When R and I lived in the U.S. we often had money on our minds. There was a lot to think about. Do we have enough to make the mortgage and pay the bills? Are we saving enough for retirement and the kids’ college? If I give the points on Alabama in the National Championship game and lose, is our only restaurant option for the next six months going to be The Olive Garden?
R and I were definitely in that mindset. Even though I was pulling down a six-figure salary, even though we were sending the maximum to our 401(k) and Roth IRAs each year, even though we had been saving for college since day one, and even though we met the mortgage and still wanted for nothing in our day-to-day lives, there was always this lingering doubt that we weren’t doing enough. I was nagged by the thought that R was going to leave me and the kids for someone who had gigantic feet and was pulling down a seven-figure salary.
The culture plays to this mentality of keeping up with the Joneses, or Williamses, or Smiths, or whatever your neighbor’s last name happens to be (in our case, it was keeping up with the Limperopolouses.) If Brian and Lena got a new lawn flag with a butterfly on it, Walmart wanted us to get one too. Instead, we wanted to move to Mexico.
We live on the red dot.
Choosing our own path has always been our nature. Sticking around in our jobs another 13 years until we reached so-called “retirement age” would certainly have placed us on the list of “successful” people in the eyes of America, but it also would have cost us 13 years.
Pulling the trigger on Mexico required us to make two judgments. First, we had to be comfortable thumbing our noses at mainstream America and the myth we had been force-fed our whole lives that you have to work for The Man until you were old enough to move to Florida so you could eat dinner at 4.30 p.m.. That was easy. Second, we had to be confident that if we quit our jobs, all the years of frugal living and smart saving meant I wasn’t going to run out of beer money before I died.
On this, we had to take a leap of faith. With input from our financial adviser that included buzzwords like “life expectancy,” “rates of return,” and “probabilities of success,” we took a gamble that the money we had in our retirement accounts combined with whatever we would get from social security and the profit we stood to make on the eventual sale of our house will be enough for us to live comfortably into our drooling years, when our welfare will become Coconut and J’s burden.
We also had to trust that the money we have saved for Coconut and J’s college education, plus money they squirreled away from birthdays, holidays, and gifts from their grandparents, will be enough for four years of higher education. Once we learned that it was only going to cover, at most, the first two years of their college, we said screw it. Now we are counting on them getting scholarships or a job. Really, I consider the final two years of college to be their problem at this point. We did the best we could.
Once we achieved clarity on these two issues, we decided that the only reason to keep working and living in the U.S. was to add more money to the pile. People (specifically R) get annoyed when they hear that some professional athlete is holding out for $30 million a year instead of the $25 million he’s being offered. At some point enough is enough. We felt we had reached that point.
Another decision we made around this time was to pay the remaining principal on our mortgage. Due to several refinances during our 18 years of indebtedness, we still had decades left to pay back the bank, but the principal amount wasn’t something that made us cringe. We had just about the right amount of cash sitting in an account waiting for the right investment, and spending that money to buy our house turned out to be a wise choice. It left us debt-free, we saved a lot of money in interest payments, and we can put the entire $2,500 we receive in rental income each month towards our Mexico day-to-day expenses.
Thus, with the retirement and college savings accounts designated untouchable, we crossed the border to Mexico with $70,000 we had banked as “spending money” and $2,500 a month in income.
Two-thousand and five hundred dollars a month in rental income covers the $1,500 rent on our Mexican house and $600 private school tuition for both kids. The remaining $400 pays for other necessities like dog food. We planned that the rest of our monthly expenses would be paid for with whatever money we happen to earn doing the hustle. As a last resort, we would tap into our $70,000 bank roll.
What Charley lacks in earning capacity she makes up for with cuteness.
Our one year anniversary in Mexico just passed and I was curious to see how much damage we did to our cash account. To figure it out, I totaled our income (which was easy to do) against our expenses (which was harder to do.) During our year-long overland adventure, I kept a daily expense log to gauge whether we were staying under our $100 daily budget. Since we don’t now have a daily budget per se, I didn’t do that this year. Instead, I estimated our expenses based on the difference in the beginning and ending balance in our cash account, our ATM withdrawals, and credit card bills.
Pesos are pretty.
