Wednesday, August 15, 2018

Secrets of a Penny-Pinching Dad (Guest Post by Tim)

A few days ago I was surprised and delighted to open my email and find this gem. Tim and I have not always been on the same page when it comes to money. At the time we got together I was a 20-something who lived entirely in the present. I figured as long as I wasn't in debt, I was doing well enough. I had paltry savings and no financial goals whatsoever. It took awhile, a lot of patience on Tim's part, and plenty of heart-to-hearts, before I finally came around. It's still hard sometimes. Sometimes it seems needlessly difficult. The sacrifices we make now are small, sometimes laughably so (though they may not seem that way in the moment), but they pay off big time in years to come. Tim has been subjected to a lot of ribbing over the years for his frugality but honestly, he's one of the most generous people I've ever known. He's only stingy with himself, and I do give him a hard time for that. I look around at our life and can truly say that I have everything I've ever wanted and don't feel like I'm missing out on anything else money can buy. I am grateful for the perspective he had then that's gotten us to where we are now.

The people who stand to gain the most from heeding his wisdom are the younger ones like his Marines, who live in the world of immediate gratification and assume they'll always be young the way I did. They're most likely to nod along politely and least likely to take any of this to heart. Delaney, Annie, Timmy and Joey: do yourselves a huge favor and listen to your father.

For the longest time, Rachael has asked me to write a “guest” post for her blog. I’ve only ever written
one blog post and I didn’t think I would ever be able to top that one. Additionally, I didn’t think that I
had anything useful to say. I’m not a finance “guy”. I haven’t studied investment strategies formally or informally. I couldn’t even tell you the difference between a yield and a dividend. But what I did know was in order to live comfortably in retirement, I (and it’s an intentional “I” that I will get to in a minute) would need to save, save, and save. So let me start where I think this all began.
Tim (right) and Derek in 1991
I remember even as a young kid that I always enjoyed saving. I tell the story of when my Mom worked at the bank in the center of our small town, I would look forward to taking my paper route money there to deposit. The cashier would take my money and my passbook and using either the machine or pen, would jot down my deposits and I could watch my savings grow. It was the best. Don’t get me wrong, I would spend on silly things like a pair of cool Air Jordan’s, but it was my money: I earned it, I saved it, and I spent it. For the most part though, I was frugal for as long as I can remember. Don’t believe me? Call my best friend Derek and he can tell you. It wasn’t until I was getting ready to graduate college and commission into the Marine Corps did my savings habit really start to be a competition with myself to always save more.

I have been truly blessed in all aspects of life. Professionally, the Marine Corps has provided me
opportunities I would have never thought imaginable. After attempting college for a couple years, I
decided to enlist in the Marines. About three years into my service I was given the chance to attend college while remaining on active duty, in the pursuit of a commission as a second lieutenant. It was on the precipice of that commission that a conversation with my father changed the course of my/our financial lives forever.

The Question that Changed Everything
Commissioning day with proud Mom and Dad in 2000
I’m not exactly sure how the conversation went word for word, but this is how I tell it now when I am
encouraging Marines (and anyone who will listen) to start their own saving strategy. When I was in college I was Sergeant Brady. With that came all the pay and allowances afforded a single sergeant in the Marines. I can honestly say I lived rather comfortably and enjoyed my years in school immensely. My savings plan really didn’t exist but I was happy. So as graduation approached and my commission (and nice jump in pay) was on the horizon, my dad approached me about investing. Essentially he said, "If you are living a high quality of life now, and you are happy, why spend the pay raise?" I had to admit he was right. Now, the smart thing to do would have been to take every last penny of that pay increase and sock it away, but I was still 25 after all, and enjoyed splurging now and then. Still, he'd gotten my attention so I headed to Morgan Stanley with him so that I could come up with a savings/investment strategy.

