In which I revisit my search for financial grace and start getting our joint finances in order so we can talk with a financial planner (#33).
I think that for lots of people, present company NOT excluded, the idea of talking about money is so overwhelming that we simply ignore it for as long as possible. But the thing is, the longer you go without taking stock, the less you know about your finances and financial goals, and the harder it becomes to look them in the face. Break the cycle with me! I’ll be looking at my existing financial plan first: the good (I’m saving money!), the bad (I have things I want to buy but haven’t a plan for), and the ugly (wait — I thought I had way more in that account!).
First step in my financial re-boot was pulling up my good old google spreadsheet. My goal is to have 100% of our money accounted for on this spreadsheet through monthly expenses, spending money, and savings. I allow it to do all the math for me. I set up the formulas once, and then it will account for any changes in our expenses or income automatically.
First thing, I made sure the categories for our monthly expenses are accurately reflected. Those numbers are still coming together as I pay bills for the new house, track our grocery and gasoline receipts, and watch our paychecks change for federal withholdings and pending raises. I imagine that things won’t settle down entirely until March, but this gives me a starting place.
I am also revisiting my savings priorities, now that we’ve purchased the house. The hubs and I sat down and talked about what was most important to us and worked our way down from there, covering everything that we wanted to save for right now. We added a few specific things, but also re-prioritized things that we’ve been saving for all along.
This is where the standing spreadsheet really earns my love. I find prioritizing easiest to tackle in terms of percentages rather than amounts, with one exception. I max out an IRA for each of us each year. So I start by taking the amount of money that takes, divided into 24 payments each. This is the only item on my spreadsheet for which I enter the amount in dollars. The spreadsheet calculates the percentage of our joint income for the IRA money. For the rest of my savings priorities, I allocate the remaining percentage, allowing the spreadsheet to calculate the amounts for each savings deposit.
So how are my particular priorities falling out these days?
I take care of my retirement first, by having money held for my 401k before my paycheck, and maxing out two IRAs after my paycheck. It is especially important to me to pour money into my retirement now, when the hubs and I are both gainfully employed, since I know that will not always be the case. The money I save now will more than cover slow times in the future with the wonder of compound interest.
The house is still a major saving priority, since we know of significant required improvements and those pose the largest threat to raiding our other goals if we don’t have enough money and everything fails at once. This fund will cover planned improvements (new water heater, AC, heater, roof…) and anything unexpected that comes up (new siding, fixing the microwave that was messed up by the new siding…).
Third priority is getting my cushion greatly expanded. My goal is to have six months’ worth of our fixed expenses stashed by the end of the calendar year. Now, we have that money spread out over all our savings goals now, but a major job set-back would significantly hinder all of our other plans. I’m not comfortable with this idea, so I’ll be saving to mitigate that risk.
My other savings priorities include furniture, cars (maintenance and a future purchase), future kids (having one, adopting one, creating a nursery, etc), vacations, gifts, and big fun.
Now that we have our priorities in order and out in the open, I’ll be changing my focus to protecting what I’ve already bought. Next week: insurance.