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Year-end financial evaluation

Year-End Financial Evaluation
AJ & KJ: Tis the season where we start to talk about the changes a new year will bring and reflect on everything from the past year. Before moving forward though it’s important to take stock of all the life changes that have occurred that will impact the next phase of our lives.

1. Changes in incomes.
Whether it went up or down, you consolidated into being a single-income household or you won the lottery changes in income top the list for considerations that require an overall financial reevaluation. Perhaps you’re considering a significant career change or a return to education. All of these things are major factors in your financial future. Compare year over year income and spending levels to identify commonalities from which you can begin forecasting the next year’s budget (and savings!).

2. Health changes.
Until you have reason to give pause with regards to your health it’s an out of sight, out of mind variable. This year we both underwent new-to-us medical diagnoses that have impacted our lifestyle and our budget significantly. We’ve added a monthly boot camp and hefty expenses of supplements and vitamins which will change the way we allocate our available funds in 2015.

3. Family status changes.
We’re at that point in our lives where most of our friends are now married or in a committed relationship and have babies on the brain. We’re the very proud aunt and uncle to three munchkins and holiday shopping always reminds me how expensive those little boogers can be. Whether you’re expanding your family, taking care of elderly family members or just planning for the future these can be expensive variables.

4. Change in housing status.
Bought a home? Sold a home? Bought a home and have yet to sell the other home? Thankfully we’re at the end of a year that has seen a lot of home improvements and renovations, so it’s all blue skies and rainbows from here – until a tree falls, a pipe bursts or I find some new Pinterest-inspired monstrosity of a project. It’s hard to plan for the unknown, but build your budget based on what you think you’ll see with regards to housing changes and don’t forget to maintain a healthy emergency fund for all those unknowns.

5. Marriage status.
Congratulations! For better or worse a change to your marriage status impacts more than a few significant pieces of your life and budget. 2 vs 1 is a very different conversation and requires planning! It involves a complete review of your finances from savings to beneficiaries of your accounts and life insurance (just to name a few).

We can’t wait to start our 2015 planning and have several of these considerations to address. The prospect of a new year is always exciting and we’re looking forward to a more successful, healthier, calmer 2015!

Year-end financial evaluation is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

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Look at your past budgets. You may be amazed

Illustration of Information Search Metaphor
KJ: We just went through this exercise, and it was quite interesting. I have used Quicken since the beginning of (my) time with an income, so I have quite a few years of history to be able to reference. I can slice and dice the data lots of different ways if I want to hone in on certain categories or just look at the high level information. What we did was look back to year-by-year spending since 2010 (the year we got married). With a good four-year history of LOTS of changes with moving homes, buying two cars, taking several (great!) trips, and adding in some home renovation costs in recent years, there was a lot to look at! Talk about a lot of one-off items that have come up over this (relatively) short time period! Amazing to look at the total figures that include the items that aren’t really part of a standard budget (well at least not what I would consider a standard budget). I like to call many of these items rotating, non-recurring budget categories. You never really know what will fit into this bucket – sometimes it may be a fun expense like a trip, but other times it may be a not-so-fun expense like a roof repair. Either way, you need to be sure you’re building some extra fluff into your savings to allow for these items that invariably come up.

AJ: Ideally, this is a once-a-month exercise unless you’re experiencing months of rapid change. I love to see the trends in our spending by category and trying to identify what it was that caused significant variances. This year, we’ve exceeded our budget pretty significantly in order to put down roots in a new-to-us home that we plan to enjoy for many, many years. Some years we’ve taken more frequent vacations. Regardless, it’s powerful to be able to look back and track where we’ve been and where we’ve seen the greatest shifts in our spending.

As we look forward towards a more lean, less project-driven year of budgeting, we’ll look to reset specific budget areas to help compensate for our heavy year of spending. Reassessing the budget based on our historical trends helps give us a place to start from and get back to knowing that we’ve been able to work within those budgets previously.

Understand why you save
At times, you’re saving for a very specific purpose, like retirement, children’s education, a planned trip, a car, etc. Other times, you’re simply saving for those unknowns. It’s good to build up some extra buffer as you don’t always know the timing of some expenses. You (generally) have control over some of those larger purchases like a home renovation, but a broken faucet or malfunctioning product may push forward the timeline from what you had imagined.

Our primary budgeting plan for when we have those rotating, non-recurring expenses is to try as best we can to shuffle our month’s budget around to absorb as much of the cost. Then, for whatever we can’t make work in the existing month, we add it as a “recoup” for what our goal is for subsequent months. While it seems like there isn’t an end in sight sometimes, our goal is to really hunker down and chip away at some of this in 2015 now that we’re past a lot of our home renovation projects.

AJ: The hunkering down and chipping away piece is where my monthly tracking notebook becomes especially crucial. Meals are planned more meticulously, excess spending is trimmed and wants are considered more thoughtfully. We know that we all have our tipping points though, so using our past years’ histories helps our expectations stay more realistic which is completely necessary. When I’m on a mission to cut spending things have a tendency to get a bit extreme! :)

    When was the last time you examined your past spending?
    Did you learn anything eye-opening about your habits?
    Share with us what changes you had to make.