Here’s what I came up with:
Income
Rent - $30,000
Sale of car - $9,500
Paul’s earnings - about $15,000 (including about $10,000 in salary and lump sum vacation payout from my prior job)
R’s earnings - about $1,000
Five hundred pesos is about $25 US Dollars. It can buy 33.33 street tacos.
Total - $55,500
Expenses
Rent - $18,000
Food/Gas/Other -
R’s credit card - $8,400
P’s credit card - $14,704
School Tuition - $6,600
Health Insurance - $3,811
Car Insurance - $398
Phone Service -
Google voice - $80
Skype - $149
Telcel (our Mexican cell phone service)(Note: this is for all 4 of our phones) - $299
U.S. Homeowners Insurance - $584
U.S. Property Tax - $6,265
Airfare - $2,350 (flights to Cancun; to Puerta Vallarta; to US)
Purchase of car - $5,500
Total - $66,925
Result - We spent $11,425 more than we earned.
Needless to say, I wasn’t happy with the result.
On the income side of things, $55,000 is a pretty nice sum of money considering R and I combined for 2 days in an office the entire year (both by me - January 2 and 3, 2018.) We have to be realistic about this figure, however, and expect it to go down this year because we won’t have the car sale income or the income from my prior job.
On the other hand, I’m hoping to make more money writing this year than I did last year. And some of the other ideas we had to make money (actually, R had all the ideas, I just agreed they were good ones she should pursue) should also begin to pan out. R has high aspirations for the three “Spanish for Lawyers” retreats she has scheduled. Further, we are in discussions to exponentially increase our kombucha sales in town. What is kombucha, you ask? Well, I don’t know exactly, but gringos will pay a lot of money to drink it.
On the expense side of the balance sheet, we spent almost $67,000, which was more than I expected. But I keep telling myself there are a few reasons why this figure may not represent what we actually spent this year or will spend on a year to year basis.
First, my expense calculation was imprecise. In short, all I did to arrive at a total was compare the starting and ending balance in our bank account, figured out how much money we took out from the ATM, and totaled our credit card statements throughout the year. Some expenses may have been duplicated because we moved money from the bank account, reducing that balance, and then took it out of the ATM, reducing that balance. So, moving $100 from the cash account to the ATM and then withdrawing it would have shown up as a $200 debit under my method. I’m sure this double-counting bumped up our total expenses, but I’m not sure how much. Even without doing a daily budget, I can better track our expenses this year to avoid double-counting.
Pickleball is fun, but you have to look sharp.
Second, we had a few one time expenses that will fall off the board - buying a car, paying for our resident visas, shots and neutering for the dog, and all my new pickle ball equipment.
Third, we would have to pay some of the recurring expenses even if we lived in the U.S., but they are cheaper in Mexico. I’m talking about things like health and car insurance, utilities, and cell phone service. Thus, even though $66,000 is a ton of money, we would have spent even more money in the U.S. for the same lifestyle.
Further, (*TAX GEEK ALERT* - watch for sharp corners in your immediate vicinity because the following may cause you to lose consciousness and fall from your seat) we will derive a U.S. tax benefit from our recurring property related expenses (taxes and insurance) now that we rent our house rather than live in it.
It’s like this: due to tax law changes, we would not have itemized these expenses this year, so would have lost any tax benefit. Since we rent, however, we can reduce our rental income by these expenses, retaining our tax benefit. In addition, some of the property-related expenses that would have been considered non-deductible personal expenses if we lived in the house, such as utilities and almost $1,000 in A/C repairs, are now also deductible. What this all adds up to is that we’ll owe less in U.S. taxes. (*END TAX GEEK ALERT*)
Finally, we made some money through Airbnb that I didn’t count as income because it was paid directly to our landlord. Even though we never saw the cash, the result was that we paid less rent in certain months. In total, hosting Airbnb guests probably saved us in the neighborhood of $1,500, or one month’s rent.
So, all things considered, we probably spent less than what I calculated, which means that we didn’t erode our savings account too much. In the final analysis, however, even if we did spend $11,000 of our $70,00, we’ve still got 7 years to go before it’s zeroed out, which means I don’t have to listen for those big feet of R’s suitor until at least 2025.