Tying the Knot in a Meaningful and Memorable Way (Without Losing Our Savings or Sanity)

Monday, September 10, 2012

Financial Planning: What Are Our Goals?

 In response to last week's post about our self-imposed struggles to live within a strict budget, I received recommendations to check out a few financial blogs. My absolute favorite one so far is called Mr. Money Moustache. It's about a guy and his wife who "retired" in their early thirties so that they could spend more time with their son, doing things they enjoy. I've started reading it from the very first post forward. He talks a lot about the environmental impact of consumption and frugality as a means to more financial freedom and a lessened impact on the earth.

Reading his blog has started me thinking about what our financial goals are as a family. It's highly unlikely that we'll be able to achieve our goals unless we clarify them at the outset. And while we'll likely revise our goals along the way as our priorities and interests shift, it's still helpful to start with the end in mind and make sure we're moving in a strategic direction. 

I suppose we do have a clear sense of what our short-term goals are:
  • Pay for Henry to attend a private Montessori school for the first two years of his life
  • Pay for the homebirth of a second child (fingers crossed!)
  • Build our dream house in the next ten months
  • Continue to eat primarily organic food
  • Take a couple months of maternity leave with the second child and then figure out some kind of flexible, part-time childcare solution so I can work while being near the baby
Eek! Listing out those goals in a centralized place makes them feel more daunting! 

However, I'm convinced we'll be able to achieve our goals if: 1) We continue to cut our spending, so that we live on Matt's income alone (so we can bank my part-time salary entirely. 2) I generate a little additional income via my online course and revenue from the sale of my book.

But what are our goals beyond the next year? What kind of life do we want to lead? I know I definitely don't want to retire early. I feel like I'm just getting started on the career trajectory of my dreams (starting a network of high-performing, authentic, dual-language public Montessori charter schools in diverse communities nationwide).

I started by asking Matt if he wanted to be able to work part-time. I thought it would be awesome to have one parent who was able to be home a little more with school-aged children who get out around 3pm. He explained that he wants to continue to advance in his career and doesn't think he would be able to do it as a part-time employee. 

What that means for our family is that we'll probably have to stagger our work schedules. I'll probably have to work from 6am-3pm, and Matt will be the one to get the kids ready in the morning and take them to school. Then when I'm done working in the early afternoon, I can bring the kids home with me and we can do homework and start getting dinner ready. It sucks getting up so early, but it's worth it to be home with the children in the afternoon. 

And what about exercise? Maybe I could put a treadmill in my office and exercise during my lunch break...

So it looks like we'll be a two-income family for a while (barring any injuries, layoffs, etc.). That makes our financial goals even more achievable. What are some of our long-term financial goals? Let me take a stab at drafting some out:
  1. Retirement: We want to have enough money saved for a comfortable retirement. It's still unclear to me what that looks like. I have no idea how much we would need to live on every year (once our mortgage was paid off). Has anyone read good guidance around how much to save a year? Is maxing our our 401k's and our Roth IRA every year enough? Too much? (We haven't even been saving much for retirement at all since Henry was born and we dropped down to one income, but it will definitely be a priority after next year.)
  2. Home: We want to live in an eco-friendly, comfortable, and fun home. What does that look like? Well, I want to install solar panels--on second thought, I better save this brainstorm for another post. I could go on and on. I will say that this category is very important to me. I'm a homebody and want to host lots of parties and family get-togethers over the years. I want our home to be a sanctuary.
  3. Home Repairs & Maintenance: We want to be able to take care of the upkeep of our home as required.
  4. Cars: We'll need to save a little each month so we can try to buy our future cars with cash (to avoid paying unnecessary interest). We should save this money in a mutual fund (or some other kind of investment that makes us money while we're not using it). 
  5. Personal Allowances: We'll continue our system of having limited, personal allowances so we always feel like we have autonomy over some of our money. We'll also start allowances for the kids, too, so that we keep tabs on how much we spend on them.
  6. College: Although we're all about teaching autonomy (we will encourage our children to start working as soon as they are able), and they will be expected to pay for things themselves (like their first car and some college-related expenses), I really don't think any young adult should have to start off their life in debt. I believe everyone deserves a college education. So college savings it is! That is going to be huge. I know we need to start earlier rather than later for the benefit of compounding interest, but we need to get going on this. I need to figure out more clearly how much we should aim to save. 
  7. Travel: This one is going to be huge for us. We live away from family, so we need to spend money for flights. We also like to travel. We'll one to do 1-2 big vacations a year + trips to see family + weekend trips to explore new cities (in which Matt can run races). 
  8. Paying off Our Mortgage: I've heard mixed ideas about this one. On the one hand, I've heard that paying off your mortgage earlier means that you can save a ton of extra money that you aren't paying in interest. But I've also heard that mortgage debt is good debt if you have a low interest rate because of the tax breaks.
  9. Investing in Real Estate: This one is a long-shot right now (Matt's not interested in it), but I would like to purchase an inexpensive home in our neighborhood, oversee a renovation project, and then sell it or rent it out (and then use the profits to do the same thing over again--assuming the first one went well). I'd have to do a lot more research before committing to this kind of thing, but I read about it in a personal financial management book, and the idea intrigued me. 
Clarifying those categories definitely helps. It will be much easier to set up automatic savings plan now that I know what we need to be saving for! 

