You need to save for a debt free retirement now
This is my story and I'm sticking to it: You absolutely can save more for early retirement!
Once upon a time, there was a little girl who grew up and knew that she wanted 3 things that her mother couldn't have: a college education, a career, and the power of financial literacy.
You see, her mother was from the old country, old traditions, and in a war torn country of Vietnam where there was no financial security. I was that little girl and fast forward today, I got what I wished for, a nearly debt-free status within a few years with husband and able to retire as we see fit (we’re now 54 and 55).
"she wanted 3 things that her mother couldn't have: a college education, a career, and the power of financial literacy."
So allow me to continue with this story, I honestly don't know how long it will take, but I promise you this, I wish someone would have taken the time to impart their wisdom to me when I was in my twenties. Well, Ok, so maybe someone did, but they were financial gurus, whose books I bought and checked out from the library; but let truth be told, they were dry and boring as heck. So, if you are looking for the certified financial gurus for spreadsheets and how to pick stocks, I ain’t it. Sorry not sorry! But what I can do is share with you our S.M.A.R.T financial goals and how we were able to cashflow and put our kids through college while funding our retirement. So cozy on up in your comfy chair with a cup of tea and a lovely blanket for my wild and winding road, onward and upward, to reach financial freedom.
"I can share with you our S.M.A.R.T financial goals and how we were able to cashflow and put our kids through college while funding our retirement."
Let's rewind to the beginning where I introduced you to that little girl in that far away land of coconuts and geckos. Well, that little girl grew up and she learned nothing about money except that she loved to spend her occasional gift money from her parents for New Year’s and her good grades. Finance wasn’t discussed openly in her family, and her mother solely consulted with her oldest sister on how to make ends meet, since her father was in the battlefields or strategizing the next tactical moves in faraway outposts. When there were unexpected emergencies, her mother had to be creative with her resources or dipped into her father’s forbidden money stash with the intention to pay it back.
Let truth be told, her mother didn’t have control over many things, like being able to charge room and board to the gainfully employed step-children who lived at home, or choosing family planning options like modern women do in the First World countries. Her mother had to feed nine kids on one income. As an officer's family they had a lot of privileges and prestige but not money on fixed monthly salaries. And how could they with so many kids?
The kids grew up not learning the basics of money in their culture's practices. As a result, no money habits or lessons were be learned either from parents nor schools.
Why you need to make a smart budget as an adult
At this point in the story, please allow me to interrupt and break down the lessons learned in digestible chunks, because I loath rambling just to hear myself talk.
- Have a budget. Discuss openly with significant other to come up with a realistic and attainable budget that both parties can agree upon
- Have an emergency fund because financial emergencies do and will arise
- Teach children to be financially responsible and hold gainfully employed grown children responsible for room and board if they lived at home. Don't coddle or enable them, instead, empower them to learn about budgeting and responsible money habits.
- Make conscious choice of marriage and family planning according to your religious beliefs, but understand the financial responsibility and consequences
- Involve children with age-appropriate money lessons, and don't cross the boundary of making them carry parents’ responsibility, that's our jobs not theirs.
Why you need to have a lovely and debt free wedding
Now that we gleaned the financial lessons from the story thus far, let’s move on to the next phase of the protagonist’s journey. This little girl became a teenager, coming of age when her family fled to America as refugees in 1975. She soon got her first job in high school cleaning house for a church congregation member, and used that money to buy shoes and sewed her clothes from patterns and fabric. She later worked as a waitress during college, keeping only the tips, and giving her parents her paychecks to help with household expenses. She got married upon graduation from college, all expenses paid with the money she and her husband saved from their part-time jobs. When they left for their gifted honeymoon from her father-in-law, they had no debt from the wedding, only sore feet and sore cheek muscles from smiling too much.
Why am I laboring with these details? I’m glad you asked. While it’s extremely helpful to make a lot of money, it’s boiled down to simply this: expenses must be less than income or budgets and financial goals are shot in the long run. That’s not rocket science you say, and I agree, so the bottomline is that they had a budget, and they stayed within the range. They lived within their means and didn’t borrow from their credit cards to have an extravagant wedding that they couldn’t afford.
You absolutely should reclaim your happiness now with less
Again, let's capture the lessons learned from the story so far:
- Work Ethics. A part-time job in high school and college where earning money is only a part of the fun, the other extremely important lesson is developing a solid life long work ethics, accountability, and integrity. (During my management years in private and government sectors, I witnessed mediocrity from lack of work ethics and accountability, and yet the same staff bristled at the constructive coaching and performance reviews.) Young adults need to learn their soft skills earlier on in their lives such as being punctual, or getting to work 5 minutes early, cleanly groomed, wearing appropriate attires, and speaking respectfully to all levels of business hierarchy.
- Set saving goals and strategies. Goals are the end results such as paying for a wedding, student loan, first home, kids’ college savings, retirement, older parents care, vacation, or a car. Strategies are the “hows”, the means to get to the end goals. Will I need to take a part-time job, eat out less, own an older car? In another word, think of our end goals as our travel destination, say Palm Springs, and strategies are our “hows”, such as, will we drive our car, or a rental? will we fly? will we stay in hotels? will we plan our route with paper maps or do we use Google map?
