Tag Archives: Frugality

How we saved money with reusable cloth diapers

We saved a bundle by switching to reusable cloth diapers. Here’s how we did it.

cloth diaper bubble butt

What’s not to like about a cloth diaper bubble butt?

This post is going to talk a lot about feces. If you don’t have a baby already or in your future or if you just don’t want to read about how to restrain the mud bunnies, you might want to explore another corner of the internet for awhile.

That’s because there’s a lot of hell’s candy involved with babies. If you’re one of those people who gets squeamish at the site of chimp chunks you might want to just be sure your birth control situation is locked down because there is no escape from the butt brie once the baby arrives.

Now when you have a baby, one of the first decisions you’ll have to make is what kind of diapers you’re going to use. We knew we weren’t going to be purist about it so we accepted that some disposable diapers were in our future. At the same time, the image of how many diapers our baby would use before being potty trained was disturbing. A typical baby will go through some 3,800 diapers in its lifetime.

Our strategy was to minimize the use of disposables as much as was reasonable. We decided to go with a local diaper service company. At $100/month, the price was comparable to what we’d likely be paying in diapers given how many he was going through in the early stages. More importantly, the convenience and waste reduction made it worth it to us.

The service would deliver a nice, fresh packet of diapers to our doorstep each week and take away the bag of diapers soaked with pee and pocket pesto. Pretired Baby really seemed to like the diapers and they were very easy for tired new parents to deal with as well.

All the pieces for using reusable cloth diapers

All the pieces you’ll need to contain the poop

But once he started sleeping blissfully through the night at three months in, our minds cleared and we began to re-evaluate our diaper strategy. Eventually we settled on washable cloth diapers. We canceled the diaper service and purchased used GroVia diapers from DiaperSwappers.com.

These diapers, along with similar versions, consist of a cloth insert that snaps to a waterproof cover (or “wrap”). We bought about a dozen wraps (you can use them a few times before they need to be washed) and more than 30 diaper inserts. In retrospect, we could easily have gotten by with a few less of each. The trick to how many you need is to estimate how many diapers you need in a day, decide how long you want (or can stand) to go between washing and do the math. (You can always buy what you think you need and buy a few more later if you find you’re running too low before you do laundry.) We bought all our diapers and wraps used and paid about $400 for everything. That seems like a lot (even considering we broke even in four months), but keep in mind we’ll also be able to sell these again when we’re done, hopefully at a minimal loss.

We’ve been using these diapers for about a year now and really have no problems to report. Right now we’re still using one disposable at nighttime as our one attempt at an overnight cloth diaper resulted in soaked sheets.

How to use reusable cloth diapers

OK, so we’ve established that we no longer just pull off the diaper covered in butt butter and just drop it into the bin to be left out for the diaper service company. Now we were up to our elbows in squishy baby gravy — what are we supposed to do with it all? There are a number of subtleties to using these diapers you’ll need to know about if you’re planning to go this route. Nothing is terribly difficult once you get in the routine, but expect a little trial and error as you get started.

Reusable cloth diapers ready to install

Assembled and ready to install

Now if you do any amount of research on these reusable cloth diapers, you’ll sooner or later come across someone touting the use of a “poop spatula.” The idea is that you keep an old spatula next to your toilet that is clearly marked “POOP”, or “MUD”, “DEUCE” or whatever you like. (The labeling is so you don’t accidentally end up mixing this spatula up with your cooking supplies.) We read about this concept and said, “Um, no.”

Fortunately there’s a better way to get the paydirt off your fancy new cloth diapers. It’s called a BioLiner and it acts as a handy barrier between the black banana and the diaper you’ll be tossing into your washing machine.

So proper assembly involves the outer wrap into which you’ll snap the cloth diaper, then you’ll add on a single BioLiner. Snap the kiddo up and you’re on your way.

Adding a booster to reusable cloth diapers

For naps and other long stretches, you’ll need to add in a booster for extra pee storage to make sure the reusable cloth diaper can handle the volume.

