2016 Financial Check In

I’m counting on this blog to keep us accountable for the Keller Household financials.  That being said, I thought it may be time for a quick financial check in.

Financial Accountability

Taking Financial Accountability seriously makes cents!

So far, 2016 has been an expensive year for the Keller Family!  I may have gone a little bit overboard on birthday presents and celebrations for BK..  I’m afraid we definitely blew through that budget!  Additionally, I’ve had a hard time this month staying under budget for shopping.  It’s only mid-month, but I’m over budget there, too!  I also booked and paid for a vacation for the kids and I (poor Mr. Keller can’t take the time off from work).  Luckily, these issues have been offset by several other things so that the Keller Family’s financials actually look great!

Mr. Keller has worked every Saturday but one since the beginning of the year.  Financially, it’s been great.  Lots of over time pay.  Of course, at this point, we would rather that he be home for at least one or two Saturdays a month, but it has offset some of my excess.

We’ve also benefited from the weather and lower fuel prices.  I budgeted for much higher natural gas, electric and gasoline costs than we’ve actually seen for the year.

The biggest helper, though, has been the bonus we received through my job.  It’s smaller than last year, but we are still more than satisfied.

In all, even though we blew through a few budget line items, we earned more money and saved in other areas.  Since the beginning of the year, we have saved about $9,000 into our regular savings, $6,800 in retirement, and paid the house down by $13,000 for an over all increase of nearly $20,000 to our net worth.  Not too shabby for not quite 3 months.

This overall net worth increase is impressive, but it really could have been better.  That shopping bug hit me hard this month!  I also really haven’t been grocery shopping very economically, but that’s a decision that I may continue to make.  I’ve really enjoyed having fresh fruits and berries in our refrigerator and eating a greater variety of proteins.  Mr. Keller and I did talk briefly about financials last week, and I think we intend to save more of Mr. Keller’s pay checks directly into savings.  After all, the best way to save is to pay yourself first!

In fact, the best way to win at the game of life is to pay yourself first!  What’s that mean?  It means putting money into savings and retirement each month before you make any other payments.  Obviously, you can’t put more into savings than you can afford; rather, you should work out a monthly budget and determine how much you can/will save, and put those little green employees away first.  Even better if you can automate those savings.  Each month, my retirement savings go straight into my 401k, and every year I have it set so that the savings percent automatically goes up.

Now, you may be the type of person who would rather enjoy themselves today and save for the future in, well, the future.  That’s certainly an option, but you’re really short changing yourself.  Literally.  You see, even though your income will surely be larger in the future,  You will have lost out on the wonders of compound interest.  Compound interest, should be in my opinion, the 8th wonder of the word.  Historically, the stock market grows at an average of about 10% per annum (that average includes the Great Depression, too!).  Run that through your calculator a few times, and I guarantee that you’ll  not only be saving every year, but you’ll be doing what you can to save more every year!

You may also be sitting there and thinking, “I’ll invest later, when the stock market is up.”  Don’t be that person!  When you’re in the wealth compiling stage of your life, a down stock market is a gift!  You’re buying when things are on sale!  Take it from someone who likes to shop:  a good sale is a wonderful thing!  Truly, though, as long as you continue to put money in while the market is down, history would say that you are sure to come out ahead.  At the minimum, be sure to save enough to earn your employer’s match!

Financial Accountability

“Life was harder before I started!” I heard that quote the other day on a Dave Ramsey podcast. The speaker was someone there to do her debt free scream, and she was referencing her budget. Prior to following Dave’s Baby Steps and holding herself to financial accountability, her life was harder!

Financial Accountability

Taking Financial Accountability seriously makes cents!

How could that be? Before she sat down and created her budget, her family just spent their paycheck. Like most Americans, I’m sure they thought they were fine as long as they could pay their mortgage, car payment, credit card minimums and still pay the power bill and put food on the table, but they found themselves in debt and stressed out; they were managing their lives around their debt payments.

That’s certainly how I felt before we went on the Dave Ramsey Baby Step program!  The funny thing is that I didn’t even realize that I felt stressed out by our debt until I started to really make a plan to eliminate the debt!  I realized that up until the Keller family implemented a budget, we were really being managed by our debt payments.  I had no real idea where our money was going outside of those payments.

Every month, I would make our payments.  I would then spend the rest of the month constantly calculating how much money was left.  If it appeared that there would be a deficit, I would move money over from savings.  I felt as though I was constantly calculating, adjusting, and transferring money.  The budget stopped all of that.  It really was easier!  Now, I just update our Mint.com budget every couple of days and note how much wiggle room we still have in each category!

Now, we’re reached most of our goals and paid off everything except for the house!  BUT, that doesn’t mean that the budget is thrown out the window!  On the contrary, it’s just as important as ever.  Now, rather than pouring money into paying off cars, student loans, and zero percent credit cards, we’re pouring money into retirement accounts, savings, and college savings plans.  After sticking to the budget for a year, it’s natural for us to continue to stick to it!  Holding ourselves financially accountable has truly made life easier!

