When my husband and I first moved in together, we assigned ourselves roles and responsibilities with corresponding job titles. My husband is the cook in the house, so he became Executive Chef. And me? Naturally, I filled the role of VP of Finances.
I just crunched the numbers, and we saved a decent amount on our New Zealand trip, so I’m now promoting myself to SVP of Finances.
As the new SVP in the house, once the new year rolled around, I couldn’t just rest on my laurels. I had to get to work. When it comes to money, there’s always something to improve. So in a span of a couple hours on New Year’s Day, we knocked out a couple tasks and plans to improve our finances this year. Here’s what we completed or planned:
1. Reviewed 2017’s Spending
Me: “Hey, should we look at how much we spent last year?”
Husband (playing a game on his phone): “N-now?”
Me: “Yeah, now.”
Husband (begrudgingly putting his phone down): “Oh, OK.”
I get it. Looking at how much money you’ve spent is anxiety-inducing. But I also think you need to face some difficult situations if you want to get anywhere in life. I don’t know anyone who’s achieved much by burying their head in the sand. Plus, if you don’t know how much you’re spending, then it’s really hard to find realistic ways to save more money.
So we saw some spending we didn’t like. Some of it you can’t really change, like medical costs. But some of it you totally can, like grocery bills. This is also the perfect time to re-review your budget and make sure your spending is somewhat in line with what you planned. For example, if you got hit with surprise pet bills last year because you never budgeted for it before, now’s the perfect time to add it as a line item.
2. Maxed Out My 401k Contributions
I currently max out my 401k. In 2018, the annual 401k limits increases to $18,500 ($500 more than last year), so I logged into my account to increase my contribution by 1%. I know what you’re thinking: who the heck has an extra $18,500 leftover for savings? You have to remember that I worked up to this level of savings after starting small. If I got hung up on specific numbers when I made an entry-level salary, then I wouldn’t have gotten anywhere. Focus on the process, which is the principle of making small incremental changes.
Whatever you’re saving or investing, try increasing the amount by 1%. I promise you won’t miss it.
3. Checked My Credit Score and Report
As a Discover credit card holder, I get free access to my credit score. However, I don’t check it often, so today was the perfect day to make sure my score has stayed steady. A few thoughts about credit scores:
I feel like the importance of credit scores is overblown. Countless times I’ve heard that the reason why people don’t want to try travel hacking is because they don’t want to ruin their credit. That’s fair. However, to me, your credit score only matters if you want to rent an apartment, buy a house or car, or any time you need to take out a loan. When you need a loan or mortgage, your credit score affects the interest rate you’ll receive. The lower the interest rate, the better. Your credit score also helps you qualify for those high-end credit cards, like the Chase Sapphire Reserve, which gives you benefits like lounge access and TSA Precheck. Here’s what I think you should know about credit scores:
A perfect credit card score is 850; a good score is 700 and up; a great score is 750 and up. You want to aim for your score to be 700 or above.
Other than that, don’t sweat it.
If you don’t have a credit card that give you your score, you can get it from Credit Karma.
The more important thing to check is your credit report, which details your entire credit history and loan accounts. You’ll want to check that all the accounts are ones you’ve actually opened. Pro-tip: I track exactly when I open and close my credit cards, so the credit report is super handy for grabbing all those dates.
The one legit free way to get your report is through AnnualCreditReport.com. You’re entitled to your report once a year through each of the three credit reporting agencies: Experian, Transunion and Equifax. So, you can choose to see all three or once or space them out over the course of a year.
4. Finally Agreed to Cut Cable
Here’s the story about cable:
We are paying over $1,200 to watch sports a few months per year. I’ve brought this up to my husband and gently asked him, “Do you think the cable is worth paying $1,200 per year???” To my disappointment he said yes. This is one of the few “happiness spending” categories that my husband insists on, so I felt like cable was a free pass. Just like he spends more on travel, because that’s important to me. And so the $140 cable bills continued arriving.
