The Financial Implications of a Theoretical Kid

There’s tons of great information out there on raising a family cheaply. Still, one of the most frequent questions I get when talking about my plans to retire early is “what if you have kids?” In this post, I’ll explain, broadly, my kid plan.

Background Info
I’m not yet certain I’ll have a kid. The maximum number of kids I would have is two. Kids are at least five years into the future. If I had one child, I estimate that our housing costs would remain relatively stable. We live in a three-bedroom apartment now in the middle of the city. This apartment is big enough, though barely, to raise a child in. If we had a child, I’d guess that we would probably move to a slightly bigger place (still three bedrooms, but with bedrooms larger than a king-size bed) in a cheaper area (an inner suburb).

Stage 1: Birth to Two: Kid is Born. Kid Cries a Lot. Kid Needs Constant Care.

• Breast-feeding: Increased amount of food for lactating mother. Increased food bill as kid starts on solid food.
• Cloth diapers: Diapers are icky, but if my squeamish dad did it, so can I. This is important to me not only because of the cost, but because of the environmental impact of disposable diapers. Disposable diapers make up a significant percentage of the trash in U.S. landfills—studies seem to vary from about 2% to 4%.
• Daycare/Baby-sitting: I hope to be semi-retired or working from home by the time I have a child. If I was not in this sort of situation, or if my spouse was not able to support me, I would not purposely get pregnant.
  

Stage 2: Three to Ten: Kid Runs Around a Lot. Kid Starts Getting Interesting. Kid Starts Wanting Things.

• Food: Further increase in amount of food.
• Clothes: Purchase used. Little-kid clothes are destroyed/grown out of quickly. If the kid starts caring about clothes when the kid grows older, I will show the kid through field trips that thrift stores offer a much wider variety of interesting clothes than retail stores.
• Toys: Buy used, buy at garage sales, trade with friends who have kids of similar or older age. Let kid play with Mommy’s art supplies, pots and pans, sticks. Buy kid a few toys kid really wants for birthday or Christmas.
• Gimme-Gimme-Gimme: Give kid allowance. Tell kid most things must be purchased out of allowance. Be firm. If tempted not to be firm, call my mommy and ask her for advice.
• Candy/junk food: A limited number of treats will be on hand. Mom will always love ice cream, so there will be plenty of ice cream. Mom is also happy to make cheap cookies, such as snickerdoodles. Mom will not listen to pleas for specific types of candy, Pop-Tarts, etc. Nutritionally empty snacks are what an allowance is for.
• Physical Activity: Once the kid starts walking/running, I’d attempt to have a yard or a nearby park/field for the kid to play in. Our upstairs neighbors have a kid who is about three. This kid runs around all the time. He runs from one end of the house to the other end of the house and then turns around and goes back again. It really doesn’t seem normal. When I was a kid, I made noise playing with blocks or torturing my brother, perhaps even kicking a ball down a hallway or something, but I don’t recall ever just plain out running back and forth for no reason. This kid needs to go to the park, which is conveniently located about four buildings down.
• School: I plan to unschool. Briefly, unschooling is unstructured homeschooling. I won’t be sending my child to school. I plan to encourage my child’s interests and support them, but not to follow a curriculum or force them to learn anything in particular. My interest in unschooling and my interest in early retirement go hand in hand, so I'm sure I'll talk about unschooling in more detail later on. From a financial perspective, this means that I will likely spend more money on hobbies/sports equipment/travel for my children. I won't be spending on things like private school tuition or textbooks (real books are better and as a bonus can be bought used).
  

Stage 3: Ten to Eighteen: Kid Learns About Opposite Sex. Kid Has Emotional Problems. Kid Wants Car. Kid Becomes Independent.

• Car: I’ve never had a car. If my kid wants a car, the kid will have to pay for it. I wouldn't live somewhere where it was impossible not to drive.
• College: If my child chose to go to college, I would like to be able to pay for it, mainly because I *hated* having student loans. I got off lucky with only about $8,000 in debt from my private college. It took all my self-control not to pay it off as soon as humanly possible. I finally caved and paid them off in January, when the interest rate from my savings account got lower than the interest rate on the loan. It was still probably a bad financial move, but it feels sooo good not to have that money going out of my account every month.
• Once the kid is born, I’ll start “snowballing” into a savings account/trust fund/529. I expect to have some earned income during “retirement,” even though I’ll no longer be working a full-time job. We’ll see how that goes. I can adjust as the kid grows older. If I save a bunch of money and the kid doesn’t end up going to college, the money can be spent by the kid on a big round-the-world trip/capital for starting a business/a house.
• Orthodontia: I had a cute answer for this one, but it just occurred to me that this theoretical kid is going to need health insurance, which I’d guess is a sight more expensive than health insurance for a healthy adult. Now that I’ve done all this thinking about my theoretical kid, can I sit on this question for a couple of years?

More on Frugal Child-Raising:

-Kacie at Sense to Save recently expressed skepticism at the “official” cost to raise a kid—an average of $204,000, depending on family income. In the comments, readers shared some great ideas.

- Leo Baubata at Zen Habits is a frugal dad with a family of six kids. One of his posts lists 100 Ways to Have Fun with your Kids for Free or Cheap. Lots of them would make a fun night for adults as well!

- Teaching your children about money can make it easier to raise them frugally. I’ve Paid for This Twice Already posted about Teaching Preschoolers about Money, with links to other posts about giving kids of various ages a financial education.

-Another excellent source on raising kids cheaply is the ever-helpful Amy Dacyczyn, who became frugal in an effort to raise a large family on one income.

Early Retirement in Three Easy Steps

Any book on personal finance will tell you that there are three steps to early (or regular) retirement.

Step 1: Determine how much you need to retire

Step 2: Get money

Step 3: Retire!

Step 1 takes a few hours to a few months, if you have no idea what you’re spending and need to track it. Step 3 takes two seconds: “I quit!”*

Step 2, on the other hand, takes approximately ten years to forever. That’s the stage I’m in. If you have a good grip on your finances but aren’t yet rich enough to stop working, that’s the stage you’re in. And I’m guessing most of us who are in the midst of step 2 could use a few more specifics on getting to step 3.

The three steps above bear an uncomfortable resemblance to the business plan of South Park's underpants gnomes. The starting point and the goal are clear, but the middle is a bit of a muddle.

In the last few months, I've been frustrated by the lack of information on step 2. Advice on personal finance seems to fall into two categories:

• Most popular personal finance books, blogs, and magazines cover step 1. They help you get out of debt, cut your spending to a reasonable level, and take some steps to prepare for the future, like opening an IRA. They may include a basic discussion of stocks or real estate. They usually encourage you build wealth towards the eventual goal of financial independence, but their specific advice ends with getting you to put 15% into a tax-deferred saving plan. The target reader is a young adult or an older adult who’s just starting to get his or her finances in order.