Piggy bank available on Amazon

REMINDER: The next Purposeful Conception Course: Preparing Your Mind, Body, and Life for Pregnancy starts September 16. Register today! We'd love to have you join us!

Share |


Justine said...

As far as paying off the mortgage goes, you might as well do it. You can always get your federal tax break from giving to charities than from giving money to the bank.

Good luck! I enjoy reading your family's journey about this. My husband and I don't have kids yet and he just finished grad school and I'm just starting, but we have many similar dreams about home and travel.

Stephanie said...

The best advice I read about saving for retirement is that you should have enough money in the bank/mutual funds/bonds/whatever so that you can live off the interest each year once you are retired. This leaves the principal for your heirs. To calculate, start by estimating your living expenses during retirement, also factoring in inflation (which you can estimate at approximately 2-3% compounded each year until retirement). That annual expense number is what your savings/principal will have to earn in interest or returns each year. Assuming 5% interest/return (fairly conservative), you can then divide your annual expenses by .05 to get the amount of money you'll need. For instance, if you think you'll need $100,000/year when you retire (inflation sucks), you'll need $2mil in the bank when you retire to earn that kind of interest/returns.

If you are forced to draw down the principal, then you need to have enough to last for the full years of your retirement (eg, if you draw down 5% of your principal each year then you will only have 20 years of living expenses).

This is also predicated on NOT having Social Security income (I personally would rather think of any SS income as a bonus rather than depending on it, because who knows what might happen to that program over the years).

Alice said...

I think that most of those are healthy, obtainable financial goals. The two areas I see potential flaws or room to investigate more are:

1. College educations: The majority of retirement planning information I have read has actually discouraged against saving/paying for your child's education. I think the idea is that, if it's a financial sacrifice for you and detouring needed money for your own retirement, it's not a good idea. Students have many viable options to obtain education without obtaining debt (or just a small amount). If it's not financially taxing for you and doesn't detour from saving money for your future needs, then it's ok. I know as an educator that may be hard to wrap your mind around but maybe you could limit the amount?

2. Investing in real estate: I am actually a proponent of real estate investment but NOT by flipping houses. Flipping houses contributed greatly to the inflation and downfall of our current housing situation and doing it in an up and coming area, like East Austin, is just a way to gentrify the neighborhood faster. If you want to live in a diverse neighborhood, flipping is not the way to do it. It just drives up home prices (artificially) and drives low-income and minority families out of the neighborhood.

Kelsey said...

This might not even make sense for your family but IF you or Matt were ever able to work for UT-Austin, employees of universities usually get great tuition discounts for spouses and dependents. This is how Chris and I plan to be able to afford to send our kids to college. And for us our kids could go to any of the three Arizona state schools and they can take 9 credit hours/semester at no cost (at least that’s the current benefit…hopefully it stays that way!). So if ever there was even a part time opportunity at UT that made sense for you or Matt it could be worth exploring!

Emily said...

I will second Alice. My parents had very little saved for college (I'm the third and last child), and I attended a very expensive Ivy League school.

Because the school was need-blind, once I was accepted, they were committed to making up the cost with mostly grants and a few loans. I was saddled with some debt, but it was far less than the money I received when my parents died that they had been able to shelter from the college. Does that make any sense? I was able to pay down the debt easily with my inheritance.

Anonymous said...

If you like MMM, I think you might also like www.nomoreharvarddebt.com.

Anonymous said...

Since you like MMM, I think you might also like www.nomoreharvarddebt.com

φωτογραφια γαμου said...

Hello, I found this blog by chance while looking for wedding blogs. I read the article and would like to share my vision: I read the 4 hour work week book and I share the principle of mini retirements. I believe that we need to enjoy our life and not working all our life in order tp save money for our retirement. I am Greek and I personally believe that I will never get a retirement. SO I try to work and develop that kind of life and enjoy it 100%
Thank you for giving me the opportunity to share this with you

Related Posts with Thumbnails