What We Teach Our Kids About Money

Parenthood is a big responsibility and I feel like I’m messing it up a dozen times a day. When it comes to teaching our kids about how to manage their money, though, I feel like we really need to get it right.

What We Teach Our Kids About Money--www.thethreeyearexperiment.com

Mr. ThreeYear and I got out of debt by following Dave Ramsey’s baby steps, and we also listened to what he had to say about kids and money. He has a lot of great advice when it comes to teaching your children about financial matters, so we started there. But money is such a complex and important topic that we certainly didn’t end there.

Here’s what we currently do to make sure that our kids have a good relationship with their money.

We Give Them an Opportunity to Earn Money

Ramsey recommends giving your children, at as young ad 3 years old, three jars in which to put their money: Save, Give, Spend. We made jars for the boys early on. They have the opportunity to earn money by doing their chores every week. They can earn up to $6 per week for doing their three chores (these are age appropriate chores–for my 10 year old, it’s making his bed, clearing the table, and doing his laundry each week, and for my 7 year old, it’s setting the table, making his bed, and tidying his room). If they don’t do their chores, they don’t get paid.  Continue reading “What We Teach Our Kids About Money”

The Financial Domino Effect

Have you ever made a change in your life–maybe a huge one, like getting out of debt, or maybe a small one, like deciding not to buy takeout coffee–that in turn, caused benefits that you never imagined?

The Financial Domino Effect--www.thethreeyearexperiment.com

Maybe getting out of debt made you realize that your house was too big, so you decided to move into something smaller. Maybe not buying takeout coffee helped you realize you could save in other small areas, and after a few months, you ended up with enough to go on a trip to Florida.

This is the financial domino effect, and it happened to me.

Like a chain of dominoes, where one tile makes the whole line fall down, one seemingly small change in your life creates scenarios that make it more likely you’ll create other small changes.

via GIPHY

One action that is, on the surface, completely unrelated to another action, causes the start of a wave of behaviors that can ultimately change your financial life. Continue reading “The Financial Domino Effect”

January Net Worth Update

It’s time for another net worth update! Are you in the midst of winter, or is it warm and deliciously summery where you live? The ThreeYears are smack dab in the middle of the coldest and snowiest parts of winter, but we made it through January and we’re raring to go for February (Little ThreeYear can hardly wait for Valentine’s Day and all that chocolate he thinks he’ll get from his classmates!).

January Net Worth Update--www.thethreeyearexperiment.com

This is the first report from 2018, and boy is it a good one. Subsequent reports may not be as juicy, given that the stock market may have more “small or significant corrections” coming up, so I’m focusing on January while I can!

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 (gulp!). 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!

We started the month of January off in warm Santiago. We took a three week trip to visit my in-laws, and had an amazing time.

La Moneda--www.thethreeyearexperiment.com
The boys had a blast during our visit to Santiago and San Pedro de Atacama in Chile, even if some of the smiles look forced!

I was very excited to see how our spending would look in January as compared to spending in 2017, given we have now eliminated the mortgage in Chile and our car payment. We’re also working to keep our food spending lower than last year.

Continue reading “January Net Worth Update”

The Average Joe’s Ultimate Guide to Getting Out of Debt

What would your life look like with no more payments? No more car payments. No more credit card payments. No more student loan payments. How much extra money would that give you? Imagine the freedom to travel, to build your dream house, to finally retire. It’s a new year. And a chance to finally, once and for all, get out of debt. But what if you’ve tried before, and nothing’s worked? Or you’ve gotten out of debt only to get back into debt?

Average Joe Ultimate Guide Debt--www.thethreeyearexperiment.com

If you’re reading this, you may have an overwhelming amount of debt to tackle. Or you may be a personal finance guru, and need this advice like you need an extra helping of pasta with dinner.

Never fear! This guide is designed to help you get out of debt, but much of this advice will also work for other large, looming goals you’ve set for the year.

But why, you may be asking yourself, should I listen to this random voice on the internet? What does she know about how to get out of debt or how to accomplish my goals?

Our Story

I have written every detail of how Mr. ThreeYear and I managed to get out of debt in this post and this follow up post, but in case you’re new, here’s a recap.

