Crunching the Numbers

I was grounded, not in the no TV no hanging with my friends type of grounding, but grounded back to the reality of needing to make sound decisions (with real information) as a family about our future. Since the beginning, my wife has encouraged financial stability and health, not because we were good at it, but more to the contrary. In our late twenties we met with a financial planner and began talking about our retirement and long term plans. I always thought it was too early because we didn’t have any money, but it wasn’t. It took us another 10 years to really soak in the information, start implementing what we learned and begin making more informed decisions. We took some hard knocks, both self inflicted and economy driven, living very lean when needed.

The 3 things that helped us simplify our approach to finances are as follows:

• “Emergency Us” – This is the first consideration before we decide where else to save or invest. We asked ourselves if we are covered for the unexpected, this includes insurance(s), cash, loss of income, home maintenance and so on. On average most advisors say have more than 3-6 months of income saved outside of retirement at min.  
• “Future Us” – Investing in a 401k and other retirement savings to their fullest. The approach we took early on was a little more each year, every year. Each time we received a raise we would increase our contributions until we hit maximum pay-in. We always gave our future selves a 1% raise. This approach also included outside investments and can take the sting of doing too much too fast. 
• “Now Us” – If we meet the first 2 “us” goals we then feel more confident in spending on things like travel, fun, home improvements or saving for other larger projects, like this one.

Nothing is as easy as it sounds, this approach took focus and continues to be something we evaluate together several times a year. We also make every decision in partnership, we don’t believe in surprises financially. Our regular partnership allows us to consider every years plusses and minuses and if we require cuts or adjustments to ensure we stay on track.

So how did we approach determining if we could afford any purchase and what amount? 

Considerations we took before moving forward:

• total assets and projected assets for 2 plus years, this was built dynamically to take into consideration all time lows and highs for investments 
• total emergency fund 
• current home upkeep budget and general maintenance 
• plan for loss of one or both incomes 
• plan and considerations for daughters education savings 
• planning for the unexpected – prolonged pandemic, upcoming election, social unrest and more…
• ability to pay off any potential land debt if needed quickly
• current debt, if any

All of this took time and patience included the risk that an ideal property would slip away. While it’s hard to take emotion out of any decision, it was worth the moment to slow down and refocus. Nothing written above is full proof, we can’t predict the future in regards to the economy, employment, hidden cost in developing the land and a myriad of other factors, but careful budgeting/resource review helps form a baseline to work from. In short, we hadn’t arrived at this moment without careful planning, long term saving and making a few a sacrifices.