2016 Savings Goals

Yesterday, I gave everyone a quick look at the Keller Family’s 2015 Financial Review. Today, I’m going to share our 2016 savings goals.

savings goals

No more running away from our retirement savings!

But first, a little side bar: to be perfectly honest, part of me is really struggling with whether I should have posted these things to social media. It’s intensely personal and typically something people keep private. That struggle is why I haven’t gone into a lot of detail other than the 10,000 foot views that I have given up to this point.

On the other hand, I’ve spent a great deal of time over the last year researching ways to save and maximize our after tax dollars. I feel like I should share that information. I also feel like sharing the Keller Family successes and struggles may help others. I truly hope that our story will light you up with hope and motivation!

Okay – so now onto our 2016 savings goals!

First, we need to save more in tax advantaged accounts! We will fully fund our Traditional IRAs. This is actually one area where I differ from Dave Ramsey. He suggests using a Roth IRA, and, truly, both have their advantages, but the tax savings you can get with the Traditional far outweigh the benefits of the Roth IRA as long as you manage the accounts properly.

You see, a Roth IRA account is a tax free withdrawal account, but a Traditional IRA is a tax free contribution account. Your tax-free dollars can grow at a faster rate due to the power of compounding, and, if you employ tax minimizing strategies in retirement, you will far outearn a Roth IRA. This is a topic that I’ve researched pretty extensively, and the best article that I have found explaining the logic behind a Traditional over a Roth is located at Madfientist.com.

In addition to maxing our Traditional IRAs, Mr. Keller will finally be eligible for his work retirement account!  We’ll start investing in that right away in order to receive his company match.  READERS, ALWAYS EARN YOUR COMPANY MATCH!!  That’s free money!  Please don’t pass up free money!!

We will also increase our investment in my 401k account.  Each year, I increase my 401k savings rate by at least 1%.  I have it set up automatically to increase.  By automating these types of savings activities, I’m ensuring that they happen!

Savings goals

Working towards owning our property out right!

Our second  savings goal is that we are committing to increasing our mortgage principle payments.  Paying extra on the mortgage combined with a healthy tax-advantaged savings rate is a great plan for personal net worth building!

First, each extra monthly payment I make reduces the total interest that we pay.  For that reason, I never recommend saving money towards mortgage payment in a separate savings account, and then making a large lump sum pay off.  You’re losing out on the ability to reduce that interest as banks actually front load mortgages with interest!

Perhaps even more importantly, in my experience, when something comes up (an “emergency” like a great shoe sale!) where I “need” a little extra money, I”ll raid that savings account.  I can’t do that if I already sent the money to pay off principle!

There are some who will argue that if your mortgage interest rate is less than 4%, you should never pay off your mortgage early.  I used to be in that camp!  What I found is that I failed to put that extra money into another investment vehicle.  I was spending it on other things instead (that shoe sale, perhaps!). Even with the best of intentions, I wasn’t disciplined enough to truly save that money if I could easily access it.  One other argument for paying the mortgage off early:  it’s a relatively low risk investment.  Historically, homes have increased in value in line with the inflation rate.

The Keller Family’s third savings goal for 2016 is that we need to tighten up our budget and be more accountable for our over spending.  I’ll admit, we love to eat out.  It’s a huge budget buster for us, and it’s actually already a large part of our budget.  I often check out the forums on Mrmoneymustache.com, and those super savers talk about only going out to eat once or twice a month!  We’re doing great if we only go out to eat once or twice a  week!  We don’t even go to great places.  We have to go to kid friendly restaurants so we eat a lot of fast food (yes, there are healthy food options for everyone at fast food restaurants–not many, but they do exist), and small family restaurants.  Both Mr. Keller and I need to work on this.

savings goalsOur fourth savings goal is directed at me.  I need to pick up the no shopping challenge again.  I ended the challenge in December last year in a big way!  I need to return to my more frugal ways, and recognize that spending less money by catching a sale is not saving money if I did not actually need the item that was on sale.  I will be putting a no shopping ban on myself through the end of February.  At that point, I may need to purchase some spring/summer clothing items for the Keller Kids as both have moved into new sizes this fall.  I’ll make those purchases frugally with most being from second hand stores.  I’m hoping to stay well under budget in this area.

wedding outfit

Darned kids just keep on growing!

Our fifth savings goal is also directed at me.  We need to have a garage sale this spring or summer!  Shoot, if I’m lucky, that garage sale will pay for the items mentioned above that the Keller Kids will need.  Even more importantly, we’ll clear our homes of items that we don’t need and simplify our lives.  No reason to keep hauling some of these possessions around!

So, there they are:  the Keller Family savings goals for 2016!  Wish us luck!

2015 Financial Review

Mr. Keller and I were talking about our 2015 financial review this morning. It was just a casual discussion as we prepared for our day, but it left me with a lot of emotions and questions. I realized that I needed to take a deeper dive!