But, wait, you say! Does that little strip of cloth really hold all that pee? Doesn’t it leak out? Well for normal, daily usage when you’re able to do a diaper change frequently, it can easily hold it. But for longer stretches, such as a nap, it’s not typically enough. The solution for that is something called a “booster.” It’s an additional strip of material that you add to the mix to hold the extra liquid. For boys you’ll want to fold it in half and place it right in the front.

How to wash the reusable cloth diapers

So say your crumb cruncher suddenly goes quiet and with a focused look begins grunting and straining. You know what lies in store. “Are you poopin‘?” you ask softly.

Sure enough, you pull back the diaper to reveal a fresh new set of moon rocks! Here’s what to do: Get your next diaper all prepped. Take off the offending diaper and carefully set it aside. Clean up the perpetrator and put him or her somewhere safe.

Next take the whole smelly mess to the bathroom and shake off the stink brick, kerplunk! right into the toilet. Now the BioLiner is supposedly “flushable” but that doesn’t mean it should be flushed. These “flushable” products are notorious for clogging up your home’s plumbing and are hated by utility companies who must contend with sewage systems that aren’t geared up for products that don’t break down in water. That said, there’s been two or three times when the chocolate surprise was so squished into the liner that it ended up going down the drain. You could alternatively bag it up and send it out with the trash, though. But generally I just hold the BioLiner by a clean corner and give the whole thing a little shake and the stinky pie drops into the water. Sometimes a little number 2 gets on the cover or the diaper where the BioLiner wasn’t covering well enough. That can be rinsed off or wiped off with some toilet paper.

So that gets rid of the nut log, but you still have the diaper to contend with. Unsnap it from the cover, pull out the booster if you had one in there, and drop the whole thing into your airtight diaper container. You’ll want to have two reusable diaper pail liners so that you can rotate them as you do your laundry.

Before you have kids, you imagine the nonstop supply of Wendy’s Frosties being the worst part of the diaper experience. It turns out it’s actually the eye-watering urine smell. It really builds up after a few days of urine-soaked cloth diapers sitting in a diaper pail. So I generally end up washing smaller loads twice a week instead of one big load once a week.

Washing reusable cloth diapers

Rinse then wash. Then rinse again.

So here’s how to wash your cloth diapers. Hold your breath and quickly open the diaper pail and pull out the pail liner, closing it quickly. Once at your washing machine, hold your breath again and dump it in, making sure to spread them around. Then turn the liner inside-out and put it in there as well. We generally just wash the covers with the regular laundry but if some of them get a little butt hail on them, they can be washed with the diapers as well.

Don’t add any soap! First, you’ll run a rinse cycle on warm to get off any nuggets that have managed to escape the system so far. Once the rinse cycle completes, you’ll add the soap — and yes, you need special soap. We use Country Save Laundry Detergent and it seems to work great. Toss in a scoop, run the wash cycle on warm and add another rinse cycle at the end.

It doesn’t seem like that’d be enough to keep them clean, but they actually do come out perfectly clean on the other end. Unfortunately there’s one last step. Remove any covers and the liner bag, which can’t be put in the dryer. Hang those up to dry. Then turn each and every diaper inside-out so that it can dry completely. Run the dryer on medium heat and for as long as a cycle as your dryer has.

That’s it — put them away and they’re ready to catch another load of poo stew.

Just a couple other tips:

  • Don’t use any Vaseline or waterproof diaper cream because those will ruin the absorbency of the diapers.
  • Skip the dryer sheets. They leave a waxy (chemical) film on the material, reducing the absorbency. You’ll want to pick up a set of these dryer sheet alternatives instead.
  • Over time they can start to smell a little woofy. Not like a sewer, but more like a wet dog. When that happens, or if they lose some absorbency, they need to be “stripped.” There are several ways to do it, which you can do your own research on, but we just washed ours a couple times in hot water and it seemed to do the trick.
  • These diapers can get a little stained over time. When that happens, you can lay them out in the sun for a few hours (we have to wait until there’s some sun here in Seattle, which could be awhile). That should whiten them up enough to be tolerable.

