I love sharing ways to save and build money. Strangers either love me or hate me as I may ask about their financial situation within minutes of meeting, then tell them about mine. This is not to be rude or obnoxious, but to share… because one of us may learn something.
Here is the path (in order) to my current financial situation…
I can’t recall the last time I thought about a bill, or tried to explain to someone how my checking and saving accounts work… but I can tell you this. Everyone in the whole world should have all their reoccurring bills automated. There should never be such a thing as missed payments or 5% late charges. Log into your online bank, find their “Bill Pay” tab and fix this problem now.
I’ll admit, every time I searched the web for ways to get the family money right, the word BUDGET kept showing up. The online spreadsheets were quite confusing and the task seemed too daunting, so I avoided it… until I came across Mint. Mint pulls all of your financial accounts into one place, creates your budget, and tracks your goals for free… FREE? This is a no brainer. Add all of your accounts to Mint, and let Mint do all the work.
Build an Emergency Fund
At first, I thought I had to save up enough emergency stash to live on for 6 months. Good lawd, that’s a lot of money.. a lot to me at least. Then someone let me borrow a Dave Ramsey book. I don’t remember which book, but I do remember it instructed me to only save $1,000 for emergencies until all my debt was paid off, then (and only then) get my emergency fund up to a level where I feel comfortable. So, if you already have over $1,000 in savings, designate the excess towards this next step.
Pay Off Debt
Next it was time to tackle debt, and at that time I had $5,000 credit card debt and $14,000 car debt. So, to help pay off this debt, I canceled all other saving obligations, like 401K and IRA. While at the same time bringing my cell phone bills down from $175 to $30 a month and cutting my cable bill in half. Then, I gave every dollar not already budgeted a job.. paying off that bad debt. With excess savings and accelerated monthly payments, I was able to accomplish this within 6 months. Results may vary.
Save for Goals
Before we jump back into saving, let’s soak in the moment and be grateful that we no longer have debt…
Now let’s not save just for the sake of saving. I used to just throw money aimlessly into an IRA, MMA, or plain old savings account with no actual goals in minds… now I use Betterment. On Betterment I can save towards specific goals and specify my level of risk, then allow compound interest to do its job. As of this writing I have earned 12% in total returns since November 2012 using Betterment on goals labeled, “Vacation”, “Home Down Payment”, “Next Car”, and “Opportunity”. I’m really excited about the “Vacation” goal, as it has allowed us to take between $3,000 to $5,000 vacations (with next year increasing $5,000 to $10,000.. thanks compound interest) every year.
I don’t benefit from promoting Mint, however we will both get one month of Betterment for free if you click my invite link above. This works for me and hopefully it can work for you. Do you have any recommendations? How are your home finances setup?