7 Things We Did to Improve Our Finances
If every year of my life had an ostentatious title, this year would have been the “Year of Personal Finance.” I’ve always had a good head for math, so you’d have thought that I’d already know tons about finance. It wasn’t until just a few months ago, though, that I started really learning my stuff. Thanks to that self-instruction, my wife and I have taken seven steps, big and small, toward improving our finances.
- We saved up an emergency fund. Our goal back in July was to have three months worth of expenses saved up by the end of the year. I’m proud to say that we’ve met that goal and then some. Now, even in the unlikely event that both of us got fired, my blogging income dried up, and we couldn’t draw unemployment, we’d still have a full three months before things got tight.
- We cut our expenses. Most notably, we cancelled our home phone service and negotiated a lower rate on our cable/internet bill. Considering how we use our cell phones almost exclusively anyway, we didn’t miss the service at all, and the net reduction ended saving us about $50 a month.
- We started saving for retirement. To be truthful, my fascination with personal finance started taking off when I opened my first retirement account this year. I’m already contributing 5%, and I plan to start contributing up to my employer’s match next year after our emergency fund is fully established.
- We started tracking our budget. If you’d asked me a year ago what we spend on gas in a week, I’d have shrugged. Now I can tell you down to the penny with little more than a moment’s notice. Knowledge like that really is worth the effort, because it lets you know exactly where your money is going.
- We set financial goals for the next few years. Now that the emergency fund is established, our next step is paying off my student loans by May 2008, followed by our car by February 2009, at which point we’ll be debt free. In the long term, we dream of buying a home, having another baby (or two), paying our son’s way through college, and maybe going back to school and getting my Master’s degree.
- We started tracking our credit. I monitor our credit score on a monthly basis now and check one of our three credit reports every four months for changes. More importantly, thanks to a little credit know-how, I know exactly when we should be ready to take on a mortgage.
- We’re moving into a new apartment. The rent will be considerably cheaper and we’ll be much closer to my work. We’re still in the process of picking an apartment, but we’re doing things smarter this time around. We’re starting early, we know exactly what we want, we’re doing thorough comparisons, and we’re not going to be afraid to haggle.
Thanks to these steps, my wife and I now have a positive net worth and are looking forward to a bright, financially secure future. Heck, I’m even considering the prospect of early retirement. The whole experience of taking control of our finances has been incredibly liberating.
On that note, I’d like to thank JD of Get Rich Slowly, Ramit Sethi of I Will Teach You to be Rich, Jonathan of My Money Blog, Trent Hamm of The Simple Dollar, and all the bloggers out there like them, without whose advice our success wouldn’t have been possible.