Can we talk about personal finance and debt reimbursement for a minute?
Christian and I have made the commitment to become debt-free in 2019. We were debt-free when we moved back to the U.S. from Germany in mid-2016.
We lived in a home we had partially financed in 2010 and fully reimbursed by January 2016.
Our quality of life changed drastically however, when we decided to move over to the next town to gain access to better schools.
We borrowed money from my Dad to be able to present a cash offer at closing. We then opened a line of credit to finance the necessary renovations in our new home.
What was supposed to be a 6-month loan to my dad, became a year and half battle to sell a home that seemed un-sellable.
Not only did we spend on average $1,500 a month in costs related to maintaining an empty home on the market, we also had to start making payments on our $250K line of credit.
As the title of this blog says it best – we live a frugal lifestyle. Always have, always will. No matter how much money we have had in the past, or may have in the future… we will never be the kind to throw away or waste in any way.
Frugality is a lifestyle and a mindset. It has nothing to do with how “rich” or “poor” you might be and feel! It is about making every day choices that enable you to have more in your bank account at the end of the month.
What you do with that leftover money is up to you. We like to go on expensive and luxurious trips, show our kids the world, help them understand people and cultures, while making incredible family memories.
We also make it a point to reimburse our debt as quickly as possible.
When we purchased our first home (the one we spend 1.5 years selling…), we paid off our 15-year loan in 6 years. We give all of the credit to our lifestyle! During those 6 years, we gave birth to 3 kids, travelled to France, Germany, Switzerland, Italy, Czech Republic, Cape Verde, Egypt, and Florida. We also spent over $20K moving internationally 3 times…
But we did all of that from living frugally the rest of the year.
What would you like to do with the saved money?
Fast-Forward To 2019
Today is Wednesday January 30, 2019. On Monday, we finally ended a year and a half of heartache and sold the home that saw us get married and become parents for the first time.
Today is Wednesday January 30, 2019. On Monday, we finally ended a year and a half of heartache and sold the home that saw us get married and become parents for the first time.
I wish I could tell you that I am ecstatic, but I have so many mixed emotions.
We were loosing $1,500 each month we owned that home (maintenance, HOA’s, property taxes, etc.).
So we made the decision to stop the bleeding and let it go cheap… which means that we still owe my dad $84,000. This whole time, we had thought the two homes would be a swap but it was time to face reality.
So here’s where we stand:
- we owe $84K to my Dad
- we owe $226K to our line of credit
- we committed to becoming debt-free this year
FUN!!
We’re also highly committed to traveling, which requires budget.
The Plan
First Step
Yesterday, we sold my husband’s car.
I know that sounds crazy and I still think it is… even though I came up with the idea. We are now a single-car suburb family…
I looked at what we spend on a yearly basis. When you do this, start big and close down on smaller expenses. The broadest I could think of was: “what are our main, and preventable, yearly expenses?”
Our 2 cars, kids’ extracurricular activities, groceries, travels, yard maintenance, pool maintenance, and property taxes came top of the list.
Second thought: what can we give up without giving up on quality of life?
No way I am pulling the kids out of gymnastics until we are at a dead-end, which thankfully we are not. Christian clearly doesn’t want to mow or take care of the pool, until we are at a dead-end…
Long reflection, short – we live, work, go to school in one little town. We DO NOT need 2 cars at this time. It is a nice luxury, but that’s all it is. A luxury.
The car is costing us roughly $5K to $6K per year in maintenance, devaluation, gas, and insurance. So we decided to sell it.
As I am writing you this, Christian just confirmed that the money is pending in our bank account and he is transferring it straight to the line of credit – $15,000.
Second Step
Is there anything else we own that could be sold and either keep us whole or benefit us financially?
Reimbursing our line of credit is a priority for us. It is on a flexible interest rate, which has been going up. In other words, it is costing us more and more money.
Christian and I make parts of our income from real estate investments. We have decided to part with some of our rental income to reimburse the line of credit. Being financially free and no longer having to make those monthly payments outweighs the lost income.
What Else?
I fully realize that many of you do not have a handy property to sell, and reading the above seems like we have it very easy and becoming debt-free is a walk in the park.
Christian and I have never earned outrageous salaries. We lost mine in July when I decided to leave corporate America to pursue my dream of writing this blog.
We have been paying insanely expensive daycare costs for the last 7 years.
Everything we own today can only be credited to our lifestyle. We only spend what we truly need to spend with very little extras because we want to reach financial freedom and leave a legacy for our children.
We are excited to be debt-free hopefully soon again, but our lifestyle will not change!
