How to Outsmart Your Mental Accounting to Save More

Have you ever gotten an unexpected check in the mail or a big tax refund, and your first impulse is to go spend it on something amazing that you wouldn’t normally buy yourself, like a lavish dinner? Me too. Why do we do that and how do we make better choices with these “bonus” windfalls?

How to Outsmart Your Mental Accounting to Save More www.thethreeyearexperiment.com

I know that money is fungible, that I can use any part of my money on any one of my expenses, even though I have different mental buckets for my money. So rationally, I would add those bonus windfalls to my biggest goal of the moment, doubling my net worth. But that’s not always how it works.

We use mental accounting, or dividing our money up into “mental buckets,” for a lot of reasons. It’s a lot easier to think “I have $700 to spend on groceries this month” than to pull it out of one big account. That’s too confusing and I might spend too much without those mental buckets in place to help me categorize things. If we get extra money that falls outside of those buckets, then it does feel like extra, and shouldn’t have to be spent according to the same rules. Continue reading “How to Outsmart Your Mental Accounting to Save More”

Our Location Independence: Your Questions Answered

After I posted our news that we’re moving to North Carolina this summer and will officially be location independent, some of you had questions. I thought I’d publish a follow up post to answer those questions and hopefully shed a bit more light on some of the decisions we made.

But first, make sure you read this post that details that plan. It contains a lot of information about where we’ll be and what we’ll be doing!

Okay, on to your questions!

The Numbers

Jalpan from Passive Engineering asks, “My question would be on the numbers. How did you decide your original number  and how did you reach the conviction that you’ll still be okay even though you’ve not hit it?”

Great question, Jalpan. When we first decided the net worth number we wanted to hit, we knew it wasn’t the same as our FI number. In order to be completely financially independent, we’d need to save up more than our double net worth goal. But, we assumed that during location independence we’d either:

  • be working full time or
  • be traveling for a short amount of time, like a year

Continue reading “Our Location Independence: Your Questions Answered”

How Fixing What’s Broken Helps Your Financial Life

This post may contain affiliate links. Please read my disclosure statement on the Start Here page for all the fun details. Thanks for supporting the site!

In the months leading up to putting our house on the market, we spent a lot of time fixing the broken areas in our house. Our kitchen sink had been leaking for months and we finally hired a plumber to install a new faucet. There were two plastered spots in the bathroom where we’d removed a towel rack and we painted over them. For the entire time that we’d lived in the house, we’d had a light fixture in the bathroom that we’d removed, because we were scared it wasn’t water safe, and had put a metallic plate over. We finally got a water safe light installed.

How Fixing What's Broken Helps Your Financial Life www.thethreeyearexperiment.com

These fixes cost money, but not near as much as I thought they would. Once I found a handyman and an electrician who’d fix everything, I think we ended up spending around $350 to: Continue reading “How Fixing What’s Broken Helps Your Financial Life”

May Net Worth Update

We’re well into June now, and the end of school is almost here. Our school year ends Wednesday, and then we’ll be spending entire days packing and getting ready for our big move to North Carolina. The weather in New Hampshire has been beautiful–cool mornings and warm days, with lots of sunshine. This time of year always has the power to hypnotize you with its beauty and leave you wondering why you were ever complaining about the weather.

May Net Worth Update www.thethreeyearexperiment.com

On the home front, I’ve been finishing school work, packing, and doing graduate work (I have three courses more in my master’s program and I’m taking one in June and July). I’m so frayed that I’ve let all the non-important stuff go (you know, like dishes and laundry). Our house looks like we hosted a college frat party, minus all the empty bottles. We have all these random items in our corner, waiting for a yard sale, and there’s a dresser standing on its head in our entry, waiting for its Facebook buyer to come pick it up.

Mountain of moving boxes May Net Worth Update www.thethreeyearexperiment.com
The mountain of boxes in our basement.

