April 25, 2018

Ask Jordan (and Stephen) – Money Mindset Round 2

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Happy Wednesday, friends! I’m sorry I’ve been a bit MIA this week. I’ve been working hard to complete some in-progress projects on the house this week. I’m hoping that I get at least one of them done tomorrow! Fingers crossed…

Ask Jordan and Stephen

Last week we did a giveaway on Instagram with three copies of “Total Money Makeover”. The book changed our lives for the better and we’re hoping it blesses a few more people’s too. I’m so excited to share the winners on Instagram today! Along with the giveaway I asked for any questions you all have about finances/budgeting. These questions are so good, you all! Stephen and I sat down and answered them all for you. Let us know if you have any more! One last thing… I know I’ve said before that we plan on doing a budget post and we certainly do/are! This post is especially important to us because we think it has the potential to be very impacting to our reader’s lives (like it impacted ours!). That being said, we’re working really hard to make sure that it is done very well and that we don’t miss anything. It’s taking quite a bit of time. Thank you for being patient!

What major purchases are you and Stephen currently saving for?

We’re currently not saving for anything in particular other than to finish paying off our house sooner. At some point next year we’ll probably start saving up to go on a little vacation next summer.

Are the “buckets” part of the monthly budget? As one entry or separate as defined?

The buckets do end up being part of our monthly budget. Basically, we look at the total incoming money and first put everything we will need for the month towards our basic living expenses: mortgage, utilities, gas, food. From there, we put it into the buckets depending on what we plan to spend our money on that month. We’ve been putting money every month into all of the buckets but a lot of our money has been going towards the ‘hobbies’ bucket to work on the house, which is something we both love doing. We break them all up on our budget. We’ll break all of that information down for you in our budget post and show you how we do ours!

How do you revise the budget during the month when unexpected things happen?

We have categories for things like house decoration/projects, miscellaneous (like haircuts, any random thing we want that doesn’t fall into the other categories), clothes, etc. We get pretty specific with our categories but really what you could just do is have a miscellaneous category in there and have everything extra in there that doesn’t fall into the basic necessities (mortgage, groceries, utilities). Anyway, if something comes up, we take the money out of those miscellaneous folders and then we just can’t buy the things we WANT for the rest of the month.

If you use an app does it allow you to share the data with your spouse in real time?

YES! Every Dollar. We use the free version because we prefer inputting each purchase manually. Like using cash, it triggers something in the brain that makes it a little bit more painful to spend. We both can share the same account and everything is updated in real time. There’s been plenty of times when we’re both on it at the same time and we’ve never had an issue.

What would you say is a decent amount to keep in emergency funds for a young couple with a lot of life startup costs/other more immediate costs?

Dave Ramsey suggests that if you have debt you put anything in your savings except for $1000 and throw it at the debt. If you’ve read this post, you know that we did not do that because we had way too many potentials to pop up around that time with buying the house and moving cross country. We don’t know what your situation is of course but for us, we got the savings down to $7000 and everything else went towards our debt. Looking back, it was pretty dumb that we did that because here’s the thing you have to realize- most of these startup costs/immediate costs you’re referring to are NOT EMERGENCIES. This means that these 100% can be planned for. For instance, we went into our house closing knowing about what we’d have to pay up front so in the months leading up to that point, we were saving money every month for that. We know that it’s scary to take your savings down so far but we also know that we could’ve and did plan successfully for everything we were afraid would pop up. If you really can’t bear to take your savings down to $1000 like Dave Ramsey suggests, we suggest going down to $3000 and then anything else you have leftover should go towards your debt. At that point this should be considered the EMERGENCY fund. When you really look at the things you need to pay for, we’re pretty sure most of it if not all of it can be budgeted or saved up for. That means that you’re going to have to cut back on the budget in other places. Rice and beans, beans and rice, friends. Or if you want to step up the game a little bit… Use Budget Bytes. 😉

How does a couple attack debt with a smaller income (2 car payments and a mtg and consumer debt)?

First, cut up your credit cards. Since there’s consumer debt involved it’s safe to assume that there’s a spending problem (which there can be without credit cards) and at this point, credit cards can’t be used responsibly so get rid of them. We’re sure this probably sounds scary and it probably is because it’s been used like a safety net but we can 100% say that the first part to attacking this debt is to get rid of the cards. Now.

As for the car payment, if you consider the total value of your vehicles (yes, all of them), what percentage of your income is that? If it’s smaller than 50%, attack the debt using the debt snowball (more on that below). If it is not, we suggest seriously considering selling one or both of the cars depending on how expensive they are and then getting a used, much less expensive car that you can pay cash for. Use the money left over from selling your car(s) and from buying a used one to pay off the cars and potentially any other debt that you have. As we mentioned here, we debated on doing this but we decided to just attack the debt with gazelle intensity because the total amount of our cars is less than 50% of our income.

What is a good amount to have in an emergency fund? We are aggressively paying off student loans and while I want to put the bulk of our income and savings towards that debt to pay it off as quickly as possible, I am still not comfortable only having $1000 emergency savings.

We too were not comfortable going all the way down to $1000 when we had a few thousand saved.  The $1000 is best for someone who has had no savings at all to build up to.  If you are used to having a few thousand stashed away for emergencies then going down to somewhere between 2-4 thousand is a good compromise of having that safety cushion and putting a substantial amount towards paying off debt.

How do you decide how much to save for vacations?

There is not a specific percentage of your income or dollar amount that we suggest to spend for vacation but it really comes down to each person’s/couple’s situation.  If you are concerned about spending too much on vacation you might want to consider alternative ways to cut those costs.  You can rent a beach house in the fall when rates are cheaper instead of in the summer. We have found that cruises offer a great value of fun and relaxation for only a few hundred bucks for a week so that’s our vacation of choice. At some point next year we’ll probably start making plans to go on one. We’ll start researching it 6+ months in advance to figure out price, decide how we’re going to budget it out, etc. From that point we’ll save some (plus extra) money every month specifically for the trip so that we have enough to pay for the entire trip in cash.

How do you budget for doctors appointments or dentist (unexpected cavity etc). Another example I went to the dermatologist and it was $180 (I have insurance just not met deductible). Had no idea it would be that much and obviously don’t have that every month.

If there are unexpected medical bills for a condition you could not predict, then you should use the money in your emergency fund to pay it off and immediately re-stock your fund from your next paycheck (pause the debt snowball except for minimum payments while building the emergency fund back up a bit). Also, if you know you are going to the doctor or something like taking your car in to get fixed, you can budget a little extra conservatively for that. If the actual bill is less than what you budgeted, that excess can be used to pay off debt or be put into savings. For example, Jordan knew that she was going to need to see the optometrist this month. We didn’t know how much the appointment would cost but we set money aside this month in case her new contacts and the fitting was more expensive than previous times. Come to find out, we had set too much aside but that’s okay because we can put that remaining money towards the principal on the house.

We hope this helps! Be on the lookout for the Instagram post that will include the winners from the giveaway!

(and Stephen)

Photography by Emily Ann Photography

with joy
jordan jean


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