Follow Up to New Year's Finance

I wrote about "paying yourself first" earlier this week and was asked how it had worked out for us, I realized that while I've done regular financial check-ups and reviews, I haven't taken a very long-term look at our progress.  I dug out some financial goals I had written and saved on my computer back in January 2010...I didn't have any from before 2010, mostly because I just wasn't diligent about writing them down.

Here's a summary of my goals:
1. Build a Short-Term Savings Fund to use for things like car repairs, new tires, a unexpected household expenses, etc.  This would be in a relatively easy to access savings account.

2. Build a large Emergency Fund to cover three months of living expenses.  This money would be in a Money Market Account.

3. Build a Vacation Fund to use each year.

4. Increase contributions for the kid's college accounts so we could meet our goal of covering 75% or more of our children's college tuition by the time they are 18. 

5. Increase our Retirement Savings to a targeted % of our income.

6. Increase our savings rate on our Home Fund so we could have a down payment of 30% or more by 2020.

To give you a little context, in early 2010, Soldier was deployed, Bunny Girl had just arrived (DeeDee wasn't even a daydream yet) and we'd had an expensive year since I had opted to move back home to stay with my parents during the deployment and for Bunny Girl's birth.  I had begun to realize that affording vacations was becoming more and more difficult when you're paying for more little people to tag along and those airline tickets really add when when I needed a "home fix."  We'd also had a few car surprises that year...never enjoyable!  At the time, these were pretty lofty goals.  I couldn't see putting that much of our income aside...especially that 20% number for retirement and the Home Fund. Ouch!  I remember looking at those goals back then and thinking how crazy I was for even aspiring to that.

I'd like to say that it was really easy, everything when smoothly and according to schedule but anything worth doing is never quite that easy.  I spent the first year with the "All or Nothing" approach described in the previous post.    I would get super excited about these goals and go overboard with my savings.  I paid so much to our savings account that we ended up "broke" at the end of each month. Whoops.  Then I had to pull from the savings account or float it on a credit card, both bad habits to get into.

I've spent the last two years taking a more gradual approach, making small changes to the budget each month and monitoring our spending.  The tiny, incremental changes were so much easier to absorb and maintain. I'm a big fan of auto-investing, automatic transfers to savings accounts and etc.  I need it idiot-proof.  Making small 1% or $5, $10 or $20 increases into the amount every couple of months as I could slowly added.

I didn't realize how much it had added up until I pulled out those goals from 2010 again yesterday.  Here's our progress:

2013 Status:
1. Short-Term Savings Fund: CHECK!  We made it to the goal, but since this is a short-term fund, it does end up being somewhat in flux. We keep up monthly contributions hear but don't sweat it if the balance gets a little lower because a surprise expense pops up. After all, that's why we have it! It's been very nice to have for unavoidable surprise expenses.  (WHAT? I have to buy Snow Tires in Germany??)

2. Long-Term Emergency Fund: CHECK!  We made it. However, now that our family is larger I've realized we need to increase this a big, so back to work we go!

3. Vacation Fund: Meh.  This didn't happen until about six months ago.  Part of it was a lack of motivation to save for this.  Moving to Germany and checking out the whooping $1400 ticket price per person for a visit home gave me some serious motivation.  I figured to afford one visit home each year, I would need to stash $400 a month in this account. That wasn't going to happen, so I started with $250 a month. It would offer an annual travel budget of  $3000.  Not enough to fly all of us home each year but it would be a start.  Since we found out we will not be staying in Germany long, I've cut this amount in half to free up some extra "fun money" each month for day trips so we can get the most out of our short German Adventure.

4. Increase College Contributions:  Each of our kids has a 529 plan for college.  We aren't quite at the numbers I'd like to be contributing each month, but we are steadily gaining.  I love that our investment company offers an automatic annual increase in the auto-investment amount.  I have it set for an extra $15 each January.  I have been doing that for three years and don't even notice the increase.  I've also been able to make small increases a few other times each year.  Slow n steady wins the race!

5. Increase our Retirement Savings:  YES and more!  This is a big victory for me.  About two years ago, I did some retirement calculations to figure out how much we might need in assess for retirement and figured out how far three different contributions in % would get us.  At the time, the low % (based off of recommendations from various articles/websites offering retirement planning advice and calculators) seemed a stretch for us.  I was really excited when I realized we made it to our mid-range target.  Way better than I had expected.  It was done with small changes...1% at annual pay adjustments and adding $25 to my auto-investments every couple of months. 

6. Increase our Home Fund Savings:  This was similar to the Retirement goal in that it seemed like a long-shot.  We're very indecisive about buying a house right now. It's tempting and we've heard some success stories from our Army Friends. BUT...the economy is a big question mark and we've also heard many stories of the house creating a burden when it comes time to rent or sell it.  Regardless of what we do in the interim, when Soldier gets close to retirement, we'd like to have a good amount of money to put down on a house. We don't have a ton of money saved but if we can maintain our current rate of savings for this, then we will meet our goal a year ahead of schedule.

In addition to our goals above, I also started a Christmas Fund.  I looked into the Christmas Clubs at our Credit Unions for kicks and giggles but determined that a good old fashioned savings account gave me similar returns and "no-touch-em's" effects but with the easy of moving it to a checking account when shopping time came.  This may not be for everyone, but I really felt like we needed it.   DeeDee's birthday is right before Thanksgiving, then comes Monster Boy right before Christmas and Bunny Girl on New Years Day...combine three birthdays within 60 days with the Holidays and it's can be a bit of a money hemorrhage.  This year was the first year we did this, though I had only been saving about four months. We made a concerted effort to scale back this year because we really felt like the last few years had been a bit excessive.  Between cutting back and the Christmas Fund, we had a really easy time this year.  It was really nice. As a side benefit, we discovered about $200 extra at the end of the month that we could use for charitable contributions. SWEET!

Speaking of cutting back this year...I really think part of it had to do with being in Germany.  We were totally removed from the US Commercial Onslaught of the holidays.  AFN doesn't have holiday sale ads, haha. No Target commercials, no Macy's sales, no tempting holiday displays at the mall, no pressure for last minute gift purchases, etc. Admittedly, there are commercial districts here in Germany but with three small children and living out in the boonies, we just don't go much.  We did make it to several Christmas Markets, but our purchases there were mostly small Christmas decorations and something we easily covered with funds we had allocated in our monthly budget for day trips. 

So, that's where we stand in 2013.  Overall, I'm really pleased (and a bit surprised!) with the progress we made and I'm glad I went back to look at where we were three years ago.   Sometimes, budgeting feels like a hamster wheel....lots of running and work but never getting anywhere...but this showed me that progress sneaks up.  I'm also glad for the new perspective on where to go from here!