How did we get here? We got married young, in our early twenties. We had one income with one of us still in school. We rented a very old, very small, very dusty, very inexpensive apartment near school and work. We each had our own car and we kept them both even though we often shared a single car. We spent our time together when we weren’t in school, studying, or working. It was a big change from life before marriage but it was great to be together.
Nine months later with one of us still in school we bought a starter house at the height of the market on one income. Why on earth did we buy a house at this point? Were we concerned about throwing away money on rent? Were we concerned about rising prices locking us out of the housing market? Should we have just stayed put where we were? Probably yes to all three. We were fortunate that our local real estate market didn’t bubble as bad as other areas of the nation.
Even while still in school our income started to grow. After Mr. LOTT graduated with a degree in engineering he started working towards a graduate degree. Tuition was covered and we even got a small stipend for being a research assistant.
We consider ourselves incredibly fortunate that we were both able to graduate debt free with degrees in STEM and healthcare which made getting jobs possible. Financially, we were ahead of most of our peers across the country. We were able to graduate debt free because we went in state to a public university on scholarship while working to pay living expenses.
2008 was a crazy year for a lot of reasons. In January we had our first child. We had one person in grad school making a stipend and one maternity income paid at half time. We had no idea what we were going to do. Mr. LOTT graduated in May and the race was on to get a real job. After fishing for months by sending out resumes and cold calling every contact he had, there was one bite, one interview, and one offer. In July the job started and our income was higher with one job than ever was before. He was one of the last people hired by his employer in 2008 and watched with steady paychecks coming in as the economy almost imploded. Another bullet dodged. We can’t imagine what our life would look like now if this offer didn’t come in when it did. The next offer for an interview wasn’t until November.
At this point we made a couple of decisions that set our financial course for the next few years. First, Mrs. LOTT didn’t go back to work full time. Second, we made the decision to live on the one starting income and to save and invest any future raises or any additional income from that point on.
The reality was that we didn’t inflate our lifestyle. We didn’t go out and get new cars with loans, we would buy used and pay cash. We didn’t hire a contractor to remodel our house, we would do it ourselves. With these simple choices, we were able to save a significant amount of money without a need for a budget.
Where did we invest the money that we were saving? What we needed was a larger house for our growing family. To us our home is our best investment. Best is subjective. Investing isn’t always about getting the largest return or beating the market. Investing can be about how you sleep at night or how much stress you feel. We aren’t going to let other people define our criteria for successful investment. Don’t tell me about how the money could have performed in the market because it could have just as easily gone in the other direction.
This isn’t to say that when we bought the larger house that we didn’t feel a little financially stretched. Our income was stagnant for about 5 years. It felt like we were no better off than we were 5 years before.
In 2013 Mr. LOTT came across a blog talking about retiring early. As a dreamer, he was frustrated with the constant stress work and lack of time with the family. He longed for work that really interested him. Reading about the financial independence of others spurred him on to think this was something we could do as well. He started tracking income and expenses and investments to create his own savings rate vs. years to retirement chart. He felt that he had figured out a low risk way off the human hamster wheel.
At the same time he thought that our savings rate was not as high as it could have been but he couldn’t figure out how to communicate it in a meaningful way.
Motivation for both of us is different. Change was more gradual for Mrs. LOTT. Compared to the people that she worked with, we were in the best financial shape, by far. Being nagged on spending too much money by the husband was counter productive. “What about this chart do you not get”, he would say as a unconscious competent as she rolled her eyes. It is difficult to manage a household. She felt slighted, it was wasn’t like he was perfect or pulling his weight helping out with the kids.
We started a large DIY home remodel a couple of years ago. Mrs. LOTT realized while cleaning out stuff that she didn’t like most of what we had and didn’t even want to keep it anymore. She realized we had too much stuff and this really opened up the communication between the two of us. Before this, she never really liked all the financial stuff shoved in her face by the analytical Mr. LOTT. Finishing the remodel and the simplicity that we were able to achieve helped in visualizing the reality of saving more and paying off the mortgage early might really help facilitate the options we want in life.
Mrs. LOTT really likes seeing the progress of paying down the mortgage every week making something long term a tangible thing. She likes watching principal go down on the amortization sheet every week. Mr. LOTT likes tracking our monthly finances to calculate savings rate and net worth.
Mrs. LOTT took a full time job in 2017. For the first time we have 2 full time incomes. Of course, we didn’t change our spending. The reality of paying off the mortgage quicker is in sight. We have spent a year working on LOTT and plan on sharing it with you in 2018.
We didn’t make large changes. We never felt deprived, pinching pennies. The focus has been on the future. And don’t forget, we’ve been lucky. We didn’t have large student loans. We have degrees that opened doors for employment. We didn’t get caught in an underwater house . We didn’t miss out on years of gainful employment (generation screwed) like others who came of age in 2008. This is not saying that if those things happened to you that you are financially screwed. For us, the knowledge that we could have a different story makes saving for the future more important. There is nothing special about us. Things could change. Maybe we are preparing for the worst, but hoping for the best with the likely outcome being somewhere in between.
January 2018
