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Monday, October 15, 2007Group Writing Contest: Financial Success Story
JD at Get Rich Slowly is sponsoring a collective writing contest where participants are asked to write about a personal finance success story. What follows is my story:
When I thought about what to write, I was a little torn. You see, I have never been in any sort of consumer debt. I have never not paid off my credit cards in full. I had no student loans (thanks mom and dad!) So I was in fear that my story wouldn’t be very dramatic; and I suppose it’s not. My story is about the everyday decisions that help keep us (me and my wife, Mikah) out of debt.
Mikah and I talk about money a lot (ok – maybe I talk about money a lot and she puts up with it!). We are constantly going over our budget and trying to figure out a way to increase our wealth with the jobs that we have. Budgeting has been so valuable in keeping us within our means. I mean, we are both savers by nature, but I know without having a budget to restrain me, I would probably spend a lot more on stuff I don’t need. The most significant change I have made is taking my lunch to work. The amount of money that frees up is astounding.
For a while I was going out to lunch every day. If I went to McDonalds, it cost $4.08, Arbys was $6.08, Burger King ran me $5.47 and Chipotle over $7. Even if I ate at McDonalds every day (which I never did!) it would still cost over $20 per week. More realistically I was spending over $25 a week. Over an entire work year, that comes out to over $1250! That is a lot of money! I have since cut down to eating out 4-5 times a month. That equates to some significant savings. I also suspect that I may live longer now that I don’t eat fast foot everyday. I just take last night’s dinner in for lunch the net day. I like leftovers so I don’t mind at all. And having that extra money means I have more to invest with. Which leads us to the next point.
I spend a fair amount of time trying to find the best places to put our money for long and short term investments. We had some extra cash, so we decided to pay off my car loan. Now the only real debt we have is our mortgage. We have our regular checking & savings account (that earns about 1 lousy percent). We have our high yield online savings account at E*Trade, earning 4.7% (it just dropped last week because the Fed cut their rates. It was 5.05%). We have our “investment portfolio” (just saying that makes me feel pretentious) invested entirely in EXTREMELY low fee index funds, also at E*Trade. We also have a small amount of money in the Paypal money market at 5.05%, although that amount is currently negligible. I try to move the money around to ensure we have enough to pay our bills and make the most interest at the same time. It takes a little bit of effort, which probably isn’t really worth the time actually, but I enjoy doing it.
All of the daily efforts we make with budgeting, keeping spending down, and maximizing our liquid investments means that at the end of the year we will have some extra money to work with. We haven’t decided what to do with that money yet. Our main options are to keep it stashed away, building interest, until one of us needs another car, make a principle only payment to our mortgage, or give it away to charity. We will probably end up doing some combination of the three.
What do you think we should do? What would you do?
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