Is It Naptime Yet

For whatever reason I was thinking about money this morning. (And apparently ABBA entered my mind while I was writing this.)
I was imagining I had to give a talk about money and how to use it wisely.

Now I guess being around the house and doing mindless tasks like washing dishes lets my mind wander.

I won’t say I’m any expert on the subject but Jon and I, I think, are very wise with what we have.
I do go over, very often, on our food budget, but our gas is always below because: one, we either way over estimated how much gas I would need for our second car, or two I don’t use a lot of gas because I try to make my trips as efficient as possible and that’s why I do a day or two of errands rather than a little each day of the week.

Food and clothes are my weaknesses in budgeting. Not so much clothes but that’s what I spend my allowance on. Darn those clearance racks at Target.
I use to feed our family on $40 a week, now $60 seems like barely enough some weeks. (Though we now have two girls who eat a lot.)
We are eating more meat, and more fresh vegetables and fruit which do add to the cost. I think we are also a big cereal eating family and that can be expensive so those are our weaknesses. (Besides Costco, which I spend a lot at too.)
So food budgeting is not what I’m giving tips on.

My first budgeting tool is to stay below your income in expenses and know what percentage of your income should go to your car payments or house payments, especially when buying.
Like housing payments, including insurance, taxes, and HOA, should not use more than 1/3, or about 30% of your monthly income.
Car payments should be around 12% to 15% of your after tax monthly income, this also includes what you spend in insurance and what you would spend on regular tuneups spent over the year.

One thing we do is we make our credit card work for us.
We have a Chase Freedom Rewards card with cash rewards which gives us 1% on everything and 3% back on the top three categories of spending each month. (They divide it into categories like food, gas, utilities etc.)
We always pay our debt off each month so it’s very worth the rewards.
If we cash in our points at the lower mark we get $50 for like 5,000 points. But if we wait we get $250 for 20,000 points. Since the money is spent we just wait for the higher rewards. With Chase we could get gift cards for the same amount as cash rewards so we just choose cash. That way it’s earning interest in our bank until we decide what to spend it on.
So I suggest get a card with good rewards. (My capital one card give less then 0.5% back so I don’t use it and it only gives rewards back with gift cards. We like Chase, but if we were to find one with higher rewards we’d definitely apply for it. )
Remember it’s good to have about 2 or 3 credit cards. If you open a new credit card keep your old credit card account because the older the card the better for your credit.

Another thing we do is set a low, but agreed on, allowance for each other.
Rather than have all our extra income go to our allowance and whatever we want we set a regular allowance for ourselves each month and then our extra income goes to savings projects like family trips or someday remodeling the bathroom. ( Heck, forget the remodeling I just want a working shower in the guest bathroom! )

We have all our income combined. Which means whatever each of makes individually goes towards the whole budget and is ours as a family. (It was kinda hard for me at first when I started watching Naia, because I wanted at least some of that extra income for myself, but Jon had supported me for the past 4 years, why should I get more just because I’m finally working and earning cash? We also have similar money spending and budgeting habits, so there’s little conflict when it comes to money for us.)

Our allowance is equal and is there for us to use for whatever we want individually.
( I actually get the better end of the deal because things like haircuts, shoes and fancy lotions can go to the budget rather then be used by my allowance if they’re needed. Some shoes I buy with my allowance, but most of the time when I buy shoes I need them. I also think it’s a necessity to smell nice. Of course some months this is more important than others depending on the cash flow and they last for about a year. I cut Jon’s hair, he rarely shops for clothing, about every other year, and his shaving soap is about how scented he gets, though that is pretty pricey.)
Large purchases are usually discussed before we buy and we trust each other to not abuse the miscellaneous budget verses regular allowance. I should mention we trust each other because we’ve never given one another reason to distrust, this might not be the case in all relationships.

My last advice is to save at least 10% of income each month.
This is my hardest goal mentally.
I believe 5% is for long term things, like retirement and emergencies like job loss or disability. The other 5% is for short term emergencies and savings. Like house emergencies or car emergencies or medical.
I’m not sure how we do this. Jon is more of the mastermind for our savings.
I just know our goal is to get 6 months of income in the bank because if he be comes disabled long term, it takes 6 months for the long term disability to kick in and start paying us. (6 months is soo much money and we’re not even close, but we’re trying.)
Also if job loss were to occur or say I get sick and am unable to take care of the girls, we’d need to pay child care.
People suggest trying to save like 5% first and then to work your way up, though if you have no retirement you should be saving 5% a month or more depending on your age and it’s best to be putting it into something like a Roth IRA.

So those are some things we do.

We’re still figuring out what is the best way to pay down debt for our car, house and student loans. We don’t have credit card debt so all our debt is what I call justifiable.
It’s a matter of figuring what is the best method because all our debt is high in these areas.

I have found some interesting information on paying down debt in the snow-ball way and I’ve included some links. I am still researching and I know some are contradictory. I figure it depends on the person and what would works for you so I’ve included those too.

Pay Down Debt Fast.
A Great Plan to Get Out of Debt
Dave Ramsey is Bad at Math
Debt snowball calculator

This entry was posted on Wednesday, January 2nd, 2008 at 4:45 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.