• Step 3 resources include most books on early retirement as well as higher-end financial news sources like The Wall Street Journal and Forbes. They assume that you’ve already made a fairly significant amount of money. They focus on teaching you how to best invest that money, or try to help you decide whether you already have enough money to retire. The target reader is middle-aged or older with a very well-paying job and significant assets. These resources can teach you a lot about investing, but the specific advice may be hard to execute if you’re not already very close to your retirement goal.

With about half of American adults saying they plan to retire before age 60, I think there’s a need for a lot more explanation of step 2.

I want Working for Rachel to be the step 2 site: a site about building wealth through frugality, investing, and entrepreneurship; about working towards goals that are important to you even when the journey gets hard; about making progress and facing setbacks. I hope to keep this site going in one form or another until I reach financial independence.

My goal is to help readers figure out how they can achieve financial independence or the freedom to do what they want with their time by sharing what I’m doing, talking about what’s worked for other people, and offering relevant tips and information.

This is just a baby blog so far, but I'm trying to improve it every day. If you've been reading for a while, thanks for joining me so far. If you're visiting for the first time, please stick around and I'll try to make it worth your while.

________

* There are a lot of complications involved in planning for that statement and dealing with it once you've done it, but those two seconds alone can make you “retired.”

What I'd Do All Day and Are You Crazy, Too?

[Image: "Books Are Love" by janetmck]

My brother: “You know, the thing I don’t get is, it seems like if you retired early you’d just sit around and read books all day.”

Me: “Exactly!”

Yeah, he knows me pretty well.

[Well, I’d actually spend about 80% of my time sitting around reading books all day, and the other 20% writing, researching, surfing the internet, watching movies, drawing, talking on the phone, traveling, walking, exploring the city, ice skating, roller skating, biking, cooking, typing, sitting outside, drinking tea, saving money, scuba diving, asking questions, answering questions, taking pictures, coloring, learning new software, petting cats, running, swimming, hang gliding, doing needlepoint, crocheting, thrift shopping, window shopping, taking long drives, picking apples, jumping in leaves, setting goals, going to the library, collecting, sweeping, making up new outfits, eating caramels, painting, playing board games, watching TV, cuddling, talking to my beloved, feeding birds, birdwatching, tubing, hiking, playing in a concert band. List from this thread.]

Emptying Out the Pantry Report:

Breakfast: Turkey bacon, cheesecake with strawberries, Earl Grey gulped down so fast I burned my throat.

Lunch: Tuna salad, romaine salad, soy nuts, square of dark chocolate

Dinner: Chicken fried rice and more cheesecake

(It might be relevant to mention at this point that I’m more-or-less on Atkins. Today being one of the “less” days. The cheesecake, however, was homemade and Atkins legal.)

As I forge ahead on this extremely strict food budget, I know that a lot of people would consider me, well, fairly insane for not just going to the grocery store and buying a bunch of food. So I'd like to try to pound a few other frugal freaks out of the woodwork here. Have you ever done something eccentric or downright crazy in order to save money? Why? And was it worth it? (I know a couple of the regular readers of this blog can top anything I could come up with.)

IRA Hacks: 72(t) and the Spousal IRA

Two little-known ways of using IRAs can be useful to early retirees or potential early retirees, stay-at-home parents, or anyone who’s not working but has a working spouse.

[Disclaimer: The following should not be considered financial advice. I have only a rudimentary knowledge on these subjects. Comments and corrections are appreciated.]

The “Spousal IRA”

In order to contribute to an IRA, your qualifying income for that tax year must be equal to or greater than your IRA contributions. So if you earned $3,000 in 2007, you could not contribute the maximum of $5,000 to your IRA. But if you’re married and your spouse is working, your spouse can contribute to your IRA up to the maximum.

This is occasionally referred to as a “spousal IRA,” but it’s not a separate type of account. If you already have an IRA from your working years, your spouse can contribute to that account, and if you need to open up a new account for this, it’s simply a regular IRA account. You must file your taxes jointly.

The most obvious use for this is so that stay-at-home parents can save for retirement. But I can also see this type of contribution being helpful for couples with a whole spectrum of other situations--couples in which one partner has retired early, is making only minimal income from a part-time job, is trying to start a new business (but not making a profit yet), or is unemployed/taking some time off. It allows a married couple to take full advantage of the perks of IRAs even though one of them may not have a job.

The 72(t) Rule

I don’t know why the 72(t) rule isn’t better-known. Even in the online early retirement community, people don’t seem to talk about it much. I think it’s so cool I can hardly believe it’s real—you mean I get to keep my money in a tax-sheltered account and I can get at it before I qualify for AARP?

Rule 72(t) allows you to take money out of an IRA without penalty before age 59 ½ as long as the withdrawals are made in “substantially equal periodic payments” (SEPP). The SEPPs must for at least five years or until you reach age 59 ½, whichever is longer. The rules governing exactly how much you can take out in each payment are fairly complicated, and there are a couple of different ways of calculating it—the IRS can tell you more (You might also try googling “72t calculator,” but I’m not familiar enough with these to recommend one here.)

The few things I've found in print about 72(t) seem to think that the SEPPs are a big drawback. I don't see why they would be. If you're on top of your finances enough to have retired early, you probably have a very clear idea of what you spend and can estimate pretty well how much you want each month and how it could change. With the limited amount of money one can put into an IRA, it’s unlikely that this would be your sole source of cash flow.

Now, clearly, if you don’t have a very solid plan for how you’re going to finance your golden years, taking SEPPs would be really dumb. But if you've got your post-65 life covered through your 401(k), IRA, or other investments and sources of income, and want to retire early, 72(t) allows you to free up some money without paying penalties.

Playing Chicken with the Grocery Store

["Spinach and Mutton Curry," jetalone]

I moved eight times before I turned eighteen. My parents were very organized about moving, as they were about almost everything. They had a household inventory. They had a comprehensive checklist. We never had to scrounge for boxes at the last minute because we always had just enough.

When we were getting ready to move, at a certain point we would start buying fewer groceries. First, we’d stop buying spices. Then we’d start questioning purchases of flour and baking powder. In the meantime, we tried to use up the things left in the cupboards at home: the long-neglected oatmeal, the container of rock salt, the wheat germ. Mom called this process “playing chicken with the grocery store.” The week before a move was often a culinary adventure, combining strange leftovers and unexpected junk food binges when Mom decided we had to get rid of the ice cream or the popcorn.

In an attempt to meet my $100 food budget, I am now officially playing chicken with the grocery store. Yesterday, I ate a garlic-butter fish entrée from Aldi. It wasn’t to my taste—I had to force it down with an improvised tartar sauce made of sour cream and pickle relish. But when I finished it, I was still hungry, so I ate the other one, too.

