Whew, life is crazy lately and we are looking forward to getting through this week and into the holidays. We're also spending a bit more on Christmas than we had anticipated, womp womp. But in better news: Kelsey got a 4% raise!
An awesome listener question has us revisiting our goal to pay off the mortgage and drives home the benefit of being honest about your personal finances. This also launches us into a more philosophical conversation about what it means to lead a fulfilling life and how getting your finances in order can enable that kind of life.
This episode brought to you by cough drops and sick days from work, ugh. But even when we're sick we love to talk personal finances.
In our money, Christmas spending is upon us! We have budgeted $500 for Christmas including gifts, Christmas cards and a Christmas tree. We're already $120 in, we hope we can stick to it! We also wax on our love of living with less stuff which has been life-changing for us.
Several listeners have asked about saving to help your kid's pay for college so we share our strategy. We have 529 accounts set up for each child (we chose the Arizona plans but as a U.S. resident you can choose any state's plan, it does not restrict the schools where the money can be used). We chose the 529 because of the tax advantages (we an write off our contributions and withdrawals from the accounts for qualifying educational expenses do not incur a tax) and because it is easy for relatives to contribute, if they are so inclined. We are not contributing much to college savings at this time because we are saving up to pay off our mortgage. But once we save up and pay off our mortgage we will turn our attention to saving for college.
Our children are sleeping! Kelsey is podcasting at work! Chris sold his side business and made zero dollars! In other news, our full work calendars have us buying lunch and coffee out way too much – shut it down!
We also share some advice for getting a budget started. Budgets can seem stressful but are, in fact, a helpful and powerful tool. A budget puts you in control of your money because you can track where your money goes, and you can identify areas for improvement (such as increasing savings, or cutting down on certain expenses). We use a budget in an Excel spreadsheet (see our budget here) along with Mint to track our money. We've also heard good things about the You Need A Budget software, but haven't tried it yet ourselves.
We are big proponents of making financial goals and working with your partner to achieve them. It might be saving for a down payment on a house, paying off a debt or something smaller like spending less on coffee (not to name names…). As you work toward your goal, celebrate along the way. We've found it to be a powerful tactic to keep us motivated as we work to accomplish a financial goal.
A listener asked a great question about what advice we would give our younger selves. We said:
Save like CRAZY! You'll never be so flexible as you are when you are young (and pre-kids) so sock away as much cash as you can.
Don't buy a house with a notion of a "starter home". Buy the best quality house that you can while keeping the mortgage payment as low as possible and plan to stay.
Happy November, friends! We are excited to share a new feature of the show. We invited interested listeners to submit some information along with money-related questions. We plan to occasionally feature listener profiles and share our advice for these listeners on the show. So if you're interested please use this form to submit your info. Thanks!
In this episode we discuss the very sad state of sleep in our household. But at least life hasn't been too busy lately and we have a super fun date night to look forward to: Book of Mormon with friends!
In money talk we give an update on our progress towards saving up to pay off our mortgage. We're at $17,300 and hope to make $20,000 by the end of the year. And just a reminder, we are investing that savings in a Vanguard total stock market index fund. The specific fund is VTSAX, which has a $10,000 minimum. A similar, alternative account with no minimum is VTSMX.
We answer a listener question about our process for deciding to have two working parents. Of course, this is not a financial decision alone and each family situation is unique. But here's a summary of what went into our decision: the fulfillment of our jobs was a big factor along with financial benefits in the short-term and long-term, and living near/being after to afford excellent childcare. Currently we pay about $2,000/month for childcare for two young children and Kelsey takes home $2,800. Because Chris has always earned more and been in a tenure-track or tenured university position we never considered a situation in which Chris would leave his job and stay home full-time. At face value that may seem like it does not make financial sense for Kelsey to be working but there are other financial benefits such as health insurance, dental insurance and a great retirement match (Kelsey and her employer both contribute 7% to her retirement account).
And in one big thing, how love is like the stock market: when things are tough is the best time to invest.
On the show, we occasionally have a featured listener and give our advice about their financial situation. These are more in-depth than our typical listener questions and in order to give our best advice we like to know a bit about the listener’s unique financial situation. If you’d like to take our relationship to the next level by sharing a bit about your financial situation we’d love to consider you as our next featured listener. Please use the form below to submit information as well as your questions for us.
Answer the questions below to the best of your ability. Of course, you are free to skip any questions you care not to answer, but the more complete information we have, the better we can address your situation. We will follow up with you via email and if we’d like to feature you on the show we will ask whether you’d like to be mentioned by name or anonymously. Thanks!
It’s cool enough to sip tea but it’s throwing Chris off his podcast game. We talk about Chris’s recent trip to Austin, Kelsey’s weekend managing the tots (which included an update to our gallery wall, below) and the spa vacation that Kelsey deserves in the near future.
We combine our money talk and listener questions and start off with a clarification on our strategy for paying off our mortgage early. Our strategy is this: each month we put $1,000 or more into a Vanguard index fund. We plan to continue to save money into this account and then pay off our mortgage with this money in one fell swoop in about five years. We are doing this instead of making extra mortgage payments each month because we expect the money in our index fund to earn better interest than our mortgage interest rate (4%).
We also answer a listener question about saving and budgeting for spending around holidays and for gifts. This is something we have been working on and we’ve had disagreements about it! We now budget about $100 per month or $1,200 per year for birthday gifts, Christmas and holidays. We don’t find that we spend much on holiday decor each year so this budget really goes to gifts and Christmas gifts.
In One Big Thing, Chris is loving Mugglecast and is looking forward to speaking along side Peter Singer. Kelsey is loving the slightly cooler weather.
