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Inspired Investing

I was thinking about a post I did on Index Funds a couple days ago. I made mention of how much you would have saved if you invested $1,000 30 years ago, and subsequently invested $1,000 each year. (As a reminder, that amount was $260k.) Of course, that is at 12% average annual interest, which as been the historical average for Index Funds. So, you are probably thinking “why in the world is she bringing this up?”

Here’s why… I’ve talked about starting small many times, I do over and over again with friends and family, really anyone who will listen. I truly believe that starting, and if that means small, is the hardest part. I could have used a number much larger than $1,000, but I didn’t for a reason. The average annual salary in the US is $40,000, so you will find me using that amount quite often. $1,000 is 2.5% of that salary. $1,000 broken out over 52 weeks = $19.23. If stashing away $19.23 per week is too steep, lets look at stashing away $10/week. If you decided today that you were going to open up an automated fund and put in $10/week. Let’s also say that you are 40, expect to work until you are 70, and are going to budget for 25 years in retirement.

This works out to $520 stashed away annually. If you get a 12% return rate, after 30 years, that would be $140,500 (roughly.) Broken down further and not taking into account the interest you will gain even after you’ve entered retirement, that $10 investment would become an extra $468/month you could draw to help cover living expenses (you’ve essentially turned $10 into over $100.) Now, lets say you COULD find and extra $20/week to stash away. That number then becomes $260k. That $468 becomes $867 (or you turn $20 into over $200/week.)

Imagine if this amount is $50 or $100. When I start playing with the numbers, I get so inspired. I love to think of all that can be, all of the possibilities that discipline and a continued focus on making the right choices. To steal from the jist of a recent Suze Orman blog, is a daily latte worth the freedom you are not allowing your future self to have? And, of course it could be anything – if you are not a coffee drinker, maybe it’s the daily lunches out when you could save by brown bagging it. You got this! <3 Bobbi

FYI – Suze Orman’s Blog:

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The Saturday Quiet

As I write this, I’m enjoying a cup of coffee in my favorite chair in my living room. It’s still a bit dark and I’ve already taken the dog out and fed her, so she’s laying quietly at near my feet. In the background I hear my boys (mostly) getting along. The older one is reading to the younger one, from time to time the younger one interjects and frustrates the older one, causing a mini-argument.

I remember long ago, it seems, how much I used to love Saturday mornings. The quiet. The time to be in my thoughts, read, plan for the upcoming week, figure out which friends I’d hang out with during the weekend. Now, we juggle work, oil changes, kid play dates, and overall, planning kid-stuff seems to trump planning adult stuff. I’m OK with it, it’s fun and it’s an exciting time in our lives. Our boys are young enough to still love us, not be annoyed by the silly things we do, and they look forward to everything. Whether it is going out to our local kid-friendly-until-8pm-bar for dinner, or planning a trip out of town for a weekend, it’s all met with excitement. As I reflect, I know that excitement is something that I can use a bit more of. Instead of just doing, being excited that I get to do.

Those reminders of excitement bring me to gratefulness. In many blogs I read, I am met with reminders of being grateful. Even with the busy weekend I’m beginning to impart, I’m grateful that I get to have a busy weekend. I know that the time with by boys in this time and space will be fleeting, just like the first 8 years have been. I’ve taken a leap. For the past couple of years I’ve had a part-time job. This part-time job hasn’t amounted to a lot in terms of income, as I average 10 hours a week, but I always looked at it as my “outlet.” It helped my boys become closer to their father. It allowed me to feel closer to an industry that I’m slowly becoming disconnected. Earlier this week I was met with tears when my oldest son realized that I wouldn’t be home that evening until after his bedtime. I then realized it was time. My “fun” part-time job was starting to make me feel stretched. Stretched between home and something else. Stretched between enjoyment and resentment. So, I put in my notice.

My husband and I talked about re-jiggering our budget so we stay on track for our goals. We will miss the extra little paycheck, but I don’t know that it was enough for the stress being away has started to provide. I find myself giving up volunteer efforts because of my “fun” part-time job, adding up all of the time away from home. I want to show my children the joy of giving back and being part of a community. However, lately when those opportunities have come up, I’ve been so tired (did I mention that I have a very busy full-time job, too?) that I’ve passed on them.

So, in my reflection this Saturday morning. I’m breathing. Knowing I’m doing the right thing. That feeling guilty because I’m leaving a store when it is already short-staffed is OK for my own sanity. That time is more valuable than money. And, that everything works out in the end. <3 Bobbi

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Creating a bucket target is one of the easiest ways to start budgeting. I mentioned previously about creating your “Need to Have” bucket and your “Want to Have ” bucket. In each of those buckets are things that naturally fall into the categories. Housing, transportation, groceries, utilities, loan/credit card payments all fall into this category. The amount you allocate into this area depends on what your goals are and what your lifestyle is.

These allocations can change as you move towards reaching your goals. For example, a few years ago, I was in the beginning stages of closing a business, for which I had taken out debt against. I was paying those debts down, along with two children in full-time daycare. Thankfully, I had a husband whose income was supplementing mine as we were both working full-time. We were able to make it work, even though there were times when we thought bankruptcy would be the easier way out. We stuck it through and are at the point now where we can see the light at the end of the tunnel. Of course, the light is simply because of being consistent with spending and an eye to the future. Even when things were tight, we were saving. As our incomes have grown and the bills have gotten smaller, we have tried to stay on the budget we had when things were tight. We’ve shifted the bills we pay to savings and taking care of other debts, like our mortgage. Paying off our mortgage means freedom to us, so for us that is a priority. For others, paying off a mortgage may not make sense or even be reasonable. I get that, which is why I even bring it up. I want to help you on YOUR path. My path is my path, I’m simply here to help you find what makes sense to you. From time to time I will bring up examples and stories of my own journey, but please do not take that as baked-in-stone advice.

So, back to the bucket allocations. Below is a simple tool that can help you get on top of where your money is going. Budgets do not have to be complex, they are simply helping you analyze where you want to spend the money you work so hard for. I’m linking this Excel spreadsheet on my website so you can try it out if you choose. To use the spreadsheet, simply fill in your information, target %, and the items that fall into your buckets. Even if things are tight, always remember to budget something in your “Want to Have” bucket, otherwise you will feel far too restricted. I always recommend targeting the “left over” amounts to push towards savings. This helps when you have expenses that haven’t been budgeted. In the example below, I indicate there is a car/car insurance, however there isn’t a budget for monthly maintenance, that needs to come from somewhere, preferably not a credit card. Using a budget like the one below pays down debt without incurring more, while encouraging savings to help when the unexpected happens.

Good luck. Give it a try, even if this isn’t the right budget format for you, you may find that it puts you in the frame of mind to start taking control of your financial life. If you have any questions, please don’t hesitate to reach out.

Thank you for coming along with me on this journey – <3 bobbi