Category: Finances

2017 Goal: Financial Freedom

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One of my main goals for 2017 is to continue our journey toward financial freedom. We’re not trying to get completely debt-free this year; that’s too big of a bite to try to take in a year’s time so following this year’s theme of “progress, not perfection” we broke down our financial goal into smaller tidbits. After discussing what we’d like to do this year, we ultimately decided that we want to become better prepared for routine expenses and emergencies, establish our savings and start working towards living off last month’s income.

What does success for this goal look like? Here’s our task list:

  • Pay back my mom (about 75% there!)
  • Pay off student loan #3
  • Commit to funding buffer (living off last’s month income)
  • Fully-fund car maintenance category (goal: $2,000)
  • Save $1,000 for starter emergency fund
  • Save for Christmas gifts (we did this last year and it was SO helpful)
  • Start Down Payment Fund

This is where using You Need a Budget (YNAB) to budget and manage our finances has been extremely helpful and gratifying. YNAB has helped me to create a budgeting lifestyle that I can actually live with and made making those infrequent (or surprising) larger purchases not as scary as they once were.

While we’re not completely living off last month’s income just yet (or not buying things we haven’t properly budgeted for – ahem, me), we started making small steps towards reaching that goal. We’re a month ahead on a couple of our reoccurring bills (like rent, retirement contributions, and car insurance) and have been steadily building a cash reserve for our car registration and maintenance and Christmas gifts.

Seeing our financial goals written down makes them feel more tangible and achievable versus just saying we want to get our finances in order (which I’ve said before. Several times). I’m actually optimistic about our chances to accomplishing most, if not all, of our task list for this year, unlike in previous years. I’ll be sure to check in through out the year to give you a progress report!

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Renewing My Financial Outlook

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congressional budget

Since my YNAB reboot earlier this year to get my finances under control, I’m here to report that I’m still trying to get my budget under control.

This is not a failing of YNAB, but simply poor planning on my end. When the mister moved out here in March, I had to get his room ready; I had to purchase a new bedding set, a lamp and a few other items. I was on a time crunch so I charged everything before having the money saved up to pay for them, which is what YNAB tries to get us to do. Also, instead of moving money around to cover the unexpected expenses, I just kept trucking along, quietly digging myself into a financial hole. It took a couple of months to dig myself out of that hole and only after nearly draining my savings account, which in retrospect was a BAD idea.

After that, I continued to spend without reallocating my budgeted dollars. Now that the mister was here, we started to go out a lot more than I was used to doing (read: rarely). We would go to the movies, pick up dinner, or I would purchase items that I hadn’t anticipated buying nor adjusted the budget for and the debt snowballed. It didn’t help that I had started thinking being flexible with the budget was okay; it is but not the way I was flexing. Budgets are a living, breathing thing but they’re not going to be helpful if you continue to overspend and not make any adjustments to cover those expenses.

Whomp, whomp.

So here I am back to working my way out of another monetary hole but I have a clearer plan for escaping and not returning. I’m putting money towards my debt and am starting to see the numbers go down (yes, I have added to it in the mean time but it’s all getting paid!). And while I try to not spend on unbudgeted items, I don’t make myself a prisoner to my budget and have simply reallocated money when necessary. Adding to this was a series of blog post on the YNAB blog this past week discussing savings goals and that encouraged to me actually come up with some tangible goals to work towards that actually has me excited about budgeting again:

Short Term Goals:

  1. Pay down all credit card debt. I’m currently have just over $1,500 worth of credit card debt over two cards. While it’s probably the most I’ve had on a credit card since my internship year in San Jose, I’m already well on my way to paying off one of my cards completely (that will probably be paid off by the end of September). I’m shooting to have this debt paid off by December.
  2. Build a one-month buffer. This is the main goal of YNAB (and rule number 4), living off last month’s income. I haven’t been able to get there just yet but I’m determined to make it happen before the end of year. I plan on setting aside some money (even if it’s just $10) with each paycheck to help me get to this goal.
  3. Save for the wedding. Yes, a wedding is happening sooner than later (more details to follow) and while we have a very nice cushion to start, we still need a few more dollars to meet our new budget. Plus, I’d like to go on a nice honeymoon, all of which cost money.
  4. Save for our apartment. While we’re currently staying with my mom, I know we can’t stay with her forever (though she wouldn’t mind). Once the mister lands his job, we’ll be on the hunt for our first place so we’ll need the funds for the deposit, moving costs, and furniture.

