Living Off the Grid With Kids

Yesterday I mentioned Daniel Suelo, and his caveman existence, as part of the weekly roundup. While scanning my list of daily reads on Thursday I happened upon a great follow up to Suelo’s story. It comes from a post at The Digerati Life about homesteading in the wilderness, and features The Long family living (almost) off the grid in New Zealand.

Robert Long walked away from medical school at the age of 24, rejecting a materialistic lifestyle and all its trappings, and sought to start a life completely unplugged from civilization. He and his wife discovered a remote area of New Zealand nestled between mountains and the sea. Here, they would live in a hut rent free in exchange for being caretakers of the surrounding area. That was 16 years ago.

Now the Long’s have two teenagers who have grown up in isolation. They have been home-schooled by their parents, and are far removed from the lifestyle most teenagers experience today. No MTV, iPods, laptop computers, and other goodies teens enjoy today. With the exception of a monthly plane drop of a few supplies, they live off the land, and animals around them.

A garden provides vegetables, and the ocean, a variety of sea life to eat. For entertainment, the family does have a radio where they can pick up New Zealand national public radio. The kids complete their studies minus laptops, and instead do research the old fashioned way – they read books (the video shows the kids working on homework with the help of an encyclopedia – remember those?).

newzealandhomesteading
Click image above to launch video

Critics of the Longs’ lifestyle show most concern for the welfare of the children. Admittedly, I had similar concerns while watching the video. Were the parents stifling opportunities for their children by raising them in such isolation? Or is it us who is exposing our children to harmful influences raising kids in a debt-driven, materialistic society? It’s an interesting debate.

I enjoyed the video because it was one of the first stories I have heard of someone successfully going off the grid with a full family. Often times we hear about the lone hermit, or even the occasional couple, who cash out and head for a life of simplicity. Rarely do we hear about family survival with small children.

I suppose the difficulties of raising kids is hard enough with the comforts we have today, but imagine doing it without any modern conveniences. My great-grandmother did it during the depression, raising a large family (nine kids) as did many in her generation. Her lifestyle was one of necessity, not the product of a voluntary rejection of the finer things. But today we’ve been spoiled by these modern conveniences, and in a way, we’ve become slaves to them.

How many of us, myself included, are working to pay for debts accumulated years ago for things we probably no longer enjoy, rarely spending time with our families while we eke out a miserable, corporate existence? I personally think there is more to life than accumulating wealth while climbing the corporate ladder. Perhaps we could all learn a little from families like the Longs.

What’s your take on this family’s lifestyle?

Weekly Roundup – Living On Nothing Edition

Did you hear about the guy that lives on nothing? No seriously, he lives on zero dollars a day. Meet Daniel Suelo, who lives in a cave outside Moab, Utah. Suelo has no mortgage, no car payment, no debt of any kind. He also has no home, no car, no television, and absolutely no “creature comforts.” But he does have a lot of creatures, as in the mice and bugs that scurry about the cave floor he’s called home for the last three years.

To us, Suelo probably sounds a little extreme. Actually, he probably sounds very extreme. After all, I suspect most of you reading this are doing so under the protection of some sort of man-made shelter, and with some amount of money on your person, and probably a few needs for money, too. And who doesn’t need money unless they have completely unplugged from the grid? Still, it’s an amusing story about a guy who rejects all forms of consumerism as we know it.

The Frugal Roundup

How to Brew Your Own Beer and Maybe Save Some Money. A fantastic introduction to home brewing, something I’ve never done myself, but always been interested in trying. (@Generation X Finance)

Contentment: A Great Financial Principle. If I had to name one required emotion for living a frugal lifestyle it would be contentment. Once you are content with your belongings and your lot in life you can ignore forces attempting to separate you from your money. (@Personal Finance by the Book)

Use Energy Star Appliances to Save On Utility Costs. I enjoyed this post because it included actual numbers, and actual total savings, from someone who upgraded to new, energy star appliances. (@The Digerati Life)

Over-Saving for Retirement? Is it possible to “over-save” for retirement? Yes, I think so. At some point I like the idea of putting some money aside in taxable investments outside of retirement funds, to be accessed prior to traditional retirement age. (@The Simple Dollar)

40 Things to Teach My Kids Before They Leave Home. A great list of both practical and philosophical lessons to teach your kids before they reach the age where they know everything. I think that now happens around 13 years-old. (@My Supercharged Life)