OK, I think that’s everything I’ve learned about using reusable cloth diapers. What do the savings look like? Well, we were spending $100/month on the diaper service before and now we only buy one pack of disposables from Costco every few months. Obviously our utility costs have gone up a bit, although it’s been subtle enough I haven’t even noticed it, and it’s impossibly hard to measure. But I’d estimate we’ve easily saved at least $50/month and maybe as much as $75. That’s not too shabby. But the best part is all the disposables we’re not using. Having a baby is one of the worst things you can do for the environment, but hopefully we’ve eased that burden at least a little bit by using reusable cloth diapers.

Here’s your shopping list if you want to go this route. Remember to buy used whenever possible!

 

How to make your own Braun shaver cleaner

Wondering how to make your own Braun shaver cleaner? Turns out it’s really easy

How to make your own Braun cleaning solution

How to make your own Braun cleaning solution — just clean out the cartridge and replace with isopropyl alcohol.

It wasn’t long after the first Earth Day in the 1970s that a nascent environmental movement began growing from a tiny group of committed citizens and started spreading into the mainstream. I was in grade school at the time and looking back it was easy to see the very early stages of environmental enlightenment seeping into our lives.

I remember stickers (stuck on everything in sight, walls, poles, bus seats, you name it) shouting “Don’t be a litterbug!” I remember some hippie visiting our classroom with her acoustic guitar and teaching us Creedence Clearwater Revival’s “Rolling on the River” except the lyrics were changed to be “Rolling, rolling in pollution.” Then there was the guest speaker from the local energy company reminding us to take shorter showers. And of course our teacher spent a lot of time explaining why overpopulation was the biggest environmental problem of our generation (using math to show the compounding nature of population growth). A lot of those lessons stuck and while I don’t claim to live a sustainably perfect life, I do try to make reasonably good environmental choices.

One of the lessons that stuck with me was from a large school assembly. I think the presentation was from the local nuclear power plant (ironic given how awful nuclear power is for the planet). Anyway, the only takeaway I remember at all was that the speaker asked the audience which shaver used more resources: the electric version in his left hand or the disposable razor in his right hand.

Many of the kids shouted that the electric shaver used more resources, because it uses electricity. The speaker, enjoying tricking the kids with his question, explained that while the electric razor certainly did use power (he was from the power company after all), disposable razors had to be manufactured, wrapped, shipped, purchased then replaced. Over and over again. While I was still years away from the arrival of my first peach fuzz, I imagined a lifetime of disposable razors accumulating in a mountain behind me. It may have been one of the first moments that I became aware of the heartbreaking waste of our disposable society.

When my first soft, breezy whiskers arrived, I scraped together a few dollars and bought myself my first electric razor (like all my coming-of-age rituals, it was strictly DIY.) The tiny bits of blond hair were washed down the sink with the rest of my childhood. I used that trusty razor right up until the day I caught my stepmom using it on her nasty legs. (Ew)

In the decades since that horrible image was burned into my eyes like white fire, I’ve only owned maybe three or four other razors. I have never shaved with a blade. My current electric razor is just a few years old. Unfortunately in recent years I’m either seeing a sharp downturn in product quality or an increase in stubble strength as I reach middle age. Probably both.

On the other hand, one of the innovations I really like has been the advent of built-in cleaning mechanisms so your razor stays clean and sharp and ready to go. Before the self-cleaning versions came out, you had to delicately clean the cutter with a little brush and it never really got as clean as you’d want. Now you click a button and the next day, voila! clean razor! My current one is an older version of the Braun Series 5.

