One of the many joys…

By xerocube | July 11, 2006

… of getting engaged is that you begin to start thinking about some of the more serious matters of life. You know the stuff I’m talking about… wedding dates, kids, financial planning, will I still get to play games? So over the past week or so, I’ve been mulling some of this over and have come to some sound conclusions.

For instance, yes… I will still be able to play games. However, my life may be made a touch easier if I find something that Brandy can beat my readily at… which, as luck has it, we’ve found already (gin, gin rummy, Phase 10, monopoly, rock-paper-scissors, etc). Anyway, I digress…

More importantly though, I’ve been contemplating the financial planning aspect of life. You may not know this, but this can be a complicated and frustrating subject. I have found myself, much to my surprise, not knowing as much as I thought I did about money. This led me to start researching the subject a little and have come up with a strategy. I can’t take all the credit, though, as my accountant buddy, Chris, assisted me in my endeavor.

So, I’ll leave it to my avid readers to review our thoughts on debt-freedom and financial security. Now, these thoughts seem pretty straight-forward and obvious to me… and may very well be more difficult to achieve than it seems, but that’s okay. I’m open to suggestions. Here we go… steps for financial freedom.

  1. Acquire a nest-egg for a rainy day. Basically, save up some cold hard cash and store it in a safe place at home. We’re talking around $1,000.
  2. Pay off all outstanding debt (not including your house, if you have one) from the smallest balance to the greatest. Pay the minimum amounts required on each account and then all spare cash on the account with the smallest balance. We would want to knock out the smallest balance first to get a early win… that way we can hope for a snow-ball effect. Once the smallest balance account is closed, push the cash you were paying for it onto the next smallest account. Do this religiously until you are out of debt.
  3. Pay yourself. Easy easy easy… when you get paid, dump a portion of your paycheck into a savings account. I don’t care if it is $10 or $500, just do it and do it first. This is an easy way to increase your savings. Continue to save until you have 3 to 6 months (rollin average) of living expenses. You’ll want that kind of cushion to help you out in case things take a turn for the worse.
  4. If you have access to a retirement account, work your way up to depositing 15% of your paycheck into it. This is the easiest way to help secure your retirement.
  5. If you have kids, this would be the time to start saving for their college education. It’ll get expensive, I’m guessing, so this would be an excellent time to start saving. Look into 529 plans and such… that’d be my first inclination.
  6. Finally, time to knock out the house… pay as much as you can afford to your mortgage. I hear if you can post an extra payment a year on your mortgage, that you can save tens of thousands of dollars on interest. Sounds like a good plan to me.

Now, that sounds easy… but ahrder to accomplish. How can a family reach this goals? Discipline, discipline, discipline. Do you need that $6 tub of popcorn at the movie theater? Do you have to go to the evening movie, for that matter? How about generic brand groceries? Personally, Publix brand groceries work just as well as brandname anyday. What about cable? The daily $5 coffee for your local bean-o-rama? What about cooking in instead of dining out? There’s plenty of ways to save some cash to use to get out of debt. I’m welcome to hear of more suggestions.. please comment away!

Once we have debt under control, what can we do?

Personally, I’ve found that paying for everything on a single credit card throughout the month is a great way to itemize my spending. However, I’m quite diligent in paying off the entire balance of my credit card at the end of each month, regardless of how painful it may be. This way, I write one check a month, plus my cash is busy drawing interest while it sits in the bank. Money management can be a wonderful thing.

Other ideas… become more charitable. Not only is it usually tax-deductible, but makes you feel better on the inside. Find ways to reduce travelling costs: carpool, fuel-efficient vehicles, biking, walking, etc. Take up a hobby that you could use for home improvement, gift-giving opportunities, or to turn a quick buck.

Does anybody else have any great money-saving, debt-reducing, financial-planning ideas? I’d love to hear them. Hopefully, these ideas will help you come up with some better ideas of your own. If so, please let me know.

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