Mar 06

Personal Finances: Average Married Dad style

Though it’s a frequent subject in our life, I don’t often post about financial matters here.  Some older ones I have written include Rising College Costs: What’s a Parent to Do and Count Your Economic Blessings: Musings on Personal and U.S. Finances.

I’m rereading the book The Millionaire Next Door: The Surprising Secrets of America’s Wealthy which, while slightly dated, has some great lessons.  Surprisingly, having a “Great” job like a Doctor or Lawyer doesn’t make it necessarily any easier to be “rich”.  These types of high-visibility jobs often require a certain appearance that requires a fair amount of capital.  Additionally, they may have a taste for higher quality goods and services that further drain their resources.  In that book, they say most millionaires A) own their own business B) are more regular folks in markets that you wouldn’t necessarily expect (examples in the book include trucking, janitorial services, etc.)  and C) are more frugal with their money.  They live in regular houses and drive used, regular cars.

To get to a place of economic prosperity you really have two sides of the fence: Offense (how much you make) and Defense (how much you spend).  You can have a great offense but if your defense sucks your long-term prosperity is always in question.  Alternatively, you can have a poor offense, but if your defense is superb you can still have great net worth and in the long run may be better off than your higher status, spendthrift, neighbors that are keeping up with the Joneses.  It sort of depends on how you prioritize your life.

Like any family, we have our own share of economic and financial issues.  There’s only so much coming in and how we allocate it for both short-term living and long-term future is always a challenge.  After years of sort of figuring things out and making our share of mistakes we’re finally more or less in the black.  After blowing wads of cash on stupid stuff over the years, we’ve finally matured enough to prioritize things in a manner that I believe finally has a pretty solid balance of quality life now and planning for the future.  Things could still be tighter and as Captain of our big picture long-term financial planning, I am still working to pay ourselves first increasing that payment each year.  Holly does the monthly bills and we’re more or less on the same page of our approach.  We could still be better, and it’s a matter of saving til it hurts a little and then saving even more, which we’re not there yet.

As younger adults, we were pretty immature about our finances.  After both graduating college with student loans and credit card debt, we moved to the east coast where everything seems more expensive.  While not exactly “living large”, we tried to keep income equal to outcome, but that wasn’t always the case.  I purchased a two-year old SUV now that I was a “professional” and besides paying way too much for it, I had to pay for way to expensive insurance too.  We did our best to not be extravagant, but what was more or less the story of our 20’s, it was death by a 1000 paper cuts.  Lots of little things prevented us from really getting traction.  We were able to buy a house in that time, use the equity to pay down debt, only to take on more debt later.  Dumb.  The few smart things we did during this time as A) buy a house that needed mostly sweat equity to make it worth more, and one that we could afford and B) fund our 401k’s from the get-go at 10% or higher of our total income.  Don’t be that impressed though, 10% of nothing is still nothing, but it at least set the table for later years as income increased.

After years of digging ourselves out of financial purgatory while still generally enjoying the things we could afford that bought us pleasure (and some of those were expensive items), we’re finally on stable footing.  For the first time in our married lives we have an emergency fund.  With the exception of our mortgage and some student loans (still!) we have no debt.  We have a decent amount saved away in our retirement accounts and have a little saved in the kids college funds.  We’re making improvements each year and I hope that we’ll eventually get to our long-term goals.  I realize everyone out there is in your own situation, and mine is finally pretty stable at this time, yours may not be.  I worked with a guy who had five kids (under 9) and a stay at home wife.  His situation was obviously much different than mine.  However, despite our differences, you may still find value in my advice.

I’m a subscriber of a few basic principals(ones that were echoed in the Millionaire book) that I think go a long way towards retirement and having a financial cushion.

