meet my needs.  I would probably still go for a bit more in income producing investments because that's my way and would put me more at ease.

Travis, thank you for sharing all this!  It's wonderful to hear how you've made it work.  I believe I'm approaching my route to retirement in a similar fashion.  The reason I'm focusing on my savings rate is not to build up a huge pile of money to then slowly (one hopes) whittle it away as I age.  Rather the idea is to "spend" that savings on investments that provide a steady cash flow.  Personally I'm much less interested in investments where my gains are expected to be in appreciation of value for a couple reasons.  First is that to get needed cash I would have to sell the asset.  I don't want to sell assets, I want them to actually produce revenue.  The second big reason is that price appreciation tends to come along the lines of assuming everything in our economy will keep growing.  Perpetual growth on a finite planet just doesn't happen.  For our entire lives, and the lives of the past few generations we've seen this kind of exponential growth thanks to discovering how to exploit fossil fuels.  So we mistake this level of growth as not just normal, but good.  Personally I think we are riding along the bumpy plateau of the tipping point in fossil fuel extraction.  There will probably still be tons and tons of it available for the remainder of our lives, BUT there will be steadily less overall, decreasing each year on average.  This means moving from growth economies to contracting/declining economies.  Assets whose values appreciate based on the expectation of future growth will likely be in world of hurt!  I don't want to be in that game if I can avoid it.

I had a similar thought regarding insurance on my home, a 1968 mobile home.  If I remember correctly insurance for my place would be something like $500 to $600 a year or more.  I thought to myself, if the thing was burned to ashes and considered completely totaled what would I get.  I think I'd be lucky to have them value it at $5000.  Why would I pay 10% or more every year for that?  So I've been self insuring ever since I paid off the mortgage and was no longer required to purchase it.

From what you are describing I'd say you are a master of managing multiple forms of capital and making them work with each other.  For example, using your saw mill (a form of material capital) to turn some trees (living capital) into lumber with the knowledge capital you have to use that tool.  Then leveraging your time capital to do the work on your house (material capital) which you then sell to get financial capital.  If that home was your actual residence for long enough I'm thinking you were able to avoid paying taxes at every stage in that process, thus gaining yourself another 25% - 35%.  Also key is having well developed emotional capital so you have learned what is enough and where happiness lies for you, thus avoiding the money/work rat race.

I often wonder why in this era where we as humans have such absolutely stupendous amounts of energy and material goods available to practically every one of us do we find ourselves working so hard "just to survive", with so little free time.  If more would discover that having much much less than what is considered normal these days was in fact plenty enough to live a great life we could have a much happier, healthier culture.  I suspect the only way to get there though is to each tackle this individually, gaining the good life for ourselves while demonstrating how it can be done to others.

Just for transparency on this, it should be known that I am indeed married, and have four young daughters, ages 6, 12, 13, and 14.

My wife was a high-end banker, but quit her job several months ago, and now just watches children. She was initially scared of quitting her lucrative job, but since quitting, we have actually made more money then we ever did with her working. It is crazy.

One reason that she was really stressed was, they were pushing her to "sell" credit cards and car loans, when she knew it was NOT in their best interest. The older I get, the more incidious I see debt as being.

elle:

I don't hugely keep track of spending but my husband realized he was spending a lot of money on energy drinks. He decided that every time he wanted and energy drink he would put the same money into a stock account. He ended up with enough money there to pay for a certification he wanted to get.

Good stuff. That is a solid story all around. Love it. Each of us has to work toward our motivations, and work on changing our motivations. You guys are inspirarional.

David Huang wrote:.  If you were able to maintain that awesome 90% savings rate and invested the extra money then in under 3 years you could be financially independent, able to retire and live the same lifestyle off the interest from the investments.  

Nice thought, but my income is so low that the savings are just to buy or repair things I can't afford the rest of the year! This year we need to replace a vehicle. Someday we'll put siding on the house :)

My goal is to live in a permanent semi retired kinda way. I go to work a couple days a week and do what I want the rest of the time. We'll have our property paid off this year, and there are a few other things we need/want to deal with. After that, any extra money will be invested or set aside for any immediate use we might need. At that point, I want to get out of the 60 hr/wk thing I get roped into every year.

Today has been one of those days that happen each year where I really sit down and crunch some numbers.  Mostly I did this today to file my annual state sales tax due for my art business.  Income taxes will come later once I get all the needed forms.  However, I also took the opportunity today to tally up my monthly sheets recording income and expenses to get the annual overview.  As I noted at the start of this thread I've been trying to get myself to focus more on increasing the gap between what I make and what I spend, rather than just focusing on one or the other.  So how did things turn out this year with all the Covid craziness?  Surprisingly way better than I expected.  My overall income is down some, and the sources of my income changed a ton!  However, I'm delighted to be able to report back here that I did achieve my goal of increasing the percentage I'm saving and investing.  This year the saving rate increased to a little over 81% of my income!!!