- Live within our means. Create a budget and list all incomes versus savings goals and bills. To be successful, keep a daily running tab using an app of our choice, on spreadsheet, or on paper. This is where the financial gurus are your best friends and can provide advice and methods with authority. However, what I can offer is a roundup of crowdsourced testimonials of “real” women and their favorite apps for tracking and keeping their budgets. Please read them at the end of this story.
Why you need to have crazy SMART savings goals
Let's pick up our story where we left off. After returning from their honeymoon, this young couple penned out their rent and utilities, car payment, student loans, food and miscellaneous to be paid by their paychecks from her full-time and his part-time jobs from their newly joint account. They put all of his tips in their “Red-Slave” fund for relocation to the wine country for his career in Enology & Viticulture. They had a tight budget so she took a calculator and a grocery list overtime she went shopping. As a result, the saved their first thousand dollars in 1984. They were in love and excited about starting their new life together, exploring new territory, so staying disciplined to reach their saving goals was their short-term sacrifice for long-term gains. Even though the young couple didn't know it at the time, they were practicing their S.M.A.R.T goals setting strategy.
- S is Specific: Relocation Fund
- M is Measurable: $1000
- A is Attainable: Having saved successfully for their wedding, they had a good idea that their saving goal was realistic
- R is Relevant and result oriented: Aligned with our career goal to relocate to the wine country
- T is Time-bound: Achieved by December 1984 for relocation in January 1985. They had eight months to reach their goal to relocate upon his graduation from college
Learn how to be happy with less and save more as a team
Lessons Learned - Couple Budget Differences: We always talk about Teamwork at the workplace right? Well, teamwork with our partner or spouse is just as important if not more. So why not treat our financial partnership like any financial transaction with a written "contract" or a roadmap so everyone is on the same page right from the beginning. Bring in a healthy ready-to-bake pizza or throw together a nice chicken salad and sit down with a beer to go over your lifelong plan.
That was exactly what this young couple did. It was the first time that they talked and opened joint checking and savings accounts, but it was a natural transition since neither had much money to worry about who's getting the short end of the stick. They started their life together with $80 in the bank so they were eager to pool their resources to reach their financial goals. There were times that they disagreed with an expenditure and arguments ensued with hurt feelings and silent treatment from the sulking wife, but that didn't last when they sat down to review their goals and that expenditure didn’t fit in, so they got nixed.
There were times that they disagreed with an expenditure ... but that didn't last when they sat down to review their goals and that expenditure didn’t fit in, so they got nixed.
- There were times the checking account couldn’t be balanced because some receipts were not kept nor recorded, or when one of them spent more than their allowance, more arguments and hurt feelings, so they sat down at the kitchen table again and figured it out. They devised an allowance range and neither had to answer to the other one on what or how they spent their money, or why they went over by fifty bucks. As their salaries increased, they devised a larger household budget that was more sustainable, and allowed them to get much needed household items and some entertainment budget so they wouldn’t be tempted to commit a spending binge. It took trial and errors and a lot of corrections along the way, but they always had their agreed upon financial goals as their beacon. Their best secret sauce is loving, kindness and daily communication.
The story will continue in the next chapter but I will leave you with my crowd sourced budgeting apps that some users swore by. Their names are omitted for their privacy but their testimonials are unedited. My questions was posted in an online forum of professional women, some of whom taught Dave Ramsey’s Financial classes.
BUDGETING APPS Users Recommended:
- EVERYDOLLAR.COM LOVE this one!
- MINT.COM "I use mint for my personalbudgeting and love it! Definitely not a financial expert, but thought I would share anyways! 2 years! Works like a charm! Super easy to use and it's very visual with charts and graphs which is really helpful for me as well!"
- MINT.COM "We use and love it! We've been using it for years! It's super user friendly and links to your bank accounts. The only thing I will say, is that it takes some time to categorize everything. But be patient! It is a fantastic tool."
- MINT.COM "I use mint as well. Been using it for two or three years and it works the best. Other times I use a good ole pen and piece of paper"
- YOUNEEDABUDGET.COM "is amazing!"
- YOUNEEDABUDGET.COM "I've been using it for well over a year, they help you create a budget down to zero. It's like using the envelope system, but electronically. Completely user friendly, great tutorials and their support is amazing. They have a 34 day free trial (random, I know) after that is $5 a month. If you are a student you get it free for a year"
- YOUNEEDABUDGET.COM "I use YNAB and LOVE it!!! Before I struggled a LOT with managing my money (and racked up 5k in credit card debt) but YNAB helped me see where my money was going. I managed to pay off 17k in 2 years thanks to YNAB!"
- YOUNEEDABUDGET.COM "YNAB all the freaking way. Three years and get in the habit of tracking your spending everyday."
- YOUNEEDABUDGET.COM "I've heard great things about YNAB!
- I do personal budget and tracking in Excel. I don't use categories or anything, just a big general spreadsheet."