Today, I made something that resembled saag paneer with canned spinach and feta cheese. The feta melted instead of toasting and I never quite got the sauce creamy enough, but it wasn’t bad. Not bad at all. The leftovers are going to be my lunch tomorrow.

I went to the grocery store today and bought $2.00 worth of vegetables—broccoli and a big head of romaine. That plus the vegetables and fruit I still have around the house (a few tomatoes, a ridiculous amount of cauliflower, and frozen strawberries, plus a few other sundries) should take care of my vitamins for the week.

For tomorrow night’s main course, I have some chicken. The night after that will be hot-dog night. After that, I’ll have to get creative. I better start watching old episodes of Stump the Chef for inspiration.

If I get really desperate, I kind of have the ingredients to try Early Retirement Extreme’s “Cooking for 6 Days in 30 Minutes for Less than $4.” I wonder if it works without a pressure cooker?

Anyone have any idea what to do with hearts of palm? Three-quarters of a cup of lentils? A bag of kasha?

$1000 March Week 3

March 20th and coming into the final stretch. The next eleven days are the hard part--seeing if I can still control my spending when I'm very close to or over the limit in all my budget categories.

I've been sick all week. I actually "went home sick" at 2:00 today, which I haven't done since about the ninth grade. I had to run to the bathroom in the middle of a conversation with one of the women I supervise. R. is even sicker. We spent the evening entertaining ourselves by comparing fevers and drinking lots of fluids.

What I've spent, 3/14 to 3/20:

Food:
$11.00 on half of a Domino's order, split with R.
$3.06 at Starbucks

Yup, I went to Starbucks. I even bought a latte, as in The Latte Factor.

I wanted to reward myself after getting my blood drawn (I have a phobia of needles). I had a gift card. Apparently, the Starbucks connected to Macy's doesn't take gift cards. Instead of heading down the street to a proper Starbucks or skipping the coffee, I paid the $3.06. A small purchase, but I do regret it, because I bought the coffee only so the girl behind the counter wouldn't judge me.

Remaining in food budget: $4.58
The cheese crisis I anticipated last week hasn't materialized. I'll spend the last five bucks on some veggies from our friendly neighborhood independent grocery store. Then we'll see if I can get creative enough with my remaining freezer and pantry food to last me through the end of the month...I can do a lot with tuna.

Miscellaneous
$30 Doctor
$10.19 Birthday present for R.'s dad.
$60.98 Tax software

Remaining in miscellaneous budget: I've gone $1.17 over this budget. I'll go a little bit further over, because I have some photos that need to be picked up.

Total budget for March: $1038.86
Total spent so far: $984.60

How to Retire Early: Six Examples

What makes early retirement possible? The following early retirees are people profiled in books I've read recently. I've changed some of the identifying details, both to protect privacy and avoid copyright infringement, but the investment/money accumulation strategies are the same. I then tried to analyze why each person was able to retire early. I used "golden parachute" as a factor for people who received a lot of money from a corporation or employer.

The results surprised me. I'm curious to find out more about people who've succeeded in early retirement and how they did it across a broader population. Did you retire early? Do you know anyone who was able to retire early? How did you/they do it?

Johnny Blue Chip, retired at age 60
- Saved 10% of his salary in a 401(k). The money was invested in index funds of large-company stocks.
- Post-retirement, half of his money is in very conservative "cash" investments like CDs and money markets; half is in stocks
- Bought U.S. Treasury notes at a very high rate of return
- His annual return was well over 10% at the time of writing
Secrets of His Success: Good Timing + Thoughtful Investing

Mr. and Mrs. Working Rich, retired in late thirties
- Took over his father’s chain restaurant subfranchising business (question: what the heck is subfranchising?). Eventually owned their own franchise and built it to be one of the top ten in the nation.
- Parent company bought them out with a deferred payment and regular income at age 40
- Also have unspecified “properties” and a very expensive house, which they had before the buyout, suggesting that good genes were very important
Secrets of Their Success: Good Genes + Golden Parachute + Entrepreneurship

The Millionaire Next Door, retired in his early 50s
- planned for early retirement from the start
- spent two hours a day researching stocks, focusing on compounded returns. Was a longtime investor in IBM, his employer.
- inherited a profitable family business and ran that while still working
- wasn’t fully vested in retirement plan
Secrets of His Success: Planning + Good Genes + Thoughtful Investing + Golden Parachute

The Company Man, retired in his early 50s
- Invested in stock index funds through a 401(k) with employer match
- Took a voluntary layoff of one week of pay for every year served plus health insurance until age 62
-Also had a fully vested company pension plan
Secrets of His Success: Golden Parachute + Investing

The Not-Quite-A-Company Woman, retirement age unknown
- had a pension and profit-sharing plan through a major corporation
- used money from the profit-sharing plan to finance various business ventures: a real estate/restaurant business, a sports bar, and two apartment buildings, all of which she later sold. It wasn't clear whether she sold at a profit or a loss.
- accepted an early retirement buyout for two years of salary, full pension, and health insurance.
Secrets of Her Success: Golden Parachute + Entrepreneurship

The Self-Made Man, retired in late thirties
- retired in his late thirties with a portfolio of about six times his annual salary
- planned his retirement from age 25
- does some consulting work
- over 90% of his portfolio is in stocks or stock mutual funds

Secrets of His Success: Planning + Good Investing + Supplemental Income

Carnival of Personal Finance at beingfrugal.net

["Cyril the Squirrel up for a challenge" by Exfordy (coincidentally, an early retiree)]

I'm excited--this week's Carnival of Personal Finance, hosted by Lynnae of beingfrugal.net, included my post on library hacks, my very first post included in a blog carnival. Check out the full carnival here. Some of the other posts that caught my eye:

I've Paid for This Twice Already has been reading recently about how buying isn't always a good idea. She asks a smart question: when renting is less expensive than buying, what's it it for the landlord? Read the whole comment thread for some great reactions.

This blogger is a kindred spirit--Shanti at Antishay Ventenne wants to retire early because she has too much she wants to do. An eloquent and inspiring post--I subscribed immediately!

Finance Viewpoint talks about tipping from a cross-cultural perspective. I've thought about tipping differently since spending time in England, where tipping is less generous and less frequent (But I still do it!).

Jennifer at Finding Financial Peace explains why she's trying to forget the Joneses.

Review: You Can Retire While You’re Still Young Enough to Enjoy It: Straightforward Strategies to Get You There in Your 20s, 30s, 40s, or 50s

Great title. Who doesn’t want to retire while they’re “still young enough to enjoy it”? Abromovitz knows of what he speaks—he and his wife transitioned into semi-retirement in their early forties. As of the book’s writing, they were living near the beach in Florida and working occasional part-time jobs for fun and money. Sounds great! Unfortunately, Abromovitz doesn’t seem able to translate their success into useful advice for his readers.

