Do You Know Where Your Money Is?

It’s the end of the first quarter of 2024 and I just completed my weekly, monthly, and quarterly budget updates and snapshot.

Money and finance, particularly as they apply to women, has been heavy on my heart ever since I was a 27-year-old college graduate facing bankruptcy. I was smart, so I know that my predicament had nothing to do with intelligence. It did, however, have everything to do with misinformation, noninformation, and bad financial habits.

In the last 13 years, I have studied personal finance voraciously and created some pretty impeccable money habits. I want to focus on the word habit, because this is where we discover the first myth of money.

Myth: You have to have money to make money.

No, no, no, no, a million times NO! To create wealth, you have to have excellent money habits, no more, no less. These habits include: creating an annual and monthly budget and logging your expenses in each budget category. That’s it. If you do those 2 things: create a budget and monitor expenses, you can build amazing amounts of wealth. Neither of these require money to accomplish. 

Peter Drucker once said, “What gets measured, gets managed.” Are you measuring your money? Do you know the status of your finances? Is there accountability and transparency in your family’s finances? Do you know where your money is?

When I was in college, my dad wasn’t keeping a job consistently. However, there was not transparency and accountability in my parent’s finances. My dad stopped making car payments and mortgage payments. One of the cars got repossessed and when my parents sold our two-story house in Coppell, Tx, they did not receive any profits because there was not any equity.

Even though my father was once a high-paid commercial real estate attorney, my parents still had to declare bankruptcy. Making a lot of money did not fix their money problems. What my dad did was wrong, but what about my mom? Is closing our eyes, crossing our fingers, and hoping that our Prince Charming pays the bills the way to achieve financial freedom?

In my experience, women are at a disadvantage when it comes to finance. We are more likely to say, “Oh, I’m not good at math.” We are more likely to take extended time away from our careers when we have children. It is likely that we will make less money than our male counterparts, meaning that our social security contributions and 401K match will be lower. We are more likely to use retirement funds for the health of ailing spouses and then outlive that spouse but not have the money or the financial acumen to maintain a wealthy lifestyle. Ladies, these are real problems that we need to face NOW, not later!

I’ve been listening to a lot of Dave Ramsey lately, and if you haven’t listened to him, you should at least become familiar with his 7 Baby Steps.

Save $1000 in a beginner emergency fund.

Do you have an emergency fund!? Emergencies will happen! The A/C will die. You will get a flat tire. Your children will have cavities and need fillings. Emergencies will happen. The question is, are you prepared for them?

I had this step completed even before my husband and I got married. Now that we have two incomes, this is even easier. 

Pay off all debt – except your house.

Do you know how much debt you have? Do you have a plan for getting out of debt? Do you have a budget and know what your monthly expenses are so that you can avoid taking on more debt?

My husband and I had debts when we got married. However, we will be making our last payment on an active credit card in June. We are using the snowball effect and will be done paying off other consumer and medical debt 1 year from today. We know exactly how much debt we have, and we have a solid plan to have it paid off quickly. Also, none of our debt, except for our mortgage, is currently earning interest.

Save 3-6 months of expenses for emergencies.

Do you know what your target number is? How much would you need to survive for 3-6 months if you lost your job or became unable to work? Life will happen. Are you going to prepare for it or just wish for the best?

My husband and I are very close to completion with baby step 3. We know what our target number is and we know what we need to do each month to get there. We have peace of mind knowing that if either of us lost our jobs or was unable to work, or there was some other emergency, we have the cushion that “changes emergencies into inconveniences”

Invest 15% of your income for retirement. 

Do you know how much 15% of your income is? What is your target number? What accounts will you be contributing to in order to hit this number? Which types of investments?

My husband has been brilliant in this regard. Every year when he gets his 4-5% raise, he raises the amount he contributes to his 401K by 1%. It still feels like he got a raise. He still brings home more income. Yet, he is also contributing higher and higher percentages to his 401K each year. This increases the amount available for retirement AND decreases the amount we pay in taxes. I also max out my HSA each year (an HSA provides the ONLY opportunity to accrue money that NEVER gets taxed by the IRS). We have also invested in Traditional and Roth IRA’s, depending on whether our need is for our money to grow tax-free or to lower taxable income now by growing tax-deferred.

Save for college for your children.

Do you have kids or plan to have kids? Do you want to provide them the opportunity to get a college education? Have you prepared for this financially?

This one is not as important to my husband and I. My stepson plans to pursue trade school. Also, I spent 15 years in the SAT & ACT industry helping students get scholarships based on high test scores. I plan to use my knowledge of the industry to help my stepson be able to attend college for a fraction of the price, if he chooses to pursue a degree. Regardless, we have a plan. Do you?

Pay off the house.

If you don’t own a home, do you have a plan to save for a down payment or even pay in full? If you have already financed a house, do you know how much is left on your mortgage? Do you know how much you could save by paying a little extra each month? Do you have a plan to pay it off?

Especially when you first get a mortgage, the majority of your payment is going toward interest and not the principal. We make extra payments toward the principal because we know that even a little bit extra helps a lot in those first few years. We also have our long-term plan and if we stick to it, we will have our house paid off 10 years from now, which would be approximately 15 years early on our 30-year mortgage. 

Build wealth and give

How would your life be different if you had no debts? What would it look like? What would you do? Who would you give your time and money to? Who could you help? How could you make the world a better place and help solve its problems?

My husband and I have a detailed one-year plan and a more flexible 10-year plan. Regardless, as we’ve come to run the numbers, I want to share with you how easy it could be to become a millionaire.

If your combined household income is $100,000, and you invest $15,000 per year in tax-deferred options – which decreases your taxable income now – and only saved it in a savings account that makes 4.5% (which is much lower than you would likely get in other investment types), it would take you 31 years to become a millionaire. 

I just turned 40 and my husband will be 45. If my husband and I only stuck to this very basic plan, we could have $1 million in cash in our early to late 70’s. 

We plan to accomplish that goal much sooner by contributing more and into higher yield investments. 

Do you know where your money is? I do.

Connect with me: https://www.linkedin.com/in/thekimstory/

Find Kim’s articles here.