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Posts tagged with: Saving Money

Sustainability Should Be a Priority When Planning For Retirement

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The local annuities market has grown over the last few years. At the same time, fewer individuals are opting for conventional life annuities, which is quite interesting since conventional life annuities are the only products that provide guaranteed returns for the rest of the retiree’s life. However, these products tend to be expensive (particularly ones that adjust for inflation) and income yields are low.

While some people are prepared for retirement, most are not saving enough. These retirees hope that the market will make up for any lack in capital and are opting for living annuities, which offer more flexibility and the potential to earn higher returns.

The real issue here is a lack of savings. If you find yourself in this category then don’t despair: Proper planning and rational investor behavior can help you manage the problem.

The key is planning

Investors need to examine their financial positions and speak frankly about their options long before they retire. This may be a painful exercise but will present you with more options and ultimately choices. Having as much information about where your funds are invested and what the best performing unit trusts are, help make these choices less daunting. Think about how much you have saved and how long you will need support yourself during retirement. The key risks most retirees face are outliving their money and inflation eroding their savings. Developing a plan will help you account for these risks. As our life expectancy continues to increase it is advisable that you limit your consumption during the early retirement years.

Facing the facts

A lot of capital is required to enjoy the same lifestyle after retirement. If you retire with less than you need you can offset it by drawing more income early on, but this is not sustainable. Spending too much after saving too little is guaranteed to end badly.

You can consider delaying your retirement a few years to save a bit more. It tends to be easier to extend your career rather than go back to work after retirement. This may not be the most attractive option available, but it allows you more time to save, less time to live off those savings and gives your capital more time to grow.

You should not underestimate the impact this extra time will have on your savings. Extending your career in your twilight years may not be that appealing, but it is a better option than having to survive on a low retirement income or running out of money too soon. While some factors may be out of our control we can at the very least influence the longevity of our savings.


Ashley’s New 2017 Budget

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It’s been awhile since I did a full budget post. As I was working on this post, I was reminded of the reason – these posts always take sooooo long to pull together. I double and triple check everything 10 times to make sure there are no mistakes and to make sure I have solid footing on where all of these numbers are coming from.

These are good posts for me to do, though, because it always offers an opportunity for us to make subtle tweaks or changes to the budget. This time around, the big one was with our Roth IRA savings. We’ve only been saving about $100/month toward a Roth. But one of our 2017 goals is to fully fund a Roth at $5500 this year. In order to do that, we’re going to have to increase our monthly rate of savings for our Roth!!

At any rate, I want to show our budget and then offer some explanation below:

MONTHLY BILLS & EXPENSES
Mortgage $1250
Property Taxes & Insurance $350
HOA $40
Electricity $165
Water $75
Phones $150
Cable/Internet $130
Preschool & Childcare $1100
Gift-Giving $50
Personal Maintenance $50
Restaurants $300
Entertainment $100
Kids’ Activities $100
Groceries $600
Fuel $100
Household Goods $100
Clothing $50
Category subtotal $4710
SAVINGS
3-6 month expenses, Full at $5,000 $0/mo ($5,000 current)
Car Repairs, Full at $2,000 $200/mo; ($676 current)
Kids’ birthday, Full at $500 $50/mo; ($150 current)
Travel/Christmas; Full at $500 $50/mo; ($50 current)
Annual Fees $240/mo (revolving)
Girls’ College Savings $50/mo
Roth IRA Savings $460/mo
Home Improvement $350/mo
Summer Vacation Savings $500/mo
Category subtotal $1900/mo
DEBT
Student Loan Payments $2200/mo
Medical $25/mo
Balance Transfer $800/mo
Category subtotal $3,025/mo

 

TOTAL = $9635/month

 

