A friend asked the other day if I recommended putting money into a certificate of deposit. We talked a bit about her goals and it struck me that with money, as in life, one should have a very clear idea of the purpose of your dollars before you make decisions about where to park them.
Mr. ThreeYear and I follow a simple financial plan with our money. It hasn’t been easy to simplify our savings and investments; we’ve had to eschew certain new accounts, consolidate investments, and roll over old 401Ks. The simpler things are, though, the less likely it is that I mess something up. The less likely I forget to make a contribution or pay a credit card bill. Money can be really complicated so in our experience, keeping things simple is clearer and easier.
We believe that our money goals should be equally simple, but unfortunately, sometimes they’re not. Sometimes we’re trying to accomplish multiple money goals at once and things get muddled.
It’s highly effective, in my opinion, to periodically take a step back and think about what it is you’re trying to do with your various dollars. What is the purpose of a particular pile of money? Then you can make better choices about where to put it.
Most of us, when we hear we’re getting a 3, 4, or 5% raise, go out to dinner to celebrate and then, without even realizing it, slightly adjust our spending to the “new” income level.
One of the most powerful tools you have, though, especially if you find it hard to save, is your yearly raise. For the last six years, Mr. ThreeYear and I have used every cent of his annual raise to increase our savings and investing.
Why? Because we live a very good life at our current level of spending, and we don’t need to spend more. If we want to go out and celebrate, take a trip, or spend the money some other way, it will be waiting for us in the savings account. If we didn’t squirrel the money away where we didn’t see it, we’d spend it without even realizing it, and then all the effort behind earning that raise would be for nothing.
We’ve frittered away money over the years in exactly this way, and it always made me feel powerless over our spending. “But where did that raise go? How do we spend more now? Where is that money?” Now, as I watch our savings grow, I realize that we’re the ones in control of the money, and we’re holding on to it until we’re ready to use it in a thoughtful way (or invest it, which is my favorite thing to do with our money besides travel!).
It’s raining right now, which is a small hint that Spring is making its way, slowly, to New England. The start of April signifies that we’ve entered the fourth month of the year and our experiment continues.
If you’re just joining, our family of four is on a three-year journey to double our net worth and become location independent. Each month, I record our progress on our net worth and our spending (gulp!). Last year, we increased our net worth by 32% over the year before! This year, we’re trying to increase it by more than 65% from where we started in December 2016. Given the wild ride the market’s likely to take us on this year, I’m not sure it’s doable. But we’re going to try.
March is always my least-favorite month of the year. The rest of the country is enjoying the first signs of Spring, and we’re still covered under snow. This year, March lived up to the adage, and came in like a lion, with storm after storm that buffeted us with snow and left the skies gray and damp. It went out like a lamb, with a few days at the tail end full of blue skies and (slightly warmer) temps. But April has brought wind storms, more cold weather, and a reminder that here in New England, there is no such thing as Spring.
Last week, I published a post that talked about the things we do to teach our kids about money. Since it turns out that we actually do quite a lot of things to teach them financial literacy, today is Part 2 of What We Teach Our Kids About Money. If you missed Part 1, read it here!
We Give Them Age-Appropriate Books to Teach Them Financial Literacy
We were given an old kids’ toy book from Chick-Fil-A many moons ago, called The Super Red Racer: Junior Discovers Work. Turns out, it was from a Dave Ramsey series of books for kids that taught about different financial topics like saving, giving, and investing. Junior ThreeYear loved the book so much that we eventually bought him the whole series for Christmas one year.
Parenthood is a big responsibility and I feel like I’m messing it up a dozen times a day. When it comes to teaching our kids about how to manage their money, though, I feel like we really need to get it right.
Mr. ThreeYear and I got out of debt by following Dave Ramsey’s baby steps, and we also listened to what he had to say about kids and money. He has a lot of great advice when it comes to teaching your children about financial matters, so we started there. But money is such a complex and important topic that we certainly didn’t end there.
Here’s what we currently do to make sure that our kids have a good relationship with their money.
We Give Them an Opportunity to Earn Money
Ramsey recommends giving your children, at as young ad 3 years old, three jars in which to put their money: Save, Give, Spend. We made jars for the boys early on. They have the opportunity to earn money by doing their chores every week. They can earn up to $6 per week for doing their three chores (these are age appropriate chores–for my 10 year old, it’s making his bed, clearing the table, and doing his laundry each week, and for my 7 year old, it’s setting the table, making his bed, and tidying his room). If they don’t do their chores, they don’t get paid. Continue reading “What We Teach Our Kids About Money”
Have you ever made a change in your life–maybe a huge one, like getting out of debt, or maybe a small one, like deciding not to buy takeout coffee–that in turn, caused benefits that you never imagined?
