Congratulations, it's a... Budget!

 Over the last few years, I have had a lot change in my life. I am starting to feel comfortable going through the normal ebbs and flows of life. However, the biggest change to my financial life during those times is the addition of new children to my life. These kids are amazing and it has been such a rewarding experience. 

With new life situations, there is a need to update your financial goals and how you can achieve them. 

College?

College is expensive. Most people my age are still battling with college debt. I was part of the fortunate few to not have any student loans when leaving college, due in part to a scholarship. For my kids, my family is prioritizing now their college expenses and saving money in a 529. 

The 529 is a great vehicle to put money away for college. First, it is tax deductible, meaning it helps to reduce your total income. Second, it is transferrable. Finally, there is a broad definition of education costs, which can include rent payments and book purchases. 

Like anything, it is good to set a goal for yourself. Do you want to afford an Ivy League school? Do you want to pay for public university? Answering these questions will help you formulate how much you need to save now to be able to pay for college later. Compound interest is just as much of a friend here as it is your retirement. 

I highly recommend starting as soon as you can. Being able to put in money now, means less I need to pay when the bill arrives.

For my budget, I have a set amount of money that is put away each month and it gets put into a managed account. No fuss, no worries, and it has performed decently. If you are wanting a no fuss solution and need to pick individual stocks, a market index fund like VOO (S&P), ITOT (Russell 3000), or QQQ (Nasdaq) are all good options. 

Diapers cost what?

Adding a new family member brings new costs. You are trying to provide a whole new person with clothes, food, and health care. Diapers are expensive and are needed for 2-3 years of life. This is one of the largest recurring costs to your budget. I found it is best to leverage subscription services (like Amazon) for diapers since you will have a good idea of how many diapers are used each month. It is best to set this up after the first 3 months of life. Babies are too unpredictable until then.  I also got a Target Debit RedCard. This is a normal debit card that can give you 5% off all Target purchases. 

Another large purchase you will make is in books, clothes, and toys. If you have family that are looking to buy you things for the new baby, have them buy a variety of clothes based on seasons through Newborn to 6 months. This will give you a good foundation to start with. A great tip we found was to use a resale store or garage sales. Since babies grow so fast, many clothes in these type of stores are gently used, if at all. 

Be Proactive

Just like with your own expenses, it is important to think about the future of your kids expenses. Do you foresee having to go to the doctor a lot? Do you want to go on a family trip with your new baby? Understanding what you want to do ahead of time gives you motivation to save for these trips and time to budget in the expected costs, such as hotels, souvenirs, and that last minute purchase.

Money in a Pinch

One important component for any person is having an emergency fund. Experts recommend having approximately 6 months worth of expenses saved up in case of loss in income for an extended time.

I find this a good number to have because it builds up your savings as well.  While I am constantly putting money into my savings, I have found more uses for my emergency fund besides protecting against job loss. 

1) Car Breakdown

Just your luck. Your car decides it needs to breakdown at the most worst time. After you kick your car, it has to be fixed. When the mechanic says the costs are $2,000, you will freak out but in the end your emergency fund is there to help you out. 

2) The Once In a Lifetime

Every now and then, there is an expense you just have to have. It is a one time opportunity to experience something unique and once in a lifetime. I recommend taking a hard look at if to determine if it is still the right investment for you, but do not pass up great life experiences. Your emergency fund can be there to provide you with necessary dollars. It is important to recoup the funds so if a real emergency happens the money is available.

The emergency fund provides me with a peace of mind. I know I may not be happy with paying a certain amount of money out, but in the end of the day, I will be able to continue my life and standard of living because I have my emergency fund.

As with most financial goals, you have to be determined and disciplined to fund your emergency account.

Spending Money to Make Money, Smartly

The phrase, 'Spend money to make money is commonly heard by people.  Personally, I am not very fond of the phrase because it is applied across the board when it only has specific applications.

Where it applies

This phrase is great for preventative investments. For example, it is important to spend money on the maintenance of your home because the $20 for the part you do not want to replace as cheaper than the $2,000 to fix the entire system. This can be helpful in maintaining your health as well. Is the gym membership worth your time and money instead of a trip to the hospital? 

Where it does not apply

This is where you have to get careful. Spending money to make money could leave you with just less money. Buying the new and flashy piece of furniture may give you good speaking power with your firends, but you may be able to find just as good of an item at Goodwill or a yard sale. I find this trade-off in the amount of money you spend can have health benefits as well. If you buy a $800 couch and it gets ruined in a year or two, I know I would be upset. However if I spent $200 on a couch from a garage sale, I would think I was able to recoup some of the cost. 

How can I tell the difference

Having perspective is the most important factor in deciding if the saying applies or not. I like to think about a financial measure called Return on Investment (ROI). Basically, it means how much value am I getting out of this investment than if I spent it elsewhere. Experts have stated experiences are worth more than buying the item in the store you have been eyeing. Go on a small road trip instead of buying the shiny new electronic device. When it comes to spending money, think of all the hard work you put in to get the money. If you are able to purchase smart investments, you will have a lot of value in your life and end up wealthier.

Please remember my opinions are my own.

Finding Balance in Your Budget

Learning to balance your budget is an important thing.

One issue I have run into recently is how to best utilizing my coveted dollars into good use. I have certain accounts in place for my necessities and my play, but I have been asking the questions for great unknowns in my life.

Am I setting myself up for my future goals?

Here are some of my goals:

- buy a house

- have children

- delve into hobbies

- retire comfortably

The question I have been asking myself is whether or not my current savings and dollar utilizations are adequate for these goals. My current financial situation is quite comfortable. I am able to afford my residency and have the ability to spend my money on pleasurable items, like going out to eat. I am saving a decent amount of money for a future down payment, so I feel comfortable in buying a house dow the line. Hobbies come and go and I feel I am able to accomplish those goals. In retirement, I am setting money aside through my company and a personal IRA.