Walking into Morgan Stanley I didn’t know what to expect, and I definitely can’t remember a single thing the financial adviser told me. This was at the height of the dot.com boom and let’s just say my first couple investments essentially tanked. But I was hooked. I did pick up on “dollar cost averaging” and “compounding interest”, so I stuck to a plan and every month would put a portion of my pay into a couple mutual funds. At this time (early 2000s) the Marine Corps did not have any retirement plan outside our pension and it wouldn’t be until 2002 that the Thrift Savings Plan (TSP) would be open to service members. I did my best to become informed over the next couple years, even opening a brokerage account with USAA to dabble in some stocks (not recommended). I was single, making good money with little to no bills, so I had room to take some risk. I made some money and lost more, in the process solidifying myself as a bona fide saver/investor. I was in it for the long haul.
Tim and his friend Murph in Iraq. It was Murph's little daughter who would one day say to me, "You have too many, Brady!"
In November 2002 I deployed to Kuwait prior to the invasion of Iraq. In Kuwait I had a lot of time on my hands, I used it to get as smart as I could on improving my investment strategy. The first step I took was opening up (and maxing out) the TSP when it became available to service members during one of the open seasons. Looking back, this is probably one of the best decisions I made. My only regret is reducing my contributions when I was transitioning from a single captain in 2006 to a married captain in 2007 with our first kid on the way and only one income. Fear of not being able to provide for my family in the “now” overruled my desire to save for the “then”. Fortunately this was short-lived as we would learn to live well within our means and get back to investing in full.

Our next best financial move was when I was selected for major in December 2009 and I looked at
Rachael and asked her the very same question my dad had asked me when I was getting ready to
commission: "Are you happy with the quality of our life now?" She might have looked at me like I was crazy but I asked her to trust me. I let her know that together we can be sure that our family will never want for anything and we can still live a very comfortable life; but in order to secure our future and the uncertainty that comes with it, I want us to save as much money as we possibly can. I don't want to be in the position of NEEDING to work after my retirement from the Marines. I also know that while money doesn’t buy happiness, it does provide peace of mind in knowing we should be able to weather almost any storm. So when I got promoted to major we continued to live on my income as captain.
Tim and Annie in 2009
This trend continued when selected for lieutenant colonel of basically living well below our means with an eye on the future. Now with retirement a couple years away we’ve set our sights on trying to achieve a net worth over $1,000,000.* Crazy, right? The infamous they will tell you that you can’t get “rich” serving in the Marines. Most people believe this falsehood and therefore never try. Reaching this goal is going to depend largely on the market and our investments performing well, but our monthly savings amount will be key and that is the one thing we can control.

*This is strictly investments (retirement and non-retirement only). We don’t own property yet and have no debt, so we have zero liabilities. This will obviously change post retirement but that is a separate post.

The Numbers

I’ve always disliked when I read a blog post or article like this one and there is not one ounce of real
information, just folks giving out a lot of advice and talking around their actual income and investments. I'm sure they have their reasons, but in order to make this more tangible and something most anyone can relate to, I’m going to use our actual data. Now, it’s also pretty easy for anyone to see how much money we make simply by Googling 'military pay charts'. Mind you this has been a 24-year career to date and we weren’t always at our current salary.

I will use three reference points to show how we got it done:
2012- Post deployment on a Marine Expeditionary Unit (MEU) as a major
2015- First full year stationed and living on Parris Island as a major
2018- Command Tour as a lieutenant colonel

***I would be remiss if I didn’t mention again how blessed we have been in our lives and we do our best to recognize that every day.***

So here goes:

2012
2015
2018
Monthly Inc
$7,161.90
$7,430.10
$9,820.20
Housing
$1,908.00
$0.00
$1,759.00
BAS
$239.96
$253.38
$254.39
Total
$9,309.86
$7,683.48
$11,833.59
Deductions (tax, FICA, medicare, etc)
$937.18
$1,107.71
$1,376.50
Total Inflows
$8,372.68
$6,575.77
$10,457.09
Monthly Charity Donations
$252.00
$129.00
$500.00
Monthly TSP+Roth IRA
$1,540.00
$1,786.00
$1999.67
Monthly Non-retirement Investments
$1,140.00
$1,300.00
$1,900.00
% of Pay Invested
28.79%
40.16%
32.95%
Yearly Contributions
$32,160.00
$37,032.00
$46,788.00

*Housing allowance is based on duty station and we always strive to have rent/housing costs
mostly covered by the allowance. Living on base as was the case from 2014-2017 is always the best option since everything minus TV/Internet/phone is usually covered by the allowance.
**2015 was the year of Joey.  We had to pay for the midwife out of pocket so our investing in non-retirement took a bit of back seat.  We did continue to max out our TSP and my Roth IRA and once Joey was born we reinvested in our Vanguard accounts.

Note: Although we receive dividends from our current non-retirement investments, those are all re-
invested automatically, so we have no other sources of income coming into our household.

Monthly Charitable Donations.  We strive to increase the amount each year. We feel a responsibility and obligation as Christians to do as much as we can to help others and to support causes we believe in.

