I feel like my financial literacy education was woefully lacking during my entire K-12 educational experience (actually, make that K-college). I didn't formally learn anything about using credit cards responsibly, understanding credit scores, or saving money.
Instead, I learned everything I know from my mom and my frugal grandparents. They taught me to save and then spend (meaning I try to pay my credit card bill off in full each month). They taught me that long-term gratification is usually more important than short-term (although I do splurge once in a while). They taught me to start saving for retirement--EARLY.
However, I never really learned that there is a long-line of very important things that I should be saving for in advance. For example, when I was in my 20s, I did not even think about saving for a downpayment on a house. I saved for a car so I could buy it outright. I added a lot to my retirement fund. I invested in high quality items like a $400 bike and a good tent from REI.
And then I suddenly realized that I would want a house someday and that it would take a lot to amass a 20% downpayment. And after that shocking realization, I learned that closing costs are thousands more dollars.
That's partly why Matt and I decided to have a $2,000 wedding. We wanted to funnel all our savings into a house instead.
We scraped by just barely and were able to close on a house two days after our wedding. And then Hurricane Ike happened and we had to spend some of our savings on home repairs. And then interest rates continued to drop and we felt like it would be prudent to refinance (hello closing costs all over again!). And then we had to invest more money in renovating our home. And then our cars were stolen and we had to use some of our savings to supplement the insurance money and get a new car. And then Matt's stolen car was returned but it started getting really old and we had to use our savings to get him a new car. And then we really wanted chickens but we live in an urban area so we felt obligated to buy a super-expensive (yet super-easy coop). Plus, we love to travel, so we keep adding more and more money to our vacation fund.
And so it's gone, for the past two years. We're not really saving as much as we would like to.
And now we're talking about expanding our family and trying to save money for that. Whoa!
And then there's the emergency fund that we never seem to build...
It's a lot, this living like a grown-up thing. It's easy to get overwhelmed.
I just wish I had learned to look ahead a little bit more and save more money for future endeavors.
So I shall start now. I will start looking farther ahead to ensure that our savings and spending patterns reflect our long-term goals.
- We need to really amp up our baby fund. Like now.
- We will need to start a college fund as soon as the baby is born.
- We need to continue saving for a lifetime of travel.
- We need to save in order to build an intentional neighborhood.
- We need to continue saving for retirement.
- We could start saving for the next cars we will need in 10 years.
- We need to continue building a reservoir of funds for home maintenance, as well as "nesting" type stuff.
- We should set aside money for medical expenses as we age.
Am I missing something? Please tell me now, so I'll be better prepared! I'm going to make sure we have separate accounts set up for each of these things and then set up an automatic transfer each month. That way, we will build these accounts little by little each month.
What's the state of your financial health? What are you proud of? What are the areas you want to work on?