Index Fund Investing Overview. If you are looking for a place to invest with high diversification and relatively low fees (for broader index funds with low turnover), index funds are a great place to start. (@Money Smart Life)

5 Reasons To Line Dry Your Laundry. My wife and I may soon be installing a clothesline in our backyard. In many neighborhoods they are frowned upon – one of the reasons I don’t like living in a neighborhood. I digress. One of our neighbors recently put up a clothesline, and we might just follow his lead. (@Simple Mom)

A Few Others I Enjoyed

Carnivals I Participate In Recently

How to Quit Your Job

The following guest post is from Steven of HundredGoals.com. After reading the post, be sure to visit Steven’s site to follow the journey towards accomplishing his list of one hundred goals!

Many of us work at jobs where there is no opportunity for advancement.  If there is opportunity for upward mobility, the positions available may require advanced education, experience which we do not have or maybe we don’t have enough seniority.  It may also be that advancement into another position may bring even less satisfaction to an already miserable work experience. Whatever the reason, working at a dead end job stinks.

When you first began working for your company maybe you, like I, had stars in your eyes with dreams of advancement to the top ranks. In no time you would be the one calling the shots, making the decisions, running the show.  Your work ethic was unmatched and you made every effort to go above and beyond at every opportunity in order to stand out above the crowd.  You took on special assignments, working late & on weekends.  You did your best to rub elbows with the big dogs without coming off as an ass-kisser.

hatemyjob0722091
Photo by Sea Moon

As time kept marching on you began to realize that despite everything you have ever been told about career advancement, you are making absolutely no progress.  Maybe you got a small promotion & an insignificant pay raise, but it hasn’t been the ride to the top you thought it was going to be.  You find yourself not caring so much about your performance.  It seems pointless to work so hard when everyone else is performing at a level much less than you yet receiving the same treatment.  No longer are you willing to sacrifice your free time for this company.  No more overtime, no more special projects.  Soon you slip into the shadows & become just another employee; a number on the payroll roster.

As the morning sun slips through your curtains & the chirping of the songbirds wakes you from your peaceful slumber you are in no mood for birds or sunbeams. Instead you want coffee & cigarettes, anything to take your mind away from the fact that it won’t be much longer before you are on your way to punch the clock at the daily Hell called work.  On your way you drive alongside hundreds, even thousands, of people just like you; eating a McMuffin, sipping coffee and smoking a cigarette.  Everyone is on their way to work.

Walking across the parking lot you are greeted with the same pleasantries as the day before.  The same conversations with the same people, day in and day out, over and over again.  Your mind is numb. The people you once found interesting, whose stories you once hung on every word, are now dull and boring.  You turn your mouth on autopilot.  “Morning Jim.  Beautiful day.  How about the Dodgers, can you believe that?”  Deep inside of yourself you don’t really care what these people are talking about but you banter back and forth just to make it through another day.

As you lay down for the night, your head sinking into the cool comfort of your pillow, you ask yourself “Is this what work is supposed to be?  What happened?  I am not happy.  Isn’t there another way? Shouldn’t I be doing something that gives me satisfaction and purpose?”

Some may think that it is naive to think everyone in the world can work in a job or career they love.  Maybe they are right.  There are those people out there who will settle for less than they deserve for a variety of reasons; security, money, insurance, education, even respect.  Yes, even people who work in highly respected positions are miserable too.  Staying in a position in order to maintain respect, or any reason, is ridiculous.  We should be seeking satisfaction in every way possible, including our careers.

Your happiness is no one’s responsibility but your own.  If you are unhappy in your job or career, it isn’t up to someone else to bring you satisfaction.  It is up to you. Quitting a job isn’t something to take lightly and in today’s job market leaving a job, even one you hate, is a risky decision.  In order to quit your job & move smoothly towards other opportunities, keep these points in mind during the transition.

Job Security- If you are staying at a job you hate simply because you feel secure, you are being foolish.  As far too many people have discovered the hard way, there is no such thing as job security.  Take off the rose colored glasses.  At any moment your company could become bankrupt, your job could be outsourced or eliminated entirely.  Life is too short to be unhappy, even for a seemingly valid reason such as “security”.

Debt Elimination- One of the most important aspects of personal finance, not just quitting a job, is to get out of debt.  Having debt chains us to our job.  We must work in order to pay others.  Our money does not belong to us.  You may think you earn $15 an hour, but really, isn’t most of it going to Visa?  They’re the ones making all of the money & you’re doing all of the work for them.

