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Mrs. Groovy here. Yes, I’m electioneering again and asking for your help. Mr. Groovy has made it to Round 4 of the Rockstar Rumble, a friendly competition among personal finance bloggers. Please take a moment to head on over to Rockstar Finance and vote for “Egotrage” in game 8. Every vote counts! Thank you!
Every day, Mrs. Groovy and I take a three-mile walk in Crooked Creek Park. And one of our favorite joys during this hour of exercise is meeting dogs. Two weeks ago, we met Fluffy—the wayward dog who we think we returned to the proper home. This week we met Tito, and the circumstances surrounding that meeting were much more pleasant. Tito was there with his mommy, Emily, and there was no chance that he might wonder off into traffic. A sturdy red leash saw to that.
Now, I don’t know what breed Tito was. Emily told us, but that information left my brain not one minute after I finished petting him. All I know is that Tito was a lovable mushball and I can’t wait to see him again. [Mrs. Groovy here. I believe Tito is a Brussels Griffon. And let’s share what Emily said when we mentioned our escapade with Fluffy. She has seen Fluffy, too, wandering in the same spot where we caught up with him. And Emily agrees he belongs to the folks in the house we returned him to. What a shame they’re not caring for him properly! It’s a strange southern thing—that people let their dogs roam in the street. I don’t get it.]
The Three Horsemen
The best post I read all week was written by Billy over at Wealth Well Done. The name of the post is The Three Horsemen That Will Make You Rich or Poor. And in Billy’s insightful mind, the Three Horsemen of personal finance are hobbies, hovercrafts (i.e, cars), and homes. Limit your spending on these three items and you have a great shot of growing your wealth and eventually achieving financial independence. Fail to limit your spending on these three items and you have a great shot of living paycheck to paycheck and working until you’re 70.
I couldn’t agree more with Billy. Since Mrs. Groovy and I moved down to Charlotte in 2006, we’ve owned our housing and transportation outright. That greatly reduces the cost of those two horsemen. Our final horseman, our hobbies, has also proved to be very inexpensive. I guess you can chalk that up to age. Once you reach middle age, a trip to Dairy Queen is much more compelling than a trip to whatever equates to Studio 54 these days in Charlotte. [Mrs. Groovy here. I added the link to Studio 54 because you’re not going to know what the heck Mr. Groovy is referring to. Look at the photos of some colorful people, including Elton John and Bette Midler. Here’s another one of Bianca Jagger at Studio 54 on a horse!]
Anyway, to show you how inexpensive our three horsemen have been since 2006, I looked up the cost of our three horsemen in 2016, our last year of gainful employment. Here are the numbers.
Three Horsemen Calculation - 2016
| Horseman | Annual Cost | Monthly Cost |
|---|---|---|
| Hobbies (picking up litter and blogging) | $60.00 | $5.00 |
| Hovercraft (gas, insurance, inspection, registration, and maintenance for a paid for 2004 Camry) | $1,515.06 | $126.26 |
| Home (taxes, HOA, and insurance for 2,000 sq ft paid for home) | $4,496.36 | $374.70 |
| Totals | $6,071.42 | $505.96 |
In 2016, our three horsemen cost us $6,071.42. Since our gross household income for that year was $110,590.04, our three horsemen only accounted for 5.5% of our gross household income. That’s pretty amazing. And the three horsemen would have accounted for even less if Mrs. Groovy and I worked the whole year. We both retired on October 14.
Bottom line: Billy has discovered a very intriguing calculation. If you can keep your three horsemen costs under 10% of your gross household income, you can save a crapload of money. In 2016, Mrs. Groovy and I saved 51% of our gross household income.
For the longest time, the foremost mantra of the FI community has been to “mind the gap.” And that’s great. The larger the gap between income and spending, the more you have to save and invest. But perhaps a more effective mantra is this: mind the three horsemen. For if you become adept at minding the three horsemen, minding the gap will be darn near effortless.
Haha! Thanks to Billy, the simple path to wealth got even simpler.
Talking Trash
Okay, groovy freedomist, that’s just about it. What say you? Is Tito awesome, or what? And how are you with minding the three horsemen? What percentage of your gross income do the three horsemen eat up? But before you derive your three horsemen calculation, give yourself a break and watch the following episode of Talking Trash. In this episode, Mrs. Groovy and I explore step one of our guide to geoarbitrage. Enjoy. [Mrs. Groovy here. He forgot to mention a highlight of the episode, where he tells me how to talk!] And have a groovy freakin’ weekend. Peace.
I have a 1978 Honda Cub scooter for my daily commutes!
