Wednesday, March 16, 2011

Fiscally Prudent

I think that's what Characterizes Mary and I. We share a number of values. That's what keeps us together through thick and thin. The one value we rarely argue about is our Financial Status. Our Finance advisor says this "If everyone acted like the two of you the US economy would be much healthier"

What brings this topic up today is in the last two weeks both Mary and I have paid off our cars. We own them outright and that is one great feeling.

We've had great advice over the years and I'm going to share it today. Nothing we do is going to put us on the front page of the get rich quick magazines. It isn't oh my gosh exciting it's just what we think is the right thing for our future and for Marco.

1. Buy Early - We bought our house when we didn't think we had the money to buy. But we didn't go big. In fact our house is small and it's old. But we bought it and started paying for it. We've done some work to make it pretty (or I should say, Mary did) and it's ours. At the time we were paying $700 a month in rent and our mortgage of $1300 seemed crazy. Today our Mortgage is Still well under $2000.

2. Refinance when the time is right - Don't do it to buy yourself a new TV do it to pay down your debt. That's how we paid off the cars. We recently took advantage of the low interest rates, and pulled out enough money to pay our cars off. Our mortgage went down $200 too. So put Car Payment #1 + Car Payment #2 + $200 and now there is more to spend no no no, there is more to invest.

3. Start your college fund the second you know you are having a child - We started with $175/month and because our son is smart we've upped the amount to $250/month. It's invested in a Mutual Fund and it's worth two years in school and it's just now getting to the point where it makes the bigger money.

4. No Credit Card Debt - Both of us have more credit limit then we could spend. I personally use two cards. I have one card that pays all of my business expense. I use it for nothing else. My other card is my Debit card. That's it. If we don't have the cash, we don't buy it.

5. Travel and Big Purchases - We plan them out and we start saving. We put whatever we are going to need into savings each month until we have the planned purchase.

6. We put $100/month in savings. We don't dip into savings it just grows.

7. We max out everything our jobs give us. 401K or the teacher funding. We max them out.

8. We have 2 mutual funds that we invest in monthly.

9. Mary takes care of the finances - I'm not the brightest guy in the world but I'm bright enough to put the finances in the hands of the most conservative of the two of us.

10. Stop buying stuff. Why do you need all that stuff. I limit my purchases to clothes to wear daily, stuff for my bike, Food and Marco.

These 10 things allow us to make mistakes. The biggest mistake we made was selling our cars when we moved to Germany. We didn't know we would be back so soon but the short term gain cost us big. When we moved back we had to buy two cars with cash down and then car payments. We just unloaded that mistake. But in the long run, it was not a major problem, we just bought less stuff.

I used to think being rich would be so cool. One day a few years back I did a calculation of our Net Worth. I was floored. But then I put a big smile on my face. We can withstand some hefty expenses right now if we had too. That's a really good feeling to have. If we can do it, anyone can do it. Oh and this plan has nothing to do with how much money we make. Mary is a school teacher and I work for a brand that knows that part of the reason you work is because it's running shoes or skis and so they consider that part of the pay. I get it and don't sweat it. I've always said "I don't work for money and the second I do, I quit".

It's a good life....
Dave
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