August 07, 2010
Making Financial Decisions - Part One
Way back in the day, when I was working full time, I didn't take a lot of time when it came to financial decision making. We had the luxury of two incomes and could buy, within reason, whatever we wanted to buy. Now I am more conscious of any decisions I have to make regarding money and I think things through.
One area of our life that we do not scrimp on is retirement savings. I truly wish back when we were in our 20's that we had begun some kind of personal retirement savings. In 1986 when we had been married for 6 years, my DH's employer began a profit sharing plan. He left that job in 1988 and after a few years his new job offered a 401K plan with his employer matching some of those funds.
After my DH started his new job in January, all of the former retirement funds from his other job went into an IRA. Now he has a 401K with his new employer and we also contribute to his IRA.
I in turn had a 401K plan at my former job. I worked to contribute up to the maximum of what my employer matched. I do not contribute to my 401K now that I am not working and we use our money to contribute to my DH's 401K and IRA.
Why do I tell you this? No matter what has ever happened, whether it is new eyeglasses, sickness, car breakdowns, paying for college, an expensive household repair, as examples, we have made it a priority to put retirement contributions at the top of our list. On payday all of the contributions to our retirement accounts are directly withdrawn from our bank account. We never see the money in our account for very long. In fact when I refer to net income, that is the income that remains after the money has been transferred to our retirement accounts. When we look at our household budget sheet, the net income is always what you see after these retirement accounts have been debited.
We will not change this. When we went from two incomes to one income, we didn't change the amount that we contribute to our retirement funds. If there is one thing that would put me back in the workforce, it would be if something happened to our retirement savings.
My advice to anyone of any age is to contribute as much as you can (and then perhaps a little more) to your retirement. I look at the amount we contribute on a monthly basis and that would make a nice chunk of money to put into an emergency fund each month, but I won't do it. Like it or not, if we don't die, we will need an income in our old age and social security is not enough. So make retirement a priority.
I make a lot of smaller financial decisions each day. Today is a typical case of one of those decisions. I am keeping my food budget low this month, using up what is in the pantry so that we can free up money for savings and extra expenses. I went to the grocery store and they were having a special in store sale. They had honeysuckle white ground turkey breast meat for $1.00 a lb. We're talking the good stuff here. I stood there and looked to see if there was a limit and there wasn't one. Then I pondered not only if I should pick some up, but how much should I buy. I'm not adding to my freezer too much this month, as I'm trying to reap the benefits of using what I already have in the freezer, but when a great deal comes along I have to be flexible.
In the end I picked up 15 packages of ground turkey breast. Then I turned the corner and they had chuck roast on sale at a rock bottom price, another in store special. I knew I had one left in the freezer so I picked up 3. Between the turkey meat and the chuck roast I had just used up the money I had budgeted for the groceries for this week. I took a breath and walked over to the laundry soap aisle and paused to think. The laundry soap aisle is a good aisle to get away to as there are never a lot of people there. As you can now tell, I have learned to go there when I need to regroup or get away from frenzied shoppers.
I looked at my list and I got out my cell phone to use the calculator and calendar. Then I decided that I would go ahead and spend double what I had budgeted. I will probably not be able to come in on budget this month on groceries now. To not take advantage of a great deal and pass it up when I didn't have any ground turkey in the freezer and only 1 roast left would end up costing more down the road. So there on the spot in the laundry aisle I decided that I would spend the extra money.
Because I had spent double the budgeted amount for food this week, I would not be able to stay on budget for the rest of the month for groceries and will come up short. Instead of proceeding with the same budget, I added $25.00 to the remaining amount I have for grocery money and should be fine. It's okay to tweak and change things when a great deal comes along. Even by spending $25.00 more than what I had budgeted, I will still come in way under what I had been spending.
I must confess, on the way to the checkout, I grabbed something that was not on my list. They had those giant marshmallows on sale for $2.49 for a bag. They are about 3 times the size of a regular sized marshmallow. I have always wanted to make smores out of those, so even though I had gone over budget for the week and they weren't on the list, I bought one bag. Our family is finally being able to enjoy making smores in our firepit in the back yard.
What does Suzy Orman say? Oh, yes, people first, then money, then things.
Next post making a major financial decision - should we take out a loan.