Gain

GET RICH NOW, or soon, maybe

For the past several years, I've had money troubles. At first, it was a major credit card purchase (in hindsight, of course, a somewhat foolish one) that I couldn't ever quite pay off entirely. And then a period of underemployment, the end of which was always just around the corner. And if it's going to end soon, surely changing my lifestyle wasn't necessary. And then two years of grad school and some ... unfortunate financing decisions. I'm telling you this so that you'll understand why it is I've made avoidance my primary financial management strategy.

That strategy was quickly becoming unworkable, however. It began to take a toll on my anxiety levels, our budget, and my relationship with my wife. And so, after several months of looking for just the right job to start my planning career, I finally settled for something else. My wife and I celebrated by thinking and talking about how great it would be to pay off more than the minimum on some of my credit cards each month. We started talking about our money issues (more precisely, I started responding when she started talking about our money issues). Suddenly it seemed do-able (two full-time incomes will do that). I got excited. And, so, I did what I always do when I'm keen on something: I read a book!

More precisely, I read about five books. I started with Your Money Or Your Life (read cover to cover in December), then picked up a Kiplinger's book on personal finance (skimmed in December), The Mindful Money Guide (mostly read, mostly in January), and finally finished with All Your Worth (skimmed in January). (So, that puts me at having read about one book's worth this year, for this post.)

Starting this, I had this sense that there were things that my wife and I ought to be doing. Obviously, the first thing is sloughing off my debt (we're on a two-year plan to be free and clear). But what next? Saving--okay, but how much, and for what? Retirement, certainly, but what's the right amount to sock away? And we're talking about kids--presumably we should be getting ready for that. And, of course, this isn't even approaching the actual tricky part, which is what to do with our savings, so as to reach those ill-defined goals.

Unfortunately, I can't say that any of these books helped out a whol lot. They were each useful in some way (along with The Two-Income Trap, which isn't really a financial planning book, but is a great examination of contemporary middle class bankruptcy--All Your Worth, by the same authors, is the application of what they learned). However, what I most needed, to start, was a sounding board to help me determine and articulate what kind of goals my wife and I had. Not how was I going to save, but for what, and how much.

And in this sense, my poor financial conditions had a (very thin) silver lining, in that it gave me an easy place to start thinking about financial goals: paying off debt, in a realistic time frame. And that required preparing a budget and developing a system for tracking it--a necessary component to determining that time frame.

That, in turn, meant tracking all of our expenses. I'd been doing that for a while in Quicken, for the accounts I had control over, but tying it to my debt payents gave my wife and I the impetus to do it more systematically, and to really pay attention to what everything was. Quicken, for me, wound up being too precise. Everything goes in, but too much time was spent balancing and inputting, and none of the budgeting and assessment tools seemed to match the way that I think. By consciously working out a system that made sense to both of us, I think we wound up with something that is simpler than Quicken, and more streamlined, but also more powerful for what we want to do.

What resulted was a massive Excel spreadsheet, with two worksheets for each month: the budget (which tracks incomes, savings, debt payments, and expenses) and an expense tally sheet (where individual expenses are listed in categories, and totaled; those totals show up in the main budget worksheet). Additionally, there's a yearly overview page that shows (or, will show, once we have more than one incomplete month's worth of data in there) income, expenses, savings, and debt plotted from month to month. (The idea for this overview came from Your Money or Your Life. The current plan is to do one of these every year, and then track all of them in a one long-term plot that spans several years.)

After that came the savings goals: a six-month emergency fund, a way to make "unexpected" expenses from month to month (such as chimney cleaning, birthday gifts, and car repairs) regular and even. Were' still working our way up to figuring out what to do about retirement and other long-term goals, but we've got the basics in place.

Out of the five books I read in figuring this stuff out, I think that the one that was the most useful was All Your Worth.

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