Paula has a question for me, but before I get to that, I want to emphasize that this is about our personal finance. Our situation is based on the decisions we’ve made and the blessings we’ve received. What works (or doesn’t work) for us might be entirely different from you.
I am curious. In all my reading of your blog, I have never read of you being in debt. Are you debt free? If not, I am curious why you would put so much into savings. I am also curious if you put anything towards you or hubby’s Roth IRA. I know Dave [Ramsey] says to accumulate [an emergency] fund before investing, but I also know on one of the blogs you read, he mentioned how they build up ER fund AND invest at the same time (which is what we are doing as soon as we pay off the rest of this debt).
Our debt situation
We are not debt-free. We have a $277/month car payment. If we don’t pay extra on it, then we’ll be making payments on it until the end of 2011, as we took out a four-year loan on the car.
Other than that, we don’t have credit card debt, student loans, personal loans, or a mortgage.
However, we have had credit card debt in the past. I’ve mentioned some of the dumber things we’ve done (including charging our honeymoon on credit cards!). Because of the decisions we made, we didn’t have much money in savings right after our wedding, when we moved to Pittsburgh and started new jobs last June.
My husband gets paid monthly, so for that month before his first check, we were living off our credit cards–charging groceries and gas and more.
My husband’s employer reimbursed us for relocation expenses and our apartment-finding trip, but, the key word was “reimbursement.” We had no choice but to charge those expenses at first, since we didn’t have money in savings. Now, Shane has a company credit card that he uses on business trips, so we don’t have to worry about reimbursement checks anymore.
Last summer, we were looking at a few thousand worth of credit card debt. It was ridiculous. We hadn’t yet discovered Dave Ramsey or his debt snowball concept, but we were doing a version of our own–making minimum payments on most cards, and getting rid of the one with the highest interest first.
We paid it all off last December, or about six months after getting serious about paying those cards off.
We don’t want to have credit card debt ever again, if at all possible. In fact, we’ve stopped using our cards altogether, and are opting to use our debit cards instead.
Now, we’re building up a savings cushion, with the goal of having six months of expenses in savings. I understand that Dave Ramsey would advise that we pay off our car first, but with the economy down and us being a one-income family, I’m going to sleep a lot better at night knowing we have a full emergency fund.
Our retirement situation
My husband and I believe that if your employer is going to give you free money in the form of a company match on your retirement account, it’s a good idea to get that money. That’s one of the ways we disagree with Dave Ramsey’s philosophies–we’re getting the full company match now, even though we do have that car debt.
My husband’s company will match 100 percent of his contributions to his Roth 401k, up to six percent of his annual salary. Right now, we’re putting about nine percent of his salary into that retirement account.
It’s likely that we’ll be moving this summer. When my husband took his job, we understood that it would be around a one-year position, then he would transfer and take a different job within the company. We don’t know when or where we’ll be moving, but hopefully within a month or two, we’ll know.
Hopefully, it’ll be a place that has a low cost of living, like here.
With that new position, he’s also expecting a pay raise. Pay raise or not, we hope to maintain or decrease our standard of living. That way, the pay raise will just mean more money for saving and investing.
We’ll increase our retirement contributions, and speed up our car payments.
I doubt we’ll focus all of our money toward the vehicle, though. Instead, we’ll likely pay $100-150 per month extra, and the rest we’ll squirrel away for saving for a down payment on a house.
Then, we can work on our plan to own our home outright by our early 30s.
Of course, life happens, and sometimes, God looks at our plans and laughs, as He has other ideas. So, we’re trying to be as smart as we can be, while remaining flexible.