Thursday, January 31, 2013

House or Retirement Savings?

Photo credit: Neosnaps

For those of you who are wondering whether to save for a house or put money in retirement I want to tell you our story.  At the beginning of our marriage I was lucky enough to have a very down to earth professor/grad student recommend to me.  I can't imagine where I would be today if I had not started reading that blog.  It is not to say that it is Money Saving Mom alone who has lead my husband and I down the frugal and simplicity road.  When I found Money Saving Mom, I found a whole world of people who were financially responsible and happy.  I found people that were living like my parents, like the way I had been taught.  

I found people that wanted to pay cash for a house.  This was a new idea to me.  My husband thought I was crazy after reading and drinking their koolaid, but he went along with my saving craziness.  I don't think he really believed that we would get as far as we did.  

This is not to say that before Money Saving Mom I was a big spender, by any means.  Money Saving Mom brought up many things that my husband and I discussed.  We planned, we researched, and we did the numbers.  

After four years of marriage, my husband and I successfully saved for 100% of our house. This was my BIG GOAL.  We also saved a small amount each month towards retirement, yet that was definitely not our main focus.  We did not pay for the house in cash because it was a foreclosure and needed a lot of work.  We also wanted to keep a certain amount out as an emergency fund and to invest.  We ran a lot of numbers trying to decide how much to put down.  We looked at several things before deciding.  

First, we decided how much we wanted to keep in our checking account (earns a little over 2%) for daily expenses and our emergency fund. 

Second, we looked into what we wanted our monthly payment to be and shopped for mortgage rates.  This involved discussions about our future and children.  I do not know for sure whether I will stay home when we have children and for how long (if I do), but I do know that I want the ability to stay home at least for a while if I so choose.  If we had a low payment it would not be hard for me to stay home. I researched rates online.  We found that the bank we got our loan from did not show up in search results, so if you are in a rural area, you might want to call around.  After getting rate information, we were able to use online mortgage calculators to get some good approximates on monthly payments.  A good calculator is

Third, we researched and decided how much we wanted to save for investments.  We determined the minimum that we needed to put down in order to get the monthly payment that we wanted.  We didn't want to put any more into the house than we needed to because right now our interest rate on the house was a bit under 3% and we can make much more than that in mutual funds/stocks.

We ended up putting a little over 50% down on the house and took out a 15 year loan at an extremely low rate.  We were renting from family previously and had very low rent because my husband did maintenance in return for our rate.  Because we were able to put down 50%, our monthly payments on our house are only about $15 more than our rent was previously (and that is with just a 15 year loan!).  This makes it really easy to plan how things will work if I try and stay home for a while.

We also called about insurance.  We have an insurance agent that works with a lot of different insurance companies.  Because we bundled our home and auto insurance, our payment is actually less than our renters and auto insurance was before.  That was a nice bonus.

After we bought the house it was a whirlwind of moving and renovation.  We ended up moving in without a countertop or appliances.  Later we got an amazing deal on appliances on craigslist and my husband has been hard at work putting sweat equity into the house.

As 2012 came to a close, I started feeling antsy again.  I have always been a very goal driven person.  When I don't have some larger goal in mind I just feel like I am mindlessly drifting along.  Around this time, my brother recommended a blog to me.  I am sure that he had recommended it before, but I never actually went to it.  Also, about this same time (Christmas break) I got a the book Smart Couple's Finish Rich out of the library.  It seemed to complement the blog very well.

The blog he recommended was  When I started reading through the articles I found a whole new "other" world of frugal people.  Moneysavingmom is mainly a blogosphere of moms that are trying to get by, which I enjoy reading.  Mr. Money Mustache focuses on early retirement and the frugal/simple life needed in order to make it work.  Reading both of them gives me balance.

I was hooked within a few posts.  Since then I have gone back and read a good portion of his posts.  I was inspired and have new financial goals.  My husband and I have had many good talks about things I've read on his blog.  After reading the blog and the book from the library and running some numbers, we were inspired to take the jump and fully fund our Roth for last year for both of us.  When we were saving for the house I was always worried that I would wish that I hadn't put all of that money into the retirement account so we never fully funded our Roth's.  Now that we have a consistent view of our financials, we have decided that we can really dig into investing.

At this point we are looking into investing 25% of our income into investments.  This money will go to fully fund our Roth's for this year and the overflow will go into our "early retirement" account that does not have tax incentives, but will not have penalties for pulling from prior to age 59.5.  We are planning on retirement without considering teacher's retirement or social security.