There is a problem, though. In the business world, there’s a famous saying that the money is in the blades, not the razor. It’s the classic replenishment business model. Printer ink is another great example. Give the razor (or printer) away for cheap and people will pay a lot more for the blades (or ink). Braun sells replacement cartridge refills but here we are again on the replenishment treadmill again! The price has really come down on these lately so it’s not as annoying as it used to be, but still! Plus here we are again with more plastic for the landfill.

The design of the Braun is also very annoying because the cleaning solution isn’t used up in the cleaning process. Most of it just evaporates! I tried putting the little cover over the cartridge holes but it basically had no effect on evaporation unless I sealed it on tight, which is not practical on a daily basis. (I’d say a cartridge maybe lasts two months when used normally.)

So I wondered: How can you make your own Braun shaver cleaner? Was there a way to hack my Braun to give me the sweet cleaning power I desire without the waste of buying replacement cartridges all the time? I looked around for bulk cleaning solution, but didn’t find much out there. I did find this Sandalwood Tree Cleaner that I have not yet tried, but may in the future just to see if I like it. But surprisingly the choices were pretty scarce.

I did finally try a solution that has been working well so far. It was simple and I’m very happy so far. Here’s what you do:

Once the razor solution is too low to do any cleaning, dump it out in the sink and rinse out the container as best you can. It doesn’t need to be completely spotless.

Then refill the container with Isopropyl Alcohol, inexpensive and available at any drugstore. I don’t know if the percentage makes a difference. I used 91 percent since that’s what we already had on-hand. I imagine the lower percentages might be gentler on the shaver. Don’t fill it up to the brim. Just fill it as full as the new ones, about two-thirds of the way full. Put the cartridge back into the device and you’re ready to clean. It does smell like rubbing alcohol but not so much that it’s overpowering. Adding some lemon essential oil would probably help, but I haven’t tried that so far either. The cleaning solution you buy also supposedly lubricates your shaver, which could be a problem long-term, but so far I haven’t noticed any difference. I may buy one new cartridge a year or so just so I can occasionally start with a clean one (it’s impossible to get all the hair trimmings out of a used cartridge). That might help if I did need some lubrication help. If it becomes a problem, I might add a little baby oil in as well to see if that makes a difference, but so far so good.

Before I tried my new homemade Braun shaver cleaner, I was thinking I was probably due for a new cutting head because the razor just wasn’t getting the job done. After enjoying a nice, crisp shave with this cheap solution, I think my cutting head is fine for awhile longer. So far I’m saving a little bit of money and the mountain of plastic behind me will be a little smaller because of it. And that alone makes it all worth it!

UPDATE 2/13/14: I founds some essential oil around the house so I dropped 3 or 4 drops into my reservoir to see what happened. OMG, it was the final piece! The Braun razor ran much smoother and was less abrasive on my skin. I’d say this mixture is AT LEAST as good as the store-bought version now! 

Disclaimer: Alcohol is flammable. Be careful when refilling and using this technique. Also, I’m sure Braun does not recommend using anything but their own solution. You could severely damage your razor by using a product other than what the manufacturer recommends. Try it at your own risk. Also, links in this post are affiliate links so I may get a few pennies if you make a purchase.

Reader story: A neglected pretirement

Fantastic retirement savings, virtually no pretirement savings

Prison.   Photo by  jmrodri 

Prison.Photo by  jmrodri 

I received a request from a man named Jim recently to take a look at his financial situation. We had a brief exchange on another personal finance blog and I offered to share some deeper thoughts here. Here is Jim’s story: 

He and his wife are both in their mid-50s and are beginning to see retirement creeping up quickly on them. It’s probably fair to say Jim already has one foot out the door from his job, but his wife is afraid of “not even being close to being able to retire.” At this point, they’re still planning to work about 10 more years, but I get the feeling they’d both rather not if they could find a way to avoid it.

