budgeting

Is Cable Worth $17,000?

/ John / Leave a comment

What do you pay for cable? Do you have Netflix, Hulu, Or Amazon Prime as well? If you were to tally up all your TV subscription based cost how much would it come to?

The national average now for cable is around $100. Here we average spend $o. We do have Amazon Prime which we will consider whether to renew in July when it expires, but we don’t pay for TV service thanks to an brother/uncle who covered Netflix for the year for our kids’ birthdays.

The math of $17,000

100/mo

10 years/120 months

7% compound interest (if you invest that money in your Roth IRA, that is tax free growth)

The total is $17,200 in 10 years. Is cable really worth it?

So what are your options? We have tried a number of different streaming players and found that Roku gives you the most streaming options. We also use Apple TV and I like it as well.

You don’t need cable. 100 channels–80 of which you don’t actually watch. Is it not worth sacrificing your future opportunities to travel, own a house, or give generously? Cut the cable, read a book, learn something new. You have a choice:  sacrifice saving, giving, and learning opportunities or watch the 200th episode of The Biggest Loser. It’s up to you.

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Emergency Funds

/ John / 1 Comment

What is an emergency fund? How much should I have in my emergency fund? Where should I keep it?

What is an emergency fund?

It is simply cash that you have available in an account in case of an emergency. Emergencies can range from a car breakdown, a trip to the ER, a water heater going out, or maybe a water line breaks in the yard. The new iPhone coming out or a new outfit at the store are under no circumstances an emergency. You may feel like they are an emergency but don’t confuse passion and desire with necessity and need.

How much should I have?

This number can vary, but most advisors and bloggers would make the case for 3-6 months income and I would not argue.  I won’t argue with you if you want to have a year. I think you should really look at the next question if you are going to have that much available and maybe have a multi tiered approach. A survey from late 2015 found that over half (56%) of Americans had less than $1,000 in their checking and savings account combined. Nearly 25% have less than $100. That is crazy. No wonder so many people are so close to the edge of the cliff. Think about it:  It is likely that half the people in the restaurant while you are eating out, if they lost their income tonight, they would not have enough money to last a week.

We have an emergency fund of about 3 months at this point. I am pretty comfortable but I could see us moving to 6 month eventually. We have other priorities to accomplish first. The amount you have should be based on your comfort level. If you have never had an emergency fund, $1,000 would make you really comfortable. Job stability, comfort level, expenses, proximity for family support are all things that you should consider when determining how much you should have.

Where should you keep it?

An emergency fund is not an investment. It is a safeguard from disaster. Looking to maximize returns on this money is not the goal. We keep our money in a couple different places and I will explain why we do.

  1. Our checking account– We keep more than a month worth of money in our checking account. This means that unless something crazy happens we now have the money in checking to make all our budgeted purchases all month. No worrying if we can pay that bill before our next paycheck. (we could pay them all on the 1st if we wanted).
  2. HSA– We have about a month of expenses in our HSA. This is only for medical  expenses but for us this makes sense. We have five very active kids and this provides safety if there is an injury.
  3. Savings/Roth IRA– We keep just over a month of expenses in our Roth not invested in the stock market. I know people will scream about never taking money out of retirement but hear me out. We are not to point of maxxing out a Roth every year. This provides us extra retirement saving while still providing security. I will go into much more detail on this eventually but 2 quick points.
    1. Why does this work? All contributions to a Roth IRA are made after-tax. You were already taxed on this money and you will not be taxed if you withdraw it. Again you can withdraw contributions only without penalty or tax.
    2. This is our 3rd line of defense. I hope that the money that is there is there for good.  I hope that I never have to take it out and in time I can invest it more aggressively. It is already there so any interest or earnings are tax free.

We are in the process of moving our accounts to Fidelity. They offer a checking account, Roth IRA, an HSA, and tons more. I like the ability to transfer money within Fidelity in a single day and I am not tempted by seeing a larger balance in various accounts. I spend based on my YNAB categories. I also have no need to go into my personal bank in over 2 years. I am entirely comfortable with an online bank at this point. They also reimburse all ATM fees so if I need cash it won’t cost me anything to get it.

Are you part of the majority of Americans who have less than $1,000 in the bank? Or, you have a year worth of expenses in savings? Wherever you fall in between find a level you are comfortable with. If you are not comfortable with where you are, start saving. Skip eating out the entire month. How much could you save? I bet it is more than you think.

