One of the perks of my job right now is that I get to research financial planning. As part of my job. The reason is that I'm trying to figure out how to make info about financial planning as accessible and understandable as possible to everyone And from a spiritual perspective. I can't say how we're planning on doing this yet, but I am very, very excited about this.
So, along the way, I've learned a couple things. I hope to share those with you now. These are things that apply to our situation as a young family, living on one income, with some credit card debt (the end is in sight!), and a good amount of school debt between us. And I'm still learning, so I hope to share more as I learn it.
- Financial planning is easy! Yes, easy! You don't need a degree in it. You don't need to have a thorough understanding of macro, or even micro, economics. You don't even have to be good at math. You don't even need to know a lot about the stock market to invest. In fact, the less you know the better! That's the first thing I learned. After having read a number of articles, doing a bit of research in the Internets, not even that much, and going to a course by a Baha'i financial planner, I feel like I have most of the basics to get started on making sure we have a solid retirement.
- People my age are going to have to fund a lot of their retirement. Not wanting to be a financial burden to Amia, and wanting to travel and meet lots of wonderful people when we do retire, and also accounting for the fact that people are living longer and longer, Suzanne and I need to have enough income to live, probably, 30+ years in retirement.
- First thing, we made a budget. Or Suzanne made it. I'm not really good at that kind of stuff and Suzanne likes to crunch numbers.
- We've, thank God, stuck to the budget. Of course having Amia makes it easier. Having Amia hasn't cost all that much for the first year and a half I'm finding. She nursed for most of the first year, so there's not much food expenses, and EVERYONE has tons of baby clothes laying around. But we've also not been able to go to movies, go out to eat, go to coffeeshops as often, or travel, so that has really cut down our expenses. If you want to be able to save something you either have to win the lottery, or live below your means. And this has also been a general pattern of downshifting, or voluntary simplicity as it's also known, that we've been trying to follow. That means, basically, deciding what are our needs and what are our wants. And where we want to put our money. We can either get a latte a day, or invest it and turn it into $25,000 when we retire. We've also stopped buying books, music, and magazines, and going to movies or out to eat. Anything we can rent or make, we can. We're hoping to soon start making our own laundry detergent. You can make healthier versions at home very easily and for a lot less money. It really puts it in to focus when the choice is seeing a movie in a movie theater or using that money for Amia's college fund. One thing I won't part with, though, is my Netflix. Since we spend a lot of time at home and I read all day, I need something else to do. Plus, there's some good stuff out there.
- We consolidated our school loans. And this is going off what the financial planner said--if you can consolidate at a good rate, then go ahead and take forever to pay it off. Even if the interest is 3 or 4%, we can invest the money we might use to pay it off early and get returns of 7-12%.
- Credit card debt should be paid off as soon as possible because the interest is usually so high.
- We slowly building an Emergency Fund. That's 2-3 months of cash we can use in case something happens--I lose my job, emergency health care, something happens to the car. So every month a small amount is automatically moved from our checking to a savings account. But the bank only gives us a little better than 1% interest on our savings account. We're going to put what we've saved in a money market account with Emigrant Direct. It's an online bank that gives you 4% with their money market account. There is no minimum, no fees or charges, and the money is always accessible. Ing Direct were one of the first to provide this service, and they currently offer close to 4%. They can do it because since they only exist online, they don't have to pay the overhead to have actual property.
The rest I'm going to post when I'm not so tired and when I can get my figures in order.