Mrs. Groovy and I have been blogging for six months now. Hurray! And we realized that we never told our story of how we stumbled our way toward financial independence and how we decided to blog about it. So in honor of our six-month milestone, here is our story.
Mrs. Groovy and I met in grad school. We were both in our early 40s and had never been married. And for some reason we just clicked. So in 2002 we got married. I like to say that I saved her from becoming a cat lady, and she likes to say that she saved me from becoming a brigadier general in the Long Island militia.
When we first got married our finances were shaky. Given Long Island’s cost-of-living, I had an okay job. Mrs. Groovy was unemployed. I brought credit card debt, a car loan, and a mortgage to our marriage. Mrs. Groovy brought credit card debt and student loan debt.
The one thing we had going for us was the one-bedroom condo I bought in 1997 for $70K. The condo was okay, nothing fancy. But it was located five blocks from the beach, in a town that was rapidly gaining in popularity. My guess is that the value of our condo had doubled by 2002. Mrs. Groovy and I thus had a net worth of $40K-$50K when our marriage began.
For our first year of marriage we trudged along financially. Mrs. Groovy got an okay job and we used that pop in household income to start paying down our credit card debt. But even with Mrs. Groovy’s added income, we never felt in control of our finances. This was partly explained by our poor money habits. We were completely oblivious to such basic personal finance concepts as budgeting, emergency funds, IRAs, mutual funds, and dollar-cost-averaging. A bigger explanation for our tenuous financial position, however, was the cost-of-living. Long Island was tough. Our monthly HOA fee was $467. The electric bill for our 600 square-foot condo averaged over $200 a month. Mrs. Groovy’s monthly train pass to Manhattan was over $200 as well. Everything under the sun, from dry-cleaning to tolls, movie tickets, and corn-beef sandwiches had the Long Island premium built into its price. And then, of course, there were taxes. Long Islanders love their government services, so taxes were absurdly high. How high? High enough to jolt Mrs. Groovy and me out of our financial stupor. Let me explain.
In 2003, two pivotal things occurred. First, Mrs. Groovy discovered Dave Ramsey. We began listening to his radio show every night. For the first time in our lives we heard someone suggest that debt wasn’t a cuddly pet and shouldn’t be a life-long companion. He was also the first one to introduce us to the concepts of an emergency fund and of spending less than you earn. Now, to someone well-versed in financial matters, Dave’s teachings are rudimentary. But to us, they were life-altering. From that point on we never looked at debt or our paychecks the same way. Debt became our sworn enemy. Building wealth became our solemn quest.
The second pivotal thing that occurred in 2003 was a substantial property tax hike. I’ll never forget the moment I opened that letter from our mortgage servicing company announcing what our 2004 payments would be. Our property taxes were going from $3,700 annually to $5,400 annually. Fifty-four hundred dollars—for a stinking one-bedroom condo! A 46% increase! Once the enormity of that attack on my substance fully hit me, I turned to Mrs. Groovy in disgust and said, “Why the hell are we staying in New York?”
The Three Year Plan
Unbeknownst to me, Mrs. Groovy always wanted to leave New York but never said anything because she thought I would never leave my family. I love my family, of course. But I also wanted more from life than eking out a living on Long Island. So I assured Mrs. Groovy that I could love my family just as well from afar. All we had to do is decide from where my love would radiate.
It didn’t take us long to determine that my love for my family would best radiate from the state of North Carolina. Why North Carolina? Mrs. Groovy did summer stock in Burnsville right after graduating high school and loved it. We also did a quick online check of home prices in Charlotte and Raleigh. At the time, they were about one-third the price of Long Island homes. Decision made! From our perch on Long Island, North Carolina looked like nirvana.
Once we had the where, we had to decide on the when. Again, this decision didn’t take long. In 2003, I had 17 years at my government job. Holding on for another three years would have meant a sweeter pension. Since I was so close to that enhanced pension, Mrs. Groovy and I agreed that it would have been foolish not to get 20 years in. Our escape from Long Island date was thus set—any date after June 5, 2006, preferably June 6.
