Personal Finance Mountain

There's a bit of freedom knowing no one will probably read this. I have been away for quite a bit. Anyone that read before, thanks for coming back and stumbling across some more ramblings.

Have taken the last few weeks to try and really focus on one thing at a time. Now being back to getting all of my finances in order I noticed something odd...

During the two months off from the blog I didn't fall off the horse. Sure I could have probably done better, but no real catastrophe! It seems the systems I had in place worked. I never used a credit card, minimal use of debit card, and used cash for all of my cash plan items.

My Net Worth Improved about$3500 and I was able not to dip into the Emergency Fund even though we had some car repairs to pay for. I am sure that their are some ninja bills out there, but I feel like even if they come up I'll be prepared.

So the mountain...ah the over-thought metaphor of the night...Personal Finance and reaching your goals really is similar to climbing a mountain. Often you cannot see the top, you'll get discouraged, but if you work your system, even if you fall...it is just to the base camp not all the way down!

Enough about me! How have your personal finance goals been going? We are at the 6-month mark for the year, days getting shorter again. Are you closer or farther away from hitting the next base camp?

All the best in your Journey!

Aligning Goals with Reality

Well we are two months into the New Year. Still early, yet 1/6th done. Trends are appearing. The rush and promise of the New Year feels quaint, while new visions of tax rebate check...sorry stimulus checks, dance in your heads. The big question is how is it going? Especially Budget and Goal-wise.

I firmly believe a good plan executed is far superior to an excellent plan in a drawer, but even better is the adequate plan that fully recognizes that the battle plan needs to be fluid. I like to do a look every two months at my goals to see if they are still on track, are achievable and even make sense given whatever has gone on.

This is so important for your finacial goals and budgets. Did you really think you would spend $14 a month on eating out when you had been spending $100? And now you are spending $125, because you also cut the grocery money in half!

So time to breakout the old checkbook and write yourself a check...a reality check. Grab two months worth of data, one month is too short due to ninja bills that can creep up, and do a line by line check of the budget. Check reality vs actual, then rebalance. Once that is done take a whack at your annual goals. Does the reality check mean your a bit behind, if you can catch up do, if not reset! Perhaps you are that rare bird that under-estimated where you would be right now. Sorry no points for lay-ups...push it out!

The idea is to have goals the stretch you but don't break you! Celebrate your wins analyze your losses to see where next time you can improve. Do this and you will be amazed at what you can do!

How are has your first 1/6th gone? Need to readjust?

180 Degrees in Less than 180 Days

Simplicity in Kansas suggested in a comment yesterday, taking a look at a post about how my family has changed since we began our journey together in October. A reflection on five changes I have noticed as we work our Success Map and through the Dave Ramsey Baby Steps.

It hit me immediately as a great idea, since a lot has changed in less than 6 months. In fact, regarding finance, nearly a 180 degree turn-around. It might be easiest to explain by listing some positive advances, and contrasting them to how they were being done before.

Change #1 Bill Paying:

• Then: We haven't had a 30-day late pay in a long time, but it was very close. Basically we paid them as they came in without a plan. This led to silly $20, $30 late charges from the cards. It also lead at times charging a payment to a credit card, or having wave after wave of Ninja Bills.
• Now: We track every bill in MS Money including yearly ones and know exactly when we are going to pay them to maximize cash flow and eliminate late-fees.

Change #2 Spending Habits:

• Then: It kind of used to be first come first served! If I wanted to go Golf, I checked to see which credit card had some credit and I was off. The kids would hit up their Mom for everything with little thought of earning or saving for what they wanted.
• Now: Everyone in the house know where a bill is allocated, down to getting a Tea on the way to work. All of us are on allowances, we can spend it on what we want, but when it is gone, its gone! We try to pay with cash anything that we can...oh yeah, the Credit Cards are chopped and haven't been used in four months!

Change 3# Success Plan:

• Then: Don't worry, we'll always make more money...It will work out. Hey, there is the sand, I am going to be over there with my head in it!
• Now: Each person, including the kids, has a good idea to where the money is going. They know we didn't handle our finances well and we are now cleaning them up. They now know that a budget is a lifestyle, not a prison sentence to be paroled from. We all know that whatever we want...we have to save for it. A great example is with the tax return that we are getting. While questions came up about vacations, etc., when I explained that we were putting it away for taxes, everyone understood why. My oldest daughter told me to find the best interest rate, so there would be more for Christmas! (Both Girls are budding CFOs)

Change #4 Attitude Towards Money:

• Then: When my 10 year old daughter was four, she asked for a credit card for Christmas...so she could shop whenever she wanted.
• Now: Just last weekend she said she never wanted one because it was silly to pay extra just to get it now! Today I was with my 7-year old son at the bank getting the cash for our envelope system and he asked if we could go to McDonald's for lunch...just us two. I said sure, but reminded him that since the family wasn't all there, we each have to use our allowances to pay for our meal, because that was fair. He turned to me and said, well, how about I save this for a Bionicle instead...Good choice Son!

Change #5 Stress:

• Then: Never knowing what would turn up next, always waiting for our next check. Everyday felt like a rainy day.
• Now: Never is everything perfect. But the stress level around money is 10% of what it was. What stress there is really due to our understanding of what opportunities we blew by not having our stuff together...

So looking back we really have turned 180 degrees in less than 180 days. We are not perfect by a long shot but we got a budget, planned out our Success Map, are working our baby steps, built our snowball, and the light at the end of the tunnel isn't a train anymore!

