money school: forward filing

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file this under the top of your to-do list! this file folder system was taken from this book. i think it is a huge MUST for every family to do this together so that everyone is on the same page. if you don't have kids just omit #11. this filing process keeps all of your important documents safe and sound and nicely organized. this makes finding things and tracking your finances ten times easier. also, God forbid that something happens to you, this system will serve as a road map for your friends and family.

1. tax returns

-have 8 folders, 1 for the last 8 years

-include w2s, 1099s, and your tax returns in each folder

2. retirement accounts

-ira and 401k statements (have ind. folders for each)

3. social security statements

-email ssa.gov to receive them if you don't have them

4. investment accounts

-mutual funds, brokerage accounts, individual stocks (have ind. folders for each)

5. savings + checking

-monthly statements for each account (have ind. folders for each account)

6. household accounts

-house title

-home improvements: keep receipts here for home improvements because they can be added to the cost basis of your house when you sell it

-home mortgage: check your statements monthly to ensure that they are accurate. mistakes happen often.

7. credit card DEBT

keep debt in all caps to drive you crazy. make a folder for each card.

8. other liabilities

-college loans, car loans, personal loans, etc (have ind. folders for each)

9. insurance

-health, life, car, homeowners, long term care, disability (have ind. folders for each)

10. family will or trust

-copy of will or trust along with the business card of the attorney who set it up

11. children's accounts

-college savings, investments on child's behalf (have ind. folders for each)

12. finishrich planner

-you'll need the book for this!

money school: what is a roth ira?

enchantment under the sea coin purse by kate spade

a roth ira's (individual retirement account) main advantage is that instead of giving a tax break upfront, you won't get taxed on the money once you begin to withdraw it during retirement. this is awesome because the money will already be taxed and once it starts growing interest and you're ready to use that money it is all yours. roth iras make a great supplement to a 401k.

most accounts will not allow you to contribute more than $5000 a year if you are under 50, that's around $417 a month. your annual income must exceed $5000 in order to contribute that much. (here's hoping, right?)

a roth ira may contain investments in the following:

real estate (gonna pass on this right now)

mutual funds

stocks and bonds

securities

certificates of deposit

notes

we will go through each of these types of investments and what they mean in the next few weeks. for now... set up that roth ira! each day that goes by that you aren't saving costs you big time in the long run. any great experiences or recommendations when it comes to roth iras?

money school: nine things a father should teach

4. Those who believe in personal responsibility control their own destiny.
5. Slow down — life is a marathon, not a sprint.
6. Violating the natural order of life can be costly.
7. The harder you work, the luckier you’ll get.
8. You won’t be young forever, so take advantage of youth while you can.
9. Always strive to spend less than you earn.

in lieu of father's day this sunday i wanted to share this great list from len penzo. i can't decide which one is my favorite. probably #1 or #7. hop on over to his site to read more.

i also wanted to pass along this inspiring post lindsay shared with me about living in "dutchie" for a year with her new husband to pay off their debt. i love that they decorated their new home and owned it. they paid off all of their debt and in turn have an incredible story.

would love to hear other stories like this. either comment below or email me!

coming up with $600 a month

chalk piggy bank found here.

on my last post i shared with you that we need to be putting away an extra $600 in to our loan principle each month.

just a few things we've done to find that magical number:

called comcast and threatened to leave because of the high cost. payment dropped from $100 for internet/cable to $70 savings=$30

fine tuned our phone bill with att. i was going over on my texts each month (oops!) resulting in $20+ in fees. we are paying $5 a month more for texts and lowered our minutes. savings=$40

we were paying $100 a year for xbox live to stream our instant netflix. little did i know that xbox is the only gaming console that requires a subscription service. we're thinking about getting apple tv which is a ONE time price and then free after that. future savings=$100 a year

packing our lunches every day we work and making our own coffee. savings=$100+

we automatically withdraw $50 a week in to savings. savings=$200

total savings a month with minor changes= $380

we also have a way 2 save account which fluctuates based on how much we use our debit cards.