The biggest “note” right off the bat is this: I do NOT make $9635 “take home” per month. I don’t make that much. So that’s a problem. But here’s the deal – we’ll make it work.
At least for the time being, hubs is still drawing a little bit of additional income, so that helps to supplement my income. But as the year progresses, assuming our income will go down at some point, we’ll end up having to cut back. Likely the cut-backs will occur in both the savings and the debt categories. Some of the savings categories are easy to cut (e.g., travel/Christmas or kids’ birthdays); some of the savings are short-term and will go away eventually (e.g., summer vacation savings). But some will be harder to cut out (e.g., girls’ college savings is set to draft automatically from my account and if we want to hit our fully funded Roth IRA goal, we need to be pretty consistent in that savings category). I hate to cut back on debt at all, too, but if faced with a lack of funds at the end of the month, we may have to dip below my projected number. To be fair, our 2017 goal is to pay $30,000 toward debt, which is “only” $2500/month, so we’ve got a bit of wiggle room if we need to make a slightly lower debt payment (though I’d LOVE to pay MORE toward debt and hit our goals early!!!)

In terms of the monthly bills and expenses, most of those are pretty “set” at this point. We did our 100% bare-bones blog days (a full 2 years) and have just started loosening up the purse strings a bit for the sake of our sanity and longevity with our get-out-of-debt plans. We may try to make our “entertainment” budget cheaper (which accounts for our monthly date nights and any family activities we do), and I’m always struggling to try to spend less on food (either/both in groceries & in eating out). I could skip or reduce the personal maintenance budget occasionally (which accounts for things like yoga/exercise stuff, eyebrow wax, hair care, makeup, etc). But for the most part, the monthly bills are going to be hard to see much wiggle room in at this point.

So all of this brings us to this point…. It’s kind of scary to see a budget that our projected income cannot cover. To accommodate for this, all savings and debt payments will be made late in the month. That way, we can alter payments (and savings) as needed so that our budget isn’t exceeding our monthly income.

There you have it! January debt update coming soon, too!

 

If you keep a budget, what are your proportions of monthly expenses, savings, and debt? Ours are 48% monthly expenses, 20% savings, 32% debt. Of course, that’s just the budgeted categories and things are subject to change as income decreases. But as budgeted, I think that’s pretty good! I’d be proud to pull those numbers! What are your numbers?


Money Saving Tips

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It’s been a long time since I’ve posted a money-saving tip, but they’re still a big part of my life! When I first started blogging, I posted little things we did to save money all the time. Here are some examples (and for the record, I still do ALL of these things….with the exception of the homemade baby wipes since the kids have now outgrown diapers!!!):

Today I’ve got a different kind of tip. Instead of a DIY product or finding a way to make something myself, I’m sharing a way we stretch every last drop of a store-bought product.

You know when you get to the very end of your lotion and there’s simply no more that will come through the spout? That doesn’t actually mean the lotion is gone! No, no, no! On the contrary, there’s still a TON of lotion leftover inside the bottle! It’s just stuck to the side walls of the lotion container so it’s not being sucked up through the spout. But you can stretch your lotion another good week or so by cutting the bottle right in half and accessing the lotion that way!

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Look at all that lotion goop still stuck to the inside of the bottle! Pro tip: once you cut your bottle in half, the remaining lotion will dry out quickly! Extend the life of your lotion by putting a simple plastic baggie (or saran wrap) over the top to keep it fresh. Seriously – another week worth of lotion in there!

I know some of these tips seem a bit silly or extreme, and they definitely are! But all the little things really do add up! Even as we’ve started loosening our purse strings a bit this year (monthly date nights and plans to buy a house!!!), we’re still mindful to be frugal in other areas.

How do you like to save money around the house? Do you have any DIY or make-it-yourself money-saving tips to share?


What’s Next

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If you missed my post earlier this week, I announced the exciting news that we are officially consumer debt-free! YAAAAAAAAAAAY!!!! (insert happy dance emoticon)

What’s funny is almost immediately after making the final payment on the car….it broke. Ha!