Maybe getting out of debt made you realize that your house was too big, so you decided to move into something smaller. Maybe not buying takeout coffee helped you realize you could save in other small areas, and after a few months, you ended up with enough to go on a trip to Florida.
This is the financial domino effect, and it happened to me.
Like a chain of dominoes, where one tile makes the whole line fall down, one seemingly small change in your life creates scenarios that make it more likely you’ll create other small changes.
It’s time for another net worth update! Are you in the midst of winter, or is it warm and deliciously summery where you live? The ThreeYears are smack dab in the middle of the coldest and snowiest parts of winter, but we made it through January and we’re raring to go for February (Little ThreeYear can hardly wait for Valentine’s Day and all that chocolate he thinks he’ll get from his classmates!).
This is the first report from 2018, and boy is it a good one. Subsequent reports may not be as juicy, given that the stock market may have more “small or significant corrections” coming up, so I’m focusing on January while I can!
If you’re just joining, our family of four is on a three-year journey to double our net worth and become location independent. Each month, I record our progress on our net worth and our spending (gulp!). Last year, we increased our net worth by 32% over the year before! This year, we’re trying to increase it by more than 65%! from where we started in December 2016. Given the wild ride the market’s likely to take us on this year, I’m not sure it’s doable. But we’re going to try!
We started the month of January off in warm Santiago. We took a three week trip to visit my in-laws, and had an amazing time.
I was very excited to see how our spending would look in January as compared to spending in 2017, given we have now eliminated the mortgage in Chile and our car payment. We’re also working to keep our food spending lower than last year.
What would your life look like with no more payments? No more car payments. No more credit card payments. No more student loan payments. How much extra money would that give you? Imagine the freedom to travel, to build your dream house, to finally retire. It’s a new year. And a chance to finally, once and for all, get out of debt. But what if you’ve tried before, and nothing’s worked? Or you’ve gotten out of debt only to get back into debt?
If you’re reading this, you may have an overwhelming amount of debt to tackle. Or you may be a personal finance guru, and need this advice like you need an extra helping of pasta with dinner.
Never fear! This guide is designed to help you get out of debt, but much of this advice will also work for other large, looming goals you’ve set for the year.
But why, you may be asking yourself, should I listen to this random voice on the internet? What does she know about how to get out of debt or how to accomplish my goals?
I have written every detail of how Mr. ThreeYear and I managed to get out of debt in this post and this follow up post, but in case you’re new, here’s a recap.
When Mr. ThreeYear and I got married, we were both debt free. This is something of a miracle when most college graduates finish college with debt. According to Tica, The Insitute for College Access and Success, 76% of graduates from New Hampshire, where we live, have college debt upon graduating as undergraduates, and the average debt burden is $33,410. That’s for undergraduate education!
I was fortunate to have scholarships to college and parents who paid the rest. Mr. ThreeYear was fortunate to live in a country where undergraduate education is more reasonably priced: Chile. When we met (in said country), neither of us had any debt. We spent a few years living like the DINKS we were, but Mr. ThreeYear’s way: we bought everything in cash. If we couldn’t afford to buy it with cash, we couldn’t afford it. I scoffed at Mr. ThreeYear as he saved up to buy a car, in cash. “Why don’t you just take out a car loan?” He looked at me like I was crazy. “I don’t want to take out a car loan! I’ll just wait and buy it when I have enough money.”
Two years later, we moved to the States. We moved to the fast and furious city of Atlanta, where Mr. ThreeYear, and then I, found jobs, and slowly, every-so-slowly, we began to adopt the Atlanta way of life. First, we bought a house. We had been renting a very nice, 1100-square-foot apartment that was 15 minutes away from Mr. ThreeYear’s job (it was literally two miles away from us, but you know, Atlanta traffic). It had tennis courts and a pool, and a low rent (we paid around $850 a month for a two-bedroom in the heart of the city), but we decided we should buy a house, instead. Continue reading “The Average Joe’s Ultimate Guide to Getting Out of Debt”
Personal finance can be overwhelming. There are so many steps, dos and don’ts, behaviors to adopt, what have you. Once in a while it would be nice to have a fail-safe, simple solution to follow to make sure you have enough for retirement.
As Mr. ThreeYear and I struggled to pay off our debt and become more financially responsible, I met with a personal finance instructor who taught at a local college. I showed her the ins and outs of our finances, and I remember her saying, “you’re not even maxing out your 401K?” We weren’t, at the time. We were only contributing enough to get the match, because we were saving for a house downpayment. We’d contributed more in the past, but never maxed it out.
It took us another two years to completely max out Mr. ThreeYear’s 401k, but when we started to do so, I realized that for many people, this was the simple key they were looking for to save for retirement.