He does not go into great detail about his and his wife’s finances, but it’s clear that they made significant amounts of money in two ways:

1. Through a 401(k) which was invested primarily in his company’s stock, which then skyrocketed. (Interestingly, I found a later interview in which he advised against investing too much in company stock.)

2. The sale of their primary residence. The profit from this sale was not taxed, and they used part of the profit to buy a much less expensive home in Florida.

Abromovitz hastens to assure his readers that they can achieve early retirement without striking it big in the stock market or real estate. Most of the chapters explain sources of post-retirement income such as 401(k)s and IRAs, Social Security, pension plans, and part-time work. He advocates taking advantage of 401(k)s and IRAs. He suggests investing in stocks. He talks about how working part-time may allow you to retire earlier. There’s nothing extreme or out-of-the-ordinary here—which is exactly why I doubt it would help anyone seriously gunning for early retirement.

There are two big flaws in his advice:

1. While he does admit that living below one’s means is necessary, he constantly tries to reassure the reader that sacrifices are not necessary or that the level of sacrifice need only be minimal. He points to luxuries like a backyard swimming pool and paying $6 a day for a cat’s paws to be massaged during a kennel stay as things one might have to “give up” to achieve early retirement. Another example of “cutting corners”: “You might need to give up that second car. Instead of trading cars every three years, you should hold onto them a lot longer. Perhaps, when your current vehicle goes to auto heaven, you’ll be purchasing a reliable used car.”

Abromovitz may be trying to reach his readers where they are (little savings, spending indiscriminately), but he does them no favors by making the goal of early retirement sound easier than it is. My impression is that he does not quite understand the sort of budgets most people are working with. The Abramovitzes “can’t bear” to rent out their second home in Pittsburgh and seem to eat out several times a week, two luxuries that are fine if one can afford it but are probably not possible for most people who retire early.

2. He recommends saving 20% of one’s paycheck. Sound realistic? Mainstream news articles tend to suggest saving 10-15% of one’s income for a post-65 retirement. These threads on Early Retirement Forums show some figures from people currently saving for early retirement.

I did some pretty extensive calculations using the 20% figure.

*beginning of extensive calculations*
Let’s say you’re 25 today, make a salary of $50,000 a year, and want to retire at age 55 (it’s clear that the author considers “early retirement” to be before age 59 ½). You figure if you retired today you could live on $30,000 a year (a figure the author mentions), so you want an equivalent amount of buying power when you reach 55.

With 4% inflation, you’ll need about $97,000 of income in 2038 to match today’s $30,000. The good news is, at least in our scenario, your income is growing at a similar rate, so that $97,000 is the same percentage (60%) of your income in 2038 as $30,000 is of your income today. Your income in 2038 will be about $161,000 a year. For simplicity’s sake (and this is a huge mathematical leap which would affect compound interest and your total end portfolio hugely, but let’s go with it), we’ll say that your average income during those 30 years is $105,000, which would make your savings of 20% $15,200 a year.

Let’s say we put that $15,200 a year, starting now, into investments that return about 7%. At age 55, you’d have about $1.5 million. Sounds pretty good. So let’s put it into FIRECalc, a retirement calculator that tells you how realistic your retirement plans are by giving you a “success rate”—the number of scenarios in which your money would outlive you based on the past 100 years of returns. We’ll assume a retirement period of 35 years, for a total life expectancy of 90 years.

*end of extensive calculations*

The success rate with saving 20% of a $50,000 income would be 38%. In order to increase the success rate to over 75%, one would have to make well over $100,000 a year at age 25. In others words, early retirement on 20% savings is possible if one is starting very young (within a couple of years of college graduation) and makes over $100,000 starting out.

This isn’t to say that early retirement isn’t possible. Far from it. But Abramovitz’s strategy is only feasible for a small percent of the population. Most people, in order to retire early, will have to drastically reduce their living expenses, drastically increase their savings rate, or both. Other factors like very high market returns or big profits from real estate will make early retirement easier but can’t be counted on.

You Can Retire While You’re Young Enough to Enjoy It may help people retire comfortably, but it’s unlikely to help them retire early. Look elsewhere for early retirement advice.

Living on $1000 a month

Halfway through the month and still on track. My all-time lows budget may be the first really challenging (and therefore the first really fun) budget I’ve ever had. Even when I made $6.50 an hour, I never strategized like this. My spending philosophy in those days was “spend the money reasonably frugally until it runs out and then spend nothing else until payday.” Having a firm amount designated for each category is forcing me to plan out my spending, and as a result makes me feel much more confident about the decisions I’m making. So far, I don’t think I’ve passed on anything I’ve really wanted because of the budget.

This strict budget is having a minor effect on my social life. I’m dodging an invite to have drinks that I would have normally accepted. But I don’t necessarily want to go out with the inviter, so I guess I’m saving time as well as money.

I’m also debating whether to go to an alumni event for my college next week. It’s a dinner event that would cost me $8-10 plus tax and tip (which always seem to inflate a bit when you’re splitting a check amongst a group).

What I've spent, 3/6 to 3/13:

Food:

$26.63

- Bought about $13.00 worth of luxury food—chocolate and ice cream.

- On Tuesday, I accidentally dropped my lunch into the trash can. How’d that happen? Well, the microwave is directly above the trash can, I pulled out my hot lunch with a little too much gusto, and… I bought a salad for lunch.

- Ate out with a friend for lunch on Wednesday. I had potstickers and a cup of soup. I bought the soup so she wouldn’t think I was cheap for only ordering an appetizer, only to find that she had also ordered potstickers, only with no soup. Note to self: don’t spend to impress other people/based on what other people think. They don’t care!

Remaining in food budget: $18.64
Still a little bit of a margin, although I’m uncomfortably aware that we’re running low on cheese. R. and I live on cheese.

Entertainment: $15.11, Netflix
Remaining in entertainment budget: $1.84
With my new addiction to lonelygirl15, the Internet is all the entertainment I need!

$30 Prescriptions
My copay just went up, so I’ll be $20 over in this category once I refill my other prescription. When I go to the doctor next week, I’m going to get 90-day prescriptions so I can start getting my prescriptions by mail, which will put this category back down to $40 a month and also eliminate the need to go to the pharmacy.

$79 eyebrow and leg waxing
In budget and on budget

Here’s the (approximately) thousand-dollar budget I’m challenging myself to meet in March.
Rent $625
Food $ 97.41
Wardrobe $ 75
Books $0, or $17.43 if I finish all my to-be-read books
Entertainment $21.45
Leg and Eyebrow Waxing $80
Prescriptions $40
Miscellaneous $100

Total: $1038.86

Library Hacks 2: Bonus Hack

(I need advice! See the end of the post for a question for readers.)