A bit of euphemism. It didn’t break down. Just a piece of it broke off. Check this out.

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Nothing even happened to cause it to break! I was just driving down the road to get to work, minding my own business, when out of the corner of my eye I saw a piece of our car just flapping in the wind! I immediately exited the highway but on the exit ramp the piece fully fell off and broke into several pieces.

Hubs looked it up and thinks he can get the part for relatively cheap ($100ish) and do the install himself. So all is well, just kind of funny that the second it becomes OURS….it breaks. Ha!

At any rate, I’ve had a couple people comment and ask what’s next now that the car is finally paid in full.

It’s tough because #1) I’d love to start punching Navient in the face, taking out loans left and right, and #2) I have a relatively small balance transfer loan (just over $2100) from what was originally a student loan that I’d love to pay off next month.

BUT…

I’m trying to use my head and not just my heart (which says to start stomping the student loans NOW), and make our first priority re-building our emergency fund.

If you don’t remember, our EF was slowly whittled away the second part of 2015. As was our “living on last month’s income” fund. Hubs’ business wasn’t doing so hot in 2015, so whenever I needed that extra little boost for paying debts, I’d “borrow” here and there. First from the “last month’s income” fund, and then when hubs had a no income month I used our EF and, well, now we’re down to basically nada in either of those accounts (note:  not entirely true…we still have a few hundred in the EF, but not nearly what we’d like to have).

We have 3 big goals for 2016:

  1. Save up $10,000 for a house down payment.
  2. Save $5,000 for an emergency fund.
  3. Put $30,000 toward debt.

Starting in February, we’ll begin chipping away at items #1 and #2. We’ll still be paying toward debt, too, of course. But we’ll be doing so at a much less aggressive rate as we, instead, try to restock some money in the bank.

The plan is to put nearly $2,000 a month into savings. This will be $1250/month toward the house down payment fund (our goal is to buy by the end of summer, so we need to save heavily the first half of the year), and another $500/month into our dedicated Emergency Fund.

In addition to that, we’ll still be making debt payments in the range of $1500-$2000 per month.

It’s going to be tough. That’s a pretty aggressive rate of savings and debt payment. We’re talking about $3500/month between the two, which is more than what our average monthly debt payments were last year (see here for a quick-view breakdown of the majority of last year).

But when you have something so meaningful that you’re working toward, it definitely helps put the fire under your pants. That, plus this will be our first full year both working full-time (and I still have the part-time job, too). It’s just going to be astronomical earnings compared to 2 years ago. Even compared to the first half of last year. So I think we can do it.

The first half of the year will, admittedly, be a little heavy on the savings side of things. Then the second half of the year we’ll make up some ground and really start making some good headway with the student loan debt.

But it won’t be all savings and no debt until then! It wouldn’t make sense to blog for a getting out of debt blog if I wasn’t actively working on the debt!

I’ve got a few tricks up my sleeve to try to make some good progress even while in savings mode! I’ve GOT to have the balance transfer student loan paid in fully by April (that’s when the interest sky rockets from 0% to 13%!!!) But right now my projections show it being paid in full by March. Then I plan to initiate a second balance transfer to do it all over again (they still have the deal with 0% APR for a year, and only a 2% initiation fee; this is half the initiation fee of other offers I’ve received).

I also may consider some type of consolidation program a little bit down the road. I like having my loans separated currently because it gives me a big psychological boost every time I pay off one of the loans (and I target them one-by-one, paying minimums on all others). However, I hate Navient with such a fiery passion that it may be worth it to consolidate with an outside company just to get them out of my life. We’ll see. I’m not jumping on anything now, but keeping my mind open to the possibility down the road.

Anyway, that’s it for now. I just wanted to dedicate a post to the question I’ve been seeing, “What’s next?”

