Finance Fridays: Welcome Decisions

My husband just found out he’ll be getting a 3% raise at work, and that leaves us trying to figure out what we should do with the extra money. We currently contribute 6% to his 401K, which is matched 100% by the company up to 4%. Side note – We used to just contribute up to the match, but instead of taking last year’s Payroll Tax Holiday and putting it into the economy like we were supposed to, we upped our contribution to the 401K.

So, we have several options for this extra money that I can see:
-    Increase our 401K contribution another 3%
-    Add to our Roth IRA contribution
-    Beef up our cash savings
-    Pay down our mortgage quicker
-    Blow the money on Starbucks and new clothes!

Although the last option sounds pretty tempting, I’m thinking it would probably be best to beef up our cash savings until we meet our 8-month emergency fund goal, then start adding more to the Roth. Which reminds me – I know I've posted here before about our monthly goals, but I haven't ever posted on our long term goals. Next week! Happy weekend!

Finance Fridays: Opening a Roth

Well, I did it! I talked about my reasons for opening a Roth IRA in this post. Well, I went ahead and did it, and now I'm wondering what I waited so long for! After researching our different options, we decided to go with USAA, who we have our homeowner's and car insurance with, and we also have a credit card with (that we don't use! I promise!). The fees seemed to be lower than opening with an independent brokerage firm or with T. Rowe Price, who my husband's retirement plan is with, and we also wanted to to try to streamline the number of accounts we have at different places. Plus, we've always been happy with the customer service at USAA. And it was super easy – it took less than 5 minutes online. Now, I'm just tweaking our budget to actually fund it.

Have a great weekend!

Finance Fridays: Net Worth for August

Since this Finance Friday finds us at the beginning of a new month, I thought I’d share something we keep track of ourselves at the end of every month. I calculate our net worth each month, both as a way to track our assets and liabilities, but also to help us set goals for ourselves. And it’s a whole lot of fun to watch that number climb each month, which is what usually happens. But, that’s not what happened this month. Even though we saved a little into our savings account, and paid a little more off on our mortgage, we were still down this month because of that darn stock market!

There are lots of different ways to keep track of your net worth. Some people include cars or other assets, but since our cars are paid off, I just keep them out of net worth calculations for simplicity’s sake.  Here's hoping that next month, we'll be in the positive! Have a great weekend!

Finance Fridays: Saving for retirement when you're a SAHM

As a stay at home mom, I worry sometimes about my retirement. These years staying at home with my daughter are absolutely priceless, but lately I've been wanting to do something about the fact that I'm not contributing to retirement while I am at home. So, I've been researching opening Roth IRA's for both me and my husband, which will allow us to contribute $5K a year each, and that money will grow tax free until we need it.

If you're unfamiliar with a Roth IRA and its benefits, a fantastic resource is this guide to Roth IRAs from one of my favorite money blogs Get Rich Slowly.

I'll post an update once I've completed the process! 

Finance Fridays: Keeping Track

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Before we got debt free, we had no idea where our money was going each month. We ate out a lot, went shopping a lot, went on lots of trips. So after we got debt free, when I knew we were going from two incomes to one, it was clear that we had to start tracking our spending and stick to a budget, or we were going to end up right where we started, which was not an option.

There are all kinds of ways to track your spending. Some people write everything they spend down in a notebook, some use Quicken or other online programs to keep track. Our way is kind of a hybrid of those two things.

We keep our budget in an Excel spreadsheet. We spend money from two places. As many purchases as we can go on our credit card that gets airline miles. (We've gone on vacation several times with those miles too, and it's all for purchases we would have made anyway. Always make your money work for you!) We pay that card off in full every month (of course). Places or bills that won't take a credit card, like our mortgage, are paid directly from our checking account. So at the end of each week, I copy the purchases from our online credit card statement, as well as our checking account, and go through each one and input it into my Excel spreadsheet. The only cash we really spend is from our blow money category, and I don't track cash purchases from receipts, I just deduct the total amount.

Some people might think this is a clunky way to go about it, but it's what works for us - I am going through every purchase, which helps me to really see where our money is going.

We've been doing this for two years. I can see how it wouldn't for some people. But however you do it, if you're interested in either becoming or remaining debt free, tracking your spending is one of the most important things you can do. 

Finance Fridays: Keeping it Simple

When I was in college, fine art majors were allowed to take a Philosophy class called "Logic" instead of having to take college Algebra. Which I used to tell myself was a compliment, because my brain found it easier to understand logic than the alternative, Algebra. I could better grasp what was logical than proofs and theoroms. Or are proofs in Geometry? As you can see, I think this was a good move on the university's part - because if they hadn't come up with this little bypass, I'd probably still be in school trying to pass Algebra. So although I love personal finance, I've really grown to hate when pundits on the news start yapping about the numbers just in from the labor department, or the numbers behind the S&P downgrade. My eyes glaze over, my mind wanders. What I want to know is, in simple terms, how those numbers affect me!

So I was interested when I saw this video about the national debt crisis posted at Blonde and Balanced. Although I think it oversimplifies a few things, the way it's explained is "logical" to me! Enjoy and have a great weekend!

Finance Fridays: Smart Goals

My plan for this blog isn’t just to post about the pretty things, although I love those, but also about money things. So every Friday, I’ll be posting about something finance related.

This is probably the best time to note that I do NOT consider myself a financial expert by any means. I’m just a girl who loves to read about personal finance, loves to watch the Suze Orman show on Saturday night, and can’t get enough of checking my budget spreadsheet or updating my net worth.

When my husband and I met, we were both in debt. The story of how we eventually got out of debt is a long one, but the single most important thing we did to allow us to get out of debt was setting the goal. It was easy to complain about being in debt. But until we decided to face the truth, tally up the numbers and know what we were trying to accomplish, we were so overwhelmed with it that we wouldn’t face it, and it got worse before it got better. And the goal setting didn’t stop when we got out of debt. That’s when it really got fun! Because instead of our goals going into the “hole” of debt repayment, they started going towards building the life we really wanted.

To help the end goal not seem so scary, it was helpful to me to set SMART goals along the way.

S = Specific – the goal must be specific

M = Measurable – you should be able to quantify or measure your progress

A = Attainable – the goal should be something you can stretch for and reach

R = Relevant – it must be worthwhile to you

T = Timely – it must have a date for completion

To make this a little more fun, let’s say your end goal was to save $2,000 to take a trip to the beach (yes, please). Here's how I would make sure it was a SMART goal:

Specific: I need to save $2,000.

Measurable: I get paid every two weeks, so I need to set a dollar amount every two weeks that I can save.

Attainable: This amount is something within my reach. Although I might like to go on a $20,000 trip around the world, that's just not something I can do (right now!).

Relevant: I really would enjoy this vacation, and I’m willing to save for it.

Timely: I’d like to do it next year. Let's say 9 months from now.

So now you can say that your specific goal is to save $112 per paycheck, rather than I need to save $2000, which can seem overwhelming. You’re able to measure every two weeks how you’re doing on your goal. You know that the goal is attainable by not eating out a few times a week, or not buying that new outfit every few weeks. You keep it relevant by picturing yourself on the beach each week when you move that money over to savings. And you know that the time will come when you’ll be heading off on your trip, not worried about how much it costs because you’re paying in cash!