Jul 18 2012

Some new savings goals


In light of Shane’s new job, we’re evaluating our current savings goals and what we’d like to change.

So we can hit certain goals faster, we’re going to take a “savings snowball” approach (sometimes called a savings bucket).

More on the savings snowball at PT Money, and the savings snowball at No Debt Plan

Quite similar to a debt snowball, we’re just going to focus on one primary savings goal at a time for the bulk of our savings, with smaller regular contributions to other goals.

Once we hit a goal, we’ll move our savings snowball to the next goal and so on.

Shane’s new paycheck will be different. He’ll get a base salary, but he’ll also get a bonus flat dollar amount for every billable hour he works during the week. Some weeks he’ll have fewer hours and others he’ll have more — it’s the nature of the gig. The base salary will cover our expenses and the bonus can be used to throw at our savings goals.

That’s another reason why I want to primarily focus on one goal at a time — some paychecks will be smaller and if I do a high flat dollar amount per goal, I could be stretching it too thin at times.

:: Goal #1: Refinance our mortgage. Rates are way low. We can get a 15-year for 2.875% today with closing costs under $400, if not even lower. That is crazy! I’ve submitted our docs and we’re waiting for paystubs from Shane’s new job so the lender to move forward.

:: Goal #2: Bring emergency fund to 9+ months of expenses. Our e-fund’s purpose is to cover expenses in the event of a job loss, or to cover a car or house insurance deductible. We could also tap it for unexpected car or home repairs but I want to have separate car and house savings accounts going because it’s only a matter of time before SOMETHING breaks.

Our current emergency fund would cover about 6 months of expenses — but I left out one important cost: health insurance. If Shane left his new job, he wouldn’t be eligible for COBRA (it’s a small company) so we’d immediately need private insurance, or for him to start at a job that had a group policy. I’d also need to bump our e-fund to cover the cost of our new mortgage payment.

We hope Shane’s job works out for a long time, but we feel like a larger emergency fund is better than a smaller one.

We’ll focus on getting this goal finished before we concentrate our efforts on our next goal.

:: Goal #3: Hit the 529s hard. We have until the end of December to make contributions for the year. Indiana has that super-sweet tax credit of 20% off our state income tax, so throw in $100, get $20 off your state taxes. Woo! We want to get a nice tax benefit and we also want to catch up a little since we haven’t been contributing a whole lot yet.

:: Goal #4: Load up our IRAs. We’re already contributing some money with every paycheck and we’ll keep it at that same level for dollar-cost averaging’s sake. But we won’t add more until the first 3 things have happened. We have until April 2013 to make IRA contributions for 2012 so it buys us an extra few months. We can withdraw our Roth IRA contributions penalty-free in future years should something catastrophic happened and we’ve exhausted our liquid savings.

I view the Roth IRA as tax-advantaged savings for retirement and a bonus e-fund that I hope I never need, but will be glad it’s there.

That’s it for now. Once we get those things going, we’ll create a priority list of savings goals for other areas and we’ll tackle that.


Jul 16 2012

Do you tell people how much money you make?


A few days ago, someone commented on an archived post:

“At first, this blog seemed incredibly useful.  However, I find it hard to use your blog as a useful tool as it leaves out information about the most important factor in balancing one’s budget: income.  We can see how much you spend per month, but we can’t see how much you earn, so there’s no context.  Would you consider providing that information for readers, in order to make it a more useful tool (or maybe it’s here but I’m just missing it).” — Nora

I posted the gist of her comment to my site’s Facebook page to get some additional opinions.

I wanted to know:  when reading finance blogs, is it actually helpful to know a blogger’s household income so you know how she prioritizes her spending and saving and the sort, or does it really matter?

Some folks said it was nobody’s business and I am entitled to some privacy. Some said percentages could be helpful, perhaps. Others said that income dollar amounts are only relevant to people who live in the same area I do. Similar expenses, tax rates, etc.

I’m inclined to agree. I don’t think sharing Shane’s exact income does much to help keep my story in context and I don’t think it particularly helps any of you with your own financial goals. In fact, Nora was the first person in almost 5 years of blogging here who wanted to know income specifics.

I know some people openly and willingly share how much money they make, and they don’t think anything is wrong with that. It’s just a different perspective, I guess. Maybe a cultural thing?

As for me, I prefer not to disclose it. Actually, I felt more comfortable sharing our income when we were first starting out but as income increased, I’ve wanted to keep that to myself a bit more. (I have disclosed my blog earnings, but I feel that’s more meta. I blog, and I feel just fine telling you how much money that earns me).

Oh, and as far as percentages go, I’m not sure since we’re still coming up with a new budget. (Shane’s income will be variable — he has a base salary and then a bonus for billable hours worked). But for percentages sake, I’d estimate our new budget to include:

– Roughly 5% income invested for college (total, not per kid)

– Somewhere around 20-33% invested for retirement. It will depend on his bonus. Doesn’t look like there’s an employer match for Shane, as far as we know, and there’s not even a 401k yet but that’s in the works. So we want to increase our contributions now and let time work in our favor.

I don’t know the percentage for other savings goals right now. And since I told you how much we have in expenses, I can’t tell what % of our income is basic expenses :p.

What about you? Do you tell people how much money you make, or do keep that private?

Hey! I'm Kacie, wife and mother of 3. I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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