When Mr. ThreeYear and I got married, we were both debt free. This is something of a miracle when most college graduates finish college with debt. According to Tica, The Insitute for College Access and Success, 76% of graduates from New Hampshire, where we live, have college debt upon graduating as undergraduates, and the average debt burden is $33,410. That’s for undergraduate education!

I was fortunate to have scholarships to college and parents who paid the rest. Mr. ThreeYear was fortunate to live in a country where undergraduate education is more reasonably priced: Chile. When we met (in said country), neither of us had any debt. We spent a few years living like the DINKS we were, but Mr. ThreeYear’s way: we bought everything in cash. If we couldn’t afford to buy it with cash, we couldn’t afford it. I scoffed at Mr. ThreeYear as he saved up to buy a car, in cash. “Why don’t you just take out a car loan?” He looked at me like I was crazy. “I don’t want to take out a car loan! I’ll just wait and buy it when I have enough money.”

hiking in Chile--www.thethreeyearexperiment.com
Mr. and Mrs. ThreeYear, very long ago, in Chile.

Two years later, we moved to the States. We moved to the fast and furious city of Atlanta, where Mr. ThreeYear, and then I, found jobs, and slowly, every-so-slowly, we began to adopt the Atlanta way of life. First, we bought a house. We had been renting a very nice, 1100-square-foot apartment that was 15 minutes away from Mr. ThreeYear’s job (it was literally two miles away from us, but you know, Atlanta traffic). It had tennis courts and a pool, and a low rent (we paid around $850 a month for a two-bedroom in the heart of the city), but we decided we should buy a house, instead. Continue reading “The Average Joe’s Ultimate Guide to Getting Out of Debt”

Don’t Want to Think About Saving for Retirement? Just Do This.

Personal finance can be overwhelming. There are so many steps, dos and don’ts, behaviors to adopt, what have you. Once in a while it would be nice to have a fail-safe, simple solution to follow to make sure you have enough for retirement.

Don't Want to Think About Saving for Retirement? Just Do This--www.thethreeyearexperiment.com

As Mr. ThreeYear and I struggled to pay off our debt and become more financially responsible, I met with a personal finance instructor who taught at a local college. I showed her the ins and outs of our finances, and I remember her saying, “you’re not even maxing out your 401K?” We weren’t, at the time. We were only contributing enough to get the match, because we were saving for a house downpayment. We’d contributed more in the past, but never maxed it out.

It took us another two years to completely max out Mr. ThreeYear’s 401k, but when we started to do so, I realized that for many people, this was the simple key they were looking for to save for retirement.

Maxing out your 401K is the single best way to save for retirement, lower your tax implications, and spend less, all in one fell swoop. Continue reading “Don’t Want to Think About Saving for Retirement? Just Do This.”

5 Money Moves We’re Making Before the End of the Year

While we’re still over a month-and-a-half from the end of the year, we know that soon, December 31st will be upon us, so the ThreeYears are currently working on end-of-the-year money moves to make sure our finances are in good shape.

5 Money Moves We're Making Before the End of the Year--www.thethreeyearexperiment.com

Here’s what we’re doing to close this year out:

1. Contribute as much as possible to my i401k

Since I’m self-employed, I have an i401k (if you’re interested in the particulars of opening one, read this post). I am playing catch-up with my contributions since we had so many cash goals that we funded with my income this year. So, in the final quarter of the year, and in the first quarter of next year (or at least until we file our taxes), I’ll be contributing a lot to my 401K. Even though the market is high now, I don’t want to miss the tax contributions of these contributions. I estimate we’ll save several thousand dollars on our taxes if I reach my contribution goal for the year.

2. Fulfill our outstanding financial obligations

We’ve got a few outstanding financial obligations, including completing our yearly pledge with our church. We usually wait and pay the majority of our pledge in the fourth quarter of the year, when our cash flow’s better (as a teacher, I don’t get paid in the summer and it takes a month or so after school starts to begin getting paid, so our income rises in October, November, and December).