I had also been shooting for a lofty goal of getting my expenses (excluding income taxes and business costs) down to $500 or less a month.  I did fail miserably on that count, coming it at $1055 a month on average.  However, a large portion of that was a major cost replacing the battery bank in my off-grid solar system.  That investment should last me another 7 to 10 years.  If I remove that cost I was at $753 a month.  I'm still aiming to keep my monthly costs low if I can, but am reaching the conclusion that I find my happy level of fulfillment, or what is "enough" for me in the $800 to $1000 a month level.  So I'm working to get my passive income streams to that point.

Does anyone else here track their numbers?  How did things go for you this past year?

Hi,

Money is only a tool. What you focus on expands.  

Things --- I want more more more --- why am I still not happy?
People --- If I have 2 or 3 real friends I am wealthy.  A real friend knows who I am. (and my wife better be one of them)/ side note / investing in a friend means finding what his/her love language is and using their language instead of my own. I put part of myself into them without expecting a return.
God -- A relationship with the creator of the universe beats anything.

So we (my wife and I) start with God.  Everything we have is His, (not just stuff either).  He does something and He lets us play along with Him. We get to track our spending, our savings, our giving.  You should see the look on a waitresses face when you give an excessively big tip,  giving can be fun. We get to invest time with other people.  But our focus is always on god no matter what we are doing-well usually.
Money is not the most important thing. I learned that living in my car while going to college.

Focus on what you are doing, tracking spending --- getting out of debt === being frugal,,,living in the gap >>>making money.  
Changing your focus often and throughout the day makes for a balanced life.

If you would like to know we do track our numbers. I also retired from a Job at 56. How we did, we spent more than we took in and we are ok with that. We  have no debt and large medical bills. Paid off each month.

People who are rich make money. People who are wealthy find focus.

Sometimes our life is hard and painful, others good. Again Focus -- we can be at peace even in the bad.

David Huang wrote:
Does anyone else here track their numbers?  How did things go for you this past year?

Luckily my husband is very good with numbers and just as frugal as myself. Our numbers look good, our savings rate is very high (I have no memory for numbers, not a bit) and that did hardly change during the Pandemic. We are spending even less.

In our case, we have somehow split the responsibilities a bit over the earn and save. My husband always worked in the big industry with the exception of a year and a half when he tried to be self-employed with a companion in the plumbing/construction business. He made very very little (and worked hard) and it was difficult for the kids to explain that we had to cut expenses - although they still got everything necessary and could continue with their tennis/music/dance classes.

But this was not the initial trigger for living a frugal live, we are doing so since we first lived together as students and kept doing so when we had a good double income and no kids.
Now with three kids I only work occasionally as a translator and interpreter for Spanish (or giving language classes) but instead I am the one helping to keep us in a frugal lifestyle. I grow as much veggies as I can, sell some seeds and plants, barter with friends and neighbours, sew and mend clothes, bake my own bread, cook from scratch every day etc.

He is making the bulk of the money, of which we save (and invest) a big deal. Whenever my kids (now teenagers) ask why we don't fly to the Mediterranean or any other location at least twice a year, why our car is old, why we don't simply buy a frappuccino to go (we have no such place where we live anyway!) or why we don't buy a new coffee machine because it looks old etc. we tell them that this is the difference to other families who just take from their savings account as long as there is money, and if there is no money, the go into debt - while we have a very comfortable cushion of money on the account and other savings accounts and investments and life insurance and a debt-free home and car.

I know people who in theory have a good monthly income and still manage to go into debt at the end of the month because they are not tracking their expenses and not making provisions for bigger expenses (repairs, medical issues, new car and similar).

I feel very fortunate that we are in this position. Especially having our own comfortable house (which is tiny compared to those in the US) is something you don't just achieve by good luck. Here in the metropolitan area of Munich it is so hard to buy a house with a normal income and an honest job (not stealing money or having inherited a fortune) that many people around us in our situation and our age (around 50), including my two brothers, will never make it.
Even if they managed to change their mindset and their spending habits it would be too late.

I understand the insight. We look at earnings and costs, relative to something. That's why when we are earning 2K bucks a month, 50$ is just a few minutes of our working hours, and it is so easy to expend. The opposite is true. Working hard to save 5$ on the electricity bill, makes you realize that you'd have enough money if you earned 500 a month, so why bother to work more than that?

In the end, it is not about money, but about energy and time. Money is just a way to put numbers on it, at least for the working class. If you want savings, then save what you want and expend the rest. If you put 200$ every month in a safe place (bank account or your favourite piggy), that's 200$ less you count as income, so if you earned 1000$, that's as if you just earned 800$, then you will expend according to your real income. A usual saving figure is a 20% of your nominal income.
Savings are only to be expended in case of desperate need. I like to leave some 'cushion' cash, just for unforeseens, the rest is apt for investment. Since you know, cash money decays.

Some people just don't want to save money. They say they want, but it's not true. They prefer to live as best as they can while they can, and bear the poverty when it comes. This way they enjoy luxury at least once. They don't like it when they are poor, but that's the price they have to pay for the effimeral prosperity. And who knows, some people die before they can enjoy their savings, so who can say who's right?