New Year’s Resolutions- Savings, Debt, New Home and More

In January, the COMPASS blog is focusing on changes and resolutions related to personal finances. As part of this series I invited Grace Duddy Pomroy to share her thoughts. You might remember that we have heard from Grace before last fall in this first and second part of a two-part conversation. Enjoy Grace’s thoughts! -Timothy

Grace headshot

Grace Duddy Pomroy

Hello COMPASS readers! Timothy asked me to join in the conversation about New Year’s Resolutions on the blog. My husband and I have been married for about four months and we recently bought our first house. As I think about our resolutions for 2015, a big one for me is organizing our financial life. I recently wrote a blog post on how to organize your financial life on my blog Classy Frugalist, which really opened my eyes.

When my husband and I got married, we combined our money. I created a budget for us that included savings, giving and debt repayment. We are confident and secure about where our money is going day to day, but we have yet to really make a plan for our longer-term goals. Here are a few things that I would like to get organized for next year:

Debt Repayment Plan

The biggest thing that I would like to do is make a plan to repay our debt. Both my husband and I brought educational loans into our marriage. Currently, we are doing just fine paying off the minimums on our loans plus a little extra when we can. I want to spend some time putting all of our different debts on the table looking at the total balance and interest rate on each one. I also want to look at the different available repayment plans and make sure that we are using the most beneficial system. My goal has always been that I would repay my student loans back in 5 years instead of 10. That may be a bit ambitious, but I would like to put together a repayment plan that gets out of debt as quickly and efficiently as we can.

Short and Long-Term Emergency Fund

I recently read about the difference between a short-term and long-term emergency savings. Ever since graduate school, I have had an emergency savings fund that I have grown and used as I have had occasion to. I never realized the value of having two separate funds. Your short-term emergency savings fund should be close at hand and generally a small amount. This money can be used for things like the deductible for your auto and homeowner’s insurance, cost of an appliance breaking, money for a medical expense, etc. (Generally somewhere between $500-$3000 depending on your life circumstance.) This should be kept close at hand, likely in a savings fund, to be used when needed.

Long-term emergency funds should include enough money to pay for 3-6 months of expenses just in case you or your partner or both lose your job. This money could be kept in an investment account: just make sure that it is fairly easy to access if needed for a larger emergency expense. I think that it is brilliant to have two separate funds rather than just one. When you are growing an emergency fund initially, the short-term fund seems like a much more reasonable goal. Once you achieve that, you can begin building the long-term fund over a longer time period. I want to create a solid estimate for both funds in our family budget and continue building them.

Continue Saving

Savings have been a huge learning area for me since graduate school. My husband and I are now a part of a credit union that allows us to have separate savings funds for different goals. Currently, we have four: an emergency fund, a puppy fund, a travel fund and one to save money to pay taxes annually for the contracted stewardship work that I do. I would like to grow my savings fund to be able to add a fund for Christmas/birthdays and a fund where we save for a few things that are more fun. I also want to make more of a plan for our travel and fun fund so we have some specific goals in mind.

When purchasing a new home and entering into a marriage, there are lots of new or adjusted expenses to think about.

When purchasing a new home and entering into a marriage, there are lots of new or adjusted expenses to think about.

Adjust to New Expenses

Since we are entering into a new housing situation, we will need to adjust for new expenses. Our monthly housing payment is a little higher than our current rent cost. We will also have higher expenses for utilities and incidentals. We will need to take a few months to adjust our budget to these new expenses.

Putting It All Together

In getting organized, I am most excited to put everything together. I want to take a look at our values and where our money is going over the long-term. Which things should be a priority for right now? Should we invest more in debt repayment or building up long-term emergency savings? What types of things will we save up for in our travel and fun funds? How will we handle additional money that we receive (tax refund, bonuses, side work, etc.) – how will that money be divided amongst our priorities?

Happy New Year Compass Readers and best wishes on your resolutions for 2015!