Children, however, feel like a great unknown in my life. People have stressed the financial 'burden' of having a child. I see having children as an exciting time, but to what extent does it take to feel financially comfortable paying for college, diapers, and toys.

Overall though, I feel it is important to gain perspective on each endevour you wish to pursue. Whether it is contacting an expect or talking to your parents, people with experience can provide a lot of knowledge for you to better understand how to achieve your goals. In fact, they may be able to provide ideas on how they started a similar goal. This could help propel you to follow a similar path. I am a true believer talking with people about goals can help to shorten your time to achieve a goal by avoiding the most common pitfalls that come with each new experience.

In a dollars and cents view, you have to take a good look at your expenses and evaluate how each purchase you make is necessary or desirable for your future. Now, you may have enough money where it may not be difficult to take on a new experience. Many people buy a house and pay a very similar payment each month when they rented. 

Another factor I had not considered early in my theoretical spending solutions was the fact I would be earning more income in the future. While prices will also go up, it is most likely I will have a higher income and can better accommodate new expenses. 

For now, I am left with more complications on what to do with my life. 

Millenials Are Ripe For Leadership

This week I have been spending a lot of time thinking about how there is a shift from what has been 'traditional' leadership/strategy to the ever-changing world of the current economy.

Currently, I feel most companies are trying to keep their traditional hierarchies of leadership in order to please their tenured employees. Rightfully, they should. However, more often than not, these companies are falling prey to losing out on the new, young talent necessary to be competitive over the next 20-30 years.

Millenials are looking to make a change. They flock to cities where driving is not required, where innovation happens, and where change is possible. I am not saying all Millenials need to be promoted to leadership positions, far from it. I am saying it is necessary for employers to recognize the need for change to happen. Traditional leadership structures need to change.

Our generation is here to rewrite the rules for corporate America. Recognize what we are on the cusp of doing for the world or we will go elsewhere. Fail to make the shift, and we will go elsewhere. Companies can preach they are changing. Companies can say they need to look at how their prized young talent are already shifted to the needs of the future.

However until we are recognized with the appropriate rewards, the company might as well see us as just another number. 

Personally, I do not know if I am destined towards a leadership role, I hope to be, but I do know each and every employer out there has to come to grips with the fact there are prized talent at the bottom of your ranks aching to achieve something disruptive to make the company more competitive for the future. 

The financial crisis is behind us, anyone who says differently needs to study some  balance sheets. For six years, Millenials have fought for a job and a career. It is time corporate America takes notice of the great possibilities which exist in this generation and start to reward them. The companies that have done this are already names who stand out in this market. I am talking more than just the large tech firms. These companies have shifted to offer better benefits for their employees, such as rewards for being healthy and time off for a new child. These are the competitors in the new market. These are the companies Millenials will want to work for. These are the companies Millenials will buy from and continue to provide with their business.

Our generation will make a bigger impact on society than the Boomers did. Some 'foundational' companies will topple because of it. Others will rise to greater heights. 

Millenials are here to make a difference. Make sure you give us a shot.

Your Financial Family Tree

While most of us would hate to admit this, most people imitate our parents. Our financial decisions are, in fact, heavily influenced by what our parents did. From the way we think about money to how it is spent, money is spent in a way similar to how we saw money flow when we were younger.

Weighing Your Options

America is a fortunate place. A standard job earning $50,000 over 40 years without increase in salary would yield $2 million dollars. The big question in your life is what to do with the hard-earned money.

How Small Changes Have Life Changing Effects

Every New Year, people across the country take time to reflect on what lays behind them and turn to what is ahead of them. Every year is a smaller amount of time we have left in this world, but it is also an opportunity to use what we have learned.

5 Tips to Keep Holiday Stress to a Minimum

Since it was very near Christmas, I wanted to provide everyone with some tips for the Holiday Shopping Season.

The Four R's: Reading, Writing, Arithmetic, and Rich

In the current state of the U.S. financial structure, there is an important education that is being lost to children in schools today. This education is financial literacy. Wikipedia describes financial literacy as 'the ability to understand how money works in the world: how someone manages to earn or make it, how that person manages it, how he/she invests it (turn it into more) and how that person donates it to help others.' Currently, the education system in America teaches children how to balance a checkbook and create a budget. However, this does not provide the skills necessary to manage a successful amount of money.

Why It Pays to be Social

One of the best ways to learn about new ways to manage your money is through books. For most people, this can be a time consuming task. However in the information age, we have access to an even better resource, the authors themselves. Thanks to companies like Facebook but especially Twitter, these authors are able to convey daily messages to people that revolve around their books. This an amazing and often untapped advice.

Money Worth Its Weight in Gold

One thing that I do not think a lot of people consider is how your money has to ability to work for you. As people get older, people hope to have more and more income. Personally, I think it would be awesome to have an income of $500,000.

In order to achieve this dream, I need to have a larger income. My initial reaction was that I would need to work 60 hours a week in order to reach this goal. However the more and more I thought about it, I realized that I would not be able to sustain this for very long. I want to spend my life with my wife and (hopefully) future children. Instead, I need to have someone else working for me. This conclusion led me to think about starting my own business. However, I am not the next Steve Jobs (yet).

Finding Meaning in Your Money

I wanted to do a post on money management today as it has been something that I have been thinking about lately.

Being a young professional, I have always heard that it is important to follow a budget. However, what does a budget really do for you? Sure, there are some positive consequences of making a budget. Some of the obvious consequences are the ability to see where you are spending the most money, spend less money, and make sure that you do not spend more than you earn. All of these are good things but after a couple months of following this budget structure left me feeling hallow.