Our pace: what we’re not saving for

If you missed the post I wrote last week about going at your own pace, I highly recommend reading it here. It’s a good reminder for all of us.

Along the same lines, here’s an example of how Mike and I are going at our own pace.

As a young married couple, the next big step is to buy a house or at least save for one. But, during our money conversation, Mike and I decided to not save money for a house right now.

Prior to this conversation, we had been saving for a house.  That was our big goal. But at the rate we were saving, we wouldn’t be able to buy a house for quite some time, 8 years according to Mint.com.

And besides, we essentially already have a mortgage: my massive student loan debt.

Right around this time I found personal finance guru Dave Ramsey (thanks, Words of Williams!) and started listening to his daily radio show and did a little bit of reading on his website. And I got motivated to pay down my student loans. I couldn’t wait to get my debt snowball rolling.

So as we walked to meet friends for dinner, I suggested this to Mike.  That instead of saving for a down payment, we start putting extra money toward my student loans each month. And Mike agreed. He said he’d been thinking something similar.

As we walked through the city we discussed that we could probably stay in an apartment for another few years and that we probably won’t need or want a yard until our kids are 5 or 6 (which, since they’re not born yet is still quite a bit away).

Our money will add up so much more quickly against my student loans (bye-bye compound interest) than it would in a savings account.  So not only will we feel like we’re succeeding at this goal as we pay off some of the smaller loans but we’ll also be saving ourselves money in the long run.

When we’re ready to buy a house, we’ll have more money to put aside for a down payment because the monthly payments on the loans will be less (and hopefully we’ll make more money each year) and we’ll be more motivated to do it when we feel like it’s in our reach.

So–here we are–a newlywed couple that’s not saving for a house. Probably a little odd.  But we couldn’t be happier with this status.  It feels great that we’re going at our own pace.

Another bonus of this decision is that if we’re not saving for a house, we don’t have to decide where said house will be–something that we felt a lot of pressure to figure out.

I’d love to know:

How are you going at your own pace?

Day One

January 1, 2012 was a good day.

We got up and relaxed and then picked up breakfast items at Starbucks.  We came back and made coffee in the mugs Mike got me for Christmas and had breakfast.

Then we had our money conversation where we figured out our budget, made some goals, and came up with a plan to monitor our variable budget lines: the tracker below.

Our current goals: allocate money each month for life events (i.e. friends’ weddings, Christmas) so we don’t have to put those things on our credit cards, and pay off the lowest of my student loans by the 4th of July. In addition to those two joint goals my goal is to pay off my American Express by April 1. (You can read more about our various accounts here.)

Our other new plan is to chat each time one of us gets paid about upcoming expenses so that we can stay on top of things and continue to be on the same page. Usually we’d just chat when the accounts were getting low, or after one of us randomly checked our online banking. This often left us frustrated and feeling like “we have no money.” But that’s a reactive way to deal with things and we don’t want to be reactive, we want to be proactive. Being reactive leaves you feeling out of control but being proactive will leave you feeling on top.

After our talk, I got in bed to read Catching Fire (the second in The Hunger Games series). I love laying in bed reading especially when it’s sunny out and the sun shines through the window. Of course I fell asleep.  Then I woke up to our neighbor talking on the phone and wishing someone a Happy Birthday! Like not OK. This happens pretty regularly (mostly at night when I get in bed at 9pm) so I figured it was a good opportunity to knock on the door and tell her.  She didn’t answer the door.

We had lunch and did laundry.  Folded it while listening to an old episode of the Dave Ramsey show.  Have you listened to this show? It’s crazy how much debt these people have paid off. Mike and I find it inspiring.

Then we headed down to the National Mall to throw the frisbee around. It was a warm day for winter, Mike was wearing shorts, and when my heart rate started to get up after a few good throws and catches, I took off my jacket.

Sometime in the last two years, Mike and I started throwing the frisbee around. I’m not sure why but I’m so glad we did. Mike really likes to play sports, any type of sport, and when we throw the frisbee around I feel like his buddy.  It’s also exercise, I can get a pretty good sweat going and feel my heart pumping. And it’s a good time for us to chat. When we lived in our old apartment, we’d walk up to the mall and toss it around on the lawn in front of the Capitol. Now that we live further from the Mall, we’ll have to make more of an effort to get down there to do but I really hope we do that more.  Why not take advantage of the great city we live in?

We stopped at Pinkberry on the way home for a light snack.  And then hit the grocery store to get ingredients for dinner.

We made a butternut squash calzone , using the filling from Jessica’s stuffed shells, with a gorgonzola cream sauce on the side. OMG was this good.  I think Mike almost died of satisfaction.

Then we watched Crazy Stupid Love.

January 1, 2012 is reflective of a lot of things I hope the rest of the year will be filled with: productivity, fun, quality time together, creativity in the kitchen, and relaxing time. We were out and about but also home. We were productive but also had time to play.

I’m really hopeful for 2012.  I think it’s going to be a great year.

I’d love to know:

How did you spend January 1, 2012?

Good talk

source

Last night Mike and I had a really good talk about money.  We talk about money on pretty regular basis, have worked out numerous budgets over the last couple of years living together, and often the conversations end with me frustrated and stressed.  But last night, the conversation went differently.

We created a budget a few months ago and have been trying to live within the parameters of it since. But we spent too much in November and then with the bedbugs and Christmas presents in December we’re kind of feeling like we’re not in control.  We’d like to get on the same page and really be on top of things going forward. So in preparation for a larger conversation about money, both of us have been thinking a lot about it.

