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Archive for November, 2013

Commencing Baby Step 3

November 24th, 2013 at 05:49 pm

We've finally finished wading through all the home maintenance projects (including an unexpected $1000 repair on the roof a couple weeks ago) and even set aside $1000 for Christmas. We've reached our family health deductible for the year and are scheduling appts like mad for these next few weeks to take full advantage of paying only 20% rather than 100% for the rest of the year. And we were also incredibly blessed to have my aunt unexpectedly send me a check to cover my first semester of tuition and books for the community college I will be starting at in Jan. And so, with that all finally behind us, it's time to commence on our TMM baby step 3 (beef up emergency fund to cover 3-6 months of expenses).

It has been almost 4 months since we finished baby step 2, so I am relieved to finally be getting back on track again. We made a lot of prudent purchases and repairs, but as the money kept flowing out rather than in, I worried that our financial plan had become derailed. Apparently though, even without CC debt, we do still have some motivation and dedication to this plan after all. And it's time to buckle down again.

My main goal for this coming financial year is to see our next worth begin to rise finally. Although given it is currently -$46K, it might be more accurate to say we want to see our gaping net worth hole begin to be filled in. It's actually much better now that it was a year ago. Partly because of paying off the CC's and car loan. But also in a large part due to home values bouncing back again finally, and we can't really take credit for that. Plus that part could go again as easy as it came.

But I was realizing the other day that we are at an exciting point none that less because from here on out, we will mainly be investing in ourselves. Even the $25K we hope to save for a "new" vehicle over the next year and a half will be savings converted into an asset, rather than simply blown out the window. And yes, yes, I know their will be depreciation, but you get my point. We're finally investing in our own net worth. And that is exciting!

Plus, during the open enrollment period this year we made sure to max out our HSA contribution for next year, as well as bump up the life insurance and disability policies a little bit. And it feels wonderful to know we are getting an adequate financial safety net into place. Almost like we're becoming real adults finally!

From this point on though, we're going to be breaking a bit from strict compliance to the TMM plan. For instance, we're going to start baby step 4 (retirement savings) as soon as we get $5000 towards baby step 3. Which should be by the end of Jan if we practice restraint over Xmas. We are way too old to be putting it off any longer and we're going to be doing baby step 3 for quite some time. We want our final emergency fund to be around $20K, but we need to buy a car along the way, so almost as soon as we get it we're going to empty it out and start again.

I consider this an EF worthy purchase though because, as discussed previously, our current family vehicle is a 1999 and has over 225K miles. It's just not going to be around much longer, and when it does finally die, it will certainly be an emergency. After doing a lot of research we decided that the most financially wise options were to either buy a cheap 7-8 year old car in decent condition and plan to cover fairly regular repairs until we can afford an upgrade. Or to buy a reliable low mileage 1-2 year old vehicle that shouldn't need much work for a few years, and which would be just as affordable as long as we keep driving it at least 10 years. And given how very tired we are of highly used vehicles at this point, we have decided to go for the 2nd option.

We're going to save as much as we can for it until May and then get a loan for the remainder. We want to give the old one to our daughter when she comes home from college for the summer so that she will have her own vehicle to get to and from her summer job. And then we're going to pay off the car loan as fast as possible, though right now it's looking like Feb 2015 before we get there.

So that's the plan right now. Hubby is in the process of applying for new jobs that pays more though, and if one of them pans out, maybe we can even do this without a car loan. Hoping for the best!