When Dave and I first met, finance was not my strong suit. I was very ruthless with money. My parents told me that if I moved downtown right after I graduated from college, I would have to understand that I can only live the life I can afford. It took me a while to understand this concept when I was 23 and lived in the city! Every month I kept my fingers crossed whether I could pay my rent or not. I spent far too much money on my credit cards, could barely afford the lowest monthly payment, paid so much interest, and basically just survived. When I met Dave I realized that he knew what he was doing and I always felt insecure about my money situation. When we got serious, he asked more serious questions about my personal checking and savings accounts (which I didn’t have! How the hell could I SAVE money?), My credit cards, etc. It was terrifying and I was always trying to avoid his questions. But it was always a reminder that I had to get my shit together!
My blog started to make more money, and the corporate job I worked for made me work hard in Quickbooks. This helped me to realize how important it was to set up Quickbooks for my own company and to really start tracking, invoicing and SAVING for my company. A year later, my business was in a really good place (this was 2011!) And I asked my father if he trusted me to quit my job and concentrate entirely on my blog. It was basically like “What is a blog?” And I told him to trust me. I asked if he would help me pay my rent when times were tough and he said yes but if I didn’t get anywhere in 6 months I knew my job would bring me back. Fortunately, that didn’t have to happen! Learning Quickbooks really helped me realign the importance of finance and savings for my business, which ultimately affected my personal accounts. When Dave and I got engaged, I was still working on repaying my credit cards. I still haven’t saved anything personally (everything I did stayed in my shop), but I realized I needed to be more honest about my financial past. Dave was so understanding and helpful! I still felt very protected from my business accounts (it was until we had kids!), But I let Dave help me figure out what was the best way to pay for myself, pay off my credit cards, and more more.
I’m telling you this funny story (Dave told me not to report $, but I’m leaving because it’s part of the story): When Dave and I got married and went to the bank to combine our verified accounts, Daves and all the different ones Accounts that he had opened over the years (savings, ROTH IRA, savings account on the stock exchange, personal review) and I was first of all of the opinion how the hell you saved this money and also Hell yes Dave! Then they looked at me and said, “Okay, and Liz, will you top up your personal checking account with a total of $ 26.27?” And I was like YES, YES, I will! Haha, I remember Dave looking at me and saying, “God, that’s just the beginning.” But it was so fun to get together financially as a family!
I’ll let Dave do it from here!
HOW WE HANDLE OUR FINANCES
Dave Adams here! First of all, so that I don’t go to jail, I don’t tell you what to do in any way, or I’m a financial advisor of any kind, this is just my view of best practices.
I think the most important thing I learned at MSU, Go Green !, was that compound interest is a nice thing. Save early and save often because it’s amazing how much a few thousand dollars will be worth in 40 years’ time when you retire. Liz and I have a personal checking account where we have just enough money to pay all of our bills, a savings account and two personal credit cards. Liz then has a business account that does her payroll and gives her a paycheck and two business credit cards twice a month.
So how do you start saving for retirement?
1: If you are employed, your employer has probably set up some kind of pension scheme with an employer match. No matter what is important, exhaust your contribution. It’s free! For example, if you take up to 3% of your purchases home, make sure that 3% of every paycheck goes into your 401K. Once you’ve set up retention with your employer, you won’t see the money and you’ll forget it for your daily budgeting. Simple calculation: if you made $ 50,000 a year, you would raise $ 1,500, which doubles to $ 3,000 paid by your employer. If you never deposit a dollar into this account again, it will be worth around $ 30,000 30 years later. Yes, it’s a long time, but you don’t have to do anything. Realistically, you will continue to work every year and continue to make full use of your contribution, so that there are one or two more zeros on this total pension.
2: Use your ROTH IRA. This is another retirement fund, but you put post-tax dollars on this account to make it grow tax-free and get tax-free withdrawals when you retire, which is a huge benefit! With the IRS, you can only donate $ 6,000 a year. So do your best to maximize this every year. You actually have until April 15, the tax day, to make a contribution for the previous year. So technically, you have 16 months to maximize your contribution. If you graduate from college at 22 and are in your first year of employment, enter that $ 6,000 into a ROTH IRA. It will be worth around $ 100,000 in 40 years. The power of compound interest at its finest!
3: Savings accounts! If you are at a large bank, stay with a large bank. They’re easy to use and have so many great features, but they open a secondary savings account with an account that pays a higher interest rate. They are becoming more popular, but Ally.com is what we use and they offer very high, competitive prices for a savings account. If you have $ 10,000 in a savings account, you earn a few hundred dollars in interest annually compared to pennies, yes pennies from a large bank. It’s not life-changing, but why leave money on the table? We had a lot of questions about savings accounts for our children and we have two college savings accounts 529 for our boys. The advantage is that you can deduct your total donation of $ 20,000 a year for your children. Each state has a specific bank to help you set it up! Just search for 529 accounts in your state.
4: Budgeting. I’ve been with Liz for over 10 years and this is a tough question for the Adams family, but we’re trying to get better in 2020. It is very important to live within your budget so that you can save as much money as possible each year. We all have a goal of buying a new house, saving for our children’s college, buying a new car, etc., and you can only do so if you set limits and goals for achieving that goal. It sounds simple, but it is not !! Like most people, you have a lot of fixed costs. It is difficult to renegotiate a mortgage, rent or pay for a car, or get a discount on daycare, but we can limit our spending on our credit card every month. Most of our expenditure is on food and groceries. We deliberately strive to limit high restaurant bills and better plan business in our grocery store so we don’t waste food or money. The easiest way to start budgeting is to get your monthly statement of expenditure from your bank to see what costs the bulk of your money. First make small changes in this category! If Liz plans to eat more efficiently, we will see a big difference! We also have an Excel spreadsheet (which Liz never sees, but I have to Visualize!) All the things we HAVE to pay every month – daycare, insurance, gym membership, mortgages, car payments, etc., so we can see what’s left for the fun stuff.
I could go into a few topics, but hope this is a good start. I am happy to answer your questions. [email protected] or call me!
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