Also…counting down the days until the all-cash paid Cruise 2016 vacation in April! We’ve been planning and saving for it since February 2015 (over a year!!!), so we’re beyond ready! I can’t wait! Whoever said you can’t have a little bit of fun while in debt-repayment mode certainly never read here! It may be a controversial stance, but I’m a believer in balance in life. We’ve worked HARD the past two years to dig ourselves out of the giant debt hole we were stuck in. Yes, we have a long way to go. But it’s precisely because this is a MARATHON (and not a sprint) that I think it makes sense to build some fun into the budget. Otherwise it’d just be impossible to stick to for so long! That’s my view on the matter.

What are your plans once you get out of consumer debt? Tackle student loans? Your mortgage? Get your savings up to snuff? Or are you going to go beyond? Perhaps save enough to retire early? Do some traveling, etc? I’d love to hear YOUR plans!

 


And We’ve Got a Plan

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As I mentioned in the last two weeks, my mind has been spinning with what my next plan of attack should be.  And I’ve finally decided that I what I need to do is sit still and wait.

The debt cloud continues to hang over my head like a dark cloud which I’m certainly anxious to tackle.

But I think even more pressing to me is what will happen in April when I am determined to leave our tiny space.

So I’ve decided that for the next 4 months (September thru December,) I will make only the minimum payments and store up a little nest egg of debt payments.  By my calculations, allowing for a little bit of extra for the twins’ birthday in October, property taxes in December and Christmas in December, that will bring me to right over my 1/2 way goal for moving to a purchased house.

In January, I think I will have a better idea of what my plan is for April.  And at that point I will either 1) payoff the smaller of my loans (ex-husband’s car which is interest free until January) and continue to save toward the move or 2) make the move/purchase the priority and continue with minimum payments to put me in a good place to move.

At this point I am definitely leaning toward choice 1, but I want to be smart and really feel I need the time to be sure.

One caveat to this…I am going to continue to look for more work.  In the Spring when I picked up new work, I just socked the money away and it came in very useful for some extras and summer fun.  With this plan, the extra would pay for additional debt payments.  And if I work hard and am able to get some decent work, I could get to January with my smallest debt already paid off or close too and a nice little nest egg towards the move. Now that would be ideal!

 


Ashley’s February Budget Update

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After admittedly falling off the frugal train in the month of January, I think I did a much better job in February. You’ll see that not every single purchase was one of absolute necessity, but I also think I maintained a good balance of saving money, paying down debt, and getting a few things that were needed during the month. Here you go….
February Budget Update

Budget Category Amount Spent
Rent 1055
Electricity 158
Water 60
Natural gas 22
Sprint (2 lines) 114
Cable/Internet 99
Car Insurance 165
Health Insurance 394
Trash 35
Preschool 1040
Gift-Giving 50
Personal Maintenance 40*
Restaurants 87
Entertainment 35
Groceries 310
Gasoline 57
Household Goods 115
Clothing 22
Toddler purchases 20
Rainy Day Savings 625
Savings Goals 500
Debt Payments 2102
Total $7105

Let’s discuss….