Our current investments:
TSP 1541.67/month (max out at 18,500) 50% to C Fund, 30% to S Fund, 20% to I Fund
Roth IRA 458/month (max out at 5500) all to Vanguard S&P 500 VFIAX
Kids UGMA 100 (25/kid x 4 kids) all to USAA Mutual Fund Cornerstone UCEQX
Vanguard Funds 1800/month (this is a non-retirement account) split among 4 Funds (VWIGX, VGSTX, VWIAX, VWENX)
TOTAL 3899.67/month

These haven’t always been this aggressive. With each pay raise and promotion over the years
we are able to set aside more and more. Also, as I've mentioned, we are challenging ourselves to save even more as we reach the end of our road in the Marine Corps. It's not always easy, but adhering to some simple principles I’ll mention in a minute makes this an attainable goal for anyone.

How we do it

Because we have been disciplined in tracking our spending through the years we have been able to save an average of 30% of our total income. Any additional deposits from tax refunds, travel pay associated with my PCS orders or TAD assignments, deployment pay, etc. are usually not spent and continue to add to our net worth. And because we have been so good saving/investing, when it does come time for a big ticket purchase such as a new set of leather couches or handmade dining room table, their impact on our overall net worth is minimal. For a small glimpse on how we can get this done, I’ve come up with a few easy tips:

 •  Quicken. If you aren’t using a tracking system to know where every PENNY goes, you will not
succeed. I know it sounds harsh, but it's true. You'd be amazed at the way the little things add up. Track every penny and you'll see how much you're wasting, and also figure out what your priorities are.

 •  Eliminate excess. If we don’t need it to fuel our bodies or our cars, then we stop and think about it before we buy it. That doesn't mean we don't buy it, only that we do it mindfully and we plan ahead for larger things.

 •  Budget. We don’t have one per se. Since we pay ourselves first with our savings, then
take care of known, recurring, and predictable expenses next ( i.e. rent, cable, phone, etc.), I tell Rachael we can spend every single other dollar left over on whatever we want. In our family, food spending is the lever that controls the whole month's discretionary spending. For example, "Hey, I want a $100 pair of Birkenstock sandals."  Ok, great.  Figure out how to spend less on groceries and other things (for example, was that $25 arch window shade for the boys' room really necessary?), and it's easy to find money to buy the things you want. But -- and this is the toughest part -- we try to wait till the end of the month to buy the extras, to ensure any pop-up expenses are covered.

 •  Spending freeze. Every January we try to initiate a spending freeze. This means zero spending
outside food and gas (if possible). This ensures we start the year off on the right foot with a
possible “surplus”. I will also talk with Rachael at other times in the year in which if while
watching our finances I feel we need to buckle down or redirect funds but for the most part we
only do this once a year.

 •  Vacations. We go on a yearly beach vacation with Rachael’s family. It is a calculated expense
and starting with the January freeze, I try to knock off a little by little each month. The goal is to
not touch any savings to pay for current year leisure.

 •  Cars. Both of ours have been paid off for years -- mine since 2009 and hers since 2013. This has
been a huge help in achieving our goals. I will admit I am tempted ALL THE TIME to buy a new shiny piece of metal with wheels. Rachael can tell you how crazy I will drive her when it comes to car shopping, but fortunately I haven’t pulled the trigger, and my 16-year-old pickup still gets me
from A to B (and it’s a bad a$$ ride).

Tim's big white truck a.k.a. his first wife
Over the years/Conclusion

This didn’t happen overnight. I went back today to look and see where we started and I was struck by how far we've come. In December 2001 as a brand new second lieutenant with no true worries in life, I had a net worth of $5,418.88. The nearly 17 years that have followed have seen a lot of living -- our wedding, the births of our four kids (two of which were homebirths and paid for out of pocket), the ever-increasing expenses that come raising kids, a lot of vacations, a couple new cars, and the list goes on. Throughout all of this our net worth has increased over 13,561%!! No second job. No “get rich quick” schemes. No unmentioned passive income. Just a young officer with a vision into the future and realizing early on what sacrifice it would take. This didn’t happen because I was an officer. It happened because I was grabbed by the ears early on by my father who pointed me down a path towards financial independence. ANYONE can do this. I may have started this journey alone but it requires a TEAM effort for us to have achieved this. We are proud of this not because of the value of our net worth, but because we know that come what may, we're going to be able to take care of our family and continue to share our blessings with others.

Thursday, August 9, 2018

Since summer is just about over, I thought it might be a good time for an update.