Armed now with the where and the when, we still needed to devise a plan. How would we transition from Long Island to North Carolina? After considerable thought, this is what Mrs. Groovy and I planned to accomplish over the ensuing three years.
- Pay off all our debt except our mortgage.
- Pour as much money as possible into our “transition” fund (we were planning on being jobless when we moved).
- Bank as much of Mr. Groovy’s time off as possible (where Mr. Groovy worked, ex-employees were paid for their unused sick, personal, and vacation days).
- Decide on Charlotte or Raleigh.
- Buy a two-bedroom condo for cash in our chosen city.
- Remodel our Long Island condo to get the best possible price when we sold.
To say that our plan was successful would be a gross understatement. Here are the results.
Pay off all our debt except our mortgage.
Success—I think. Mrs. Groovy swears we paid off our non-mortgage debt before we sold our condo. I think we paid off the remainder of Mrs. Groovy student loans (roughly $2,000) after we sold our condo.
Pour as much money as possible into our “transition” fund.
Success. We really hunkered down on our expenses. We skimped on groceries and air conditioning. Dining out and entertainment were almost completely banished from our household budget. No new clothes. No vacations (except our trips to Charlotte and Raleigh to scout out potential homesteads). I also got a part-time job working in a warehouse. Toward the end of our three-year plan, we were saving over $2K a month. When we said goodbye to Long Island, we had a little over $60K in our transition fund.
Bank as much of Mr. Groovy’s time off as possible.
Success. When I left my government job, I had a little over a year’s worth of unused sick, personal, and vacation days banked. This meant I had no pressure to get a job when we arrived in North Carolina in 2006. I had a year’s worth of paychecks, at my New York salary, to cushion my transition. And during my first year in North Carolina, I turned down two jobs. They were perfectly fine jobs. But they were with small mom-and-pop operations, and I thought I could do better. I eventually found a job that offered better pay than my first two opportunities and provided excellent opportunities for growth—the job I’m currently in. Amazingly, my first day of work at my current job (7/9/2007) was my last day of unused time at my government job. Were the financial gods smiling upon me or what?
Decide on Charlotte or Raleigh.
Success. We decided on Charlotte. Why Charlotte? We don’t really know, or at least we can’t articulate it. We liked Raleigh a lot. But Charlotte just seemed to be more “us.” Besides, it had the world famous Price’s Chicken Coop and Penguin Drive-In.
Buy a two-bedroom condo for cash in our chosen city.
Success. In April of 2006, we bought a two-bedroom condo on the south side of Charlotte for $88K. We used $58K from our transition fund and borrowed $30K from Mrs. Groovy’s mom to pay for the condo in cash.
Remodel our Long Island condo to get the best possible price when we sell.
Success. We remodeled every room in our condo, paying particular attention to the kitchen and the bathroom. When we were done, our condo showed like a model home. And we did it all—thanks to a lot of sweat equity and help from family—for a very economical $20K
We sold our one-bedroom condo in May of 2006 for a whopping $340K (I still can’t believe it). When all was said and done, after paying our lawyer, our real estate agent, Nassau County’s sales tax, and all the other lovely incidentals that go with closing on a piece of property, we walked away with a little over $250K.
On the morning Mrs. Groovy gave her two-weeks notice, she had only been working for her new employer for nine months. She thought there was a slim possibility that her employer might let her work remotely, so she mentioned the idea to her boss. Her boss rejected it outright. Wasn’t going to happen, she said. But later that afternoon, Mrs. Groovy was called into her boss’s office. Her boss really liked her and didn’t want to lose her. So her boss convinced the big boss to modify company policy and let Mrs. Groovy work remotely. Mrs. Groovy would not begin the next phase of her life looking for work. She would begin her North Carolina adventure with her New York job and her New York salary.