It’s ancient, cheap, and gets some funny looks but I love that I’m not a drone like so many others!!
Matt recently posted…How to manscape your junk (for noobies of the topiary arts)
2003 Honda Metropolitan and 1978 Honda Hobbit for me.
This is quite accurate – I consider food as a hobby but we are without a hovercraft and our home is partially covered. So yes this theory works in minding the gap! This reminds me a bit of the top down by Apathy Ends. (Where is sir AE anyways – I want teaser pics of the new bebe…)
I love the way your mind works, Lily. I’ve been thinking about the three horsemen and the baby horsemen and I don’t know if I’d include hobbies in either group. Not that Billy is wrong, mind you. Out-of-control hobbies can certainly ruin a budget. But I think I’ll have to jump on Billy’s three horsemen idea and give it the Groovy twist. Thanks for stopping by, Lily. Always a pleasure hearing from you.
P.S. I’m with you on AE. Where has he been lately and where are the baby pictures?
Hmm, here’s our horsemen:
Housing: 0 on mortgage, so just insurance and utilities, probably 1% of our income for the year. We have tenants pay our mortgage.
Hovercraft: Maybe $40 / month, we borrow in-laws car when we need, and overfill gas in return.
Hobbies: Another 1% or so, my hobbies tend to either be playing video games or hitting the gym. MrsSLM tends to have cheap hobbies too, lately she’s gotten way into gardening.
MrSLM recently posted…Financial Update – February 2018
Very impressive, Mr. SLM. I got a tremendous CMLT reading your comment. Thanks for stopping by, my friend.
Very impressive indeed MrSLM. As I said in the original: The Three Horsemen that will either make you rich or poor. It looks like you’ve creatively found ways to work WITH the Horsemen so they’ll make you rich!
Indeed! I thought my three-horsemen calculation was impressive. But Mr. SLM blew me out of the water.
We’re not doing too well with our housing cost. It’s just expensive here. Currently, we spend 15%-20% of our income on housing and very little on the other 2. It’s not feasible to move right now, but that’s my goal someday…
I think that’s pretty normal for most people. It’s a special case if you spend less than 10% on housing.
Absolutely. Good point, Joe. Spending less than 10% of your income on housing is an oddity. What limit do banks generally impose on the ratio of income to mortgage? Isn’t it around 25%? Throw in taxes and insurance and maintenance and most Americans probably spend around 40% of their incomes on housing. Is it any wonder so many people have a problem saving money?
Yes, Tito is a Griffon Bruxellois. When I was breeding Cavalier King Charles Spaniels a friend of mine had the 2 breeds. They’re funny little people.
Thanks for clearing that up, Frogdancer. And you are so right about them being funny little people. Tito would get very angry at any pedestrian who walked by and didn’t pet him. In fact, he would charge said pedestrian and block his or her advance. Once you paid the petting toll, though, you were good to go. Tito wasn’t a greedy tyrant.
There must be something with three’s going around, since I just recently wrote about the big three expenses in your budget. In my thinking that’s home, car(s), and groceries. Perhaps that’s because I’m not all that into hobbies, or maybe my hobby is eating. Anyway, the idea’s the same…minimize those big expenses and you’ll have plenty of money left to save and invest.
Gary @ Super Saving Tips recently posted…How New Metal Import Tariffs Might Cost You in the Long Run
“Perhaps that’s because I’m not all that into hobbies, or maybe my hobby is eating.”
Funniest comment of the week, my friend. Thank you.
We’re dying watching Talking Trash right now! So funny! And loved Billy’s post too. Those 3 big expenses are SO important. Estimating our three horsemen if we moved to Florida would be almost exactly what yours is and our income would be about the same in a few years. But the second house up north adds more – but not an unreasonable amount.
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Thanks, Vicki. Having two homes definitely makes the three horsemen harder to tame. But I love western New York. Sure, it’s cold during the winter, but it’s so damn beautiful. And the people are pretty awesome too. You and Jeff have the best of both worlds. You enjoy Florida during the winter and western New York for the rest of the year. I’m jealous.
I like the three horseman idea, but ours is definitely a LOT higher than 10% living in the Bay Area. Very impressive that you guys keep it so low! We do well on hobby spending, but housing/hovercraft still too high. Completely agree that lowering those 3 expenses can have a huge impact on your savings rate.