If you haven't started, start. If you stopped, restart. If you are doing well, look for improvement! You can do it!

Personal Finance QuickTake: Align Your Finances with your Values

I found this neat article this morning on Yahoo from David Bach's Automatic Millionaire column that I thought that you might enjoy as much as I did.

Basically, David points out that our Personal Finance Goals need to be aligned with our Personal Goals and who we are as a person. Tie your core beliefs into our core investment strategy.

I have my financial goals wrapped up for the year, but I need to go back and work on my personal goals. It is so easy to stare at the trees you miss the forest. I want to make sure I end up not just finishing, but finishing at MY finish line. Otherwise it is like running 26 miles in a random direction and then wondering why you didn't complete the marathon! :)

This really resonates with me. It reminds me to make sure as I work through this years Goals that they tie to where I want to go as a person, husband and Dad to three Monkeys.

Good weekend thing to ponder and work on...

Personal Finance by Micheal Scott of The Office...

I am a big fan of The Office, both the British and Us versions. There is one episode from this season that is sticking in my brain as I sit and hear many of my fellow office workers talk about budgets and getting their finances in order and start managing their money better.

In the episode Micheal realizes that he is running out of money. His finances in shambles he overhears that some people's finances got so bad that they had to declare bankruptcy. Believing that this is an actual declaration ala Ye Olde Town Crier (not to be confused with Jon Cryer) Michael address the room and yells, "I am bankrupt, I am declaring bankruptcy!" Luckily Oscar takes pity on Michael and decides that he will take a look at Michael's finances and see if he can help him out.

The next scene show Michael looking at an Excel chart like the one in the picture. save that it is three instead of five columns.

Oscar: Micheal, this first small column is what you spend on your needs. You know the basic necessities of live like shelter, food, etc..

Oscar (points to next column, twice as big): Micheal this column is what you spend on things you don't really need, like dining out, etc..

Oscar (points to third column, well larger than the other two combined!): ...and this column is what you spend on things that nobody needs, like backup Magic Sets...

The point is many of us, especially those of us struggling with our finances, have a hard time discerning between our Needs, Wants and Desires. We don't lay these out like a hierarchy that they are, we run to what feels better, rather than what is better for us. Like the kid ( mine!) who is always full until Ice Cream is available!

Here is the Life and Liberty guide:

• Needs - Don't get these and you...well die. Air, food water, shelter. The basic needs of life. Not I Need to be seen in a 535i BMW...not really the same at all.
• Wants - Things that make our life more comfortable, a refined need if you will. I want to eat pizza, it is good. Food sustains; pizza is a preference of a type of food.
• Desires - I desire to eat pizza from Wolfgang Puck's in Las Vegas, then see a show and retire to my suite for a massage...

Now it is OK to desire all of the better things in life; trips, fashionable clothes, Mont Blanc Pens, awesome watches (both my desires). But not at the expense of your other lower level priorities.

In other words a trip to Europe is a desire, contributing to my IRA so I don't eat Dog Food when I am 70 is a Want, much less making sure I have my own shelter (a Need).

So when you are budgeting and managing your money, really think about where in the priority chain the purchase of Your backup Magic Set is...

Our Top 10 2008 Financial Goals...

OK, time to put it on the line with our Top 10 2008 Financial Goals. Over the course of the year I will provide updates on how we are doing and hopefully knocking these off of the list!

1. Pay Off State Farm CC - $2836.22 - We only have two CC's left to pay off, but they are both good sized with horrible Interest Rates. This is our current #1 snowball debt and we are overpaying the minimum. I hope to pay this off when my bonus comes.
2. Pay Off Car - $4594.87 - We were overpaying on this loan until we began following snowball payoff plan. This would be really nice to retire this year as it is a $350/mth payment...on a Taurus...doh!!!
3. Pay Off CitiBank Platinum CC - $8989.16 - Our oldest CC. When we got into trouble though they jacked the rate. High $ + High Rate + High Suck factor! I am going to work the Rate down and if my bonus will pay off the first two debts, our snowball may be able to kill this one too!
4. Pay Off all CC debt - This would be accomplished with the above and not charging anything at all! We would still have our Lines of Credit to pay off, but they are at interest rates 66% lower! This would be a big boon to our FICO scores as well.
5. Save 100% for 2008 Property Taxes - $5000 - Don't want to borrow to pay on this one this year. Already saving for it. Hope my neighbor isn't "helpful " again. May fund part with bonus...can you see I am really counting on a good bonus :)
6. Keep Snowball 100% Intact - If we pay off the above debt our snowball amount shouldn't change, but it is easy to justify other uses when minimums are much less...Must protect Snowball!!!
7. No CC use - We will use Debit card were we have to, but it's Cash and Direct Electronic Payment where possible.
8. Increase Average FICO Score to 720 - Current: 692.7 over three bureaus - Need to refinance house in 2009. ARM will end with bang otherwise. As soon as I can afford to , want to move to fixed loan. I will sleep much better. 720 is the basement for the best loans, really want 750...one step at a time!
9. Stick to Cash Budget System - This has been key to not letting us go over budget. However, it is a pain. Our society IS trying to be cashless so they make you go inside to pay for gas, cannot use the self-checkout at the grocery store, etc..
10. Net Worth Increased by $20,000 - This would be a great move and poise us well for 2009.

Our stretch goal for the year - This would be to get to a break even Net Worth. This would be a tough goal given were we are, but if we stick to budget and work our plan we may be able to do it.

Thanks to all for your support in 2007 to reach our goals in budgeting and money management. We can't wait to mark some of these goals off as well!