Let’s take a look at the numbers:

They have a joint $675,000 in 401(k) accounts and have just started IRAs. They owe around $115,000 on a $408,000 home and are planning to have that paid off in three more years. They refinanced last year into a 15-year loan at 3.25%. This very generous couple has been living a comfortable, American lifestyle and showering their family with a great deal of support. I’ll spare you all the details, but among the list, they paid for their own schooling, and paid for two kids to attend school with no debt. They paid cash for a daughter’s expensive wedding and pilot training for a son as well as a study/travel abroad program. Jim also mentions a sports car “driven only for fun in the summer” and a motorcycle. Additionally they are committed to helping their son through law school, at least the first year at $1,000/month so he can utilize scholarships (it’s a requirement that he not work the first year).

Monthly expenses look something like this:

  • Mortgage payment: $1,300
  • Groceries: $600
  • Charity: $600
  • Cars/gas: $500 (Jim mentions a “long commute”)
  • Car insurance: $170
  • Utilities: $250
  • Water: $100
  • HOA: $60
  • Cable: $80
  • Internet: $40
  • Miscellaneous: $160
  • Total monthly expenses: $3,900

On top of that, Jim and his wife have begun paying extra on their mortgage to pay it off in the three years mentioned above so they’ve actually been paying $4,000/month on the mortgage. Jim didn’t mention any credit card or other debt, so it sounds like they’ve been responsible with their money management.

On the income side, they make decent money, bringing in a joint $6,600 per month. When they take Social Security at age 65, they expect that to bring in about $50,000/year.

So can Jim and his wife pretire yet?

I really appreciate Jim sharing his story because it illustrates the exact reason I felt the need to start writing this blog. The financial services industry does a great job (in some ways) of gearing people up for a traditional retirement. But the concept of PREtirement is completely ignored. Many folks don’t even understand there IS such an era to life until they’re in it, often unfortunately due to an unexpected job loss. Jim and his wife, fortunately, are still employed and have done a great job saving for their retirement. So let’s take a look at their situation and see if we can get them into a comfortable pretirement as soon as possible. And IF they choose to keep working to build an even cushier retirement, they’ll be doing it by CHOICE, not because some expert tells them they have to save up some arbitrary amount of money.

First of all, it’s important to understand what pretirement is and is not. On the simplest level, pretirement is building up an investment fund that is large enough to pay for your monthly expenses. Now when most people hear that, they look at their monthly expenses multiply by 12 and then 20, realize it’s hopeless and then buy a new car to make themselves feel better. But in fact, it’s much easier to reach this level by controlling expenses than by building up the fund (although you do have to do both).

Let’s, then, take a look at Jim’s expenses.

Right now expenses are $3,900 a month. With $1,300 of that going to mortgage, they are at a very tolerable $2,600 with $600 of that going to “charity”. That brings the core bills excluding mortgage to about $2,000 per month, which I think is about the maximum one should have. Car/gas expenses are super high at $500/month, which as he mentions is due to “long commutes” — plus that figure doesn’t even include the sports car and motorcycle. It’s a little unclear if the $500 is for two or for three people, but really it doesn’t matter because Jim shouldn’t be buying gas for his adult child anyway.

Now before I continue,  I need to deliver a firm spanking to Jim for being so indulgent with his kids. Paying for college? That’s something we can debate and I even debate with myself from time-to-time. But paying for a kid’s extravagant wedding? Work/study abroad? These are adults! You have GOT to be kidding me! My eyes aren’t that good, is that Bill Gates over there? What’s more, that a kid would WANT a fancy wedding shows that there is a long pattern of receiving hand-outs and that the child has developed a consumerist value system. I’m sure Jim’s daughter is a lovely person, and this may not apply to her, but I bet even Jim would agree that the overlap of kids who get their parents to pay for their weddings and the kids who later beg to be bailed out of their credit card debt is enormous. Perhaps the only thing dumber than a parent paying for a fancy wedding is a kid putting that same wedding on a credit card. Couples should be investing in their marriage, not their wedding! (Like these guys.) My wife and I spent just a few hundred dollars on our wedding (eloped to Vegas) and spent barely $60 each on rings. Is something wrong with us? Well, I’m 45 and work just four hours a week and my wife will be done working when she reaches her 40s as well. So who is crazier?