To put in perspective how remarkable our transition to North Carolina turned out, consider the following. Our household income in North Carolina, at least for the first year anyway, was about $130K. After paying off the loan to Mrs. Groovy’s mother, we had no debt. Our taxes and utility bills were about one-third the cost of Long Island’s. We had a paid-for condo, no commute (at least until I got a job), and over $200K in the bank. Had we remained on Long Island and moved up the housing chain—buying, say, a modest three-bedroom detached home—our financial position would have been much less rosy. Yes, we’d still have our $130K household income. But I’d have a job I loathed. Mrs. Groovy would have a commute that beat the hell out of her emotionally and physically. We’d have our ridiculously high property taxes and utility bills to wreak havoc on our finances and spirits. And rather than having $200K in the bank, we’d have at least a $300K mortgage. Moving to North Carolina in 2006 easily resulted in a positive $500K swing in our net worth!
Mrs. Groovy and I have been living in Charlotte for almost ten years now. We don’t have a single regret. Our financial fortunes have remained strong, despite my new job resulting in a $30K salary cut, and despite the economic calamity of 2008-2009. On average, we have saved between fifty and sixty percent of our gross household income. And we’re not living like paupers. We live in a nice three-bedroom house in a very nice neighborhood. If we want something, we buy it. We’re just not very materialistic. We much prefer experiences to stuff. What we sacrifice in cars, electronics, clothes, and fancy restaurants, we make up for in vacations. Our annual vacation budget is between $5K-$10K.
Up until about a year ago, I was convinced that I would be working until I was 65. But then I came across this weird guy called Mr. Money Mustache, and he had this weird notion that one only needed twenty-five times one’s annual expenses to achieve financial independence. So I introduced MMM to Mrs. Groovy, and she was intrigued. “I wonder if we have enough money to retire,” she said. “Let’s run the numbers.” And much to our surprise, we didn’t have twenty-five times our annual expenses, we had over thirty-times our annual expenses. Having a job was suddenly optional. Hallelujah, hallelujah! We were free at last.
But we were also wimps, and somewhat fearful of living our lives without regular paychecks. So rather than pull the trigger on early retirement right away, we decided to wait until this fall, when my mini-government pension begins.
It would be nice to pound on my chest and proclaim how awesome I am to the world. I’M FINANCIALLY INDEPENDENT BECAUSE I’M THE BADDEST BOY IN THE JUNGLE AND MY FINANCIAL ACUMEN IS OFF THE CHARTS!. But that would be total bullsh*t. Here’s a breakdown of what Mrs. Groovy and I can’t take credit for, and what we can.
The Luck Part (What We Can’t Take Credit For)
$250K capital gain on condo sale.
We made $250K on our Long Island condo because 1) Wall Street and the feds decided to create a monstrous asset bubble in real estate by doing away with lending standards, and 2) my eligibility for an enhanced pension came up in 2006. If my eligibility came up a year later, or if Wall Street and the feds had been more prudent, Mrs. Groovy and I could have easily made $100K less on the sale.
Marrying someone who is on the same page financially.
Mrs. Groovy and I didn’t discuss finances or our attitudes toward money before we got married. We just lucked out that neither of us were materialistic. I didn’t give a crap about cars, big-screen TVs, and sports. And Mrs. Groovy didn’t give a crap about jewelry, clothes, and shoes. We both wanted to get ahead financially, and we were both willing to make the necessary sacrifices.
Having a supportive family.
We got no resistance from either my family or Mrs. Groovy’s when we announced our move to North Carolina. Both families were one hundred percent supportive. And Mrs. Groovy’s mom even lent us $30K to facilitate the move.
Mrs. Groovy keeping her New York job.
This was the icing on the cake. We fantasized about it, but never thought it would come true.