My post on Library Hacks got picked up by the official WorldCat blog (squee!). Apparently, you can also save lists in WorldCat, add notes about them, and share them. If you're already an Internet book geek, think LibraryThing or Shelfari.

I went ahead and set up a list on WorldCat.

I see two big advantages of WorldCat's service over the "social cataloguing" sites. First, it's free and is likely to remain free, since it's run by librarians and is used by many librarians. LibraryThing allows you to post only 200 books before you have to pay, not nearly enough for a book glutton and cheapskate like me. WorldCat has a limit of 250 books per list, but you can create unlimited lists.

Second, it allows you to find out instantly if a book is available at your library. When I get ready for my monthly trip to the library, I do a lot of clicking between my list, the Chicago Public Library site, and WorldCat. It doesn’t take long, but it is annoying. Using WorldCat to store my "to be read" list will allow me to eliminate a step and see immediately whether a book is available locally and which other libraries might have it. (I'll still have to visit the Chicago Public Library site to see if the book is available at my branch.) They also have a place for reviews, which, if it takes off, would eliminate the need to visit Amazon to see whether a book is any good or not.

A third advantage, which is important to me but probably not to most people, is that the books on WorldCat have been catalogued by actual librarians, not through “social cataloguing.” This means keyword searches work better, it’s easy to find all the books by an author (including any pseudonyms), and when you add a book to your list you’re adding the book itself, not a particular edition. (You can also search for a specific edition using WorldCat if you want to.)

And, of course, WorldCat lists obscure books and scholarly books that might not show up on mainstream sites. I can rarely find the books on literary criticism that I want to read on LibraryThing, Shelfari, or even Amazon, but a search of WorldCat shows me that some of these titles are actually fairly common and will be easy to get through interlibrary loan.

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Question for Readers:
I read a book this week which I planned to post of a review of. It turned out it was pretty bad. If it was a best-seller, I'd feel okay about posting a scathing review, but it's a small older title written by a guy who seems very nice. It's also on a topic very relevant to this blog. Should I review it? In favor of reviewing: it might prevent a few readers from wasting their money or time on the book. Against reviewing: Is it really fair, or necessary, to tear down a book that's not causing any significant harm?

Thirtysomething Retirement: My Plan So Far

I’ve blogged several times about my short-term goals and my frugal rules, but I haven’t talked much so far about my long-range plan. Since I’m not Tim Ferris, how exactly do I intend to be able to retire in my thirties?

First, let me define what I mean when I talk about “early retirement.” By my midthirties (or, in the back-up “Leah” scenario, my early forties), I want to have enough reliable income from my nest egg to be able to cover my basic needs for the rest of my life. I will continue to add money to my investments after that point, but I would like to be able to take on only the amount and type of work that I want to do. I don’t want to have to work full-time or go into an office on a regular schedule (I hate getting up in the mornings, and I currently “sleep in” until 7:15).

Right now, I can cover my basic needs (food, shelter, utilities, healthcare) with about $1000-$1300 a month. Last month I spent just over $1600 total. I didn’t feel deprived. With my all-time lows challenge, I plan to decrease my spending to the point where I do feel deprived, and then go back up one level so I’m at the level of “just enough.”

My savings goal is $2650 a month, which is about 75% of my net salary. I also make some money from freelance editing, which varies a lot by month. Since I’m busy enough at my day job, I’m not currently pursuing new freelance gigs, but am simply taking the ones that are offered to me.

So far, so good. But what about the variables?

There are a huge number of variables. I don’t know 100% if R. and I will be getting married. I don’t know if I’ll have a child (though I know I wouldn’t want more than two) and I don’t know how much it will cost if I do. I don’t know if I’ll buy a place—probably, eventually, but I have no idea when it will become financially wise and I don’t know if we’ll choose to move somewhere cheaper in order to make our real estate money go further.

And then there’s this recession. I believe the market will rebound eventually, but who knows how long that will take? My estimates are based on very conservative returns of 3–7%, but it’s always possible that even those returns won’t happen in the next eight years. Even if they do, inflation may very well increase my basic expenses pre-retirement.

I’ve read Your Money or Your Life and The Tightwad Gazette* enough times that I think the dangers of inflation are greatly exaggerated, or at the very least avoidable by making more frugal lifestyle choices. But when the price of a dozen eggs at Aldi doubles in just over a year, even I have to pay attention.

My Inflation Plan

I’m hoping my salary will keep pace with inflation—my current employer gives cost-of-living increases of about 4% a year. This is lower than the CPI rate of inflation, but probably pretty close to my personal rate of inflation, since I’m not directly affected by changes in oil prices. (Rising oil prices affect everyone through increased costs of transporting goods and increased costs of running public transportation. But I do think the rate of inflation of my personal expenses will be a bit lower than the norm since I don’t have a car to fill up.)

If it doesn’t, I have three options:

1. Increase my income by looking for a more lucrative job. It’s probably possible. I’m underpaid for the job I’m doing. This is fair, since I’m also underqualified, but in a couple of years I’ll be “experienced” and could probably command a higher salary elsewhere, especially at a larger company.
2. Seek out more freelance work. Again, I think this is pretty plausible. I have a good resume for my freelance work, there are thousands of possible clients, and the work isn’t dependent on my finding local clients.
   
3. Decrease my savings. Last resort!

I've started thinking of my spending as "the money I don't save," which is sort of an interesting change in mindset. If inflation goes crazy, I will cut every corner I can to preserve my savings goals. I will be the woman recycling tinfoil and discovering the joys of lentils and unplugging my phone charger when not in use to save two cents per month. Heck, I'm already that woman, but I can go further. Pray that inflation stays at its current rate or lower so you don't have to watch me try.

There are three other variables that are on my mind when I think about my future:

1. Health insurance and healthcare expenses
2. Marriage and family
3. Buying a house or condo

Each of these deserves its own post, so I’ll save them for…da da...the future! (that was terrible, I know). Look for posts on my concerns and predictions in each of these areas sometime in the next few weeks. Subscribe to my RSS feed to make sure you don't miss out!

*If I don't mention these two books at least once an entry, my personal finance blogger license gets revoked. If you haven't read these two books already, you must do so immediately.

Library Hacks: (Almost) Any Book in the World for Free in Five Easy Steps

To spend less on books, movies, or music, learn to hack your library. The five-step process will help you find almost any media item for free in just a few minutes and make the resulting library visit as quick and easy as (but much less expensive than) filling up the gas tank.

I'm always surprised when people don't use the library. Some people say that their library doesn't have the books they want, or that they don't have the time to go to the library. I suspect that a lot of these people don't realize three things:

1. The most popular books aren't on the shelves. Your local library probably has dozens of copies of Harry Potter and the Deathly Hallows, but they're not in the children's section. They're behind the counter waiting for someone who put the book on hold.