While I’m ranting, can we talk about long commutes? Many of us have done it (including me), but it’s time we Americans stop putting up with this daily torture. That starts with facing down this lie about the “American Dream.” The American Dream is to own a home? Please. Stop. Owning a home is great in many ways, but let’s stop pretending it’s what life is about. The American Dream should be about freedom to do what you want to do. Just because you fell in love with a lovely house in a “nice” neighborhood is no reason to throw away a decade of your life. What’s more we tend to ignore the costs of these homes, whether it be lawn equipment, time, repairs, remodels, commuting costs and time away from our families. It’s even sadder watching empty-nesters try to keep up the large house in which they raised their kids only to have those same kids dump it for cash right after the estate sale. But that’s a rant for another day.

OK, now that we have Jim begging for mercy, let’s build him back up with some good news!

On the mortgage, he’s on the right track. Although it’s too bad he chose a 15-year loan instead of a 10-year. The payment difference would only be around $300 or so and would have greatly increased the pay-down time. He could even afford to do a five-year loan in his situation! But that doesn’t matter that much because he can keep going with his current loan.

When it comes to a traditional REtirement, Jim and his wife are basically done. With only moderate growth, they should have close to $1 million in retirement funds available in 10 more years when they are 65. That million bucks should generate enough to cover their basic monthly bills even without counting their social security income, which they could actually live on by itself. Despite what professional investment advisers would say, they ALREADY have plenty of money for retirement.

Our challenge is to bridge the gap from now until age 65. The upcoming years are the classic “pretirement” phase that almost NO ONE talks about. I do find my GenX peers a lot more focused on it than my Boomer elders, but still in general, it’s just not an accepted “phase” of life. Anyhoo…

Jim, here is how you and your wife can reach the freedom of pretirement as soon as possible. Hang on, we’re going to thread the needle here…

