90-Day Life Challenge: Savings Goals

This was a big step for me today. I have a tendency to refrain from planning out my financial future because I'm too worried about having the money that I need on a daily basis. I've always saved for the future, but I don't typically feel like its ever enough or that the saving would ever end. The fact of the matter is, there should be measurable goals that we work towards as a family.

My 7 Essential Savings Goals

At the moment, I only have around $500 per month to devote to savings, but I know this won't be the case forever. I've got extra work becoming available starting in September, and DH's business has started to pick up, so he's able to contribute a few hundred dollars a month to our financial freedom. 

1. EMERGENCY FUND - I set our emergency fund goal at $2,000. My thought process was that this would cover tires for both cars and a month's worth of rent at the same time.
2. 6-MONTH JOBLESS FUND - Sometime around 4 am a few weeks ago, I happened to catch the Suzi Orman show. She suggests upwards of a 9-month fund, but that isn't really realistic to me. We are a 2-income household with a lot of family support in the event of an emergency. To cover 6 months of essential spending, we would need roughly $15,000.
3. HSA - Ideally, I would like to see at least $25,000 in a Health Savings Account. This would help with any surprise medical bills that I--or my little "dare devil"--might accrue.
4. 529 PLAN - Obviously, DH and I will want to be prepared with Wee-One is old enough to go to college. Like his father and I, Wee One will be asked to live at home, work part-time, and attend a local university, which will definitely help with the overall cost. In addition, we invest in a small personal account for him on a regular basis, and his grandparents have set up a custodial account as well. We settled on $25,000 as a reasonable goal.
5. NEW CAR FUND - Another $20,000. We are not specifically saving for a new car since both of ours are running beautifully and just had tune-ups, but we want to have a large lump sum set aside for major necessary purchases (i.e. new car, air conditioner, family emergency, appliances, etc...).
6. HOUSE FUND - Now, this is where it gets personal for us. This would be a good place for anyone to store their down-payment savings, but we have decided to go another route if possible. We want to buy a foreclosure property outright. No mortgage, just standard bills. Considering that a 2 BR/1BA, 900 sq. ft. home on 1 acre in this area goes for around $110,000, we feel that $90,000 should be able to purchase a reasonable foreclosure and allow us some wiggle room to fix problems or customize as needed. 
7. RETIREMENT - The most important piece of future planning in anyone's savings portfolio, but easily the most daunting. I highly recommend reading Retire On Less Than You Think by Fred Brock. It's a wonderful read, and gives great perspective about how to prepare for retirement logically--as opposed to catastrophically. I'm aiming for $500,000.

Here's an image of my own Savings Plan. As you can see, I used grid paper and a simple "bullet journal" style of charting. It just seems to work better for me if I am visually pleased by the charting process.

Cute, But How Is This Going to Work?

So good of you to ask, I asked myself the same question the instant I finished the Savings Plan. I'm restarting with my Emergency Fund. Like I said, I have $500 each month (approximately) to put towards savings. I am going to split this and put $400 towards my Emergency Fund, and $100 towards my 6-Month Jobless Fund. I generally do prefer to work on more than one thing at a time and have a little bit of that Dave Ramsey "snowball effect." It should take 7 more weeks to finish filling up the Emergency Fun, and then I get to deposit the full $500 into the 6-Month Jobless Fund. In October, I will begin depositing $25/month into each of HSA, 529 Plan, and New Car Fund accounts. It's not much but I will still be able to feel like progress is being made.

As more funds become available in October, I will immediately begin depositing $150/month into my local Credit Union Roth IRA. Why a Credit Union? So I can never lose the original investment. Why a Roth IRA? So I won't be taxed on what I withdraw from the account during retirement. As the other savings goals are met, I will end up deposit their full amount into the IRA, roughly $750/month. Of course, this is assuming that my income is fixed.

The last component of my savings is the House Fund. It's easily the most daunting because we so desperately want to find somewhere to call home. Everything else we bring in goes here....Who knows? Maybe this blog will take off...

Thanks again for "listening" to my pontificating and supporting me on this journey. As always, I welcome criticism and suggestion, from anyone.

Happy Reading,

Your Devoted Friend

When Life Gives You Lemons...

So, there we were...minding our own business, paying bills, making ends meet, and BAM--we're homeless. Hyperbole aside, it happened over the course of two weeks because our *dripping with sarcasm* super-cool landlord realized that he could rent the house for far more than he was getting from us. 

So, here we are...living with my grandmother in her upstairs apartment, desperately trying to save enough money for my Dear Man, myself, our beautiful baby boy, and our 3 dogs to get a new place.

At first, I was predictably upset and scared, but truthfully, it's not all bad. In fact, there are a few very important lessons I've learned as a result of this upheavel:

1. Stop romanticizing and buckle down
2. Income minus future planning equals "actual" income
3. Enjoy each moment for what it is, not what you want it to be
4. "More" makes you tired, not happy

Lesson 1: Stop Romanticizing and Buckle Down

While we were living in our rental property, we behaved as though we were going to live there forever. We didn't overly worry about savings, we made repairs to the house out-of-pocket, and we planned for a life we couldn't realistically afford. Our finances--and our dreams--needed a harsh wake up call. Ideas do not equate to ownership, and are useless without a solid plan to achieve your goals.

Lesson 2: Income - Future Planning = Actual Income

Yes, what you just read is correct. Dear Man owns his own "Start-Up" business for which he cannot yet take a salary, so we decided to only take my income into account. In the interest of transparency, my income is divided between 3 part-time jobs (preschool teacher, program coordinator for a local non-profit, and church nursery worker), and totals $2,200 for 10 months out of the year. The 2 months that preschool is on Summer Vacation, I only make $1,300 per month. 

What's the equation all about? I decided that we would pay ourselves first.

Right now, $100 per month will go to building our $1,000 emergency fund. An additional $400 per month goes to our standard 3-6 month emergency fund. Right now, Sweet Baby's savings account is comprised of all of our $1 bills and change that we scrape together and deposit at the end of every month. Doing the math, that means we don't have $2,200 to work with, but rather $1,700 ($800 in my Summer months). This is a big shout-out to Dave Ramsey and David Bach who outlined simple, logical, doable plans for the Average Joe who wants to live without financial fears.

That's Us!!!

Lesson 3: Enjoy Each Moment For What It Is

Fun and relaxation are now an important, and coveted commodity in our home. Whether we're talking about a free community event, or a chance for a family outing to the grocery store, it's not just the mindless spend-fest it used to be. Our son is 11 months old--big and beautiful--and all I want is for him to grow up happy. So maybe some of this living in the present is related to guilt that we feel, but who cares? In the end, he's only going to see how hard his parents worked, how grateful they were for the work, and how much he is loved.

Lesson 4: More Makes You Tired, Not Happy

My typical day before we moved consisted of taking my son to Preschool with me, having my Mom watch him while I went into the non-profit office for a few hours, pick up my son, cook dinner/play with Daddy, put Sweet Baby to bed, and crash. Guess what? Nothing's changed, except for my attitude. Now I care and appreciate the time with my son, the work that provides us with money for food, and the family that has supported us through our challenges.

Working towards shared family goals (financial or otherwise) is energizing!

We take great pride in watching our debt decline, our savings increase, and our lives declutter. Each month, we grow stronger as a family and take a few steps towards the future we want.

CHALLENGE: This week, think about whether or not you are putting your family first. If you aren't saving the way you want, is there a bill you don't need? If you don't spend enough time together, is there an activity you don't need?

Thank you for reading.

Sincerely,

Your Devoted Friend