Finances

It's probably apparent by now why I need to prepare my kids, especially M, to one day leave the nest. Her depression makes me worry that she'll need a lot of support as an adult, so while she's still under our roof I'd like to give her as many coping skills as I can instill in her. But I am also preparing financially so that my husband and I will have the money to enjoy being empty nesters.

Over the past year, I've been doing a lot of research into early retirement. My husband is 39 and I'm almost 41, so while we might be getting started too late to achieve a Mr. Money Mustache-esque early retirement, I still feel confident that he can retire when he's about 58. If I go back to work sometime in the next 15 years or so, he'll probably be able to retire sooner. As of right now, the idea of me going back to work is off the table. I'll explain why another time. Hubby actually enjoys his job as a software developer though. If he were in more of a hurry to retire, our finances would reflect that.

In addition to the early(er than normal) retirement, I also want to be able to enjoy our 40's and 50's. I've had older friends who have told me that their 40's were the best years of their lives, and I want to make the most of mine. I also have friends in their 50's who are still struggling with debt and household finances. I want to be free to help out our kids if we want to, or to travel, or buy a vacation cabin, rather than being tied to debt and financial troubles caused by a frivolous lifestyle.

M had to write an essay about her family recently, and in her blurb about me she said that my hobbies are working out and budgeting. Ha! She doesn't realize that my form of budgeting really doesn't take much work, she just constantly hears about it. See, I tell my kids about saving, budgeting, and the evils of debt all the time. I want them to be financially aware. That's part of my empty nest plan.

So on to the details. First of all, we have no debt other than our mortgage. I'll get into specifics in another post, but over the years all of our debt has disappeared. We have a 2001 Toyota Tundra (I think, it's hubby's truck so I don't pay attention) and a 2008 Toyota Sienna, both paid for in cash. I plan on driving them into the ground. We choose to have less house than we can afford because we'd rather spend our money in other areas, so our mortgage is currently at $137,000 and the payment is just over $1,000 a month, which includes insurance and taxes. We also have a $150/month payment for our daughter's braces, but that comes out of our HSA account, so that money doesn't come into or go out of our monthly budget. So here's what our monthly finances look like.

Mortgage                                                           $1026.00
Cable/Internet                                                        135.00
Cell Phones (3 on Virgin Mobile)                         105.00
Insurance                                                               106.00
Water                                                                       75.00 - 180.00
Electricity                                                              120.00 - 240.00

Our water and electricity vary widely, we live in a hot climate where cooling the house and watering the lawn get super expensive in the summer. I'm currently shopping around for a family cell phone plan that would be cheaper than what we're using, since on Virgin Mobile we have to pay cash for our phones and we'll need to add a 4th phone within the next year or so for C.

So our expenditures are between $1,567.00 and $1,792.00 monthly. Hubby's income is about $5,434.00 a month, not including $200 a month in pre-tax contributions to the HSA and a 7% contribution to his 401k (his company matches 3%). From his take-home pay, we're left with between $3,642 - $3,867 a month. Minus food (which is where we tend to splurge), we have roughly $2,500 a month left. That's not a paltry amount.

The question becomes what to do with the leftover money. Yes, we have personal care items, gasoline, entertainment, all of those things that need to come out of that money, but there is still a lot left that we could use to splurge. But I don't want to splurge, I don't want to look back in 20 years and wonder why we didn't get to truly enjoy any of the money we've brought in. I don't feel like $150 dresses or $450 car payments will help me truly enjoy that money. To me, having experiences with my family and financial peace of mind are much more enjoyable.

To that end, I have several savings accounts with Capital One 360. I put money in each of those accounts every paycheck, before we spend a penny. Then I pay the bills or mortgage. The first paycheck of the month is earmarked for bills and the second goes to the mortgage. Plus I budget $150 a paycheck for tithes. Whatever is left over is what we get to spend for that half of the month. It needs to cover everything, from food to entertainment to the girls' allowance to M's dance class. The cell phones actually come out of that money too, since they're billed at 3 separate times over the month. So here's how that looks.

Monthly paycheck #1                           $2717
Vacation Fund                                        -300
General Savings                                       -50
Back to School                                         -30
Gifts                                                          -40
Cable/Internet                                         -135
Insurance                                                -106
Water                                                       -75
Electricity                                               -150
Tithes                                                      -150

Leftover                                                $1681

The second paycheck of the month looks very similar, except I pay the mortgage instead of the bills, so there's less left over. I budget by half of the month instead of the whole month or paycheck to paycheck, so $1681 for 15 days is a huge amount to expect to spend. I allot ourselves $1300 and the rest goes to the second half of the month, when there's less left over from the paycheck. Anything left at the end of the month goes into our Surprises fund, for things like car repairs, tags, vet bills, etc. That fund was filled a while ago with $1,000 so I use this method to add to that amount only when we can. If that drops below $1,000 I alter our savings to get it filled back up.

As you can see, the bulk of our savings goes into our vacation fund. This covers the girls' summer camps and season passes to the local water park. It will also cover our big vacation to Ireland this summer. I've been saving for this vacation for almost 2 years. I look back at the past 2 years and think of having $600 more to spend every single month instead of saving it for this big vacation, and I'm so glad I made the decision save it. What would I have to show for that $600 a month now? Some new clothes? Maybe a newer car? A more expensive house? Not tempting. I'm not sure what we'll do after this summer's big trip, if I'll keep saving for another big vacation, or if we'll come up with another plan for that $600 a month.

As I said earlier, in addition to our savings, we're putting 7% of hubby's salary into a 401k with a 3% match. We also managed to fully fund a Roth IRA last year and plan to do so again this year. I have a few tricks up me sleeve for funding the IRA, but this post is already so long that I'll save that for another day. We plan on upping hubby's 401k contribution by at least 1% every time he gets a raise. With the 401k and Roth, plus the money from my 403b that I rolled over into an IRA last year, I'm pretty confident that a retirement age of 58 is doable for hubby.

This isn't set in stone by any means. I'm always tweaking, finding ways to save here and there, reigning hubby in so he doesn't over spend, splurging and then regretting it, etc. In other words, this isn't the last this blog will hear about our finances.