A recent weekend trip to the mountains was a perfect getaway and included taking our boys to a bar and a magical drive home. In sleeping news our toddler is now sleeping past 5 AM – what is happening?! All the hoorays. Also, Chris is pondering eliminating all coffee from his life and might want Kelsey to join him. None of the hoorays.
We check in on our money, which is under control and humming along. To try to save money Kelsey tried out getting a cheap haircut and we ponder the possibility of traveling to New Zealand during Chris's sabbatical next year.
A listener wrote in with a great question about whether earning potential influenced our career choices. So we take a quick stroll down memory lane to tell the stories of how we each came to have the jobs we do. In short, we each did think that by earning advanced degrees we would position ourselves to eventually have good jobs and hopefully good pay but we chose fields of study and jobs that truly interested us without much thought to the financial ramifications.
Chris tried to rename One Big Thing to something much different and has toddlertopia on the brain; Kelsey is excited for her mom to visit!
We went on a coffee date! We also recap Chris's birthday celebrations, which did not include Kelsey's present since apparently she didn't actually place the order. But when it does arrive, it'll be the best boxers ever (which have earned the Dr. Wharton seal of approval). The cardamom cake was awesome; we highly recommend it (we made it without the strawberry filling).
In money talk we're keeping an eye on our cash flow now that our daycare bill is being debited weekly. And instead of spending $600 on a new iPhone, Kelsey spent $0 and got her phone camera cleaned (at BatteriesPlus), woo hoo!
We answer a listener question about how we're saving for retirement. Chris shares his method for retirement planning which includes projecting our income and cost of living during post-working years. Chris's method includes:
+ Estimating monthly income from retirement accounts + Social Security. Weused calculators available on the websites of our retirement accounts and activated an account with the Social Security Administration, which provides benefits estimates based on your earnings.
+ Estimating monthly cost of living in retirement. We based this on our current expenses (minus our mortgage and daycare expenses since we will not have these in retirement) and accounted for inflation at 3% annually.
+ Comparing monthly retirement income versus monthly cost of living in retirement. We're looking OK but the cost of putting two kids through college will be a factor in how early we can retire.
In One Big Thing Kelsey is thinking a lot about bacteria and dietary fiber after reading Gut and The Good Gut. Chris is thinking about the power of social networks, both good and bad.
We reflect on how we’re doing on getting into a school year routine so far (dishes front: good; coffee date front: not so good). Kelsey is eager for fall weather but all Chris wants to talk about is his birthday.
In money talk, we look back at August, as tracked in Mint, and reveal how we did at sticking to our budgets. We had wins and losses. For those of you who love to break it down graphically, here’s what our August spending looked like:
We budget a total of $6,100 for our expenses each month but in August we spent $6,800, womp womp. We had overages in the categories of childcare, home repairs and car repairs although we did well on our entertainment spending (a challenge for us!). We also determined that our coffee habit is the gateway for unnecessary spending and we need to do some soul searching about it. Overall, our spending resulted in not being able to save as much last month.
And we’ve got our current budget to share with you! Find it on our Resources page.
We also give some more context to our advice that you probably don’t need a financial planner. First, let us say that for some people a financial planner could be a great resource. This might be if you have overly complex finances (many rental properties, self-employed, are so intimidated by your finances you don’t know where to start or you are preparing to retire soon and draw down your investments).
If you do plan to see a financial advisor we recommend choosing someone who does not work for a large investment firm and therefore will be more likely to evaluate your finances objectively with your goals in mind and not push a pre-determined investment strategy or products. And be sure to choose a fee-only advisor and not fee-based advisor. Fee-only means you will pay a flat fee.
We have gotten by without a financial advisor following these steps:
Identify life goals and the financial strategies to support those goals.
Increase income (only partly under our control, such as raises and changing jobs).
Drastically reducing expenses (nearly completely under our control). This is where we have done a lot of work. We discuss several of the ways – big and small – that we have decreased our living expenses in episode 3.
To determine where and how to invest our money we did lots of reading and research and determined that Vanguard investment accounts are the right choice for us (low fees and perform well). We invest in an index fund, which means that the fund is a diverse portfolio of stocks, is not actively managed and tracks with the stock market (goes both up and down with the stock market).
We close the show with Chris reflecting on the philosophy of creating more value than you take in and both of us getting emotional about how fast our boys are growing.
If you are in the United States, happy Labor Day! We hope you have the day off and are relaxing, perhaps by budgeting and finding new ways to save.
We're heading back into our school year routine which will hopefully include weekly coffee dates and a clean kitchen. Chris reveals his trick for convincing his students that he's brilliant and our baby has been super cute this week.
In money discussions, we give some details of our budget including our monthly income, biggest expenses and where we've found big savings.
Several listeners have asked how to balance saving versus paying down debt versus retirement contributions.
To support these goals our financial approach has been:
Step 1. Build some emergency savings. Which Kelsey occasionally refers to as a peaceful cushion of cash. We used to maintain an emergency savings of living expenses for 3 – 6 months, but with Chris getting tenure in 2013 we've felt comfortable with just a couple months' worth.
Step 2.Eliminate expenses. For us this has included a mix of big and small savings. We've found big savings by refinancing our mortgage, being a one-car family and paying off one of our student loans. Smaller savings have come from switching our cell phones to an MVNO (we use a company that isn't taking new residential customers at this time, but check out Republic Wireless), not having cable and not using paper products in the kitchen, among other things.
Step 3. Invest. Debt reduction versus savings can be a tough decision. It depends on goals, but comparing what you’d lose to interest on debt payments vs what you’d gain on returns with investments can help answer that question in a lot of cases. We strategically reduced debt to start and since have gone to town on investing.