  1. Credit cards – pay them off.  Easier said than done, but this should be the second highest priority after a mortgage (assuming you have one).  While I’d still do number 2 below, at least in part, while paying off cards, the interest is killing you.  Once paid off, use sparingly and pay off monthly.  Use what you were paying in CC fees to bump up item 2 below.
  2. Pay yourself first, most important aspect.
    • While there are certainly flaws with most 401k plans, primarily the fact that most employer sponsered plans fees are too high and who knows how the government will treat these going forward, it’s a really easy way to set aside money without you seeing it or missing it.  If your employer matches, put at least enough in to maximize the match as it’s free money.  Alternatively, a self-directed IRA into an E-trade type account allows you to select funds with much lower fees, but you need to be disciplined enough, or set up auto withdrawals, to make this work.
    • Many employers also allow you to split your paycheck into two, or sometimes more, accounts.  Send part of it to a high interest savings plan and forget about it.  We use CapitalOne360, formerly ING-orange, which pays 0.75% right now (which sucks, but is better than most, if not all, local places).
    • If you have kids, it’s not a bad idea to start a 529 account, which offer some long term growth and tax advantages compared to just a savings or investment account tagged with this in mind.  Some states are better than others, but you can have automatic withdrawals to that account. We have ours set up to take out money for both kids the 1st and 15th day of every month.  However, be aware that later, when they’re applying for financial aid, the amount in their name may be counted against them in determining loan packages.  This contribution should come secondary to retirement as you can’t get loans, grants or scholarships for retirement.  But a $10 or $20 a month contribution to start will at least be something and perhaps motivate you through the years to increase it as you can afford it.
    • Also, while not technically in the “pay yourself” category, make sure you have life insurance, the term kind makes the most sense.  Both Holly and I have several slightly overlapping 20-year term policies that we add to if our income goes up enough.  This is most critical when the kids are younger and you have the need for the lost income to make up for college savings, mortgage, etc; or if you are the sole breadwinner of the house.
    • To give you some scale, both my wife and I are putting 16% of our gross income into 401k or directed IRA accounts, another 4% into savings/emergency fund and another roughly 4% into kids college funds.  We’ve only recently reached these levels and usually were adding a percent or two to each category per year when we got raises.  We still haven’t maxed out 401k or IRA amounts, but is our goal to keep adding percentages of our income for that to happen one day.  Money out of sight, out of mind.
  3. Be frugal.  What was interesting in the Millionaire Next Door book was the level of consumption that low net worth people had, and how it impacted their ability to save.  Lower income earners often had higher net worth because they saved, cared less about appearance and both spouses felt those things were a higher priorty than having the latest gadget or  newest car.  Find ways to save, and what that means is you really need to A) prioritize what is important to you and your family to participate in or spend money on.  This could be kids sports league, the gym, quality food (grass fed beef is expensive) or hunting. Spend what you need to on your passions, cut back as much as you can everywhere else. B) Buy used where you can.  Used cars, thrift store purchases, Craigslist.  Holly likes to shop, I think it’s dumb and wasteful, but at least 75% of her shopping takes place at a local charitable thrift store so that’s a compromise we can both agree on.  C) Wring every last hour out of what you do have.  Our cars are both paid for; mine is 10 years old nearing 200,000 miles, love it and hope it lasts another couple years without too many issues.  We are late adopters of new video games, gadgets and televisions, and our recreational gear is also pretty dated but in very usable condition.
  4. Third, and very important, focus inward on happiness and don’t get caught up in the consumption competition.  Our house is in a nice neighborhood, but is one of the smaller and lower priced ones.  Our cars are smaller, older and not as high-end as many of our neighbors.  We rarely eat in fancy restaurants and prefer camping to cruises.  The friends we see most often are from agricultural backgrounds or general blue-collar mentality; work hard, save money, enjoy family and friends.  Our family doesn’t worry about “toys” like snowmobiles, boats or so many other trappings that seem so common place.  We’ve got everything we need in our situation and are thankful to be where we are.
  5. Do things yourself. We’ve toyed with hiring a cleaning person or lawn care guy, but honestly, the thought of parting with money for something that I can do myself sort of stings.  Our house may be a little messier, and lawn not as green and manicured as our neighbors, but it’s acceptable to us.  We also cook about 90-95% of our meals, freeze or can stuff from our garden, make homemade ketchup and mayonnaise  and I even make homemade wine at a financial cost $3.50 or less a bottle.
  6. Lastly, do whatever you can to stay married. Often divorce sets both sides back a number of years. Let’s say your wife works as a teacher or a SAHM and you as a trucker/middle manager/business owner.  You toil long and hard to provide, making sacrifices so you can have golden years, and squirrel away for retirement.  Now that nest egg figure: take half of it and burn it.  That’s essentially what happens when you get divorced.  Also, if kids are involved, expect your paycheck to be much lower as your wife and kids live in the house you helped to build while you’re in a crappy efficiency apartment wondering what happened.  Read Athol Kay and the MMSL and get a handle on the rules and why even when it’s not your fault that you’re on your way to separation/divorce, it’s still your fault. Staying married makes long-term financial success much more likely.