I hear ya, Matt. Own your housing outright in a low-cost-of-living area and it’s hard not to save money. But that luxury isn’t easily replicated in a high-cost-of-living area. Even if you own your home outright, it will still be tough to get your three horsemen cost under 10% of your income. On Long Island, for instance, property taxes on a nice home in a nice neighborhood are in the $12K to $15K range. This means you’ll need a household income of $240K to $300K just to keep your property tax expense in the 5% range. Very scary.
In my pre-retirement planning, I identified some big-ticket capital expenses: replacing a car, a roof, and rental house-painting. Of those, the car replacement was most pressing since my Mercedes was a decade old.
On a beautiful Friday afternoon I was driving home down the freeway when ahead of me cars began panic-stopping. I hit the breaks and the amazing Mercedes AMG brakes did their job narrowly averting my crunching the cars ahead of me. Huzzah. Three cheers for Mercedes brakes.
I was mid-thanksgiving prayer when WHAM the car behind me proved that cheap Honda brakes are inadequate. It totaled my beloved Mercedes. The capital expense just got real.
Replacing the Mercedes got me thinking about the price of auto repairs. German parts are more expensive than Ford parts. Since my wife hated the Lincoln we looked at, I bought the equivalent Ford Fusion. I figure that in the first years of retirement I’ll engage in egotrage. This makes the Ford a smart buy, but I’m still jonesing for German steel…
Got to mind the hovercraft category
You never fail to amaze me with your insights, my friend. Exquisite engineering shines most when chaos comes calling. But chaos is such an infrequent visitor, mundane engineering is very enticing. “[J]onesing for German steel.” Great freakin’ line.
Great example of sharing a strong lesson from one blogger to another. I love the idea of the 3 horseman, tho I’d shudder to think of our % expense this year (I’m still paying for our apt, we only recently paid off our house, and we bought a new truck for our retirement camping). Ah well, since we’ve already achieved FI, I guess it’s ok to “Live Like No One Else”, right?
Haha! Nailed it, Fritz. I have the worst car on my block–by far–and in the words of Maxwell Smart, “I’m loving it.” Better to drive a crappy car and “live like no one else” than to drive an awesome car and “go to work like everyone else.”
I like the idea of the three horsemen. I think it would be fair to also add house repairs in. Our house and cars are all paid off, but the travel trailer hobby adds up. Totally worth it though. The other horsemen pick up the tab!
Sure, I’m in total agreement that “house repairs” are the same Horseman as “Housing.” That Housing Horseman comes in many shapes and sizes. I may have to add this note in my post: “Remember, if you’re house is 4,000 square feet, it’s going to cost twice the maintenance and energy as a 2,000 square foot house, minus the appliances.” Be aware of that when you’re comparing square footage layouts.
When it comes to housing, I’m definitely in the smaller is better camp. Less stuff, less maintenance, less costly utility bills.
Agreed. I’ll add in my repair costs and adjust my analysis accordingly. Repair/maintenance costs are every bit a fundamental cost of home ownership as property taxes. Good catch, Susan.
Well, crap…now I have to go create another tab in my mega-spreadsheet to calculate my 3 horsemen values…
Work will have to wait.
Budget On a Stick recently posted…Our Walk With Cash Budgeting
LOL! Damn work, more spreadsheet magic ahead! The three horsemen tab is worth it. I’m adding one myself.
The Three Horsemen, this is brilliant. I’ll be heading over to check that post out. Great job on keeping your expenses so low. Those items are really a killer.
I’d take DQ over the club any day. Good luck in the rumble, you have my vote!
Couldn’t agree more, Mr DS. Billy nailed with the three horsemen.
I can’t wait to link back to this article right now! Great job! You took the insight I had, and fleshed it out to make it an even bigger, even more awesome thought!
After publishing the original “Three Horseman” Post, I received this email from a reader yesterday that I thought perfectly summed up my point:
“This post really resonated with me because, as you pointed out, it just takes a little bit of intentional focus in these areas to either set you up for a trajectory or success (making smart decisions) or a slow bleed of all your incoming resources (by making poor decisions). It’s like these minor decision points – how do I want to spend my weekend, which house should I buy, what method of transportation do I want to utilize – have such a profound effect that just compounds over the course of our lives. If you can simply put some focus and make intentional decisions in these 3 areas – or even 1 of the 3 areas – that decision moves the needle every single day. It’s interesting stuff 🙂
I just saw the glimmer of the thought. Thanks for helping me grow it into something even more awesome!
I love it, Billy. So glad the three horsemen concept is helping people change their financial mindsets. Can’t wait to see where you take this. It’s going to be good.
Tito looks like a lovable little guy. Glad to hear you got a confirmation on Fluffy. I’d take a trip to Dairy Queen over any bar/club.