In summary, my advice for people who are trying to decide whether to save for a house or for retirement is 
1.  Make a 5-10 year plan.  We knew that I wanted to be able to stay home, so that meant I wanted a lower monthly payment.  We also didn't like the idea of a 30 year loan.  If I hadn't wanted to stay home we would not have sunk as much capital into the house, but would have instead invested it.
2.  "Play" with an investment calculator such as this one on Dave Ramsey's website.  Look through your finances and try different amounts of savings and change the time line.  The general rule is that you can pull 4% off of your retirement each year and it will virtually last forever.  For example, if you have saved $1,000,000 you could pull $40,000 each year.  
3.  Discuss with your partner your plans of retirement.  Do you want to retire early?  What do you want to do in retirement?  Use this information to help guide you as you dink around with the retirement calculator.

Wednesday, January 2, 2013

Goals for Growth and Change in 2013

Wow, it has been quite the year of changes!  We bought a house, my job changed (same place- added responsibilities), and we traveled overseas together with our youth group.  Each year I set goals for myself because I have found that if I am not intentional with my goals, absolutely nothing gets accomplished.  Here's a check up on last year's goals.

1. Memorize at least 12 verses.  I actually memorized 13 verses!  Although that is small compared to the whole Bible, it is 13 times more than I memorized in 2011.  The verses I memorized were Ephesians 2:10, Isaiah 41:10, Psalm 90:12, Proverbs 12:18, Hebrews 4:15-16, Matthew 11:28, Colossians 3:23, Ephesians 4:1-3, 1 Peter 5:7, and Proverbs 14:1.  Each one of those verses has spoken to me during various times this year and I am so glad that I took this on.  During one various emotional breakdown Isaiah 41:10 really spoke to me.  It was like God was there comforting me specifically.

2.  Read at least two "wife" books this year.  I ended up reading 365 Nights: A Memoir of Intimacy and Every Marriage Is a Fixer-Upper: A Do-It-Yourselfer's Guide to Bringing Out the Best in Your Relationship.  Each of these helped remind me that being less selfish actually turns things for the better.

3.Part a- Visit each grandparent once a month.  We did pretty good on this.  There were occasional misses, but in general we always made it to each.  This time with them has really blessed our marriage because it has kept things in perspective.

3. Part b- Visit each sibling once in the spring and once in the fall.  We see them at family gatherings in the summer and winter, so I wrote this goal to deal with that issue.  Unfortunately we did a really bad job at this. Next year we will focus a bit more on reaching this.

4.  Visit long distance friends over summer.  I went and visited one and the other one came here.  Investing time in relationships really pays off.

5.  Exercise more (breakdowns of minutes are in the post from last year).  I didn't necessarily make it every week to the minutes goal, but these goals really pushed me.  I am going to continue with minutes per week goals this year.

6.  Money goal- This got changed because we bought a house before October.  We were actually ahead of schedule for meeting our goal and the house ended up be cheaper than we expected, so I will call this goal met.

7.  Read through the Bible chronologically this year.  I have to admit that I actually finished this this morning, but I will still call it met.

8.  Tape goals to the fridge and revisit online once a month.  Well, I didn't necessarily get to this every month online, I still am happy with where I am at.


1.  Keep memorized verses from 2012 and memorize at least 12 more verses.
2.  Read 3 books on relationships or Christianity (or both).
3.  Visit each set of grandparents once a month.
4.  Visit each sibling in the spring and fall.
5.  Exercise 60 minutes a week (this is a stretch, but I think I can do it).
6.  Meet our monthly savings goal.
7.  Write in a prayer/Bible reading journal 5 days a week.  The past few years I have been reading through the Bible in a year, but I feel that I need to really start meditating on the Word and writing my prayers.
8.  Invite people to our house at least once a month.  I have been realizing that my husband is a quiet extrovert.  I grew up with extreme introverts as parents and I am about half introvert and half extrovert.  Also, my job puts me around people all day long, so I am not always sensitive to my husband's need for people time.  Inviting people to our house will help fill this need and will also help us reach out to our community. Furthermore, I feel that God has blessed us with a house and he doesn't want us to keep it all to ourselves.
9.  Use a magnet (yippee- our fridge is now magnetic) to hang my goals each month.  Revisit once a month online.
10.  Plan something special for our 5 year anniversary.

One last thought... our worship pastor sang this new version of Auld Lang Syne and it really resonated with me.  I hope it blesses you as well.


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