i just ordered dave ramsey's total money makeover and smart couples finish rich per your suggestions. i used my reward points to pay for them. we're trying to make our credit card work for us. we have a gold card with american express and we put all of our mandatory bills on there so that we automatically get points for things we would be paying for regardless. the trick is just making sure to pay them off every month.

are you liking these money school posts?

interest only

when sam and i bought our first (and current) house we were wide-eyed, naive newlyweds. we loved the street, the idea of a renaissance movement in my hometown, easy access to the highway and the square. we loved the people that we met when we were shopping the neighborhood. there was so much history and charm.

all of these reasons still hold true for us. we could not ask for better neighbors, we even went on vacation with 2 of them! we brought matilda home from the hospital to this house, we've experienced major loss in this house, we've had hundreds of happy moments in this house. we wouldn't change what this street has meant to us for anything.

we bought at the top of the market in 2006. months in to living on our street the builder went bankrupt, we lost several neighbors to the recession, and we were stuck.

like so many other people in our same situation we fully financed with an 80/20 interest only loan. truth be told we couldn't have afforded the house otherwise at the time and we thought for sure that we would only be here for a few years (read: tiny bungalow). we are already approaching the 5 year adjustable mark for one of the loans. learn from our mistake, just say NO to interest only loans. what can we say other than it seemed like a good idea at the time. we are not alone, all of our neighbors were urged to purchase their homes the same way.

BUT there is hope. i hope.

sam went and met with a financial advisor yesterday who told him three important things:

1. that we should stop putting money in to our savings (we set up an automatic weekly withdrawal which would still be helpful in putting that money aside) and put it towards the principle. we were given the goal of $600 a month. egads, but what doing this does is it allows us to chip away at our loan and ultimately lower our interest that we're paying each month in the process.

2. to raise the percentage in sam's 401k from 10% to 15%. sam's company matches a percentage of his 401k and that's free money folks.

3. we should not take a loss and come to the table with the difference at closing. say we are upside down 50,000 (optimistic) and we paid the difference, in doing so we are ultimately sacrificing millions in the long run of what that money could be doing for us in stocks and/or savings. compounded interest is a serious thing. take this simple math for instance:

this example is from green arrow investments:

"So what exactly is compound interest? Say you have $100. You put that money in a bank that promises you a 5% annual return. After one year you will have $105 ($100 plus the $5 interest). The next year you will once again receive 5% return. However, now that your account has grown by $5, you will be getting 5% return on $105. At the end of the second year you will have $110.25 ($105 plus $5.25 interest). You have gained an additional $0.25 in added interest from the previous year."

so that's the plan. to pay off this loan until we can break even. our hope is that in the next few years the value will rise and we can keep our shirts.

money matters...

i've been thinking a lot about the future lately and where i see us in 10, 15 years and pondering more and more on how to achieve our goals. money is such a dirty little word. it's complicated. no one really talks about it. we all have debt of some kind wether it's credit card debt (i just had to have that bag that i'm still paying for 2 years later) or you're upside down on your house (party of 3). where to even begin on dragging ourselves out of the financial pit?

we recently opened an account with mint.com which i think is an amazing (and FREE) way to chart all of your statements in one place, as well as set up budgets and goals and to get a realistic view of what you're "worth." clearly i think we are all so much more valuable than some number that sums up our spot on the food chain, but it's important to not be tuned out either. speaking of tuned out, i have definitely taken more of the "ignorance is bliss" role in our marriage when it comes to money matters. i think that sam has been carrying this heavy load without me for six years and that really is SO not fair.



i've been working on learning more about finances. holy tomato roth ira. i am so clueless. we watched a little of suze ormon's money class and i like how she makes these foreign concepts easier to understand. according to suze a roth ira is the best place to save for retirement unless your company matches a percentage of your 401k. we have also been thinking already about saving for matilda's college. you can check out this website for more info, but suze recommends a 529 and to make the savings account under your name and not your child's.

just a few things i thought were interesting. i want to share things that i learn and hope that you'll share with me. would love to hear about any books that you found to be helpful when it comes to managing your money as well as tricks and tips for saving. what works for you?

second image: dollar redesign project