  • Electricity. It’s weird that my electric bill this month was exactly the same as last month. At first I thought this was a mistake and double-checked, but this is the correct figure. Just a weird coincidence (note, I’ve been working to try to conserve electricity and the bill has gone down this month – wahoo!!)
  • Car Insurance. This got messed up this month because somehow husband’s truck ended up back on our personal insurance (instead of a separate policy in his company’s name). I’ve called to correct this so the bill should go back down again for next month.
  • Gift-Giving. We had several gift-giving occasions in February. This $50 figure includes a $30 photo book for my Mom’s birthday, my $5 classroom gift basket, and supplies for the Valentines we sent out to friends and family members (including pictures I had printed, postage, and a couple of cheap V-Day gifts I picked up from Dollar Tree for the girls).
  • Personal Maintenance. I put an asterisk next to this item because I didn’t actually spend any money during February on personal maintenance, but I plan to spend the money this month and wanted it set aside. I’m trying to decide what to do (may write a post about it), but am thinking I may get my hair done again before my big “not an interview” trip. It feels so soon, since I’d gone a full 9+ months without getting it done a single time, and then I went at the end of January before my ‘real interview’….but it’ll be a solid 9 weeks by the time I go on my next trip. Should I get a trim? Have my highlights touched up? Etc? I know I want to look sharp, so basically I set the money aside with the intention to use it this month. Not sure how (i.e., what I’ll be doing) or in what fashion (e.g., Groupon? Hair school?) yet. I’ll keep you posted.
  • Restaurants. We did better on eating out this month than we have in recent months (generally I set this at a $100 budget). However, we spent more in the next category than we usually do…
  • Entertainment. Some of this was little stuff ($3 for itunes songs; $6 to feed the giraffes at the zoo). The biggest splurge is that hubs and I actually went on a date this month! This was our first date since our anniversary in November, and we won’t be going on any dates for probably another couple of months so I’m okay with this expense. Just to be transparent, I paid for the actual “date” (movie tickets and snacks), and hubs paid for a babysitter separately, so this figure is lower than it would be if a babysitter were included here.
  • Groceries. Knocked it out of the park with groceries this month (we usually budget $400!!) I guess this makes up a bit for my overage in January, though it means I’m starting out March with a pretty bare pantry and fridge/freezer, and with it being such a tight month financially it means I’ll have to be creative with our dinner plans.
  • Household Goods. This category was also much higher than normal (usually we spend less than $30/month on household items). Some of it was just refilling some cleaning supplies (new kitchen scrub brush, laundry detergent), but I spent $40 on Round Up since our weeds have been out of control (side note – Costco is the cheapest place around for Round Up! I spent $40, but I got THREE of the big jugs-worth of weed killer, whereas Walmart sells the same stuff for $40 for only ONE of the big jugs of weed killer. Costco is the bomb.com)! The other large expense here was the YNAB software. I spent $54 for the YNAB software, but I think its money well spent (edited to add = I thought this was an annual expense, but a reader pointed out this is a one-time fee! Wahoo, I didn’t even realize that, makes it seem like an even better deal now!!!)
  • Toddler Purchases. $20 on gummy vitamins. I get two kinds: a multivitamin and an omega-3 vitamin. Also from Costco and much cheaper than I’ve seen anywhere else (even beats the sales prices at my local grocery store).
  • Rainy Day Savings. In YNAB I’ve made categories for all my savings needs. This month’s rainy day savings include: $200 (car repair fund), $125 (dental/vision), $100 (semi-annual fees), and $200 (a one-time pet expense saving). Remember when I was going to just put $500 toward my pet savings for the year? Yeah, too much money. But I made a good dent in it with the $200 savings (and then I promptly withdrew $51 to buy pet food). But still, that money will last for probably half the year, and I’m not planning to add any additional money to the pet savings right now since things are a bit tight.
  • Savings Goals. These are longer-term savings goals, not just for routine expenses. I saved $100 toward a Roth IRA, and $400 toward cruise 2016.

I said I was going to stop doing a full “anticipated budget” post for the current month, but just to give you a quick idea of how things are changing this month during our time of lower income….

In March I’ve done away with rainy day savings. I’ve changed all my Capital One 360 automatic savings plans so that nothing will be saved toward any of my rainy day funds in the month of March. I’ve also reduced my savings goals. I still have the $100 going toward a Roth IRA, but only $200 is going toward Cruise 2016 (instead of the $400 I’d initially planned). That’s a whopping total of $300 in overall savings in March…. compared to the $1125 I saved in the month of February.

This is yet another example of how having a lean month can be helpful. When I was really studying the budget and seeing where we could cut back, it’s hard not to notice that OVER A THOUSAND DOLLARS A MONTH IS GOING TO SAVINGS!!!!

How is this??? HOW!?!?!