2. Putting a book on hold and picking it up takes about as much effort as ordering a pizza from Little Caeser's.

3. Even if your library doesn't have the book you want, they can probably get it for you. In fact, they can get you almost any book in the world for a couple of dollars--or even free.

The 5-Step System
Every few weeks, I look at my list of books I want to read and pick out a few that seem especially appealing. When I have my targets defined, I go online and start the hunt. It takes me about two to three minutes per book to go through the process below and find the book.

Step 0: Do you have a specific item in mind?
If not, stop. A library website is usually not the best place to browse. Go to the actual library to get a sense of their selection or spend some time on Amazon or at your local bookstore. When you have a specific item in mind, then it's time for:

Step 1: Go to your library's web site.
(If Google doesn't turn up anything for your city name, try your county name.) Click a box called "find books" or "catalog" and type in the name of the thing you're looking for. I'm assuming by now most of us know how to put search terms in quotes if we get too many results and to look for a "search by type" menu if we're looking for the audio book of Stranger in a Strange Land. Step 1 completed! If you got results, go to step 2. If you didn't get any results, go to step 4.

Step 2: Figure out where the book is.
Click on the item you're looking for to "see more detail" or "view the record." This will show you how many copies the library has or at which branches the title is available. It will also tell you whether the book is checked out, on the shelf, or missing. If the book is on the shelf at a convenient library, you're done. Go and get the thing. If not, go to Step 3.

Step 3: Place the book on hold.
Look around the screen. If you're lucky, there will be a button somewhere saying "place a hold." You'll enter your library card number and tell the system where you'd like to pick up the book. The system may even tell you you're third in line or let you place a hold on a book that hasn't been published yet. Once the book gets to your local library, you'll receive an e-mail or phone call telling you that it's there and how many days you have to pick it up (usually about a week).

If you're slightly less lucky, you'll have to call or go to the library in person to place a hold. Until the fantastic redesign of the Chicago Public Library web site earlier this month, I placed holds as part of my regular monthly library trips. While you're there, ask a librarian to make sure you can't place a hold online. Some library sites aren't especially intuitive.

But before you go to the library, finish reading this post--if you're looking for anything obscure, steps 4 and 5 will help you out, and you'll want to know about them before you go to the library.


Step 4: Go to WorldCat.
WorldCat is like the Google of hard-copy information. Once you enter your zip code, it works like a GoogleMaps business search, showing you the nearest libraries that have the item you're looking for. Try it. Type in something ridiculous that you're sure no library would have--Sweet Valley High 86: Jessica Against Bruce or the original version of Mortal Kombat or your grandpa's master's thesis. 10 to 1 some library somewhere has it.

So what's the point of this, other than the novelty factor? Two things:

a. WorldCat can teach you about libraries you never knew existed, some of which may let you borrow for free. As a Chicagoan, I have free access to the Newberry Library and the Metropolitan Library System. Some university libraries will let a "visiting scholar" borrow for free after registering or jumping through a few hoops. Others charge members of the public for a library card. If you're a student, you may have reciprocal borrowing rights at other schools in your area.

When I was looking for an obscure book for work, I found it at the private library of a nonprofit a few blocks from my office. It wasn't a circulating library, but the librarian seemed so thrilled to have someone actually take an interest in the collection that he let me take the book home "off the record" (I returned it promptly, of course).

b. WorldCat will also tell you how likely it is that you can get the item through interlibrary loan (see Step 5).

Step 5: Place an Interlibrary Loan
Through interlibrary loan, libraries lend and borrow from each other and as a result can get almost any material a customer needs. It's often free. It's always cheap. I've used it for everything from a long-lost childhood favorite to a book on polyamory (research purposes only, folks!). WorldCat can give you a pretty good idea of how likely you are to actually get the book. If it's in 125 libraries, great. If it's in only three libraries, one of which is in Scotland, your chances are a bit more slim, but it's still worth trying.

To place an interlibrary loan, you'll almost certainly have to go to your library. When you get there, find the reference desk or ask the person at the checkout counter where to find a librarian (the person who checks out your books probably isn't one). You'll have to fill out a form. Ask for one more form than you need and take the extra one home to copy so that the next time you want to request an interlibrary loan, you can fill it out at home and just drop it off with the librarian.

Once you've filled out the form, go home and wait. Interlibrary loan can take a while. But with all the books you're putting on hold at your local library and your application for a visiting scholar card at the nearby university library, you've got plenty to keep you busy in the meantime.

Sunday Night

I just made tuna salad for tomorrow's lunch and transferred $2,166 into my savings account. My frugality is ingrained enough that I can't really imagine spending $2,166 at one go. For $2,166, I could eat out every workday for almost a year and a half. I could buy several items of clothing from the pages of Vogue and Lucky. I could buy part--a tenth? a fifteenth?--of a car. Or I could do what I just did and buy myself a month or a month and a half of freedom. More, I guess, assuming that compound interest starts happening again sometime before I retire.

Sunday night is one of the reasons I'm doing this. I stay up too late on Sunday nights trying to make the most of time. I don't hate my job, but I do sort of hate going to my job, and I'm never a huge fan of getting up early in the morning.

This weekend was largely consumed with a freelance editing project. I hope to be back to lengthier posts tomorow.

All-Time Lows Challenge: Week 1

Six days into March, I'm starting to get into my All-Time Low Challenge.

I have a tendency to put off buying an item until I've done the finances for a particular month. The problem with this is that I purchase Said Item in the first few days of the next month, so that by, say, the 5th of the month, I've already spent 75% of what I wanted to spend.

Not this month! March 6th and I've only made a few purchases, all well within my all-time lows budget. I think I've discovered the secret to spending less: start blogging. I've spent so much time writing, reading RSS feeds, and trying to figure out what the heck I'm doing that I've had nary a moment to even browse Amazon, much less go to an actual store.

What I've spent:

Rent: $625
Boring. Next!

Food: $52.14
My half of our major grocery shop of the month. With the challenge in mind, I was pretty conservative, so I expect I'll probably have to stock up on a few things mid-month. I'm rather surprised by how little I spent, since even with the challenge I did buy a few different kinds of meat and my usual (insane) amount of cheese.
Food goal: $97.41
Several people commented on the original all-time lows post that they thought this number was very low. It might end up tight, but I'm on track.

Wardrobe: $38.01
Took a trip to my neighborhood Sally Army and Village Thrift on Saturday for urgent pants-buying. I may have also purchased a jacket or two, and possibly a belt.
Wardrobe goal: $75
On target. I don't plan on doing any more clothes shopping this month. This gives me a comfortable margin in case I need to have some shoes reheeled or decide to get some of my too-big pants taken in.