When Mike picked me up for dinner last night, we started chatting about what we’d both been thinking so far: how we should allocate our money, the logistics of paying bills, budgeting, planning to attend friends’ weddings, go on vacation, save, buy Christmas gifts, pay down debt, etc. And we were on the same page.  Mike would say something and I’d say “Yeah, I agree, that’s a good idea.” And I’d say something and he’d say “I was thinking the same thing” or “You’re right.”

I think the difference between that conversation and some of our prior conversations is that we were both on board, both thinking about the issues separately before we came together. In the past we’d sat down to chat about money and we’d ask each other questions we didn’t have the answers for. Then I’d get combative and frustrated when Mike didn’t know exactly when the cable bill is due. But this time we’re both brainstorming, both thinking about potential budgets and different ways to allocate our money. We’re thinking about where we’ve gotten stuck in the past and how we can prepare for those types of things going forward.

We’ll have a more detailed conversation this weekend where we lay out real numbers, come up with a plan to manage our money and communicate about our money on a monthly basis, and decide on long term goals. I hope that by preparing individually for this longer conversation ahead of time, it will be more productive and substantive.

From our conversation last night, I’m thinking it will be.  We were very much on the same page and talking to each other as partners and teammates.  It’s exciting to plan our life together.

Married Money

Everyone has their own way with money and attitude toward money and they bring these feelings into their relationship. In a marriage, it’s important that both husband and wife are comfortable with the way money is handled. I know couples that have all of their money completely combined (like my parents did) and others that have no money combined and split everything. I don’t think there’s one right way to handle money in a marriage. As long as both parties are comfortable with the way financial decisions are made and are on the same page, that’s all that matters.

Since I’m always fascinated by the ways people manage their money, I thought I’d share what we do.

After our wedding, I was excited for us to combine our money.  We’ve had a joint checking account since moving in together. We used it for bills only and would transfer the exact amount for our monthly bills each month. This worked great for bills but often left us wondering who was going to pay for what/whose turn it was to pay for things like meals out or gas for our car.  I was excited for us to move to a more combined model and start working towards some bigger savings goals.  I was also excited to have a clearer snapshot of my available “fun” money at all times 🙂

Here’s how we combined our money:

Joint checking account–the majority of our direct deposits go here.  From this account we pay our monthly bills: rent, my student loans, cable, car insurance, groceries, etc. We also have a set amount of joint “fun” money each month for dates, meals out, etc.

Joint savings account–Ideally we’d have two joint savings accounts, one for short-term savings (emergencies, travel, big life events) and one high-yield account for long-term savings (house).  But for now we just have one. We have a set amount deposited here each month.

Individual checking accounts–We each have a set amount direct deposited here each pay period.  We use this for social things: happy hours, trivia night. And other individual things: lunches out, clothes, haircuts, hobbies, etc.

Individual savings accounts–I’ll use mine to save for a big surprise for mike (planned for a few years down the line), larger social events (friends’ bridal parties, bachelorette parties, girls weekends, etc), and some bigger fun purchases (a coach bag,  a mac desktop, etc).  Not sure what Mike will use his for.

Individual American Express cards–We each had these coming into our marriage and we’ve kept them separate. We use these for bigger individual purchases.

Joint credit card–for bigger joint purchases or emergencies.

When we combined our money, I thought it was important for us to still maintain individual accounts for spending money, or fun money. Part of me–the romantic–wanted to have separate accounts so that we can surprise each other with gifts and last-minute weekend getaways (I’m such a dreamer). And another part of me–the realist–wanted us to have our own accounts so that we can maintain some independence. Mike didn’t feel as strongly about the independence aspect of this but he agreed that surprises are nice.

This system is working out nicely for both of us.  I think we both enjoy having the freedom of separate spending accounts, and having an account purely for “fun” money. We’re still finessing our monthly budget, working to find the right balance of saving and spending.

Now tell me:

What do you and your spouse do?  If you don’t have a spouse, what did your parents do or what do you think you’d like to do?

saving strategy

my grandfather shared this saving strategy with my sister who shared it with me. it’s super simple, mike and i have done it before, and its cool to see how quickly the money adds up. we’re now employing this strategy to save for our trip to chicago at the end of october. so what’s this quick, easy saving strategy that’s going to have us eating our fill of yummy chicago pizza?

save $5 bills.

i’m telling you this works.  the last time we did this we saved $150 to put towards my credit card bill. and i read in real simple about a women that took her family on vacation to cape cod by saving $5s. it’s a small enough amount that you don’t feel the pinch but it’s sizable enough to add up relatively quickly. like if you go to starbucks and pay with a $20 and get three $5s back.

granted you have to carry around cash to make this work.  you won’t get very far if your wallet only sees a $20 bill once a month. it’s all about how committed you are to this saving plan.  i get cash once a week from tutoring and my rate of saving is quite a bit higher than mike’s who only has cash if he makes an effort to go to the atm. maybe you start to take out your weekly or monthly spending money in cash. and you have to be disciplined about it. i put $5s in a different place in my wallet so that i don’t spend them accidentally.

i’m not going to lie there are times when i’m getting a burrito at chipotle and secretly hope i don’t get $5s back. and maybe yesterday i paid for my $2 coffee with my debit card so that i could keep my $20 bill in tact. [do as i say, not as i do.] wow, now i feel really guilty about that. but now that i have that little confession out in the open, i’ll be more accountable.

i’ll keep you posted on how much we’re able to save using this method before we take off for chicago.

 

two things i don’t normally do

last night i did two things i normally don’t do:

1) take a cab

2) get money out of an ATM and pay a surcharge.

i feel like i’ve been spending money a bit loosely lately.  i need to get my financial life in order and pay more attention to my spending and how quickly these little purchases add up.  though i am married now, i’m not rich.