Priscilla was a self-described spender, while Vince was frugal. That sometimes caused friction.
“It’s funny to look back on how I thought about money. We had a big disagreement after I started working as an R.N. I wanted to buy an expensive new car, but Vince thought I should get a cheaper one.” Not one to back down easily, Priscilla insisted on making the purchase.Shortly after buying the car, Priscilla’s life changed. She was diagnosed with multiple sclerosis (MS), a nervous system disease that causes pain and weakness and is often disabling. Her symptoms forced her to stop working while she focused on managing the disease.
The diagnosis made her rethink many aspects of her life, including her views on money.
“I was in the hospital for rehab, and suddenly I realized—and I hate to admit this—that my husband was right. Emergencies happen and you need to prepare. In your 20s, you don’t think anything will happen to you—until it does.”
Priscilla turned to the internet to learn more about personal finance and investing. She came across the Bogleheads and learned about Vanguard. The philosophy of investing in low-cost index funds and building wealth over time resonated with her and changed her life.
They saved 38% of their income last yearPriscilla and her husband made significant changes in their lives to become avid investors. They went from spending most of their paychecks to saving 38% of their pay last year.
“Once you get out of the ‘buy, buy, buy’ mindset, you realize that having a lot of things doesn’t mean you’re wealthy,” Priscilla said. “The satisfaction of having an emergency fund is better than the satisfaction of having the latest and greatest of everything.”
It wasn’t easy for them to become such accomplished savers. It took lifestyle changes and willpower for the couple to increase their savings rate, especially because their income went down when Priscilla left her job.
Here are 5 key changes they recommend:
1. Move to an affordable locationAfter Priscilla was diagnosed, the couple decided to move closer to her family in Orlando, Florida. Vince was able to work from home, and she focused on doing physical therapy and regaining her strength.
While the decision wasn’t just about money, it ended up being a frugal choice. The move was the first step toward creating a different lifestyle and lowering their cost of living.
They bought a house with a monthly mortgage that’s less than they paid for their pricey D.C. rental.
Other costs went down too. Because Vince works from home most of the time, his commuting expenses, including gas, are low. Plus there aren’t any state income taxes in Florida.
After they settled in, the young couple created a budget. They started tracking all their expenses using an online app.
2. Create a budget and develop a plan
“The budget was a game changer for us,” Priscilla said. “We could see where we were spending too much and how quickly it added up.”
They also wrote an investment policy statement. Putting this in writing enabled them to prioritize their goals, and it helps them stay focused on the long term when there’s market volatility.
The statement includes information on their:
- Goals, such as when they’d like to gain financial independence.
- Risk tolerance.
- Target investment allocation.
Priscilla recently finished writing the couple’s investment policy statement for 2019. Her top goals: to max out their retirement savings (including Roth IRAs) and to continue to build their emergency fund. She’s hoping to have a child in 2020 and wants a year’s worth of living expenses invested before they make that leap.
Any extra money will go toward paying down their mortgage early. “If we have $10, we put it toward the mortgage. It’s amazing how little bits of money make a big difference when you’re thinking long-term,” Priscilla said.
3. Make tough spending choicesCreating a budget was just the beginning. For it to work, Priscilla and Vince had to make tough spending choices. Some were easy; others weren’t.
Their top budget cuts included:
- Food. The couple went from spending about $1,000 a month eating out and buying groceries to $250 to $350 per month. They stopped eating at restaurants and buying meat. These changes served a dual purpose: to save money and to allow Priscilla to eat a healthier diet to combat MS. “When you feel pain, it’s easy to change your ways,” she said. “It’s been harder for Vince, but he’s adapting.” The couple still eats out on special occasions that are planned for.
- TV. Priscilla and Vince joined the millions of people cutting the cord for cable TV. “We pay $5.99 for a streaming service,” Priscilla said. “We’re too busy to watch much TV anyway.”
- Cars. The couple currently has one car, and it’s paid for. In fact, it’s the one Priscilla insisted on buying years ago.
To boost their income, Priscilla started selling items she doesn’t need. Using online resources, she’s able to make money while decluttering their home. “I was the queen of ‘stuff.’ I had too much stuff, but I’ve been slowly getting rid of it.”
4. Add other sources of income
In addition, her husband has a side job working as a research and teaching assistant. The extra income gives them room in the budget for things that are important to them. For example, they recently saved up to buy Vince a home computer.
5. Purchase insurancePriscilla and Vince have also reevaluated their insurance needs. “I regret not getting life and disability insurance when I was healthy,” Priscilla said. “It’s been difficult to purchase insurance with my diagnosis.”
The couple has done their best to get as much coverage as they can. “You never know about life! I don’t want others to make the same mistake,” she said.
Sharing her investment knowledgePriscilla wants to share her newfound knowledge with others. But she doesn’t offer unsolicited advice. “People like to spend money in different ways. Most of my friends are in 2-income households. They’re able to spend more freely. I don’t want to preach to them.”
But if friends and family ask for investment information, she points them to a variety of useful resources. She enjoys helping others, and sharing what she’s learned allows her to do that.
Priscilla knows the value of easing financial stress firsthand. Since she made the shift to being a saver, she loves the sense of freedom that comes from investing.
“After being diagnosed, I realized the importance of enjoying your life. Investing gives me peace of mind, so I can appreciate every day,” she said.
All investing is subject to risk, including the possible loss of the money you invest.