Medium Term Goals:

  1. Create an emergency fund. I started saving for my emergency fund last year but ran into some difficulty but I’m ready to start again. I’d like to have at least $6,000 for emergencies.

Long Term Goals:

  1. Pay off student loans. This is going to take some time but I’m hopeful that I will be able to get these paid off in 10 years. Wow, 10 years sounds like a really long time.
  2. Save for retirement. I’m in my 30s so this is a great time  I really need to get going with this. I already have a Roth IRA set up and have rolled over my 401k from my old job so we’ve got something going. I would like to increase my contributions though and while I won’t benefit from the tax breaks, at least I know I’ll be able to withdraw my cash tax-free later in life.
  3. Save for down payment. While home ownership in the Bay Area isn’t impossible, it definitely isn’t as easy as it could be in just about any other place. I’m sure we’ll be able to find a house we both love in the area that will fit our needs but we will need a down payment. 20% is the gold standard so we’ll see how we do.

While I know this isn’t going to be some quick fix, I’m looking for a sustainable transition and a healthier financial outlook. I know there will be times when I see something I just must have that I hadn’t budgeted for, but I won’t feel constrained by my budget. If it’s important, then I’ll be willing to move the money around so I can get it. If I’m not willing to do that, then on the shelf it shall stay until I’m willing to make those adjustments. I’m simply trying to set myself up for a stronger financial life, not only for myself, but also for my family. If I can create healthy money habits now, it’ll be easier to teach my kids to follow in my footsteps in the future.

Staying on right side of the fiscal cliff

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budgeting-out-of-debt

One of my goals this year was to get my finances into fighting shape. My budget program of choice, You Need A Budget (or YNAB – I wrote about it before) has been helpful to get me to think more in terms of staying on budget, however, I noticed that I was still struggling a bit between paychecks and unable to make any contributions to my savings accounts. So I decided to take the time to take advantage of the many webinars, video tutorials, and fairly active forum YNAB makes available to learn how to use this awesome program. What’s the point of having a sword if you don’t know how to wield it?

I signed up for one of the introductory webinars and, you guys, I learned to much! I can’t believe I didn’t take one sooner. I was content with just reading the how-to’s and tutorials but that obviously wasn’t working. Sometimes you just need additional help. During the webinar, I realized my problems had stemmed from an incorrectly designated budget account. I made my savings account and “on-budget” account, meaning that that money was being counted as spendable, but I was only spending money from my checking account. You can see where the issue lies.

Now that I’m properly educated on how to use YNAB, I’m excited to get going again. I reorganized my budget categories, correctly assigned my accounts, and instead of budgeting for the whole month, I’m now budgeting with each paycheck so I can make sure each dollar is being distributed. I have a few aggressive savings goals for this year that pretty much hinges on getting my finances correct. I have benchmarks for an emergency savings fund, my everyday savings, our wedding fund, our apartment fund, and I need to set aside some money for my life insurance that I want to set up and start making a real dent into my student loans. Look at how grown up and responsible I am.

Even though I just started on the new regime, I’m really excited. I keep checking my YNAB app as if there were some changes since I last added transactions (of course, there hasn’t) and I look forward to payday just so I can fiddle with my budget again. It’s nice to know that I’m taking the first steps towards being in control of my finances and to stop being controlled by them.

What are your financial goals this year? What are you doing to reach them?