Paying down debt can be a long process.  Depending on your debt load, it could take years before you are debt-free.  Figure out a plan to pay down your debt, and stick with it.  Once you have a plan written down on paper it is easier to meet your goals, especially if it is broken down into smaller, more manageable pieces.  Don’t look at your debt as one big mountain to move.  Instead, try to see it is a bunch of spoonfuls of dirt which are easier to move, bit by bit.

Job Search- Maintaining a job while actively seeking other opportunities provides you with the benefit of time.  You can search for the perfect position without feeling pressured into taking a job that isn’t right for you.  If you are seeking other avenues of opportunity, maybe self-employment, having gainful employment while making the transition into running your own business takes some of the financial stress away.  You will continue earning a wage while your business is young and maturing.  Once you have established yourself & the money coming in is enough to support you without needing your “real” job, you can quit safely.

Education- One way to find more meaningful work or work that is more suitable for your ambitions is to further your education.  Whether you have a degree or haven’t graduated high school, you can always benefit from learning something new.  Take classes in things that interest you.  If there is an area that needs brushing up, say your language or writing mechanics, take some courses on these topics.  Many universities offer evening courses which will mesh well with your work schedule.

Returning to school on a full-time basis may also be something to consider.  Returning to school can be costly & requires devotion to your studies, so be prepared.  Have your finances in order and do your homework to figure out what the cost will be and whether you can afford to make the transition from work back into school.  A part-time job can help ease your financial situation and may even lead to other opportunities.  Try finding something through the University which is in your area of study in order to gain valuable experience.  There is nothing more frustrating than trying to find a job in your field with no practical experience.

Networking- Networking these days is over-rated.  It isn’t all that it is cracked up to be but a few great connections can prove to be a valuable asset further down the road.  Don’t just collect phone numbers, really connect with people and form relationships that have substance and meaning.  There should be give and take within these relationships, don’t just look at these people as a way to get something you want.  If you stick to the standard of collecting cards, you will see why social networking doesn’t work.

The road to your future is paved with the decisions you make today.  Tomorrow is a choice you make. Only you have the ability to determine the path your life follows.  Taking the risk of quitting a job is a risk many are unwilling to take, no matter how unhappy they are with their jobs.  There could be nothing else in this world that we hate more than to have to walk through the Gates of Hell on our way to our desk, our drill press, our counter, our register, our dump truck, yet we still repeat the process each day.

Breaking the cycle is hard.  It is scary.  It is a process that requires thought and preparation, but at the end of the day, isn’t our happiness far more important than a paycheck?

How Much House Can I Afford?

Jeremy writes in with the following question regarding maximum mortgage payments for a new house:

What percentage of your net income should go towards a mortgage?  I don’t want to rush into anything so I was hoping you could give me some ideas as to what to avoid.  Would you consider giving me a couple pointers?

Thanks for your question, Jeremy. Before we get into specific numbers, I have to commend you for even taking the time to ask the question. Unfortunately, many people are still rushing out to sign up for a mortgage without considering the years of financial obligation they are taking on, and what impact that will have to their overall financial plan down the line.

The 28/36 Rule

There are several ways to look at the answer to, “How much house can I afford?” Some people, including most Realtors and mortgage brokers, banks, etc. use what’s called the 28/36 rule. The formula means mortgage lenders like to see your monthly mortgage payment come in at less than 28% of your gross income, and your total monthly debt payments, including your mortgage, represent less than 36% of your gross income. Notice I said gross income, as in before taxes and deductions. The fact you asked your question specifying “net income” means you are on to something.

When someone asks how much our annual income is we typically respond with our annual salary, and any other income from self employment, etc. But the number we use to budget from, and live off, is much lower after Uncle Sam stakes his claim along with benefits deductions for health insurance, and other employment-related expenses that come right out of our paychecks. So why not use this figure to determine mortgage affordability?

Because using gross income increases the amount of house agents can sell you and mortgage brokers can lend you, which means higher commissions and larger interest payments in their pocket. It’s not that they are doing anything wrong, it is just a different way of looking at the question of affordability.

The Frugal Mortgage Calculator

I actually have a more frugal formula for determining how much you can borrow for a home. I personally would not spend more than 25-30% of my take home pay on housing. So if your combined household income is $4,000 a month, meaning the direct deposit or paychecks from your employer totals $4,000 a month, then I would not spend more than $1,200 a month on a mortgage. To do so would mean giving up money towards another financial goal such as debt freedom, kids college savings plans, or even an early retirement.