The Partial-Luck Part (What We Can Take a Little Credit For)
Kids are expensive and a major responsibility. Not having kids made our move to North Carolina and our quest for financial independence much easier. If things went awry in NC, we would have just hurt ourselves, not some innocent children. And since we didn’t have to throw money at a couple of 529 plans, we had more money to throw at our defined-contribution plans. But kids can and often do enter the picture if a couple isn’t careful (queue the Barry White music). So Mrs. Groovy and I should get some props for managing our marital intimacies with aplomb (i.e., no accidents).
Having a year of unused time.
I forget the exact number, but I had saved over two-hundred days of unused time. A major reason why I was able to do this was because I worked for the government. Each year I got 5 personal days, 13 sick days, and 25 vacation days. Any unused time was banked. So I was definitely lucky to work for an operation that provided such a generous perk. But on the other hand, I had to get up every workday and subject myself to a totally dysfunctional workplace for 8 hours. And if I didn’t do that, I wouldn’t have built up as much unused time as I did. I didn’t take a personal day or a sick day during our 3-year plan.
Mrs. Groovy and I are nice people. We’re also conscientious workers who play well with others. If Mrs. Groovy had been difficult to work with and only produced so-so work, it’s highly doubtful her company would have made the telecommuting option available. Likewise for me. My company closed the Charlotte office a few years ago and moved operations to the headquarters in Dallas. They allowed me to stay on and work from home. If I had been a pain in the arse and did mediocre work, this wouldn’t have happened. So, yes, Mrs. Groovy and I are lucky to be living in the age where telecommuting is possible. And, yes, we’re both lucky to be working for companies that are telecommuting friendly. But because we’re really groovy people, we’re also partially responsible for our uninterrupted employment.
The “We’re Awesome” Part (What We Can Take Credit For)
It takes guts to remove oneself from the familiar. Mrs. Groovy and I decided to quit our secure jobs and move to an unfamiliar city—where we had neither friends, family, nor gainful employment. By historic standards, what we did was hardly audacious. People in the 1600s left England for an untamed wilderness by crossing an ocean in little wooden boats. But by today’s standards, our move to Charlotte was pretty gutsy, especially when you consider our advanced age (we were in our mid-40s).
With over $300K in our pockets, we could have easily acquired a McMansion in Charlotte and placed a new Mercedes in the driveway. But rather than go back into debt and surround ourselves with the symbols of wealth, we refused to succumb to lifestyle creep. We vowed to live on half our household income. Honoring this vow, in turn, has meant shopping at Walmart, driving a used-car with high mileage, and “dining out” at Sonic. Not a fabulous life, by any means. But not Dickensian poverty either. We would rather spend our money on buying freedom than on buying things that impress small minds.
Mrs. Groovy and I both have master degrees, but we never fooled ourselves into thinking that those pieces of paper made us brilliant. Heck, we reached the fifth decade of our lives and we didn’t have a dime saved for retirement. We didn’t even know what an emergency fund was. But we resolved to smite our ignorance. So we listened to Dave Ramsey, watched Suze Orman, and read David Bach. And we kept on listening, watching, and reading anything related to personal finance until we were no longer financial morons.
Why We Blog
One reason we blog is because we want something to do in retirement. But more importantly, we blog because we think we can help people. Now, granted, many parts of our journey toward financial independence can’t be replicated. Not everyone can take advantage of geoarbitrage or sell his or her home for nearly five times the purchase price. But many parts of our journey can be replicated. Living modestly, learning how to invest, being valued employees—these are things anyone can do if motivated.
Mrs. Groovy and I like to describe our blog as an affirmation blog. We learned the core teachings of personal finance, applied them, and watched to see if they worked. And our message to our readers is this: THEY WORK! Dave Ramsey, Mr. Money Mustache, Michael Kitces, Farnoosh Torabi, and all the personal finance rockstars we’ve come to know are not selling snake oil. If you embrace the core teachings of personal finance, and faithfully adhere to them, your finances will improve. It’s as simple as that. Mrs. Groovy and I are living proof.
Okay groovy freedomists. Thanks for reading our story. I sure hope you follow our journey and stick with us for the next six months.