My husband and I live on our own piece of land in southeastern New Mexico, along with our two teenage boys. He retired last year from his job at age 51; when we moved here and began building our own home, with the plan to be able to live on his retirement and be fairly self-sufficient on our own land.
We have no mortgage, no car payments, no credit card balances (beyond what we plan to pay off each month) and no plans to get into any debt. We live on about 33% of the income we had before my husband’s retirement with no problem.
The thing is…we were far from this only a few years ago. We had the big suburban house in a neighborhood with restrictive covenants, a big mortgage, and a high cost of living that is very common to many Americans, only three years ago. The difference is that we made a significant change in our focus and personal plan.
Granted, we weren’t in the kind of bad financial shape many folks are, even before we made the change. We hadn’t financed a car since the mid 90’s, didn’t carry huge credit card debt, or have a terribly extravagant lifestyle. However, we did have the huge 30-year mortgage and no plans for early retirement. Our house owned us and kept us enslaved to the high costs of maintenance and taxation. It provided nothing for us in terms of production.
Day to Day Lifestyle Changes
About 2009, I began listening to Jack Spirko’s podcasts regularly, joined the TSP forum, and began learning from more experienced preppers. My husband and I became convinced that we needed to make a change in lifestyle to allow us to completely change our path. We needed to save every penny we could to allow the purchase/construction of a debt free homestead.
The changes at first were very subtle. We just stopped wasting money on things we didn’t need. Eating out became a fairly rare occurrence. We just cooked food at home – every day. I began to be more of a frugal shopper and planner, stocking up on foods we ate when they were on sale and storing more food in the pantry and freezer. This alone made a huge difference in our monthly expenses – and in how much money I could put aside into savings each month.
We began to seriously think about each purchase we made, considering whether we’d rather save the money toward the homestead or just spend it now…you can guess where most of the money went, right? Each month we were able to save more and more from the take-home pay and the nest egg began to build.
Making the Plans
We also knew that we had to change the focus of our plans for the future, so we began looking for suitable property to use for our homestead. We did some searches on various states that had reasonable property taxes, productive land, etc. In the end, we decided it was more important to be close to family, so returned home to New Mexico. The land is very dry, but the growing season is long, so the potential for good food production is there, as long as we have access to water. We finally found five acres that are reasonably close to town for convenience, yet outside the city for taxation and no homeowners’ association or restrictions. We purchased it (cash) when we were still living in the big suburban house. Immediately we had a well drilled and capped on the land. We didn’t want any possibility of a problem with having our own well due to future water rights legislation.
For us, it made sense to also build a small workshop with some amenities. Our plan was to live in a travel trailer while building the main home. We hired out the construction of the workshop out to a local builder, who completed it before we returned to New Mexico. In order to make life more comfortable, the workshop was equipped with a full bathroom/shower and washer/dryer hookups. To do this, we also got all infrastructure installed – electricity, pump/pressure tank for the well, septic system, cable (for internet service). We paid cash for this. We could have built this much less expensively ourselves, but we just didn’t think we could stand living out there without the basics covered before we started.
Next, we had to figure out the best way to rid ourselves of the home mortgage albatross. That big home cost us nearly $8,000 per year in property taxes alone. Consider the interest payment on the mortgage and you can see money dropping down a rat hole at an alarming rate.
My husband was in a career field that had a mandatory retirement after 30 years’ service. Most people in that career field apply for and receive a waiver for that so that they can continue to work up to either age 56 or 60. He let it be known that he had no intention of requesting the waiver. His employer then transferred him to a position across the country for his last assignment before retirement. With this transfer came a relocation package, and a home buyout option. Even though we lost money on the house, we took the relocation offer and got free of the mortgage.
Although we had to rent a house at the new place, it was much less than the cost of a mortgage, homeowners’ insurance, and property tax – that much more to save before retirement.
Checking the plan
For years, we had been living well…with a fairly high income. With the planned retirement, our income would be steady, but very low in comparison. We had to find out if it was a feasible plan. We calculated what the retirement income would be after taxes, healthcare deductions, etc. Then, except for the monthly rent payment, we made ourselves live on no more than the income we would have after retirement. Since this was only about 1/3 the take-home income, it meant we would potentially be able to save two-thirds of the monthly income for the rest of his work time.
So, the plan had two purposes:
1) See if it was feasible to assume we could make it on the retirement income without finding other employment
2) Save the extra money so that we could build our house without a mortgage once the retirement came.
In short order, it became obvious that we were able to live just fine on the 33% (which made me realize that we had been very foolish with our money for many years). This, along with the equity from our home sale, provided the money set aside for building a home free and clear. We essentially had nearly two years’ salary set aside for the building project when we began.
Can you do this?
I think many people could do the same thing with their plans. No one has exactly the same situation, but the general idea would work for anyone. Obviously, if your situation involves more current debt, it will take you a bit longer to save up the nest egg. Here’s how I would boil our plan down:
1) Decide as a family that you want to be debt free.
2) Make the monthly spending changes to rid yourself of current debt as follows:
a. Consumer debt (pay smallest balance first, then snowball to the biggest)
b. Student loans (these things will never leave you…get rid of them)
c. Mortgage (Once the consumer and student debt is gone – pay it off as soon as possible or sell the house if you need to)
3) Start a savings plan for the homestead
a. Reduce consumer spending
b. Eat at home
c. No buying on credit
d. Become a more frugal shopper
e. Live on the amount of income you’ll have at retirement only – save the rest
4) Determine the retirement location
a. Analyze taxation, growing season, location relative to friends/family
b. Purchase the land (or house and land – as your situation demands)
c. Begin work on the homestead as time/money allow
i. Dig well
ii. Install septic system
iii. Build/install other infrastructure needed (electricity, internet, gas lines, propane)
iv. Consider building small outbuilding to assist with living during construction.
v. Design the home, using current materials costs to estimate what it will really take. If you plan to subcontract most of the work out, you must save a lot more before you start. We ended up doing most of our own work in order to stay within the budget and ended up with a building cost of about $67/sf.
It is not easy to do this…I won’t lie to you. It’s been a hard fifteen months of building. Perhaps you need to plan to live in a rented house or apartment instead of living in a travel trailer, to save your sanity/marriage. The travel trailer living was much harder than I imagined. Just build your plan accordingly.
This was our plan…yours will look different, I am sure. But if you are willing to make the changes now in your life, you can live your life much differently than other folks can in the future. You can make your homestead work for you instead of the other way around. You can have less stress in your life without debt and high taxation, if you choose. You can have time to do things that truly interest you, instead of being tied forever to a job just to make it.
We have been (and will continue to be) documenting our plans and struggles at our website: The Homestead…Starting a New Phase of Life.