2015 Financial ReviewThe quick discussion that we had was really empowering. I was left feeling very proud! We realized the amazing progress we had made in just the last twelve months: student loans, 0% credit cards, and car loans were all paid off! We were left with just our mortgage! In addition to that, we are now regularly funding our children’s college education funds, we started IRAs, and we increased our investment in my 401k. Those are some results!  As Dave Ramsey, would put it, we went from being normal consumers to being Weird!

As I thought more about it, I went from feeling really proud to just being a mixed bag of emotions!  I was still proud, but I was also feeling cautious as I wanted to run the numbers to double check everything.  Additionally, I felt challenged to do more!

First, I pulled up all of our bank accounts and ran the numbers.  We did, indeed, pay off about $60,000 in debt over the past twelve months.  Nearly half of that was an auto loan that we paid off by selling my super nice but excessive GMC Yukon.  We then paid for a Honda Accord, half with cash, and half with a loan, but we paid off that loan just a couple of months later with my bonus.  At this point, we were taking the Dave Ramsey Financial Peace University class, and Dave’s teachings about getting rid of all debt really started to sink in!  I took the money out of savings to pay off my student loans and 0% credit card balances!  Before, we had just been making monthly payments on those items because their interest rates were low.  It seemed silly to pay them off when we could afford the monthly payments and pay interest that was less than the typical inflation rate; however, I decided to give Dave Ramsey’s zero debt thing a try.  After all, he’s a successful guy, and we didn’t seem to be making much progress on our own.

I am sooo glad that we finally paid off those debts!  It’s so freeing to only have a monthly debt payment related to our mortgage!  Plus, by removing those monthly payments, we had the cash flow each month to finally set up 529 plans for our children!

Those things are well and good, but I also wondered if our savings had actually increased.  We had put all of this money towards debt re-payment, and much of it had come out of savings.  What was the impact of that?

We actually increased our savings by nearly $43,000!  I had increased my 401k contribution mid-year, and that helped tremendously!  We also opened IRA accounts.  Even better, part of how we reached that $43,000 number was that we were consciously putting money each month into our savings account.  We really have a lot to be proud of in 2015!

I think I’ll probably ruminate on this financial review a little bit longer.  There are lessons here that we can take into 2016 that will help us save more! Once I get those strategies down, I’ll write another post for you!  I’m hoping that by posting the Keller family’s financials, anyone who reads this will feel motivated to improve their financials, too.  Maybe rather than competing among ourselves for the best possessions, we can compete for the highest savings rates!

Saving vs. Not Spending

Kohl’s, Target, Krogers, and even IGA like to tell you on the bottom of your receipt how much money you “saved” by shopping with them.  I had no idea they could peek into my savings account!  Wait…they can’t.  So did I really save anything?  Probably not.

Saving Money vs. Spending LessUnless I missed something, when I purchase something, money leaves my pockets.  I do not believe that I have ever truly been paid to shop (credit card points and store rewards aside).  So no matter how much I “saved” according to stores like Kohl’s, I actually just traded in my hard working and hard earned green employees for something disposable, and my account balance at the bank got a little bit smaller.  I certainly did not “save” any money.  I may have spent less than planned, but then again, maybe I didn’t.  I often find myself thinking, “look!  the shoes that I needed for work are on sale!  I can afford to buy those really cute boots, too!”  So, I went from “saving” money to actually buying a little bit more.  For those of you who are disciplined enough to purchase only with the on sale shoes that you went in to purchase, did you put the funds that you “saved” in your bank account?  Or did they just kind of disappear?

Even with my goal of not shopping (still going strong by the way!), last month I did not see the savings from that goal hit my savings account.  I forgot one vital step:  I didn’t move the money in my budget from the shopping line to the savings line.  Consequently, those funds never made it to my savings account.  I suppose a few of those green employees are floating around in my checking account, but I noticed that we over spent on groceries last month.  We covered the overage by not spending my shopping money.  I strongly suspect that if I had moved the money I normally have budgeted for shopping into our savings account, we would have stayed on budget for groceries.  Lesson learned:  put green employees in savings at the beginning of the month.  Then, they might stay put and actually go to work earning me more little green employees!

This is one area where I actually disagree with Dave Ramsey.  His position is that if you completed the zero based budget, and it’s in your budget, go ahead and spend the money.  In fact, one of the stories he likes to tell is that a lady came up to him and thanked him because she no longer felt guilty for buying something for herself as it was in the budget.  I would argue that she should feel guilty if she didn’t need it and it didn’t make her life better/easier in a significant way.  Every time I open my closet, I think about how blessed I am to have so many clothes, and I feel the same way when I open my children’s closets, the pantry, or even the storage room where I keep our lesser used kitchen items.  We have so much stuff!  Additionally, Dave Ramsey’s position would be that if something is on sale, you just freed up a little bit more room in your budget to add more items.  The Keller Family’s (newly updated) position on this is that when our budget benefits from a sale, there is now more money to go into savings.

My updated no shopping challenge:  continue to refrain from buying myself clothes and accessories and put those savings into our savings account.  Not spending money on something is not the same as actually saving money. Whenever I realize that the Keller family has refrained from spending on something that we normally would have, I will move those funds into savings.  Then, and only then, will the Keller Family have actually saved.