Call us crazy. We don't care. While most families count their mortgage as their biggest expense, we blow through $3,000 a month on this instead. Here's why.
Retirement

Why Our Biggest Bill Each Month ($3,000) Isn’t Our Mortgage

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These days, our financial situation is fairly simple. Beyond the complexities of self-employment and paying quarterly income taxes, our monthly expenses are downright boring.

At the beginning of each month, I sit down and create a zero-sum budget that outlines each expense we need to pay. For the most part, those expenses include things like our ever-decreasing home mortgage, utility bills, insurance payments, groceries, cell phone bills, and stuff for the kids. In total, our monthly living expenses are usually around $3,000 – that is, unless we have a trip planned that month.

Why We Max Out Our Retirement Accounts

Still, looming in the corner is another monthly expense I pay – the $3,000 I send to our Vanguard retirement accounts at the beginning of the month. Since I pay this out of our business account and rarely think twice about it, it’s easy to forget just how monstrous it is. This expense is especially big when you consider it’s equal to the amount we spend on housing, utilities, transportation, food, and miscellaneous combined every month!

Plus, this is just the beginning of what we can save in tax-advantaged accounts. With Vanguard, we each have a Solo 401(k). That means we’re able to save $18,000 each year (hence the $3,000 per month). Plus, our business can contribute up to 25 percent of our salaries as a profit sharing contribution – although we make that decision at the end of the year. (Side note: In 2017, the maximum limit on ALL contributions is $54,000.)

Regardless, I try not to think about it… mostly because it hurts. Let’s face it; there are around a million ways I would rather burn through $3,000 per month!

With $3,000 per month, I could:

  • book two round-trip economy flights to Italy every month for $2,000, then use $1,000 for a nicer AirBNB.
  • pay principal and interest on a $600,000 home mortgage at 4 percent APR. In other words, I could buy my dream home!
  • buy Greg a new Aston Martin or some other sports car.

Do I want to do anything of those things? Not really. Still, you get the point.

Regardless, I still fork over these funds – month after month and year after year.

Here’s why:

#1: We are desperate for tax savings.

Earning more money over time has been a dream come true for us, mostly because it has given us the liberty to create the life of our dreams. One notable downside, however, is the fact we pay a lot more in taxes! This truth becomes especially evident when I tearfully write a check for quarterly taxes every three months, then wonder why the heck I pay so much!

Saving as much as we can in tax-advantaged retirement accounts has obviously helped us reduce our tax load – at least for now. The more we save, the less taxable income we have. It’s as simple as that.

#2: Compound interest is magic.

One of the best ways to invest money is by doing it early and often. Compound interest is magic, which is why I’m sad I didn’t care about saving for retirement in my early 20’s. I never had a lot of money when I was young anyway, buy I could have saved something before the age of 25! Unfortunately, I was too busy being young and dumb and thinking I was invincible.

The good news is, we got serious about retirement savings in our late 20’s and have continued ramping up our efforts ever since. The longer we save, the more time our money has to grow… and grow… and compound on itself. While we’re saving a lot, I know we’ll need every penny we can get.

#3: We want to retire early.

One of the biggest motivators for saving so much is the fact we want to retire (or semi-retire) while we can still enjoy it. I’m not sure we’ll ever quit working altogether, but I do envision a future where I’m not sitting at this computer for 40 hours every week.

It’s not really that far away when you think about it. Our oldest child is eight and our youngest will be six soon. That means we’re only 10-12 years away from having kids in college and earning the ability to retire and slow travel however we want.

Will we actually retire? I have no idea, but I do know we want to have as many options as we can.

#4: We don’t want to be a burden on our children.

Call us crazy. We don't care. While most families count their mortgage as their biggest expense, we blow through $3,000 a month on this instead. Here's why.Saving for retirement isn’t just for us – it’s for our kids. While that probably sounds especially snooze-worthy, my feelings on this are real. Greg and I are lucky to have parents who have their financial lives together, but not everyone is that lucky. Truth be told, I could probably name at least ten people I know who are helping their parents in retirement. While I’m not against helping my parents and would definitely do so, it’s nice to know they are doing well on their own.

The bottom line: I refuse to put myself in the position of having to ask my adult kids for money. The only exception I would make is if one of them winds up filthy rich, in which case, I would gladly let them support me. (Kidding!)

#5: We love our future selves… a lot!

While saving for retirement has some short-term perks (like tax savings), the real benefit is taking care of someone you don’t really know yet – your future self. No matter how young and healthy I feel now, I know that one day I’ll be old and tired of working. How would my future self feel if I ignored retirement savings and YOLO’d my way through my 30’s and 40’s?

You can bet your bottom dollar my future self – the grouchy old lady I will surely become – would be pissed! Since I’m scared of her already, I’ll keep on saving.