What If the House I Want Comes With a Higher Mortgage?

Well, this is a case of suffering from champagne tastes with a beer pocketbook. Who doesn’t want to buy more than they can afford at some point in their lives? As I see it, you have three options.

  • Ignore my advice and buy the bigger home with a bigger mortgage payment.
  • Save up for a larger down payment to drive down the amount financed, and the resulting monthly mortgage payment.
  • Shop for a more modest home.

Of course I would strongly consider option number three, because larger homes come with larger expenses (taxes, utilities, maintenance, etc.), even if you can get the monthly mortgage payment lowered with a large down payment. Still, option two does have some advantages. By waiting to save a larger down payment, chances are you can also clear some debt, which may improve your credit score and qualify you for a lower interest rate (and a lower payment). Still, consider the increased costs of owning the larger home, even if you technically qualify for it based on income.

If you are wondering, we currently spend about 18% of our monthly take home pay on housing. But that wasn’t the case when we first moved in (fortunately our income has increased over the years) – and it caused a real pinch those first few months. Don’t make the same mistake we did!

Ask the Readers:  How much of your take home pay are you currently spending on housing?

The Tri-Level Emergency Fund

This past Saturday evening I joined radio talk show host Michael Finney of KGO AM 810 San Francisco on his weekly radio show, “Consumer Talk with Michael Finney,” to discuss my recent post about safe places to keep cash at home. During our conversation I shared with him my Tri-level Emergency Fund Plan, and even though I have mentioned all three levels here separately in the past, I thought it might be nice to present in a single, concise article.

What is a Tri-Level Emergency Fund?

A basic definition of a traditional emergency fund is a pile of money saved separately from other savings goals, and outside of a normal spending account. Its main purpose is for covering emergencies, or required expenses that crop out outside of the normal budgeting process that cannot be cashflowed with regular earnings. A sale is not an emergency, and job layoff, broken transmission or serious illness is – you get the idea.

Emergency funds come in many shapes and sizes, and while experts disagree on the amount that should be saved, everyone agrees that we all should have one adequate to cover some months of required expenses. Whether that number represents one month or twelve months, or somewhere in between, is entirely up to you. I say save just enough to sleep comfortably at night and invest the rest.

Level I:  The In-House Emergency Fund

The first $500 of so of your emergency should be something completely liquid (cash) and saved within arm’s length. This amount could be spread out around hiding places in your home, your car, or at your job (or some combination), or could be locked down in a fireproof safe bolted to the concrete slab under your closet. The point is to stash some cash to cover short emergencies that may happen around the home, when using a debit card or visiting the ATM is not possible. Think state-wide power outage, a family member in desperate need of cash, a local natural disaster, etc. Don’t keep your life savings at home, but stashing a few hundred dollars makes sense.

Level II:  The Local Emergency Fund

I recommend keeping the next $1,000 of your emergency fund in a local emergency fund at a bank or credit union checking account. These funds would cover things like car repairs, broker appliance and late-night calls to the local plumber. The beauty of these accounts is they are local and have check-writing privileges from a local bank, so most service providers in your area would not give you a hassle about accepting a check. If they did, a quick trip to the ATM, or a counter check from the local branch, should resolve the problem.

Level III:  The Mega Emergency Fund

What’s a “mega emergency?” Mega emergencies are the types of emergencies that might require you to live off this fund for a short time. Think job layoff, medical disability, a serious accident, etc. My mom suffered an aneurysm and stroke about a year ago and had to wait six months for disability insurance to begin coverage. Are you prepared to live six months without an income? Most of us are not, and unfortunately, neither was she.

The Mega Emergency Fund is the only place I worry about interest rates, and even then security is a more important consideration. Still, you at least want to stash the money where it will earn a little interest, and the higher the rate, the better. Consider one of the best online banks (read my ING Direct review), or if you have enough saved, a tiered money market account at a credit union may offer higher interest rates than traditional savings accounts.

A tri-level emergency fund is the ultimate way to diversify your cash portfolio dedicated to emergencies, and when fully funded, should help you sleep better at night. It’s been said that there is no softer pillow than money in the bank. After many sleepless nights in the past with an empty bank account, I would have to agree.