I think in general we’re on the right track, but still feel that we’re a little behind where we want to be due to some of the mistakes we made from 18-30 years old and the “lost decade” of the 2000’s (our first with any money in any accounts). I’d also like to play even more defense, but am not sure where to cut things further at this point.  We don’t have cable, we’re not buying new clothes frequently, we heavily utilize the library system, though we do spend money on decent hair cuts for us (kids and dog grooming are done at home).  I still wish we’d cut out more consumption and acquisition of items, but at least they’re mostly thrift or used items.

Resources I like on general personal finance are:

  • Bogleheads – a group of regular people intent on being frugal and often retiring early while making sound investing and personal finance decisions.  I also recommend their book The Bogleheads’ Guide to Retirement Planning
  • Financial Samurai – this guy makes me feel like I’m way behind the curve, but has some good insight and advice on making changes to be in a good financial place eventually.
  • Get Rich Slowly – a blog by regular people with a variety of regular people topics about making and keeping money, and has various financial situations, some people with smaller incomes, tackling debt
  • Can I Retire Yet – a blog/article reservoir on some basic issues of investing and personal finances related to saving up a nest egg
  • Vanguard investments – they have very low fees and I personally hold a lot of various mutual funds and ETF’s in a retirement account I manage from my rolled over old 401ks.  When we finally have enough to do taxable investing after maxing out IRA’s and the like, it will be with Vanguard funds.

Take all this post for what it’s worth, which is with a grain of salt.  I personally believe and live this way, but realize it took us a long time to learn the hard lessons and dig out to the place we are now.  Just takes discipline, time and to some degree finding happiness from within and not from external circumstances or material goods.

Unless I win the lotto, I’ll never be rich, but I can still live a rich life with my family and plan for a life where I won’t have to work, while at the same time hope to provide an opportunity for my children to go to additional schooling without taking on the massive amount of debt we both had to.


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  1. Dominant Monkey

    I have quite an interest in personal finance. I bet if I was in another career it might be that one.

    I couldn’t agree more with all of your points, I think the toughest one is not “keeping up with Jones’ ”

    For instance, I drive what I would call a “conservative” car, most people in my industry in my position drive BMW’s, Lexus etc… So I do always get a bit of a twinge when I go to an industry function and park next to all of the nicer cars.

    But I remind myself that it’s supposed to pay off when I’m older and in retirement or wanting to retire.

    The only other point I would add, and I’m Canadian so I pay a boat load of tax, is to educate yourself or hire a good accountant to help you with “tax avoidance”. Not “tax evasion” but finding ways to legally reduce your tax bill can be huge. Most people never see the money they give the government cause it comes off their cheques at source, but if you can get a better return each year, it adds up!

  2. thecaptainpower

    When is the AMD book coming out? You have a niche market here…

  3. darlingdoll

    I work in a law firm, and the one thing I would add, especially where men are concerned, is to get a pre-nup in place prior to marriage. If you own a business, have them sign a waiver of rights or interest and consider getting a post-nup too when accumulating wealth after marriage. If your fiancé throws a fit over it, that should be a huge red flag.

    I have seen so many men build successful businesses and amass considerable wealth and then almost go bankrupt through divorce proceedings. It seems unromantic, but the reality is most marriages fail, and the American legal system is skewed to benefit mothers and wives. You can still provide for and support your spouse with a pre-nup in place, but at least you’ll have some protection if the worst happens. IMHO

    1. AverageMarriedDad

      That’s a great point. When we got married we both had negative net wealth and knowing we would both be in a professional field, we felt our fortunes were tied together. For 90% of our marriage, I had a higher salary, but now she makes more than me. If I had positive net worth and were older when I got married, a pre-nup certainly would make sense. I would guess modern feminists who balk at changing their last name would also balk at signing a prenup. Like you said, if she’s not willing to sign it, it is a red flag. Thanks for the advice.

  4. Lisette

    way to go on improving your financial situation!

    would you post your catsup and mayo recipies? I am intrigued at the thought of making them from scratch.

    1. AverageMarriedDad

      Holly said she’d answer that, since she makes it and I eat it! May post homemade bbq sauce too since all the store stuff has sugar. Stay tuned…

      1. Lisette

        Sounds good, I look forward to a Holly post!

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