  • Tell your son you’ll help with support for school for year 1, but after that he’s on his own. If he has to take on debt, he has to take on debt. But, oh no, school loans suck!
    Here’s the deal: Aside from the emotional desire to ensure a debt-free law school graduate, it’s really quite mathematical. You have limited years to save up for retirement, he has many more years to pay back debt. And don’t kid yourself that there is no debt involved when you pay to support him. Unless you’re debt-free, you’re effectively borrowing to pay for his education anyway. Basically you’re using your home loan to support him instead of paying off your mortgage and building your own pretirement fund. In addition, I think he’ll learn more about money, pretirement and what it’s like to be carrying debt in his 50s from how you handle this situation more than anything he’ll learn in school. (By the way, if he has scholarships, the loan he’d get for living costs would be quite small. I’d reconsider your approach there. He can take 10 years to pay back his loan, but you are going to try to pay off your house much more quickly making your cashflow that much tighter.)
  • Let’s talk about your expenses. Overall, you live a relatively frugal lifestyle, which is great. There are a few areas you should think about cutting back because there is some low-hanging fruit there.
    Your food budget is EXTREMELY high. You should be able to easily trim $200 off that to bring it down to $400. I suspect that number includes some restaurant spending and probably some waste. Time to bring that under control. Say goodbye to Whole Foods!
    Your internet and cable total to $120/month. For high-speed internet plus TV I pay just over $60 for full HD, so I think you’re getting ripped off there. As a former Dish Network customer, I suspect you may have a satellite system. That needs to be canceled To-Day.
    I’m not seeing a cell phone cost line, but I assume you have one. If you’re a normal American, you can probably save on that, too. And it’s time to get rid of the landline. That’s just a needless expense that you’re wasting money keeping. If you want to keep your phone number, you can convert it to Google Voice and have that number ring through to your cell phone. That’s what I did and it works awesome!
    It’s nice you donate to charity, but it’s also not appropriate when you’re trying to hit aggressive goals. I don’t know what kind of cars you drive, but I suspect they’re perhaps not the most economical. If you’re driving an SUV to work every day, you should be hanging your head in shame as you head over to Craigslist to put that beast up for sale NOW. But since you didn’t mention this, we’ll just assume there is moderate room for improvement and drop this to $400/month. It’s hard for me to imagine anyone paying more than $100 per driver just for the honor of getting to work every day. While you’re on Craigslist, you’re going to put two more ads up: one for your sports car and one for your motorcycle. Keeping a depreciating asset sitting there not earning you money is painful to see in your situation. I don’t know what those are worth, but I’ll just throw in a round $15,000 coming your way once you dispose of those toys.
  • It’s also painful to see you have an HOA. For what? The joy of living “there”? Frustrating! But since I’m sure have deep roots there now, I’ll give you a pass and we’ll leave that in place. (Although see below for more fun!)
  • So with barely even touching your extravagant lifestyle, we’ve dropped your monthly pretirement number from $2,000 to $1,600 a month.
  • Next, just to undertake a little financial discipline, you should immediately open a home equity line of credit on your house, if you don’t already have one. Don’t freak out, you’re going to keep this balance at ZERO at all times. You can get as large of a credit as you want, but no less than $24,000 (one year of your current core expense amount.) This HELOC is your new emergency fund! Now you don’t need to keep cash sitting around in your savings accounts earning nothing. Not having loads of cash sitting in the bank might help you learn to say no to your kids, too!
  • For everyone reading this, it doesn’t typically help you to pay extra principle on your mortgage. I mean it does but it doesn’t. Let me explain. It does help you in two ways.
    One it lowers your principle so you owe less and your payoff target does come closer. You could even consider those payments as “earning” the amount of interest on your loan — in your case 3.5%.
    The other way it helps you is by putting your money somewhere you can’t get to it.
    On the other side of the same coin is your money is somewhere you can’t get to it. And even as you pay the mortgage company gobs of money, your PAYMENT doesn’t budge at all. So in general I suggest considering investing those funds elsewhere instead, but keeping them semi-liquid for eventual loan payoff. For Jim, though, it may make sense to go ahead and throw this money at the principle as we’ll see.
  • Now that we’ve lowered your expenses down to a more sane $1,600/month, you have $5,000 remaining, not including your mortgage. With mortgage, you’re left with around $3,700 each month. Here’s how you’re going to get rid of your mortgage in two years, not three! ALL of your $3,700/month will go toward your mortgage fund. That, plus your motorcycle and sports car money should be enough to get that monkey off your back. ($3,700 * 12 * 2 + $15,000) If you’ll check your handy amortization table, I think you’ll see that just about gets you there*. (For other folks interested in paying off a mortgage quickly, see my post on How to get rid of your mortgage.)
  • That was two painful years, but are we at pretirement yet? Unfortunately, not yet. Now that you have paid off his mortgage, it’s time to build up a pretirement fund. The good news is that without a mortgage, you can now save around $5,000/month. That $60,000/year should build up quickly. The bad news is it’ll STILL take about five or six more years to reach a break-even point. That’s frustrating, but we can’t argue with the math. You’ll need nearly $400,000 invested in order to cover monthly expenses and by the time you get there, you’ll basically have just retired. Hey, worse things have happened! Nothing to cry about!
  • But what if there was another option? If we say you’re about 55 today, you would need to do some careful planning, but you could simply work for the two years to pay off the mortgage (until you’re 57). Then work three more years to age 60. If you save aggressively during those last three years, you should have somewhere in the neighborhood of $190,000 saved. Now that you’re 60, you could simply live off the principle, giving you way more than you’d need every month. Then, at age 65, you can dive in and tap your social security and other retirement funds. You could even consider taking retirement at 59 1/2, but you probably know that already.
  • You could also consider semi-pretirement. That would mean working part-time to make ends meet and to have a little extra spending money. Since you are so close to obliterating your mortgage, I’d recommend you stick it out until that’s paid off. Then, if you desire, you could quit your jobs and find something part-time closer to home. You’d only need $1,600/month coming in, which would be a trivial amount to make for two people. Without your expensive commuting costs, you would need even less each month as well!
  • Let’s assume for a moment that you guys hate your jobs as much as I hated my last job. Can you do anything sooner than the two years it’ll take to pay off the house? It’s time to talk downsizing. Because you have good equity in your home, that is a source of funds you can tap. Also, by downsizing you may be able to lower your living costs as well, including commuting costs, utilities, your ridiculous HOA and, of course, your mortgage payment. Of course this depends on where you want to live and how much room you really need. But if you could sell your house for the Zillow price of $408,000, you should be able to net somewhere around $260,000 in cash. That may not sound like much, but remember, now you don’t need to pay your mortgage for two more years. We’ll assume you can buy a comfortable, well-built small home for $200,000. This isn’t possible where I live nor is it possible in many areas of the country. But, remember, they can move anywhere they want! Once that house is purchased, they’ll again open a big HELOC and not use it. Now with no mortgage, no commuting costs and much smaller living costs, I believe you can get your monthly bills under $1,000/month, maybe a little higher with homeowner’s insurance and taxes. You could certainly save up the $250,000 it would take to generate that expense or you could simply work part-time to make up the difference. I used to joke that if I ever got into a cashflow crunch, I could always water the plants at Home Depot and be happier than I was at my soul-sucking job. And I could!