We still had a decent debt payment (over $2,000; nearly 30% of our total income), but it was a bit of a shock to realize just how much is simply being set aside and saved on a monthly basis. When things get tight, the savings is the first thing to go! Just as a heads up, my debt payments will be much smaller this month, too. I’m just focusing on trying to pay all of our minimum obligations (okay, a little over the minimum, but not by much), and get through the month without any overspending. It’s been a long time since our income has been this low, and with the girls’ preschool accounting for nearly 25% of our take-home pay, regular bills (rent, utilities, insurances, etc.) accounting for another 50% of our take-home pay this month….there’s not a lot leftover for big-sized debt payments and non-discretionary spending (like groceries, gasoline, etc.).

But still, progress is progress. Any month that we’re moving forward is a good month, no matter by how little.

So there you have it.

How’d you do with your budget last month? Any big changes for this month?


Talking to Friends About Money

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Today I wanted to talk about something a little taboo (I guess we’ll just keep with the theme, since today’s mid-day post was a bit taboo, also).

Do you ever talk with your friends about money? Not just casual mentions of money, but deeper conversations about budgeting, debt payments, financial goals, etc?

Confession: when I first started blogging here I hadn’t ever talked about money (on a deeper level) with any of my friends, ever! It made for a challenging transition from my old spending habits to my newer (more frugal) ones.

Eventually I slowly started talking a little bit about how I’ve been working to pay down our debts. One of my friends, in particular, has been really kind about my debt reduction mission. She still doesn’t know specifics (exact figures of debt versus monthly payments, etc. etc.), but she knows that I’ve become much more money-conscious (side note: she’s actually made innocent comments occasionally about how “tight” money is right now in our household. LOL! If she only knew the truth = that we spend $2,000/month on DEBT!!!).

This friend and I used to get together nearly once a week for lunch or a happy hour and, instead, we now get together to do a little 3-mile walk/jog on a popular jogging trail here in Tucson. I love it because I’m able to get some exercise and some girl talk all at once, and to do so for 100% free!

But still….no one knows the extent of our debt situation, nor the sacrifices we’ve made to really try to chip away at our debt.

I have a different friend that I was chatting with the other day. She and her husband were preparing their taxes and realized that last year they’d had a dramatic income boost – 33% over the previous year. The scary part is that she said she has absolutely NO IDEA where the money has gone. They still have the same living arrangements (same modest apartment, same old car, no new baby, same basic “stuff”), so it’s not like their expenses have gone up. Just…the money has disappeared.

To be totally fair, she recognized that her spending has gotten a little “willy-nilly” lately (e.g., extra Starbucks runs, more dining out), and my friend is one of the most generous people ever so she spent a TON at Christmas (I don’t want to give her financial specifics, but when she told me the amount she’d spent on family I was SHOCKED!) I’m sure she’s equally as generous throughout the year with other occasions (birthdays, showers, etc.)

So after hearing all this, where does the conversation go from there? I know my friend has some debt (student loans at a minimum, though I don’t know specifics about other consumer-related debts), and I want her to win with money! I wanted to tell her all about what I’ve been doing, to encourage her to examine her spending, make a budget, try to cut back, etc. etc. etc. Only…I didn’t feel comfortable to do so completely unsolicited.

I did mention that I’d been working really hard this last year to pay off debts by really trying to stick to a budget (hoping this would open the door for more questions), but the conversation just kind of ended there. She picked up with a different topic.

So what would you do? Do you talk to friends about money? Would you ever do so unsolicited, or simply wait to be asked? It feels like a weird topic (kind of like trying to push your religion on a friend), but I’ve just felt so thrilled with my progress this past year and I really WANT my friend to do well financially, too! Especially with their big income boost, they deserve some financial wins, you know? But it’s definitely still so taboo.

How do you feel about the topic?
Would you talk to your friend(s) about money? Would you try to encourage them to get on a budget, or just let them see how you live your life (with the hopes that one day they ask about your success)?