Entertainment: $4.50
Picked up some old VHS tapes while I was at Salvation Army.
Entertainment goal: $21.45
Our Netflix costs $15.33, so that leaves me with only $1.62 left in this budget. What should I spend it on? A pack of Skittles? A tip for a busker? A single round of air hockey? This all-time low obviously can't be sustained forever, but it'll be fun to see how long I can take it. (Yes, I have a twisted idea of fun.)


Coming up next week, I'll be going to the doctor (at least $20 of my miscellaneous budget), going to my two monthly spa appointments (the full $80 of my spa budget), and possibly meeting a friend for lunch ($5-10 of my food budget). Keep reading to see if I can keep this up!

As a refresher, here's the full budget I'm challenging myself to meet in March:
Rent $625
Food $ 97.41
Wardrobe $ 75
Books $ 0, or $17.43 if I finish all my to-be-read books
Entertainment $21.45
Spa Treatments $80
Prescriptions $40
Miscellaneous $100

Total $1038.86

Hell Week on the Cheap

Every once in a while, that week from hell comes along. Finals week. The week you get dumped. The week the auditors come. The week your hard drive gets wiped in a freakish computer accident that you had nothing to do with and you have to work in an abandoned cube with a mouse that doesn’t roll and can only access e-mail through an antiquated Web interface that won’t let you delete messages so that you have to scroll through pages and pages of spam to find the Absolutely Vital document you need for the last-minute all-staff meeting.

When you’re under stress, it’s tempting to spend more money. Sometimes that’s fine. But if past stress-induced spending sprees have resulted in gut-wrenching guilt, or if you’re on a tight budget you can’t afford to blow, use the following tips to minimize the damage and get through Hell Week on the cheap.

The two areas of the budget where it's most tempting to splurge during Hell Week are food and entertainment. The food keeps you going; the entertainment takes your mind off the hell during the moments when you’re not actively going through it.

Food and Other Consumables

1. Keep emergency food on hand in your bag or in your office at all times. This food preserves your sanity when you can’t stop for lunch and cuts down on fast-food runs. Your emergency food should be nonperishable, of course. Protein is good. It should be something you like, but not so well that you’re constantly tempted to eat it—for this reason among others, things like candy bars aren’t the best idea. I carry a bag of almonds in my purse, and keep some beef jerky and chocolate in my desk drawer. Other good options for emergency food include trail mix, dried fruit, protein or granola bars, and the fixings for an easy lunch, like Ramen or a can of soup.

2. Develop back-up breakfast and lunch options for mornings when you’re running late. Tuna plus a Tupperware full of lettuce and dressing is my default lunch when I can’t think of anything else. If I’m really pressed for time, I just throw the can of tuna, jar of mayo, and Tupperware in my bag—I can mix it together later. You can also freeze extra portions of your dinner or even freeze emergency sandwiches so that you always have something to grab. If you get hit with an unexpected Hell Week, making a bunch of peanut butter sandwiches or a really easy casserole on Monday night can do wonders for your wallet later on.

If you’re slightly less cheap than me, your backup might be a fast-food dollar menu, but don’t pretend you can eat just one double cheeseburger for lunch if that’s going to leave you ravenous by three. And please don’t skip meals when you’re already stressed. If you do this, you will be that much more unpleasant for those who have to interact with you.

3. The cheap luxury. You’re going to need a little something extra to get you through till Friday. What’s it gonna be? Unlimited tea? Internet free time from three to four every day? One single, expensive chocolate truffle when you finish killing yourself for that deadline? Maybe even a daily Starbucks run if you must, but don’t you dare make it an hourly run or keep going to Starbucks after Hell Week is over.


Entertainment

1. Get your media free or cheap. Make a playlist of angsty songs on YouTube or drown your sorrows in brain rot freely and legally available on the Web (MTV.com offers almost the full run of My Super Sweet Sixteen and PBS.com has lots of depressing episodes of Frontline). If you have Netflix but need more movies, there are thousands available through Watch Instantly. Spend an evening reading Entertainment Weekly or fashion magazines at the library (it’s quiet, too, which may help calm your nerves). If you like to read actual books, check out a big bunch of them or spend the night at Borders, but don’t buy anything. Books are bad impulse buys.

2. Control the damage. If you know you’re going to self-medicate with alcohol, smoking, shopping, etc., plan ahead to make it as cheap as possible. Need a drink? Buy some Two Buck Chuck, visit the liquor store, or at least find a bar with a good special. If you go out, leave early—you need your sleep, and those neon shots that show up later in the evening are always a bad idea.

Must buy clothes or shoes? Can you at least limit yourself to thrift shops, Target, or Payless instead of going straight for a boutique or department store? Take out a small amount of cash and leave your credit card at home or at the office so you won’t be tempted to spend more.

3. Stay home. Going out tempts you to spend money, and if your crisis is work or school-related rather than emotional, it will just tire you out and make it harder to be productive. Talk on the phone or have your friends come over instead of going out with them—tell them real friends make house calls when you’re having a bad week.

4. Let yourself crash when hell week is over. Wallow in the pain. Eat junk food. Watch endless reruns of crappy TV shows. Satisfy every lazy, whiny, complaining, indulgent impulse.

If you want to give yourself a material reward, keep it in proportion to your budget and the magnitude of the Hell. As for me, I’m looking forward to several hours of Sex and the City and a big bowl of ice cream this Friday.

Cheapskate Must-Read: How to Survive without a Salary

How to Survive without a Salary deserves to be much more well known than it is. Tim at Canadian Dream : Free at 45 reviewed it a few weeks ago and didn’t seem especially impressed. Other reviews are few and far between.

Most readers won't want to duplicate Long’s lifestyle exactly, but all of us can learn from him. The chapter on “Needs” is some of the most useful personal finance writing I’ve ever read. For anyone working towards early retirement or simply trying to live below their means, this book is invaluable. Some of us will be able to translate his ideas into a way to quit or downsize our own jobs as he did.

The Strengths

Charles Long quit his salaried job early in life and eventually moved to the Canadian countryside with his wife and two children. Their lifestyle is based on reducing costs and material needs as much as possible (“conserving”) and using “casual income” to meet their remaining need for cash. “Snowflaking” as popularized by I’ve Paid for This Twice Already is similar to the idea of casual income, but Long’s family uses their version of “snowflakes” to pay for essential needs rather than to reduce debt.

Long and his family make extreme frugality sound normal, even fun. They may not have indoor plumbing (really!), but they do have, as he describes it, “a standard array of offspring, pets, and bulky appliances that signal a rather ordinary middle-class household,” as well as a sizeable country house and an abundance of homemade wine. The beauty of this book is that it helps you realize how you, too, might be able to adjust your needs without giving up quality of life.

