Monday, March 18, 2013

How I Manage Our Finances

I am a little obsessed with budgeting. I visit multiple times a week. I was the only 21 year old I knew with a retirement account (and it was hard to find a Target Retirement Date 2055 mutual fund to invest in). I have net worth projections calculated 15 years out.

I'm also deeply lazy. Here, in no particular order, is what works for us.

-As many bills as possible are auto-drafted so I don't need to remember to pay them.

-I have one financial goal at a time. I keep a list or priorities, and when one is accomplished I move on to the next one. Current priorities look like this.
  1. Pay off the credit card balance.
  2. Keep the emergency fund at 3 month's of living expenses.
  3. Fully fund my IRA.
  4. Fully fund my husband's IRA.
  5. Pay off my student loans in order of interest and then size.
  6. Save up a down payment on a house.
Any income, from any source save my husband's freelance income goes toward these goals, whether it's credit card rewards, tax refunds, overtime, bonuses, or normal paychecks. It helps to focus on one thing at a time. We've never carried a balance on a credit card, so whenever money comes in, I just pay off the balance and then move on. It's been at least 6 months since we've had to touch the emergency fund. My IRA is funded before my husband's because he has access to other retirement vehicles. For a variety of reasons, I try to keep the marital assets divided evenly between us, though it's hard. I kick in extra toward the student loans when we've finished funding one year's IRAs but aren't eligible to fund the next year's. We've managed to fully fund my IRA since 2009 and CodeMonkey's since he was eligible in 2010. My student loan balance is around $8,500, down from $12,000 when I graduated in 2009, which isn't great, but we'll get there. We've never gotten around to saving up to buy a home, but that's just not a priority at the moment anyway.

CodeMonkey's business income is handled separately. I run our budget on the assumption that it doesn't exist, because I prefer not to count on it. Going forward, any money he makes there after expenses and self-employment taxes will be going into a Self-Employment 401k. This will, with any luck, leave his business making no taxable income at all in 2013.

-I track our net worth at the end of every month and have net worth goals I try to reach on an annual basis. Monthly tracking keeps me in line.

-We both have IRAs from previous jobs that I need to roll over into Vanguard IRAs. That's a project for the second quarter of 2013.

-At the moment, all our retirement assets held by Vanguard are in age-appropriate target date retirement funds. Down the road I would like to get more involved in actively managing our investments, but that's not a priority right now and these funds do well enough.

-The whole system probably takes less than an hour a week to manage, so it's very easy.


  1. When my children got their first jobs, and once they made the minimum deposit required, I nagged them into starting Roth IRAs. (That $1000 minimum was the showstopper for several years.)

    I hope they have the good sense to keep that money growing.


  2. They were 17 and 19 when they opened their IRAs. And, like you, Target Date 2055.