Today I am offering a free printable to help you see your own family needs over the next five years. If we break it down year by year, then we can evaluate what it will take to get there! I’m also sharing the budgeting app that’s helped us stick to our budget and a good ol’ pep talk.
Staying home for months on end has taught me that I spend too much money on unnecessary things when I am out and about, browsing! Do you do this too?
Taking a pay cut and fearing job loss made me realize we were not seeing the big picture, and not planning for our future the way we could have been. We should have had more in our emergency fund. We had let small distractions rob more important needs.
Moving forward, we decided to live every day as if we are taking a step toward our big picture goals. Living simply today means we can be secure and generous in the future!
Let me give you an example. Spending too much time in my living room, I thought about wallpapering, which made me think about a cabinet to hide the TV, which made me think about a new coffee table. That puts me a couple thousand dollars in the hole!
That is not a wise decision considering we need new windows, a new roof and a water filter for our well! So either I need to find a $100 solution or skip it altogether. A hutch for the TV cannot be a priority when hurricane season is approaching and we don’t even have shutters for our house.
I do recognize, however, that we have to allow some miscellaneous money in our budgets. Otherwise we will fail. It is not realistic to never budget for a new throw pillow, outfit or road trip.
The takeaway here is that we need to budget for miscellaneous items or trips while weighing how much they will take away from our big picture goals.
Some financial goals take priority and urgency over others. We need a new roof before most other things so our house doesn’t leak. To afford that roof we need to break down our timeline and how much money we need to save within that amount of time. That equation will determine how much miscellaneous money we have.
So moving forward, I have allowed myself a certain amount a week for miscellaneous items. Until our immediate goals are met, that includes clothes, home projects, basically anything not food, household products or birthdays.
I have big plans for the second half of this year so I am very motivated to save. I am not a financial expert, but these are priorities to consider:
- Emergency savings fund. Dave Ramsey suggests $1,000 to start. Ideally, get this up to six months salary.
- Fix urgent house repairs.
- Pay off all debt that is not mortgage.
- Pay extra on mortgage.
- Save for children’s education.
- Save for vacation.
- Save for home updates.
Stay on top of budgeting
Evaluate how much you have coming in and how much you are spending. Do you have a budget? Not only do you NEED one to get ahead, but you have to update it at least weekly.
I’ve been using the free version of the Every Dollar app by Dave Ramsey for several months now and it is great! It has helped me incredibly because it’s on my phone and I can update my budget with every purchase.
If you are married, your spouse can download the app too and you can both keep it updated! It helps stay on the same page when you both have access to the numbers.
I’m grateful for Dave Ramsey’s tools, but I don’t follow everything that he suggests. For example, we do have a credit card that we pay off in full each month. He prefers debit or cash only.
There are lots of ways to save money. I wrote a blog post called 101+ ways to save money, but cars seem to be the standout money waster.
When you are looking at the budget, get serious. Average car payments are $400-500 a month! That’s crazy. If you don’t have an emergency fund and you carry a balance on your credit card, you need a car downgrade. Where could you invest an extra $200 a month?
If you view vehicles as a status symbol, check this out:
“The Ford F-150 pickup truck, the Jeep Grand Cherokee, the Jeep Wrangler, the Honda Civic, the Honda Pilot and several Land Rover models are among the most highly-favored mainstream vehicles owned by the super-rich.” — Investopedia
In fact, the more I dug into articles on things mega millionaires have in common, a lot of them live frugal lifestyles. It makes sense, that’s how they became millionaires in the first place!
And if you need another reason, cars depreciate as soon as you drive it off the lot — and continue to devalue rapidly year after year. Unless you have extra money to burn, you are throwing it away.
Instead, putting that money into your house payment will save you thousands in interest!
First up, we need an emergency fund. We can thank 2020 for that red flag. Before we can start saving for anything else, we need a reserve.
How much? Dave Ramsey suggests $1,000 before starting to pay off debt, but nowadays I think it should be more. Marcello and I have worked hard to pay off our $18,000 debt so our next goal is six months of expenses.
Don’t get excited. I said home repairs, not home updates, haha! What are the things that you need to do to your home that are in disrepair? Things like roof, leaks, drafty windows, rusty water heater … the things that will cause harm down the road. I know it’s not fun to spend money on these things, but it’s worth the investment.
What debt do you have? Pay off those credit cards first. And don’t you dare charge one more thing until you have! Using cash is the quickest way save money. When it’s gone, it’s gone. Check out the envelope system in this post.
Dave Ramsey advises to pay off the smallest debts first and then work your way to the larger ones.
I get more personal about finances than most bloggers because I find it encouraging when I hear others’ stories about financial freedom. So I’ll share that we have our minivan paid off, but not my husband’s car.
We actually plan to pay if off this year, but the interest rate was so low that it made more sense to put that money toward urgent home repairs. It’s a $295 payment, by the way ;)
What if you could pay your mortgage in half the time?!
The other focus that we have is our mortgage. We would like to pay off our house before all three of our kids are in college! That requires sacrifice and thinking ahead early in the game so we can put that money aside and not waste it.
You save big on interest by paying extra on your mortgage in the early years of your loan rather than at the end.
The first years of your loan payments go mostly toward interest. The last few years of your mortgage go toward the principal. So the sooner you get on top of making extra mortgage payments the more you will save!
Here is an example:
▪️If you had a $200,000 home loan and could manage to pay $5,000 extra a year (or $417 a month) you would pay it off 13 years faster and save about $67,200 in interest! This example is with a 4 percent interest rate. You’ll save even more if yours is higher.
▪️However, if you started paying $5,000 extra annually 10 years in, you’ll only save $28,800.
To see how much you could save paying extra on your mortgage, check out this payoff calculator.
And FINALLY we get to the big, more fun, buys! These will have to wait until all these other items are in check.
If you have a little left over you can open a savings account and slowly add to your dream purchase, but ask yourself if it makes sense. I’ll give you an example.
I took a look at our 5 year plan and after household repairs and paying off debt we would have some money left if we lived below our means. So of course this home blogger thought: KITCHEN RENO!!! [insert party dance]
But then I heard Ramsey ranting on Instagram and it gave me a serious reality check. Is it wiser to invest thousands of dollars into a kitchen or put that money toward our mortgage so we save tens of thousands?
Yes my kitchen is dated and the laminate cabinets are peeling, but I can wait! I did my $19 stencil backsplash and added my little touches. At our last house I painted the cabinets myself ($200). Same for the bathrooms. I painted all the tile in the master bathroom ($261) and love it so much now!
I would rather find a cheap solution to love what I have for now so that I can save for my future dream kitchen, pay it off in full and not be house poor.
Even when you are saving and scratching the bottom of the barrel to pay bills, do not be stingy. There’s always someone with less than you. And if you start tithing when you have little, it will be easier to tithe when you have much.
This post is not about hoarding and loving money. Nor do I want to suggest in any way that money will bring you happiness. Instead, I want to talk about being a good steward of your money and using it a God-honoring, wise way.
Looking at your financial goals on paper can help you see what your priorities should be. Here’s how to use this printable:
- Print it out.
- Estimate how much you can save in a year.
- Prioritize your goals.
- Make a plan.
What do you think? Will you use this printable? Tell me in the comments what you are saving for!
Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.