Having 6 months worth of savings means should we both lose our jobs tomorrow, we’ll be able to cover our monthly expenses for 6 months without having to work a single day. Add in any residual income that I earn on a monthly basis, and we’ll be golden. Fingers crossed we’re never put into this situation but it’s worth reminding the world that emergencies happen. Life happens.
Here’s a recap of our progress:
Baby Step 1: Save $1,000– DONE! Finished August 2017 Baby Step 2: Pay off all consumer debt– DONE! Finished in December 2018, $89k paid off in 16 months! Baby Step 3: 3-6 month emergency fund– DONE! Finished June 2019, 6 months of expenses saved!
- Baby Step 4: Invest 15% of income toward retirement – NOW UNTIL RETIREMENT
- Baby Step 5: Save for college for kids – SKIP! (We don’t have kids.)
- Baby Step 6: Pay off mortgage – Sorry SEFCU, you aren’t going to earn much interest from us!
- Baby Step 7: Live and give like no one else!
That means we’re up to Baby Step 6 on the list!
For the first time ever (yes, it’s true) I’ll be investing toward my retirement. And for the first time in a long time (we’re talking a decade), the beau will be able to start re-contributing to his. I can’t tell you happy this makes me feel – I was dancing this morning as we re-capped our investing plans, which will begin in July. And for those of you who are interested, here’s a quick breakdown of what that’ll look like for us:
- Me: I’ll be maxing out a Roth IRA and then I’ll be contributing to a 457b plan (deferred compensation which is offered by my employer). Even though my position is not a state position, we are a member of the NYS Retirement System, so it is and has been mandatory that I participate (aka invest) into that. That figure is NOT calculated into the 15% I’ll be investing – so in reality, I’ll be investing 19.5% of my income.
- The beau: his employer offers a 401k match! He’ll be investing the minimum to receive the maximum amount of match and then fully funding his Roth IRA.
Both of our paychecks will become significantly smaller but that’s okay – in fact, that’s great news for us! That’s money we aren’t going to have to think about from this point forward and is going to grow and grow and grow (the majority of it tax free) for our futures. This step won’t end for us until we hit retirement. We’ll continue to invest 15% of our gross income from now until then, making changes as we earn more.
Baby Step 5 is saving for college for any children that you may have. We’re both happy to be skipping this step, ha!
Baby Step 6 includes paying off your mortgage – can you even imagine?! We took out a 30 year mortgage with SEFCU back in October 2016. If we’re like many other Baby Steppers, we should have our home paid off within the next 5 years. That’s in 2024! That means we would shave off 22 years of interest payments! Ay-oooooo! If we were to keep our gazelle intensity, I know we could do it within 3 years but here’s why that won’t happen (with our financials as is): because we don’t want to live that way for another 3 years. Ha!
Our mortgage payment is only like $400 a month, if that. The remaining amount (like $650) each month is taxes… and those are something we’re going to have to pay forever. I’m not complaining and yes, I’d like an extra $400 in my pocket each month but I guess because it’s not a larger amount, I’m less gazelle about it. But the idea of selling our house and getting ALL THAT CASH is a great motivator!
We’re also going to be saving for other items during these two baby steps, so we won’t consistently have a lot of cash to dump toward the mortgage each month. Examples of such items include:
- a new couch for our living room (Kitty oh so kindly peed on our current couch on the regular toward the end of his life and we don’t use it and wouldn’t expect anyone else to use it while visiting)
- a new back deck because it’s starting to sag oh so unsafely
- a new (used) desktop computer because the beau hasn’t had one for over a year now – as a graphic designer, this is a need ha ha
- finish our upstairs bathroom because we’ve had exposed drywall since February 2018 (new everything except the tub)
- travel! I’d love the opportunity to take two big trips a year
- oh and remember the section of roofing that was leaking during BB2? We’d like to fix that / room as well
- a new car. Neither one of us needs a new car right now but eventually I will. My car is now 11 years old – I bought it brand new off the lot – and my goal is to have it until 2023 (15 years!). Cars are expensive, so we’re going to start squirreling cash away each month NOW so that LATER we won’t be scrambling.
The list is never ending as an adult, right? And while the list grows, so does our trust that this plan works. There is absolutely nothing wrong with saving up money for something. In fact, I think it makes you appreciate whatever it is you’re saving up for even more. It also gives you a lot of time to think about what you want / research all of your options. We haven’t had the money to buy a couch yet but we’ve been looking for months. It not only motivated us to stick to our budget to finish BB3 as fast as possible, but it’s given us time to shop around until we find one that’s juuuuust right. We haven’t found it btw, the deck has been bumped up to be our first saving priority.
Something else that’s changing this month that’s been weighing heavy on my heart over the last 8 months or so is our budget line to GIVE. Dave Ramsey talks about this extensively throughout his program and honestly it was something we didn’t connect with, not having the same faith background. He suggests tithing 10% of your income throughout your entire debt free journey. I couldn’t wrap my head around that concept until I met a couple doing just that. They make less than the beau and I AND STILL GAVE AWAY 10% of their income. And yes, they are debt free! Each and every time I watch lesson 9 of FPU I cry and get worked up with anticipation of doing more. The time has finally come.
We are officially giving 10% of our gross income! It’s built into our July budget and ready to be implemented. Because neither one of us are of faith, we will not be giving this money to a church but to other causes and organizations. We’re opening a separate savings account to deposit this cash in to and as we see fit, will put the money to good use. Top on my personal list is a lifetime membership to the ADK 46ers, mostly because I’m always behind on my annual $10 payment, ha! I’m also looking forward to sponsoring a child for summer camp via a local organization – I’m telling you, the possibilities are endless! I LOVE thinking about making a difference, no matter the size. Think about it, if you had say, $1,000 a month to gift to someone or some organization, what would you do with the cash? DR has this amazing visual that I love sharing:
Picture yourself holding a handful of $100 bills. You’ve got a tight grip on that cash, not allowing any of it to “get away” from you. Essentially, your hand is making a fist, holding on to that cash so tightly. This is the grip of someone living paycheck to paycheck, unable to save, unable to help their community. That fist is a symbol even a dog can recognize. That fist doesn’t allow money to leave your palm, but it also doesn’t allow any more to enter.
I don’t know how much I’ll be sharing from this point forward on a monthly basis on this platform, as I know progress will be slow in Baby Step 6, but you better believe we’ll be walking the walk. And once we get to the halfway mark on the mortgage, I’ll keep you posted. I’m a true believer in the budget and will continue to make one for the rest of my life, regardless of how much income we earn. It feels pretty surreal to be at this point, saving 15%, giving 10%, paying off our mortgage (who does that in their 30s?!) and living life to the max. But let me tell you, it feels pretty damn good.
It’s day 176 of 2019, which means there are only 189 days left of the year. That happened REAL FAST. If there’s one thing I’ve learned throughout this entire process is that time goes by, regardless of whether or not your working the baby steps. Regardless of whether or not you’re training for a race. Losing the weight. Eating organic, whatever your next goal may be. Make your days count.