Image courtesy of cooldesign / FreeDigitalPhotos.net.

Look at your past budgets. You may be amazed is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

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A billionaire’s perspective on working: a three day work week?…

Calendar Image
AJ: Irrefutable fact: Carlos Slim knows things about making money. His estimated net worth at $83 billion pretty much speaks for itself, and it makes him one of the wealthiest individuals in the world. Carlos Slim has an interesting take on the future of the working people – 3 day work weeks that span 11 hours each up until age 75. In our house we call an 11 hour day a Monday, or a Tuesday, or a Wednesday, take your pick, but 11 hour days aren’t something that gains attention in our household. I couldn’t physically do my job in 3 11-hour workdays currently, but maybe if I had until I was 75 it’d be a whole different story.

Live life at every stage
So what of it? Carlos thinks that life should be lived at every age and at every stage as though you’d earned the beauty of retirement day in and day out. I LOVE the idea of shorter work weeks, but my shorter work week would be 4 12-hour days, not 3 11-hour days, and I’m betting I’d still wind up working some evenings and weekends. I don’t think I’m special or unique, I think that’s just become more the standard of what we’re all accustomed to working in order to get our jobs done. Our generation is waiting longer to start families, is climbing the professional ladder faster than the previous generation and is working in a fully connected universe, so it’s impossible to imagine a world in which we work less than we do today, but maybe Slim’s onto something.

KJ: This is one of the daily conundrums of saving money. How much do you want to sacrifice or withhold consumption today only for some uncertain point in time in the future? Why push yourself so hard today and miss out on all the together time, family time, travel, whatever suits your fancy in the meantime? If there’s one thing we can glean from Carlos’ perspective now it’s that life is about balance – across all ages and stages and to not just continuously push for a brighter future. Relax, and learn to enjoy the scenery along the way!

75 isn’t so old
KJ:Standards of living have continued to rise over the last 30+ years, making the new 75 much more cozy than the previous generation’s life at age 75. And if that’s the case, maybe we won’t have all that much reservation to working to age 75, 80, 85. It all just depends on WHAT we are doing at that point and finding something along the way that we really enjoy that we could see ourselves doing for decades.

AJ: Slim votes for machines and services working 24 hours a day and people enjoying life more and spending more time in training. It’s truly revolutionary thinking and other richy rich people don’t love Carlos for his perspective which is why I find it so interesting.

Fascinatingly, the 5 day, 40 hour work week has only been in existence since 1938. I literally have jewelry that’s older than that. So is it really all that strange to think that we could be in a remarkably different working environment 20 years from now? I would love to see what a difference that kind of thinking would have on the quality of life for future generations.

What would three days of work change for you?
How would that change your overall quality of life?
What would you do with the extra time each week?

Read more about Carlos Slim’s perspectives from CNN Money on his work week thoughts from July 2014, and Carlos’ thoughts on a three day work week from October 2014.

Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net.

A billionaire's perspective on working a three day work week is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

When was the last time you reassessed your budget?

Man And Tap Water With U.S. Dollar Banknotes
KJ: Sometimes, it seems like money pours out of the bank account, so what better time to see if your current plan is really what is right for you at this stage in your life? It’s easy to keep coasting as is, but address it before it really gets out of hand, so you don’t keep saying, “it will get better” or “this is temporary.” How many times have you heard yourself speak those words only to realize that your “temporary” had actually become your new normal? What better time than now to take a step back from your regular budget and assess if your budget and goals you have set for you and your family are realistic? Life happens, life is always changing and I have built SO many spreadsheets over the years with projection after projection of how much we need to save for different goals we have. It never ceases to amaze me how much things can change over even short periods of time like six months or a year.

An appliance breaks and you suddenly need to replace it. A windfall comes your way from the lotto (er, not quite, but wishful thinking, right?). The budgeting and goal-setting process should be fluid with lots of feedback loops. Something changes (unexpectedly or expectedly), so it’s time to work on a new plan and reassess. Did your expenses creep up and now you have a higher emergency fund need (the double-edged sword of expenses where the more you spend, the more you need to save for your emergency fund for that 3-6 months living expense goal)? Yet, the less ability you have TO save to that goal by nature of spending more…sheesh…enough to make your head spin sometimes!

Here are a couple of trigger events for when you might consider adopting a new budget.

Did you reset your budget if you had a change in income?
Maybe you got a raise that allows you just a little more wiggle room each month or maybe quite the opposite happened – you got a pay cut. Sometimes you can’t plan around either one of these, particularly if your company goes through some tough times. While other times the pay cut may be voluntary, through one person deciding to stay home for the family, reducing hours to allow for more home/family/vacation time, etc.