Lo and behold, my husband surprised me by saying this year is it. In February, after the Super Bowl is over, he promised me we would cancel cable.
Thinking through your spending, is there one thing you can just eliminate altogether?
5. Revisited Subscriptions
A while back I was looking at our spending in Mint when I saw a random monthly charge for $14 at iTunes. It turns out we were paying for duplicate Spotify subscriptions because of an account mix up. Anyway, we finally dealt with it, and the duplicate charges should be no more.
The new year is a great time to reassess all the subscriptions you’re currently signed up for, and decide whether or not to keep or cancel them. For example, if you have Netflix, Amazon Prime and Hulu, are you actually using all three?
6. Made a Plan to Reduce ONE Spending Category–Food
Our spending Achilles’ heel: We spend a lot of money on food for 2.5 people. Over $1,100 per month. It also doesn’t help that we use credit cards for everything, so of course it hurts a little less to swipe a card, over paying cash. This is a category that I always felt was ripe for improvement, and inspired by Done by Forty, we’re going to do an experiment:
In February, we’re going on an all-cash diet for food. So, for the entire month, we’ll take out $1,000 in cash, and that’s the only money we can spend on restaurants, takeout and groceries.
I know $1,000 sounds crazy high to some of you still, but I’m decreasing the budget by a small amount, so we don’t epically fail. Then, we can slowly decrease it little by little as the months go by.
NYC people: Anyone want to pipe up with how much you’re spending on food?
If you’re not happy with your spending, instead of trying to spend less in all categories (too much thinking and discipline required here), try keeping it simple: choose just one category to focus on. Then, when you’ve successfully implemented those changes, move onto another category.
7. Figured Out Our Emergency Fund Number
I have a really chill attitude when it comes to money. Having low balances in my accounts has never freaked me out. So, I’ve never had a specific amount I set aside for an emergency fund. There’s always been some money in savings, but it’s never been like, “I need $5,000 in the account or I can’t sleep at night.” This is where I say, “Don’t try this at home,” because I wouldn’t necessarily recommend the same method for anyone else. Because you might not have the same relationship to money as me. I don’t have a house, car or kids, so find your own emergency fund threshold by looking at your own lifestyle. Many experts recommend 3-6 months of living expenses. That’s not realistic for many folks, so if you’re starting from scratch, aim for $1,000 at first.
For us, we settled on $10,000, which is a little less than two months of expenses. Then whatever money we have leftover is going to investments. We want our money to grow, not collect dust in a savings account.
Figure out an emergency fund number that helps you sleep at night. Whether that’s $1,000 or a year of living expenses, it’s up to you.
8. Got Psyched for New Personal Finance Books
With the new year came new money books! There’s nothing like reading an inspirational book in the new year that makes you want to go out there and get things done. There are three new releases that I’m super excited about. *Note: Affiliate links below.
If the idea of dealing with money seems like the worst, then a super dry personal finance book probably won’t cut it. Try The Financial Diet. I read the website a lot, so I can bet the book will be just as witty and engaging.
If spending is your kryptonite, then you might be intrigued by The Year of Less, where Cait Flanders details her one-year shopping ban.
If you want to get inspired by financial independence (retiring way early) and the super frugal life, no one’s more of an expert than the Frugalwoods. Mrs. Frugalwoods has written a book called, Meet the Frugalwoods: Achieving Financial Independence Through Simple Living.
But you know I mostly don’t ever buy books, so I went on a reserving spree on the Brooklyn Public Library’s website. I can’t ever remember my 16-digit library card number to log in, so when I reserve books I tend to do them all at once. So now I just wait to get the email notifications when the books are ready to be picked up.
In just 20 minutes of talking, and a few hours of work, we’ve made some concrete plans, not resolutions, to improve our finances. Hopefully, I’ve inspired you to make some changes in your own money life.
What about you? What’s on your list for improving your finances this year? Do you think our food spending is crazy? And what’s your emergency fund number? I want to compare!
Image: The Luxe Strategist