Wednesday, June 30, 2010

A Gazillion, or how not to do financial planning

Have you seen the commercial where the two men are carrying around their "numbers" - i.e., the amount of money they need to retire? One has a large, but somewhat reasonable number and the other has the words "A Gazillion." The one with the number asks the other "How do you plan for something like that?" and the response is "I just keep throwing money at it and hope something good happens."

Oh my gosh, I can't tell you how much that resonated with my husband and me.

For a long time, our solution to most of our financial goals, whether we were planning for emergencies, retirement, or the down payment on our house, was to just to throw money at them and see what happened. We had no stopping point, no end goal, and no plan for what to do when we finished - if we even knew we had finished. I had a lump sum of money in a savings account that was to furnish all of our goals (except retirement).

Recently we sat down with a calculator, some paper, and our balance sheets and tried to reconcile all of this. Here's what we came up with.

1. Based on our Good Faith Estimate from our lender, we got a number for how much we would need for a down payment and closing costs, and put that in a separate savings account not to be touched for anything.

2. We made a list of what we need to pay for in the next few months - some basic baby furniture, moving expenses, a lawn mower, etc. - and a price point associated with each of them. I made a subaccount in my savings account for expenses and moved enough money to cover all of these immediate needs. (If we didn't have enough saved to cover them immediately, we would have figured out how long we had until we needed them and allocated a monthly savings amount until we had the money saved to buy it.)

3. We looked at our spending for the past 6 months and figured out what our recurring expenses were - medical bills, car insurance, car maintenance - that came up less than once a month. When a huge payment came up, it was killing our budget for that individual month. By dividing this by how often they occurred, we calculated how much we needed to set aside each month. We made a separate subaccount for each of them and set up a monthly autodraft from our checking account so that we would always have the money available when things came up.

4. We looked at what we had left - both in our savings and in our monthly cash flow and made some decisions. We agreed to put enough in hubby's 401(k) to max out the match, and to put enough into our emergency fund to cover 3 months worth of our expenses. We worked our budget to be sure we could get to that goal fairly quickly, and set up monthly auto transfers to make it brainless. We have some student loan debt we could be paying on instead, but we decided for right now with all the changes and impending expenses that the security was more important to us than the numeric advantage we'd gain. However, now that we have a goal for our savings, we will know when we have achieved it and can then reroute that portion of the budget towards debt reduction.

I'm so much more happy now that we have a clear plan, and having everything on autopilot gives me so much freedom. Maybe we don't have a gazillion just yet, but it turns out that's not what we needed.

Friday, June 25, 2010

Do Good: Share the Table

Right now if you go to Share the Table and click to support family meals, Barilla will give $1 to Meals on Wheels. $1 for one click is a pretty big impact.

Plus, if you're into sweepstakes, you can enter to win a pasta meal. The odds are pretty good, and it's pretty easy to enter.

Thursday, June 24, 2010

Getting my life in order

So I've been home from work for about 2 weeks now, and I just started to realize that in that time I haven't done anything. I had piles of laundry, an overflowing to-be-filed box, clutter all over my apartment. I hadn't read started reading any of the books that I wanted to read, and I hadn't written anything. Worst of all, I hadn't had any fun!

So, yesterday I sat down and started to reflect on what it was I wanted to do with my time. I started by writing because that is the way I begin everything in my life. As I was writing and trying to reflect on the things that I needed to do, I found my stream of consciousness turning into lists and the things I wanted to do falling into categories.

1. I wanted to get organized with my money and papers.
2. I wanted to clean my apartment.
3. I wanted to read and write more.
4. I wanted to have fun.

So I decided to dedicate time every day to each of those things, come what may. I set aside an hour for each of the first three: from 2-3 I would have a quiet hour when I would turn off all podcasts, music, and television and just write or read. From 3-4, I would have a desk hour when I would pay my bills, file papers, check my bank balances, balance my checkbook and budget, and maybe apply for a few work at home jobs. Then from 4-5 I would clean: I would empty my dishwasher, fold my laundry, dust, clear off any surface clutter, and do as much deep cleaning as I could do in about an hour. Then I'd be done. I made a separate list (when did I become such a listmaker?) of things large and small that I wanted to accomplish during each time period; some were recurring, some were small scale, some were ongoing. I even made a list of fun things I wanted to do when I had time to play, so that I wouldn't forget and just waste away the time on the Internet or watching TV I don't even like.

It is amazing to me how much has gotten done in just two days of this. I feel more centered and settled, my life feels in order, and I have the whole rest of the day to play, take naps, or do whatever else I want. How liberating! Why haven't I been doing this all along?

Wednesday, June 23, 2010

Life turnarounds

In the past few months, my life has taken a few major turnarounds. I already wrote about my husband graduating and us moving halfway across the country (again). Since then, I have undergone the following changes

  • I had a long term sub job for the past three months, which just ended last week with the end of the school year.

  • We bought a house and will be closing in August.

  • I am expecting a baby in September.

So... life is a little different than it was a year ago this time. I'm excited and scared and a little overwhelmed and only just now ready to start unpacking the implications that his has for my money - and a little bit for my life. Jobs and babies and houses and moving, these are things that can take up all of your attention, and often rightfully so. So right now, before the next storm hits, I need to take some time to reflect and to plan. I'm hoping to do some of that here, and if any of it interests you please chime in.