A change in income is most certainly a great time to look at your budget, and in most instances, is best if you reassess your budget BEFORE you take that leap, as is the case in a voluntary change of circumstances.

Have you continued to find it difficult to meet your budget each month? Did you need to reset your budget because it wasn’t realistic?
Maybe your expenses just aren’t all that realistic. Budgeting is about forecasting what you think your expenses will be, and at times that means you’re just flat out wrong. You could be way over budget or way under budget in certain areas.

When we moved to our existing house after having lived in a town home previously that had residents on either side, we weren’t quiet sure what to budget for the cost of electricity for a single family home let alone what the lawn watering costs were going to be. Fortunately, we WAY over budgeted for those expenses assuming a worst case scenario increase in costs, and we have been pleasantly surprised that our bills weren’t quite as high as we thought they would be – even in the cold of the winter or the heat of the summer. What this has meant though is we often take the “under” on this area and reassign to other areas that need increases for those one-off items like birthdays, pet food every few months, etc. Maybe it’s time to give up some of the “over” in this category and permanently reassign to somewhere else once and for all.

The other component of this too is your costs may rise. Gas prices may shoot up, your electricity contract renews – yet the only options now are more expensive, your insurance costs go up, the costs of your regular groceries go up. Any of this sound familiar? Don’t just assume you have to immediately increase your total budget though – as it may be an opportunity to cut back elsewhere to keep your expenses in check. Gas prices rising may simply mean being more creative in the kitchen and eating out one to two less meals a month.

AJ For me, reassessing the budget feels like a massive undertaking. I’m awesome at maintenance and upkeep, but change is a major speed bump in my budgeting world. For my tracking purposes the last year has been a major challenge. When we bought our first house (the town house) we had major buckets and few fixed expenses with no maintenance or updates to make, so there was more breathing room in our budget. We used to regularly save more than planned in a year because we just didn’t need to spend it. These days our unexpecteds in life seem to cost a whole lot more and sometimes they don’t fit quite as nicely into my monthly plans. However, when we sat down to talk about whether we needed to increase our budgets in some areas to allow for increased expenses, we ultimately decided that these overages were temporary and we’re budgeted appropriately for the foreseeable future, so I get to rest easy and continue resisting change – at least until next month!

Image courtesy of cooldesign / FreeDigitalPhotos.net.

When was the last time you reassessed your budget? is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

Adapting to a better life

Change Ahead Sign Refers To A Different And Changing FutureAJ: I don’t often read Oprah’s magazine, but I read the September 2014 issue and felt a strong connection to a point she drove home in her final thoughts. From her article entitled Best Advice Taking Care of Yourself she writes:

    “We live in a state of constant change. Whether or not we’re paying attention, the process is always happening. Even people who can’t see it in themselves witness change daily in their children or in others around them.

    Life is about recalibrating. About continually asking yourself: What do I have to do to get where I need to be? How do I create the life I want?

    …We have to make ourselves over daily, consistently, in order to keep moving forward. We are not meant to stagnate.

    If change is the one thing you can be sure of, the goal is to figure out how you can use that certainty to your advantage, to modify, transfigure, refashion, and transform your day-to-day being.”

My first reaction was “that’s SO true!” I do feel like I’m in a constant state of change and evolution, and I feel like if I’m not daily asking myself where I’m going I’m already behind. Rarely do we take the opportunity to just be. In such a forward-focused, fast-paced world it often seems impossible to take enough time to slow down and recenter. I very much live in the moment, but the future is never far from the forefront of my thoughts. The place I most often seek balance is in that constant battle of living life fully and saving for our future. Surely you can’t do both with equal finesse, right?

Maybe not. Taking the time to live AND enjoy AND spend are equally important to the constant pace of saving and planning. Planning for retirement isn’t just a marathon, it’s a freaking triathlon, and it’s not sustainable to never reap the fruits of your labors. Sometimes you just have to spend more than you planned, you have to take an unplanned, unbudgeted-for vacation because if you don’t you’re going to quit your job and live in a box on the side of the road. Give yourself room to make decisions without constantly living in fear of the long-term repercussions.

KJ: When you’re in the thick of whatever it is – be it a project, your job, chores, saving for a goal – it’s very easy to lose sight of the end goal by getting caught up in the day-to-day. Whether you are intending to change or not, it’s something that just sort of happens and it’s seldom something within your control. But you can control how you react and process the new information. Your goals may shift at any point – your kid wants an expensive camp, private school where their friends are going, your job prospects may suddenly change and your retirement goal gets pushed back just a little, a sudden windfall suddenly brings some of your goals to the forefront. Look at the change as a way to see if you’re still on track, but don’t lose sight of what you’re doing today. It really is a balance between the here and now and the uncertain future, but don’t be afraid to live a little. Just don’t use it as an excuse for always saying you’ll get to it “tomorrow.”

AJ: Drink the extra glass of wine, buy the piece of art, take the extra day off. It will all still be there tomorrow changing as quickly as it always does.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net.

Adapting to a better life is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

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