For Tim, Joey and me it was a very quiet July. We sent the Big 3 up north again to stay with their grandparents for a month. Delaney got to go to the long-anticipated sled dog camp with her cousin Alexa in western MA. Delaney and Alexa had a blast at that smelly dog camp, from everything I've heard. They spent five days and four nights camping and playing with huskies. They roughed it together in a two-man tent with only baby wipes to clean up with until their ineffective solar shower before being picked up. Tim Sr was there for pickup on Friday, and he said the whole place stunk. I got the pictures Sam (Tim's sister, Alexa's mom) took the day she dropped them off, but then I didn't get any more. I was miffed about that because after what it cost for her to go, I felt kind of entitled to some pictures. I watched their Facebook page all week, and they only posted three pictures, none of Delaney and Alexa. But they sure did look cute -- and clean -- on drop-off day. I was and am really happy for Delaney to have this opportunity. She is a lucky girl.
The packing list was insane.
Delaney tells me her favorite parts of sled dog camp were primitive skills and playing with the dogs. When I asked her what primitive skills are, she told me making their own dinners by the campfire. One night they heated up chicken and vegetable wraps inside foil over the fire. The next night they made their own stew with herbs they picked themselves. Another night was pizza they made over mini fires. She picked up the dogs' poop, fed them, and let the dogs pull them across the river. 
They each got to go on their little camps and excursions, but what made me happiest was them getting to spend time with family and getting to be outside a lot. They could step outside any time of day and play in the pool or throw a ball around the backyard. Here in the south it gets way too hot and humid. Summer reaches its expiration pretty quickly around here where all there is to do is pool in the morning, have lunch, Joey's nap, and spend all afternoon inside in the air-conditioning. I give in to them being on devices way too much, but there are only so many games of Uno we can play, and we kind of get tired of one another. Add to that the incessant rain and thunderstorms we had for the second half of July, which took away the best thing about summer -- swimming. I was really glad they weren't here for that.
I'm going to stop here and give a shout out to Tim Sr, Carolyn, Kathy and Brett, Sam and Karen for making this possible: getting them up there, keeping them, taking them places, and bringing them back to us. You're all the best. These kids had a fun and memorable July, and it's thanks to you.❤️

Joey didn't seem sad without his siblings even though he talked about them all the time. We Skyped often, and he loved talking to them. I think he kind of liked the undivided attention he got from Tim and me.
Dinner for 3
They got back August 1, and school starts the 27th. We are back to our regular summer routines, and it's not too bad now that the rain has taken a break. On any given day we might do an errand or two, and then go to the pool at the Y.  I started a once-a-week library habit when it was just Joey and me, and now that they're all back we're continuing it. I read this book right before they got home, and that lit a fire under me to start read-alouds again with them. I used to read to the older kids all the time, books like the Little House series and The Lion, The Witch and the Wardrobe. Then as time went by and they got to be such good readers themselves, I thought they didn't need or want me reading to them anymore. I realized after reading this book that I was completely wrong about that, and 'duh' since I have fond memories of having my mom read with me when I was Delaney's age and older. I decided to begin again asap. What better time than the doldrums of summer! We finished our first read-aloud which was one of the author's recommendations: My Father's Dragon. Those of us who could read each took a turn reading a chapter until we were done. I hadn't heard Timmy read out loud more than the occasional short storybook, so I was impressed by his fluency -- no stumbling at all. I was not crazy about the book; I found it to be just OK. The kids seemed to like it. Next up is one of my old favorites, Cheaper by the Dozen.
Spot It -- a game that makes me feel like my brain is paralyzed
Cow Cafe with Grandpa
Every day after dinner we walk the neighborhood loop and the kids ride bikes or a scooter. I really enjoy these walks, as sweaty as they are. They are good family time. Thankfully, even during the rainy weeks we had, it was usually clear for just long enough for us to squeeze it in. Sometimes we run when Tim makes me.
Sometimes it can feel overwhelming having them all home every day, bickering and making all their noise. But the other night as I sat there finishing up dinner -- alone, as usual, because I'm the slowest eater of all time -- I took in the scene around me. Delaney and Timmy were clearing the table and loading the dishwasher. Annie was upstairs starting a bath for Joey. A couple years ago I could hardly picture the possibility of this. They are growing up and they have the ability to lighten our load. Whatever we're doing is working!

Next week Delaney will spend a few mornings learning how to play clarinet at band camp, and we have some other things here and there to take us through the rest of the month. I'm hoping we can fit in a couple more beach days and enjoy the lull before the craziness of back to school. 

On September 8, we'll meet my parents in Asheville to pick up Willow, our Frenchton puppy. Brace yourself for an onslaught of puppy pictures! I'll leave you here with a couple because I can't resist:

We are now annoying dog people.