The Home Horsemen is currently killing us in NY, but you are all too familiar with that.
Let’s see? Ice cream in a sedate environment or thunderous music attacking my eardrums in a dark, cavernous box, surrounded by people a third of my age? Ice cream never looked so good.
Mr. G, I got my vote in and couldn’t agree more with the trio as it relates to personal finance. Get those wrong and it can mean a tough slog. Tom
Tom @ Dividends Diversify recently posted…Tech, Where Cash is King
Slog is the perfect word. Your finances and life will be filled with much stress if you overextend yourself on the basics. Thanks for stopping by, my friend.
It’s funny you mention the dogs running loose. In rural areas that was the norm up until a decade or two ago (at least here in VT). I literally can count on one hand how many dogs that I knew were tied up outside. The rest roamed the neighborhood with generally no ill effect. The only problem was getting hit by cars, which of course IS an ill effect.
I’m not sure where I sit on this – having dogs be able to roam free for 7-15 years and have a chance of getting hit by a car might be worth it to them. Of course, I’m the same guy that’d let my kids roam free at a fairly young age too, if I had them. I read yesterday that only about 100 kids a year get abducted in a traditional stranger kidnapping. A lot more dogs get hit by cars, I suppose.
So true, Ron. I don’t think we had leash laws on Long Island until the 90s. In western NC you still see a lot of dogs running wild. It was definitely normal when I was a kid, but it strikes me as very strange now.
Those tennis shoes in the featured image? Way too white, clean, and comfy looking. I was expecting Jesus sandals, man!
Our three horsemen are our twins and all the costs associated with raising kids. Triplets would’ve made the analogy better I guess…
True @Cubert! We’re still a NK family (No Kids), so children don’t impact my budget (yet.) For people with kids, I am sure they are the fourth Horsemen, which we can call, Hijos, which means “Children” in Spanish.
This is what I’ve been told from friends who have kids: “Kids aren’t inherently expensive. It’s often the parents that make them expensive.” So being smart with the financial decisions surrounding your kids, is definitely the fourth horsemen that I haven’t encountered yet.
Nice, Billy. Hijos are the fourth horseman of personal finance.
Haha! Mrs. G is very punctilious when it comes to caring for her sneakers.
Comparing Dairy Queen in the South to Studio 54 – Priceless!
I like the tree horseman idea. Home and hovercrafts for sure will kill you. I got to FI by having not-so-cheap hobbies though. I have TONS of gear for my outdoor sports. But I probably made up the difference in savings by being super-frugal in other ways.
Accidental fire – Don’t feel bad about investing in the right hobbies. In fact, I think I may add a paragraph to my original Three Horseman post, or dedicate an entire article, about how to INVEST in hobbies the right way. For example, I own three bikes that cost thousands, a premier guitar and keyboard piano. I own xc and downhill skis, snowshoes, rollerblades, fishing equipment, art supplies, etc. I also own alot of nice stereo equipment that allows me to enjoy the music I love. (I did buy all this awesome gear slightly used, which helped with the costs.) But the cool thing about these types of hobbies, is that once you invest in them, you can use this gear to create free adventures and opportunities for personal growth for the rest of your life. And hobbies that force you to create, and make you feel healthier, happier, and smarter are really investments in yourself and your life experience. The hobbies that you have to avoid are the consumable type that make you feel lost and empty when you’re done, like you just wasted a bunch of time and money, and you didn’t get any sustained happiness or personal growth out of them. So by all means, feel invigorated to invest in outdoor sports, as once you own the gear, and use it, your favorite entertainment will be free forever.
Impressive collection, I might have you beat. Let’s see, I have 6 bikes, 5 guitars, drums, a small studio, 6 tents, 5 sleeping bags, 4 climbing ropes, 2 stand up paddleboards, a kayak, a snowboard..
I’ll stop there 😉
You’re right though. My outdoor sports keep me healthy and fit, plain and simple. And without health and fitness, what’s the point in having money? That’s how I see it at least. They are indeed investments in life experience as you said, well put!
It sounds like you and I should hang out! Seems like we do the same things with our free time!
Agreed.
Hey, perhaps you guys can jam at FinCon.
Not sure if I’ll be there but the Happy Philosopher plays too and he could fill in!
Sorry to hear you might not make it this year. I was hoping to meet you. But there’s always FinCon 2019, my friend.
Investing in hobbies. I like the concept.
Hey, AF. Nothing wrong with expensive hobbies. As long as the three horsemen are under 20% of your household income, there’s no reason you can’t splurge. Enjoying life is what it’s all about.