If you’re just joining, our family of four is on a three-year journey to double our net worth and become location independent. Each month, I record our progress on our net worth and our spending. Last year, we increased our net worth by 32% over the year before. This year, we’re trying to increase it by more than 65% from where we started in December 2016. Given the wild ride the market’s likely to take us on this year, I’m not sure it’s doable. But we’re going to try.

May showed us more steady growth. Much of our financial progress was on autopilot last month, as we found a buyer for our house and looked for places to live in our new town. We know that our net worth will take a big dip when we sell the house, so I’m enjoying these numbers while we can.

Continue reading “May Net Worth Update”

How We Save Money on Travel with Kids: Guest Post on M$M

Travel with kids can be a scary concept for some people. Just thinking about flying with your baby can inspire terror in the most stoic of travelers.

How We Save Money on Travel with Kids: Guest Post on M$M www.thethreeyearexperiment.com

And while I admit that flying with our youngest was the reason that we have two, rather than three, kids today, traveling with kids can be done in a way that creates good memories for the whole family. Yesterday our story was featured on Millennial Money Man‘s blog and in it, I shared some tips we’ve gathered during the past few years for traveling with kids and sticking to your budget.

Related Reading:

Bobby is the millennial behind Millennial Money Man and his story is pretty cool. He used to be a high school band director, but after paying off $40,000 in debt on his teacher’s salary, he started a blog, and then decided he was going to turn the blog into a business. He shares his monthly blog income reports and he’s been pretty successful so far. While our family is obviously far from the millennial category (although my sister tells me I am now officially a millennial because they’ve decided to include ’79ers), I know there are a lot of people with kids, or thinking about having kids (like Bobby and his wife Coral) and they’re wondering how to fit kids into their travel plans.

While I didn’t include details about how to survive the plane rides (drug your kids), I did include other tips about making travel work with limited travel dollars. So read on! (And I’m kidding about the drugs–sort of).

A Year of Good Food: Survive the Move

June is here and with it, summer weather and summer eating! We love the beginning of fresh fruits and vegetables and the lighter meals we tend to eat during the summer months. There’s no air conditioning in most places in New Hampshire, our house included, so keeping our house cool is important. That means limited time using the stove and oven.

A Year of Good Food: Survive the Move www.thethreeyearexperiment.com

This year, our family is challenging ourselves to spend less on food so we can save and travel more. Last year, I adopted one habit a month that would translate into better money moves for our family. You can read all about our A Year of Good Habits here.

That experiment worked so well that we tried a new one this year. In 2018, we are challenging ourselves to do better at our food spending. Last year our family spent over $12,000 in groceries, or $966 per month.

This year, our goal is to spend 20% less on groceries. That may not sound like a lot, but it’s almost $200 per month in food savings. The extra $200 per month is going into a travel savings fund, so we can see the results of our hard work in spending less on food.

We could have adopted a radical goal to keep our spending under $500 or something like that. But we know better. We thought it made much more sense to consistently hit our modest target, month after month, for an entire year, to show ourselves we could do it, than to maybe hit the $500 goal once or twice and then face plant with more $1000+ grocery bills.

And if we consistently hit sub-$772 spending, then perhaps we’ll challenge ourselves next year to shave off more.

Each month, we’re trying out a new way to save money at the grocery store. Last month, we focused on shopping the perimeter of the store only. It meant we ate healthier. You may have read the news that we’re moving at the end of the month. That’s right; our dream of location independence is coming true.

May

Because of the move, there was zero planning for May’s food shopping. We went to the store when we could, didn’t use lists, didn’t meal plan, and generally just pieced our meals together as best we could. Despite the chaos, I’m happy to report that we spent $775.95 in May. Yes, I know that figure goes over our budget, but it only goes over $3.95, and believe me, we were spending left and right with no plan. Our house was on the market and we sold it this month. Plus, we had one visitor during the month of May and took two quick weekend trips, meaning our routine was even further skewed. So the fact that we were able to keep the spending down even while not really thinking about it makes me feel like we’re changing our underlying spending habits around groceries.