It’s easy to misinterpret this book as a back-to-the-land guide to country living, especially when the author keeps throwing in examples like how to get the best deal on roofing felt. However, it’s far more than that. If you pay attention, you’ll notice many examples of “conserving” in the city from both his family and from others. It’s also not a step-by-step guide to quitting your job—he mostly describes what he and his family did after he quit his job. But the techniques he describes would certainly help anyone still on their way to building up a nest egg.

Long’s can spin a good tale, and he’s lived an interesting life. He has an impressively broad and colorful circle of acquaintances and introduces us to characters ranging from perfectly conventional careerpeople to a nomadic salesman. I loved reading the details of how these vastly different people live frugally but well.

Amy Dacyczyn’s Tightwad Gazette books introduced me to the idea of “creative frugality.” Dacyczyn’s books will give you lots of examples creative frugality. Charles Long’s book will teach you how to be creatively frugal. The list of questions he gives us for examining a possible need, his thoughtful analysis of the true costs of owning things, and his extensive exploration of secondhand and barter economies teach us how a “conserver” thinks, which is more valuable than any number of examples. Specific thrifty techniques may or may not work depending on needs, wants, resources, and location, but a new way of thinking can be universal.

Long shows that the principles of creative frugality can be applied to any need, no matter how obscure or how complex. He also offers an exceptionally broad look at the alternative economy—thrift stores, auctions, dumps, and barter, to name just a few of the places he shops.

He encourages readers to make the most of their creativity, to believe that they can do things on their own, and to have the confidence to use some of their “unmarketable” skills as sources of casual income. It’s clear that Long loves his lifestyle, and he wants to help other people live the lives they love, too.

The Weaknesses

Long is Canadian, and his brief discussion of healthcare seems to assume that catastrophic coverage is both available and affordable. Anyone in the U.S. seriously working towards early retirement will want to examine the issue of healthcare from all angles and budget for health insurance carefully and generously.

He doesn’t spend much time on long-term big-ticket items that worry most of us, like how to support ourselves as we age or how to pay for kids’ college. Long’s “pension plan,” is “a young hardwood forest.” Most of us could use a little more specific guidance.

He also has an interesting blind spot when it comes to debt—his discussion of renting vs. buying assumes that one is able to buy a home without taking on a mortgage! He explains the difference between “good debt” and “bad debt” quite nicely, but doesn’t give any specific ideas on how to eliminate debt. I do think this book still has a lot to offer to those who are in debt, especially if you need to cut your expenses to the bone in order to make progress on paying it off.

Highly Recommended

The chapters “Needs,” and “Casual Income” and the section in “Getting Ready” about material fasts are essential reading. “The Secondhand Market,” “Auction Buying,” and “Alternatives to Buying,” are also packed with great information and interesting stories. If you’re turned off by politics, you may want to skim or skip the preface and the last two chapters, which at certain points deteriorate into screeds against the state of the economy.

How to Survive without a Salary was most recently updated in 2003. It’s now out of print and available from Amazon only at relatively high prices. I believe it’s well worth $15.00 or so, but check it out from your library or request it from interlibrary loan to see whether it resonates with you before buying. According to Worldcat, it’s available at about 300 libraries worldwide
(more on the wonders of Worldcat and other library hacks coming soon).

My Wild Card

I have a trust fund. Those are not words I ever imagined myself saying. It's not a large trust fund, at least not so far. So far, the principal is $24,000. That might be it. It might be much more. It's likely that the money from this trust fund, when it becomes available to me at age 35, would be a significant help to my early retirement. At the least, it could allow me to raise my standard of living to include a few more luxuries without having to rely too much on freelance work or casual income.

I think about this money. How could I not? But I try not to. I try not to think about how much will be added to the principal or how much interest it will earn. Thinking about it seems callous. It seems selfish. And it's definitely counting my chickens before they hatch.

The branch of the family that set up this trust fund has been wealthy for several generations. They owned a lucrative family business that consumed my great-grandfather's life until he died, and consumed my grandfather's life until he started losing his mental acuity to Alzheimer's in his late seventies. My grandfather had six children. Only one ever worked for the family business, and she quit after a short time. My father, the eldest, refused to have anything to do with it, but continued the family tradition of workaholicism in his chosen career. He always made it home for dinner, but would often return to the office afterwards, sometimes staying until after midnight.

This gives you some idea of the value my family places on hard work. If I used this money to partially fund my early retirement, I am certain that many of my relatives would disapprove. My grandmother, if she is still alive, might even regret giving me the money. Early retirement was not the purpose of her gift. In the letter I recieved when my grandmother first set up the trust fund, she said that she would like to see her grandchildren use the money wisely. She mentioned furthering our education, buying homes, and unexpected healthcare expenses. She also mentioned giving back.

My grandparents have donated a lot of money, especially to religious and educational institutions. I'm not opposed to charity by any means, but I don't like the work of most religious and educational institutions. My giving would probably go to an organization working for marriage rights for the GLBT community or to support the homeschooling movement in some way. I don't think my grandmother would approve of my pet causes any more than she would approve of early retirement.

Education would be another possible use for the money. I don't have an advanced degree. While there are several things I would enjoy studying, another degree is pretty far down on my list of priorities. It also seems a bit frivolous--if I got a degree, it would be an MFA in Creative Writing or a PhD in children's literature. I emphatically don't want to go into academia, so this sort of degree would be for personal edification rather than any sort of professional development. I'm pretty sure my grandmother was thinking more of MDs, MDivs, and MBAs.

When my grandmother set up the trust funds, she didn't count on me and my unconventional plans. I love her and I would like to use her money in a way that she would like. But if I had access to the trust fund tomorrow, I know I would invest it for the purpose of early retirement.
I honestly feel that the best way to fulfill my potential is by not having a conventional job, by buying myself the time and space to really explore my interests.

I'm making my plans based on what I can do on my own: $2650 in savings every month and reducing spending as much as I can. In the meantime, though, the idea of the wild card money lurks in the back of my mind.

I guess the real question is if someone gives you a gift, do you do whatever you want with it? Or do you try to use it in the way you think they would want you to?

End of February Update

Total savings for February: $3523.68

A good chunk of my salary, Christmas money, and freelance income. Some of this money will go to taxes, but I'm still very pleased.

Total spending for February: $1639.14

Housing	625
Food	253.11
Clothes	167.5
Transportation	75
Entertainment	149.08
Health	20
Waxing	80
Books	44.6
Writing	1.35
Office Supplies	45.06
Gas Bill	178.44
Gifts	3

Rule #1: No new books

Status: good

Last purchase of a book: 2/4

Number of books left in to-be-read pile: 37. I found a big stack of junk books I'd forgotten about on a seldom-used bookshelf. At this rate I won't be buying any new books until 2009!

I'll be posting updates on my progress on my "all-time low" challenge throughout March. I don't expect to make it in every category, but I'm challenging myself to see how little I can spend while still feeling like I have "enough."