We Blow $3,000 Per Month… and We’re Okay With It

Doing the adult thing really sucks sometimes. The truth is, it would be a lot easier to spend our retirement savings on something fun, or to upgrade our lifestyle in some pretty crazy ways. Part of me can absolutely picture myself in a huge house with a pool in the back yard, or with a newer car that isn’t embarrassing to drive. And we all know I could easily plan a $3,000 vacation every single month and enjoy it.

Fortunately, we are well aware of what’s at stake here. We also know that, one day, we’ll be glad we did the right thing.

How do you stay committed to your retirement goals? Do you ever wish you could blow that money instead?

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23 Comments

  1. Bahahah! That’s not blowing money at all. 🙂 I looooove the idea of prioritizing tax-advantaged accounts to see some tax savings. We owed taxes to Uncle Sam the first time this year, and it wasn’t fun. I could stand to see some savings. 🙂

    1. Yes, I hate the thought of owing the tax man! I would much rather save that cash for retirement – or at least part of it.

  2. I would say this is the exact opposite of blowing your money. Though, I think you could have fun envisioning your future selves blowing through it. 🙂 Sometimes, when I get sick of saving for retirement, I try to imagine future Penny. Maybe I’ll be saddled up to the penny slots in Vegas with my blue hair or doting on grandkids. Props to you for making your money work for your future selves so well! That’s a major investment!

    1. Yes, the future you is real…whether you like it or not. I know the future me would be PISSED if I didn’t take retirement seriously =)

  3. $3,000 a month is AMAZING! And while it may not be the most fun right now, you’re living like no one else so you can really live like no one else later!

  4. Great advice for entrepreneurs and small business owners! Like you, I know at least ten people who are helping their parents and/or siblings in retirement. Some owned very successful businesses and upgraded their lifestyle instead of saving for the future. Unfortunately, instead of enjoying their retirement years, they’ve had to borrow money from family (and ruined relationships), significantly downsize living, and had to get hourly jobs to pay the bills because social security doesn’t cover the bills.

    1. Yes, it sucks to find out you’re ages 60+ and don’t have the funds for retirement. But, by then, it’s too late! Better to plan early.

  5. Fantastic savings rate and motivation behind it! We’re not putting away $3k/month into retirement accounts or using traditional versions, but maybe we will be soon!

  6. That’s a great way to think about one of the “good” line items in any budget. Our largest item is our savings, too…probably my favorite one as well.

  7. I love your attitude on finances 🙂 My parents are also doing OK for now, but if they ever needed it, I’d gladly help, just like I’d gladly help my kids financially, even when they’ll be all grown up (well, first I’d have to have them, but that’s not the point!). I’m very grateful I don’t have any stressful family relationships right now!

    We’re also working hard on saving as much as possible, but still make an effort to enjoy life in our 30s (then 40s and so on) as well!

  8. Happy those who can actually put money away in tax-advantage accounts. We non-us residents have to do it the hard way…

  9. I like the thinking on this one. I mean if that is the case then I “blow” $2000 a month sending it to my retirement accounts (403b and 401a). Not a bad way of thinking about that.

  10. $3,000 per month is awesome. I’m hoping to just finally be able to max out my Roth IRA ($458 per month) haha. I love my future self just as much as my current self. No eating Ramen in retirement!

  11. The biggest benefit of maxing out your retirement accounts year after year is that gets you used to living on less and gives you OPTIONS. No one wants to be forced to do something they don’t want to, and having money in the bank will allow you to do whatever you want essentially.

    Now that I think about it, the money we save into retirement accounts along with early debt payoff surpasses our mortgage as well. And once those debts get paid off, they will be funneled right back into savings. It’s a good feeling!

  12. Very funny wording coming from a self-pronounced personal finance guru …LOL.
    “monthly expense I pay – the $3,000 I send to our Vanguard retirement accounts “. Why is it an *expense* exactly? Such a thought never entered my mind until I noticed it here…seriously?!

    1. Personal fiance experts know that when you consider savings an “expense,” it actually happens. When savings is considered optional, it often falls short.

  13. This is a very down-to-earth, real, and informed article. I’m impressed that you’re being so smart about the way you’re investing. 1. Vanguard Index Funds – THE BEST VALUE OUT THERE. Actively managed funds are usually a scam, and can destroy your savings. So I love that you’re using Vanguard. 2. You’ve found the Solo-401k from vangaurd, which is the BEST way for a single owner LLC or S-COrp to sock away money! 54,000 each is amazing, and the profit share side is UBER tax efficient. By the way, are you an S-Corp yet? 3. You are on a zero-based budget monthly – AWESOME! 4. You speak about the impact you’ll have on your kids down the road. That’s wise. GREAT ARTICLE – question – are you setup as an S-Corp and maximizing that tool?

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