About the Writer: Grace Duddy Pomroy is Executive Director of Operations at Kairos and Associates, and previously served as Assistant Director for the Center for Stewardship Leaders and Luther Seminary. She is author of “Stewards of God’s Love,” recently published by the Evangelical Lutheran Church in America. She blogs regularly and you can follow her on Twitter.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Image Credit: New Home

Financial Resolutions and Improving Your Finances

In January, the COMPASS blog is focusing on changes and resolutions related to personal finances.  Last week I shared some of my wife Allison’s and my financial resolutions.  This week I want to reflect a bit more on them with some help from “Young Adult Money.”

budgetingRecently Young Adult Money shared a post listing “7 Ways to Improve Your Finances in the New Year.” I encourage you to go and read the post. I think it’s very helpful, and it corresponds nicely to my own list of financial goals shared last week. The ways they highlight include: evaluate your debt; automate retirement account contributions; contribute to a health savings account (HSA); get life insurance; churn a credit card for rewards; commit to analyzing your spending; and find a way to increase your income.

Not all of these ways fit my current life situation, but many of them do resonate. For example, last week I mentioned Allison’s and my “Saturday Budget Breakfasts.” This is a time where we intentionally reflect on our debt, evaluating it as well as analyzing our spending.  How do you (and your family) reflect on your spending and debt load?

Obviously, giving is important to my wife and me. That’s part of our understanding of ourselves as children of God, as stewards of what God has entrusted, as well as a part of our vocations. Financially, giving may not necessarily improve one’s financial standing, but I believe that thinking about and then giving are important parts of one’s finances because that’s the piece where you steward what you have as part of your community, society, and faith (if you have one).

Young Adult Money’s post and mine from a week ago shared two other points nearly completely in common: making retirement contributions and life insurance. If you have recently made strides here in your life, what has your experience been? If not, what is keeping you from contributing to retirement or purchasing life insurance?

The only suggestion from Young Adult Money that I might push back on is their advice about churning a credit card for rewards. If you have the means and are reliable with credit, you may want to consider this. But having a multitude of credit cards can turn into an unintended slide to increased debt. So, as with all things, proceed with caution and take to heart young Adult Money’s warnings, “This strategy is only for those who do not currently have credit card debt and who do not struggle with misusing credit cards.”

In thinking about your own finances, what areas are you thinking about changing or doing differently this year?

 

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Image Credit: Budgeting 

Financial New Year’s Resolutions

Happy New Year from close to where my wife and I celebrated it back in the Pacific Northwest! (This is the Space Needle in Seattle, WA.)

Happy New Year from close to where my wife and I celebrated it back in the Pacific Northwest! (This is the Space Needle in Seattle, WA.)

Happy New Year! In the spirit of the New Year, and in thinking about possible changes, goals, hopes, dreams and resolutions, the COMPASS blog is providing space during the month of January for reflections about New Year’s Financial Resolutions. To start this series, I figured it would only be fair if I shared some of my own.

I’ve never been a big fan of making resolutions. Maybe that is because I am generally very goals oriented as it is. That being said, I do have a few things that come to mind when thinking about my wife’s and my finances for the year ahead. I offer these with the caveat, that as our financial and employment situations have fluctuated so much these past couple years, I am hoping that 2015 first of all is one of adventure, growth, and ideally with a greater sense of sustainability and stability.

Saturday Budget Breakfasts

My wife Allison and I have a regular custom of sitting down at least one Saturday morning per month over breakfast. During this meal, we review our spending and budget for the previous month(s) as well as the current and future month(s). We share and reflect on how we have used our resources, and what goals we are working towards, questions we have, etc. I firmly believe that it is imperative to communicate openly and honestly about finances with your family (and especially your life partner).

Give More Regularly

We have worked hard to increase our giving over the past couple years of our marriage, but I would love for us to be able to not only increase our giving this year, but also our frequency of giving. This is important to me especially in the sense of my understanding of vocation and stewardship. Giving is an important part of our faith lives.

Make Regular Contributions to Retirement and Life Insurance

With our various roles and incomes, we have made some contributions toward retirement accounts. However, it would be nice to be able to increase frequency and amounts this year. Additionally, we would like to be able to invest in life insurance and other types of accounts for peace of mind. We are tentatively planning on doing both in 2015.

Honeymoon

Allison and I have been married for 4.5 years now, and have yet to go on our honeymoon. It is a goal of ours to go on a honeymoon in the next year, and we have been saving for one since getting married.

These are just a few of the financial areas where I am focusing on this year. In what areas are you wondering about or contemplating making changes or resolutions?

 

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Image Credit: Happy New Year from Seattle