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Re: What Does "He Looks Presidential" Mean?!
Totally serious.
Hopefully, I can organize this...
While I do think Financial Peace is a good program, there are some things I think is bad advice (ex. not funding retirement until you pay off debt. If you have a match, that is free money).
1. If you have joint finances in your house, you and DH/SO have to be on the same page. One can't be trying to save while the other is spending.
2. Determine your goals and priorities. We used Smart Couples Finish Rich to do this. Our priorities are to retire early, own a condo in Maui when we retire and travel a lot now. Guess where all our money goes...retirement accounts, vacation funds and an investment account to buy a condo. We had to decide between cable and putting money in an investment account. The account won and the decision was easy b/c that is our priority.
3. Develop a realistic budget. I like to use mint.com and have for 4 or 5 years with no problems. Some people are nervous about it. You can also use an excel sheet or pen and paper. Doesn't matter. How do you develop a budget? Track your spending for a month or maybe a little longer. Look at your spending habits. Create a realistic budget off of that. Let's say you are spending $600 a month eating out. If eating out is a priority to you, then great! If not, realign your spending with your priorities but make sure the budget is realistic. If you spend $500 a month at the grocery store, you can't make a budget saying you are going to start spending $100 a month. You may be able to say, we are going to spend $400 a month and watch what you buy, make sure you aren't wasting food, etc.
4. PAY YOURSELF FIRST (yes I am yelling). Retirement and savings. In my previous post, I didn't even talk about my savings account but it is important to be saving as well. Start small. $25 a pay. Most people won't miss $25 a pay. When the social security tax got cut to 4.2%, what did you do with the other 2% savings? We put it into our retirement accounts (not exactly what Obama wanted us to do...). I make sure we contribute to our retirement accounts. For us, the best way to do this was to put all raises directly into retirement accounts. We are now just starting to take home raises and we are 32/33. At least make sure you are getting the company match on your retirement.
5. Then I do the little things...I read topics about money, cut coupons, shop sales, shop my car and homeowners insurance, refinance my mortgage when it made sense, eat at home a lot (my monthly eating out budget for our family is $100 a month), DH rides the bus to work, we have a monthly allowance for non-essential spending, price compare, buy quality things once. I charge everything and pay the full bill monthly to build cc rewards. That cash back bonus is my Christmas and Black Friday account. All money has a "plan" in our house.
6. Increase your income. I am not afraid to ask for a raise. I just got a 5% raise a few weeks ago. Someone left our company. I wrote a proposal stating how I can take over aspects of their jobs. My job said great but there is no raise associated with it. I was like..um no. They don't give their services away for free and neither do I. 5% raise in a year when they said no raises. If you don't ask, you don't get. Sell stuff you don't want. DH is the master of ebay. My iphone 4...he just sold it for $350 on ebay. I kid you not. Paid for my new iPhone and warranty. We proctor test on Saturday mornings (SAT, ACT, LSAT, etc.) for extra income (DH and I do it together and its about $230 a Saturday. You read the directions, make sure no one is cheating and read a book while students are testing).
7. We put off having kids. I know this is personal but we did do this. I say it is to save money but secretly its b/c I love going to Napa and that doesn't mix with being pregnant.
8. Be patient with yourself and each other. Rome wasn't built overnight and neither will your savings. Set a challenge...I want to have $400 in savings by 3/2013. Each year we write goals and try to achieve them. Examples of our goals this year were to save money in a new car fund, save money for our bathroom remodel, redecorate the family room, get a nice professional headshot, etc. I am already thinking about goals for next year with DH.
Nothing to ground breaking. You just have to stick with it. When the price of food goes up or gas is high, we examine our budget and say where do we want to prioritize our money? Obviously we can't starve but there are usually other things that we would rather do without before cutting vacations (ex. from cable to netflix in our house).
Let me know if you have any questions...I know that was long.
Remember I didn't have to literally save it all. The stock market grew so it is just really gains on a piece of paper and if the market crashed on Wednesday, my post would be totally different.
True. We're just still in a place where we're just getting by and really the only savings we have is what would end up being our emergency fund if something happened to DH's job.
these are all great points! I do have a question about your retirement account. I have a decent amount in mine, not as much as you have. I'm trying to figure out what to do with it, it's an IRA. I have thought of having someone manage part of it while I try and manage the other part. Have you done this. I guess it makes a difference if you have a 401K. I know there are not as many options. My goal for us is to actually have a savings in 2013. Having a kid put a damper on it. we also want to retire in Hawaii, but it's Kaua'i for us. LOVE it. I will also check out that book you mentioned.
There was an editorial in the NYT this morning about this very idea.
http://www.nytimes.com/2012/10/24/opinion/the-austerity-trap.html
Not to step on Jan's toes but I just went from moving my money from an IRA to a Roth IRA so thought I could help. In short: a traditional IRA you pay taxes when you take it out on the full amount. A Roth you pay taxes up front. The advice I've heard, is if you are young and can afford it, go Roth. So in Jan's case, if her 100k to 300k was in a Roth, she paid taxes on the 100k up front, and wouldn't have to pay taxes when she took out the 300k (ignoring penalties for taking out too early). In a traditional, she'd be stucking paying for taxes on the extra 200k she makes.
Thanks for the advice Jan! We are newlyweds trying to get our finances in order and aligned. We aren't anywhere near where you guys are and DH has had some job issues. But I have to agree that the last 4 years haven't been bad to us either. I've successfully switched jobs twice with no gaps in employment and we were first time homebuyers at the end of this past summer. I certainly feel for those who have been hit by the tough times as we've gone through lay offs ourselves. But, that whole "ask yourself if your better than you were four years ago" campaign falls on deaf ears for us!
we absolutely are not better off than we were 4 years ago. We live in a town that is mostly centered around tourism and the construction industry. 4 years ago when everything crashed we took about a 70% cut in income. My husband owns his own business so it's not even a matter of just picking up and moving somewhere else where jobs are better. You can save your butt off but combine a 70% cut in income with a couple of kids and it's fairly unsustainable for very long much less 4 years. It's pretty arrogant actually to assume that everyone else has lived on the charmed side of life and would be better off if they simply just made the choices you did. We haven't had vacations in over 6 years (saving for the baby initially) and are about as frugal as they come. I do know that despite all of that and claiming zero on my paycheck deductions and his deductions for his second job (we're down to just the two jobs for him because the three were killing him) and paying estimates on the business he owns, we still owed THOUSANDS of dollars in taxes this year because of the brutal way small businesses are taxed. We will pay more in taxes on his small business this year than I earned gross the same year.
As far as looking presidential, I think it means confident, calm and polite although I think there has to be a bit of aggressive in there too.