Continue reading “A Year of Good Food: Survive the Move”

The Big News

Mr. ThreeYear and I have some news to share. I’ve been waiting to tell you for awhile, but I wanted to wait until everything was finalized first.

The Big News www.thethreeyearexperiment.com

This summer, we’re going to be location independent!

That’s right, we’re doing it a full year and a half earlier than our plan. Needless to say, we’re pretty excited.

No, we haven’t reached our goal of doubling our net worth (we’ll keep working on that). And no, we aren’t going to take off on an around-the-world trip (yet!). But we are going to be able to move wherever we’d like.

We’ve sold our house in New Hampshire. We’re just waiting until the end of the month to close and move. I’ll be sure to write about all the details of our house sale and move later this summer.

And, we’ve found a place to live in a small community in a lake town of North Carolina.

How Did This Happen?

We felt very good about our timeline of becoming location independent by the end of 2019, and were working hard to save up and make decisions about how we’d make our location independent lifestyle look (if you read earlier posts, you’ll see we’ve changed our minds on that a lot over this past year and a half). But, this January, I had a fateful conversation. Continue reading “The Big News”

Pay Off Debt or Invest?

There’s a big debate in the personal finance community over whether it’s best to pay off your debt, or keep low interest debt (like a mortgage) and invest more.

Pay Off Debt or Invest? www.thethreeyearexperiment.com

After all, with low interest rates, you can likely earn more over time investing more of your money in the stock market and keeping low interest debt around. However, while the math may support keeping debt around, it certainly doesn’t account for the behavioral economics side of things. After all, as smart and logical as we’d like to think we all are, it’s all too easy to prefer a new car or vacation over disciplined investing, especially if a partner is pushing for those things.

And what about the feeling of being debt free? Being indebted to no one? If you carry a mortgage, you have that debt burden (and responsibility) over your head. Continue reading “Pay Off Debt or Invest?”

What Our Cars Really Cost

On Wednesday I wrote a post about all of the cars Mr. ThreeYear and I have owned in our time together (it was actually about most of the cars we’ve owned. There were a lot!).

What Our Cars Really Cost

Today I thought I’d delve into the financials of those cars, or as much as I can remember and piece together, and see what the total operational costs of our cars have been over time.

I predict that I will be shocked and disgusted by how much we’ve spent on transportation. A keystone to Mr. Money Mustache’s low spending is his reliance on bikes. Operating cars is one of the big three expenses that we’ve worked on reducing. But I suspect we’ve still spent a lot.

Let’s dive in: Continue reading “What Our Cars Really Cost”

How to Choose Cars that Match Your Financial Goals

Mr. ThreeYear is a car person. I am not. But we have both owned a lot of cars in our fifteen+ years of dating and married life.

How to Choose Cars that Match Your Financial Goals www.thethreeyearexperiment.com

We have made good car decisions. We have made bad car decisions. We have had car payments. We have owned cars outright.

Currently, we have two of the best, if not sexiest, cars we’ve ever have, and they match our financial goals pretty well. But how did we get there?

Today’s post contains all the details of our wonderful cars over the years, and how they’ve worked with or against us.

The Laser

I realized that I was marrying a car person when, soon after we started dating, Mr. ThreeYear decided to buy a new car. For our first date, he was picking me up outside my apartment in Santiago, and he told me he had a pretty old car. I had gotten locked out of my apartment, so I was waiting for him on the sidewalk, watching cars drive by. I have to admit that I was looking at some clunkers, and thinking to myself, “Please don’t be that car. Please don’t be that car.” He pulled up in a dark blue Ford Laser that was as old as I was (at the time, 22). But I thought, “I can live with this.” True, he had to adjust the radio with a screwdriver, and the interior was a bit worn, but the car took us where we needed to go. Continue reading “How to Choose Cars that Match Your Financial Goals”