I also have to pay my fourth quarter taxes for income earned from September through December. I have until January 16th, 2018, to file the taxes, but I’ll probably go ahead and pay what I estimate I’ll owe before the end of the year. I set aside 20% of my income as it comes in, in my business account, so that money is ready to send in anytime I decide to pay the bill. Continue reading “5 Money Moves We’re Making Before the End of the Year”

How We Plan to Double Our Net Worth in 3 Years

I started this blog almost a year ago to document our family’s journey toward location independence over three years. We picked a three-year time frame because it coincided with several significant events in our family’s life: our oldest son finishing sixth grade, my husband turning forty-five, and me turning forty.

How We Plan to Double Our Net Worth in 3 Years

We love to travel, and we also have family who live in two different continents, so becoming location independent would allow us to spend a few years, before our boys start high school, living in an international location, or traveling between our respective families for a few years.

In order to make our plan work, we decided we would need to double our net worth and find jobs that would support us during our travel time. While doubling our net worth could allow us to live on 4% of our investments at a certain spending level, we know that with our current spending plus the need to fund two college accounts, we would prefer to have employment during our travel years, preferably employment that provides health benefits.

While we’ve talked about other aspects of our plan, we haven’t delved into how, exactly, we plan to double our net worth. So I thought I’d walk through our plan in this post.

Year 1 (roughly 33% increase):

We have almost completed Year 1 of our Three Year Experiment. This year’s focus was on paying off the last of our debts and funding some major home repair projects, all while saving and investing to grow our investments and decrease our debts.

I don’t know if we’ll increase our net worth by the full 33.33% this year, but we’ll likely be close. Here is where the majority of the gain has come/will come from. Continue reading “How We Plan to Double Our Net Worth in 3 Years”

The Best Way to Avoid Lifestyle Creep

Recently, I was listening to an interview by The Mad Fientist of financial planner Michael Kitces, who is the person responsible for a lot of the research done on the 4% withdrawal rule. Kitces has worked with many clients working towards financial independence and/or early retirement.

The Best Way to Avoid Lifestyle Creep--www.thethreeyearexperiment.com

At the end of the interview, the Mad Fientist asked him for one piece of advice for speeding up one’s journey to FI, and Kitces replied, “avoid lifestyle creep.”

Lifestyle creep, or lifestyle inflation, is the tendency we have to inflate our standard of living as our incomes increase. When we first graduate college and get a “real job,” we’re content to live in an apartment with a roommate, use Goodwill furniture, and drive a beater car. But as we bring in more money, we tend to upgrade our houses, furniture, and cars, and once we trade up for a nicer model, it’s really difficult to downgrade again.  Continue reading “The Best Way to Avoid Lifestyle Creep”

How to Save Money When You’re Not a Saver

Raise your hand if you’re a saver. You know, you never spend money. You’re biologically opposed to pulling out your wallet. You’ve got thousands squirreled away in a savings account somewhere, and you’ve built it up almost without thinking about it.

How to Save When You're Not a Saver-www.thethreeyearexperiment.com

I bet you grew up in a frugal family, right? Did your mom always pack sandwiches when you went on road trips? Did you rarely, if ever, go out to eat? When you did, the whole family ordered waters and split entrees. Am I close? Did you live in a modest ranch your whole life, wear hand-me-downs, and ride in the same car for a decade (that your parents paid cash for)?

I’m not making fun. No way. I’m actually a little jealous. Here’s why: you had the best possible education growing up. Your frugal family taught you how, almost without thinking about it, to spend less than you earn. You feel trepidation–a healthy fear–towards buying stuff, and you instinctively pause before buying a material item, and think about whether you actually need it or not. Continue reading “How to Save Money When You’re Not a Saver”

Outfitting Your Kids

Mr. ThreeYear and I practice selective frugality. That is, we spend our money on the things that matter to us, but minimize spending in areas that don’t matter. One of those areas is clothes. While I haven’t been on a three-year clothing ban like Mrs. Frugalwoods, I minimize costs in this area whenever possible. We also have two kids and live in Winterfell–I mean, New England–so we have growing bodies to clothe through our long, snowy winters.

Snow--www.thethreeyearexperiment.com
Happy winter. And Spring.

So how do we outfit our Little ThreeYears each year Continue reading “Outfitting Your Kids”