Personal finance has become a hobby of mine and since my wife and I also enjoy working together on goals 2014 was year of working hard on our money. By God's grace we accomplished several things we set out to do as well as successfully handled several unexpected challenges. Here they are in no particular order.
1. Started my education on mutual funds.
When I changed jobs in 2013 I moved my retirement savings from my old employer’s 401(k) plan to a rollover IRA with Fidelity, my new employer’s plan administrator, so all my savings would be in the same place. When I did that I didn’t select any investments so all that money has been sitting there doing nothing for about a year and a half. Late this year I decided to do something about that but I wasn’t sure where to begin. I reread the mutual funds section in Financial Peace, which is notoriously vague but gave me a feel for how much risk I’m willing to take and helped me to develop some further questions to ask. I also found this website, built around the investment philosophy of Vanguard founder John Bogle. This site helped me to better understand some of Dave Ramsey’s terms and discussed a few specific mutual funds which gave me a place to start using the fund research tools provided by Fidelity. I’m planning to add the book, The Boglehead’s Guide to Investing, to my reading list for next year.
2. Selected some investments.
When I first started saving for retirement, about six years ago, I put all the money in a single mutual fund inside my employer’s 401(k) that billed itself as an “aggressive” fund and included some mix of stocks and bonds. I think it might have been a target date fund that adjusts the investment mix as you age to become more conservative over time. This is all contrary to the counsel of Dave Ramsey, who famously recommends all-stock mutual funds of four categories: growth, growth and income, aggressive growth, and international. After getting a feel for those terms I picked three funds that I think fall somewhere in the ranges they describe.
3. Rolled $5150 into our debt snowball.
This is definitely our biggest ongoing financial goal and we’re proud of our progress this year. We weigh every financial decision in terms of how it will impact our debt snowball. So far we’ve eliminated our smallest loan and cut the second smallest almost in half.
4. Bought life insurance.
Oddly enough, I had the most fun with this one. The point of life insurance is to provide income replacement in the event that the family’s financial provider dies unexpectedly. Since Susannah and I are starting a family, we decided that this was something we wanted to have in place. We purchased a $500,000, 20 year term policy. That means the policy will be in effect until 2034 and we will be paying premiums until then. If I die anytime during that 20 year period, Susannah will collect $500,000. This means my wife and kids will be fed and sheltered in my absence. They won’t have money worries while dealing with the emotional implications of my death. Eventually, we'll purchase coverage for Susannah as well.
5. Cash flowed $1800 in car repairs.
Not including oil changes, we had our cars in the shop several times this year. We did ignition tune-ups on both; new ball joints, fuel pump and inertia switch on my truck; and new distributor and brakes on Susannah’s car. Many people would consider this a major hassle but since the average car payment in our country is $500/month and our cars are debt free, we came out ahead.
6. Cash flowed $1000 in home repairs.
Last year a broken water pipe damaged our kitchen floor. Over the summer we tore up the linoleum and the subfloor and replaced them. We also repaired a broken drain line and had a few other minor plumbing repairs.
7. Upgraded range and sofa.
Our old range didn't have a working oven so we lived for a while with just a stove. Over the summer we finally decided to replace it. We found a used gas range on Craigslist for $275. We also gave away our old threadbare sofa and bought a used one for $250.
8. Started our zero-based budget.
A zero-based budget means planning how every dollar you make will be spent, saved or given before each month begins. Since we’ve been married we haven’t used this technique. Instead we focused on tracking our dollars each week using the My Cash Flow tool, and adjusting as the month progressed to make sure we came out with a surplus at the end of the month. We made good progress with that method but creating a good budget at the beginning of the month has strengthened our ability to avoid surprises that come with atypical expenses or reductions in income.
9. Saved up for Christmas.
I had a really difficult Christmas in 2013. I've never been a great gift-giver and getting married meant even more shopping to do. I admit, I got pretty tense about the money we were spending. So, in January Susannah and I set a budget for the 2014 holiday season including travel for Thanksgiving and Christmas. We've been setting aside money each month for the entire year. I’m not completely enjoying Christmas yet but the money side of it has not been an issue.
I’ll write in the future about things we’d like to accomplish in the coming year. You might not manage your money as a hobby, like I do, but maybe now would be a good time to ask yourself the question, “What financial accomplishments do I want to be listing next December?”