Comment in the notes what the goal is for your emergency fund.

How to Spend Your Tax Refund

/ John / Leave a comment

For some people March and April can be a painful time financially.  If you have to pay additional money in taxes it isn’t much fun.  On the other hand, for those of you who get a refund due to over payment or simply not making enough income you will end up getting a refund.

Today I want to give you a list of a few things you might consider doing with your refund instead of wasting it on meaningless spending.

  1. Start or finish your emergency fund.  Depending on the size of your refund you might be able to add to an emergency fund or at least get one started.
  2. Age your money a little. We talked about how I love YNAB a tax refund would be a great way to get a couple weeks or even a month ahead on expenses.
  3. Invest it in an IRA. If you don’t have a significant tax liability I would recommend a Roth IRA. The money grows tax free and you can always withdraw what you contribute tax free.
  4. Pay off some debt. If you still have debt hanging around, a tax refund is a great way to clear some up some of that debt and save some interest.
  5. Learn something new. Have you wanted to learn more about a topic like personal finance, cooking, minimalism, or any host of other topics? Use your refund to pick up a few resources or take a class on that topic and get learning.

If you get a refund make sure that you have a plan and execute the plan.  If you let it sit there and don’t have a plan, it will end up slipping away.

We got a refund and chose to do a little of everything. We bumped up our emergency fund, put some into aging our money and we are going to have a nice dining room table built by a friend. (Ours is a little small for our family size).

 

5 Reasons A Husband Might Need To Grocery Shop

/ John / 4 Comments

In too many  families the idea of the husband or dad doing the grocery store is radical. Doing our weekly shopping on a regular basis, I know that is the case. There are not a lot of husbands or men grocery shopping when I am out.  In this post I will explain a few reasons I do our shopping and why maybe your husband should as wel.

To be honest at one time I was stingy with the grocery budget and my wife might say I still am at times.  Part of the reason I do the shopping is because if we end up going over budget by $20 this week, I bought it. This avoids money arguments (we might argue if I don’t buy enough lunches or snacks, however).

I am much more analytical. I look at the cost per oz. for everything. Many people think I am crazy but that is just how my brain is wired.  I am not an engineer but I probably think like one. My wife is not that way, so while I may spend slightly more one week because chicken is $1 a pound or that the 2 smaller bags of chips because they are on sale are actually a much better deal then the family size bag. Amanda gets distracted by ideas she saw on pinterest that randomly pop in her head, or any other number of creative ideas she gets while at the store.

I understand retail and I am very efficient. I can tell you where on the shelf nearly everything is that I buy regularly. My mind thinks in maps and pictures. I am not looking around and seeing the things the store wants me to buy. I do comparison shop per oz. when it makes sense. I am also not brand loyal at all. Sometimes a name brand is cheaper than generic (not usually), but I won’t be swayed by fancy packaging or marketing.

I know the system, I am a methodical shopper and grocery stores advertise some products below cost because they want you to come in and shop and buy other things.  Anytime there is a limit there is a good chance that it is a deal worth stocking up on.

It doesn’t stress me out.  I spend hours in a store every day and another hour or so shopping is not stressful. I don’t have strangers commenting on how many kids I have (it happens more then you would think with moms). Strangers are not saying to a guy with a beard and a few kids, “You know what causes that, don’t you?”

Grocery shopping stresses out my wife, especially if she has to take all the kids. Since we homeschool, if she has to take time out of the school day to get groceries, it ends up being a whole day of schooling lost. Instead, I usually go get groceries while she helps out at local ministry in town with our oldest child and our youngest child. Our two middle kids go to a Mom’s Morning Out that morning. It works out and gives me some one on one time with our second child, who tends to need more Father/Son time.

You remember how I said my wife likes to be creative? One thing we had to sit down and talk about was how I could make her less unsatisfied with me choosing groceries. What we figured out is that she just wants to have some creative allowance. So having things like chocolate chips and other baking supplies really makes a difference to her. Also, little add ins like some frozen peppers and onions, mushrooms, olives, rotel, etc.

Overall, there may not be a best person to do the shopping.  Maybe, the saver needs to do some shopping so they will understand how much it costs your family to eat. Shopping together is another option that will work for some couples. Overall, never go into the store before you have a plan. Deviate from the plan if you find great bargains that you know you can use in the coming weeks. Spend an extra $5 this week on a great deal so you can save $10 next week that is a 100% return on investment in just a week

Happy Shopping, whoever is going this week!

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