Our Frugal Lifestyle
Those are the main ways we save money, every single day:
- No eating out: I know it sounds cliché, but we do not ever eat out. We probably order a pizza every 4 to 6 weeks and we pick it up to save on delivery. That also means no Starbucks or other daily coffee
- Grocery shop at Aldi: if there is an Aldi near you, or a Lidl for the lucky ones, pay it a quick visit next time you drive by. We are a family of 5, eating in every single day of the week, and spend on average $120 a week on groceries
- Grocery shopping once a week: I swear I do not plan my weekly meals. Never have, probably never will… nothing wrong with it and some say they save money that way. I simply walk into the store and kind of know how much I will need for my week. By only shopping once a week, I reduce all of the impulse purchases and am better able to manage my budget. I am sure $30 each day would seem like nothing, while $210 (7 days of $30) at once seems outrageous!!
- Temperature control: we live in Florida and have our thermostats set on 83 in the summer and usually make it through the winter without heating (yes, the house does drop in the low 60’s for several weeks and we put on a robe). While most houses our size spend about $450 / month in electricity in the summer, we top around $200
- Avoid constant driving: Christian and I not only drive efficiently, we also organize our schedules to avoid driving back and forth. With a bit of planning, you can save hundred of miles and pricey gas fills every month. For example, we do our weekly grocery shopping while the kids are at a sports class near the store, to avoid an extra trip
- Eat everything that is in your fridge: we fill up a whole fridge and freezer to the rim every week, and yet we almost never trash food. Yes, we eat food that is past its ‘Best By’ date several times a week, I’m sure. To be entirely honest, I don’t even look at dates… we eat the meat before it starts changing colors, chop off a piece of zucchini if it starts molding and eat the rest, etc. There is NO reason to trash food… and we have not yet once been sick!
- Very limited clothing expense: we are obviously not fashion stars… Christian and I have several pieces of clothing that are over 10 years old, and it is OKAY! Totally OK!! When we feel like we need something, we will never purchase full price but rather head to the local T.J.Maxx and find something cute and suitable (maybe once a year?). If it motivates you: think of how far those dollars can get you and the time you are saving on the shopping trip
- Pack yours and the kids’ lunches: along the same lines as eating in, all of us eat packed lunches. Even though the kids’ cafeteria serves a full meal for $2.40, which seems like it wouldn’t be worth my effort, that’s $12/ child/ week = $36 for all of my kids each week. That is 30% of what I spend to feed all of us an entire week…
- Skip the salon: I know this one won’t work for everyone but it is working for us and a part of our successful financial freedom strategy. I have never gotten my nails done (outside of a birthday Groupon from my sisters), and only get my hair cut once a year. Agreed! I am not a hair model! But I also save $50 on a visit. I cut Christian’s hair and all of my kids’ hair when needed
- Save on utilities: there is soooo much to save here. And this is the most frustrating item to me. I see everyone wanting more money in their wallet and they only know to turn on the faucet to its maximum… why? We turn all lights off when not in use. The TV is barely ever on. I have already touched on the A/C / heating costs. We do the dishes on the minimum amount of water possible (which is not much – try once!). We turn the faucet off while brushing teeth, washing hands, hair, and body, and shaving. We water the yard only as much as needed. Our pool pump runs only a couple of hours a day. Etc. Etc. You get it. We are mindful and it is asking us no effort. The only change in lifestyle you might notice is the indoor temperature, which you’ll get used to quickly
- No cleaning lady: I just can’t get myself to hire a cleaning lady… we did give in on the pool cleaning and lawn yard a year and a half ago when my husband called it quits. Each of those services are pricey, do you need them or can you take over and make an extra mortgage payment this year?
- More ideas in this 101 Ways to Save Money Every Day guide. We do all of that too!
If you are reading this and wanting to accelerate your payments and gain financial freedom faster, I urge you to give the lifestyle above a try for a month. Keep to it and measure your savings at the end of the month.
When it comes to making payments, see with your bank if you can make bi-weekly payments instead of monthly. You would be making an extra monthly payment each year, saving on interest payments and further reducing your principal each year. Stick to it and you could be saving several years of payments and interest! In an example of a 30-year $250K loan at a fixed 4% interest rate – I am talking savings of nearly $30K and 5 fewer years of payment!
So what are you going to do to start sprinting towards the financial freedom finish line? It can be a lot closer than you think.
If you have any questions or want to bounce ideas, use the comment box below or email me directly at laura@frugalforluxury.com
I am not a financial advisor in any way but always happy to chat!
Pin this for later!
Related articles you would enjoy:
101 Ways to Save Money Every Day
Financially Prepare for your Next Vacation in 5 Steps and 5 Minutes
5 Tips to Save Money Without Giving Up Quality of Life
13 Comments