Now let’s talk about health care for a moment. It’s probably the biggest wild card hanging out there to worry about. First, let’s talk about health. People who spend $600/month on groceries, $500/month commuting and $80/month on cable TV are, almost by definition, not healthy. This could have a direct impact on your health care costs over the next decade. Again, by moving to a more walkable and bikeable community, by not sitting on your butt either in front of the TV or in a car every day will have a lasting impact on your health and your happiness. Secondly, I haven’t listed health-care costs in the above because there is such a wide variance in the potential costs. How I wish this country would pull its head out of its collective ass and implement a sane Canadian-style health care system. It is truly the ONLY thing that makes a lick of sense.

But that doesn’t mean there are no options. If you choose to work part-time, finding a gig that covers health insurance is definitely an option. Thanks to Obamacare, you WILL actually be able to buy coverage, that is something that was not a guarantee even a couple years ago. You are VERY lucky that this legislation was passed before you needed it. The bad news is that health insurance companies are still evil, blood sucking scumbags that exploit the desperate for profit. It’s time to start looking around for an affordable plan with a high deductible (you have that HELOC if you really need it, remember?) I have heard of plans for folks your age that were a ridiculous $1,000/month and I’ve heard of some that are $300/month. A lot depends on where you live and your health, etc., so shop around. This could be a reason to choose another state over another where you live today. Shop around. What you find may help you determine what is possible.

So let’s summarize!

Jim and his wife did a great job of saving for retirement but basically didn’t save at all for Pretirement — outside of paying down their house. This leaves them potentially commuting to jobs they’d rather not be going to for 10 MORE YEARS — and that’s after an already long career. This happened because they forked over a ton of money to their kids, have lived an expensive, if typical, lifestyle and, frankly, never planned seriously for this era of their lives.

With some relatively minor lifestyle adjustments and learning to say no to their adult children, or more significant lifestyle adjustments if they want to speed things along, they can leave their jobs and gain a great deal of freedom quite quickly! EVEN IF they decide to keep working out of fear or simply a desire to live a decadent retirement, I would STILL recommend reaching pretirement stage (investments cover expenses) as soon as possible. You’ll won’t need to take as much bullshit at work, you’ll be safe in case of a major life event (such as a job loss) and you’ll live every day in the sweet, sweet mindset of complete freedom that comes with PRETIREMENT!

 

*There will be some looseness in these numbers due to taxes, insurance, inflation and various surprises and unknowns that may occur along the way. It’s the concept that’s important, not the exact numbers.

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