Keeping track of my pennies

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Now that I’m working again and earning money, I decided it was high time to start getting serious about my budgeting. With my previous job, I never really had a grasp of how I was spending my money; just that I was borderline living check to check, which was odd since I was living at home with minimal expenses. Where could my money be going when I didn’t have anything extravagant to show for it? Now that I’m on the verge of moving out on my own and will need to budget for a family, it is really important to develop a budgeting habit now, especially when I still have a safety net (hi, Mom!). Besides, having a handful of dollars left at the end of the month was not a situation I enjoyed being in. It didn’t leave a lot of flexibility for surprise expenses or even student loan payments and honestly, it was frustrating.

In an attempt to keep myself from living check to check (because it doesn’t matter how much money you make!), I looked into budgeting programs. The most popular (and free!) is Mint. Since you connect your Mint account with your banking and investment accounts, it automatically updates your information as it pulls information from your accounts. It’s really easy and helps to give you an overview of your spending and suggests ways to save money. There’s also a budgeting tool that helps create a budget based upon your past savings (which you can adjust) and there are a myriad of reports to help give you an overview of your spending trends. It really sounds fantastic except for the fact that I’d have to link my banking accounts to register my account. Even though it is only a “read-only” access, meaning no one would be able to conduct any transactions through my account, I still was uncomfortable about the whole situation. Yes, it would be rare if something happened, but what if something DID happened? That unknown was enough to keep me looking for other options.

I tried making my own spreadsheet on Excel but that was rudimentary at best and I didn’t really know where to start. To be honest, I didn’t want to have to deal with the issues of setting up formulas and making it look pretty (because apparently aesthetics is really a really important step towards having a balanced budget) and the pressure was on if I did a formula incorrectly. All I wanted to do was input my numbers and be done. So after some Googling, I came across You Need a Budget and the clouds parted, the angelic choir sung, and lions played with lambs.

Okay, so not seriously, but I definitely found my budgeting system. YNAB is a great little system that actually helps you plan for future months. There are four “rules” to the YNAB method. Rule One: give every dollar a “job,” Rule Two: save for a rainy day, Rule Three: roll with the punches (which is essentially learning to adjust on the go, whether by reassigning your allotments or adjusting your budget for the next month), and finally Rule Four: stop living paycheck to paycheck, which is exactly the goal I’m trying to achieve.

My budget. Yes I'm paid in Xs

My budget. Yes I’m paid in Xs

Unlike Mint, which essentially shows you what you’ve spent, YNAB shows you what you spent and how that affects your budget for this month AND next month. Talk about forward thinking! Since you don’t link your banking accounts to YNAB, it does take some effort to enter transactions, which you can do manually on an ongoing basis (which is what I do) or you can wait until the end of the month and import your bank statement (they use the Quicken format, which most banks have as an exporting option). Once you’ve added your transactions, you can categorize them and even split them if you’ve purchased items from several categories from one store, say like Target. They also hold you accountable for any overspending or over-budgeting by taking it out of your next month’s budget, leaving you with less to budget/spend. This is a great tool to keep you aware of what you’re spending or have left to spend in any category.

In all, I love how easy this program to use and how helpful it is in planning out the month. I have a habit of “feast or famine” when it comes to spending. Either I’m spending like there’s no tomorrow or I shut down completely and try not to spend a dime. And then feel guilty when I do spend that dime. Now with YNAB, I know exactly how much I have left to spend in each category so I no longer freak out over money, which is a fabulous feeling.

YNAB has recently upgraded their program to version 4 which now includes Cloud syncing and reconciliation (which is awesome if you’re like me and suffer from Fuzzy Mathitis). I just upgraded a few days ago and have been checking out the new features and really like what they did. There is also a mobile app (the full iPhone app is still under review as of this writing) that allows you to sync transactions to your account so you’ll be able to have access to your accounts on the go, and now with the cloud sync, you’ll always have an updated budget!

If you’re interested, they have a 34-day free trial to give it a shot. The full software program is only $60 but you’re able to download it onto as many computers as you like. The mister purchased one for us after I showed him the program, which will be something we’ll be using together when we start living together. They also offer classes (live and recorded) and video tutorials to introduce the program and offer tips on how to take advantage of all it has to offer. I highly recommend YNAB if you’re looking for some budgeting help.