Mind on my money

and money on my mind.

I’m lucky, for a combination of reasons, we don’t have to worry too much about money.  Good job, generous family, and any number of other things mean that we don’t have to stress about the essentials.  Sure, the value of our house has probably dropped (ack, we bought at the tip top of the peak in summer 2005!!), but we have no immediate plans to move or sell, and we have a good rate on a fixed 30-year mortgage, so it’s all good.  We’re just not big spenders, either, so thankfully we haven’t had to work too hard at managing our money in order to make ends meet.  And we did plan ahead for me being a SAHM.  From the time that we got married, we changed the direct deposit so that my (much smaller) salary would go directly into our savings account.  It allowed us to “practice” living on one salary, but the money was right there in case we needed it.  A good tip for newlyweds if you’re considering one person not working after kids are born…

No, the aspect of money management that is crowding my brain today is more about consolidation and long-term planning.  I know, so exciting, right?  But it’s one of those not-so-glamorous things that you really need to do, and no one talks about because they’re boring.  Well, money needs to be talked about, especially if you’re married, getting married, or having kids.  Spouses need to have a plan, know where they stand, know how much money is where. Talking to a financial planner to cover the finer points is on my list, but first I want to make sure I know where all of the accounts are and what they’re up to. So, here’s what we’re (and I do mean the royal we) doing:

Consolidating old retirement accounts.  You know how it goes, you switch jobs, the new place does their 401(k) at a different company, etc.  They’re all over the place.  As I’m not working at the moment, I’m taking my old pre-tax retirement stuff and rolling it into a Traditional IRA.  At least, as soon as M gets around to having his signature notarized on the form.  Yep, your spouse needs to be in on that, too.  M could stand to do some consolidation, too, but at least all of his happen to be different accounts with the same investment company.

Consolidating other investments. My mom and M’s grandparents had given us gifts of stocks over the last however many years.  Again, all over the place.  Half of mine still have my maiden name, M’s have his name misspelled in a few different variations.  And they’re all these little, individual pieces that are hard to keep track of, especially at tax time. We have a little custodial account that will hold all of those, so we only will have to look in one place for them.  That is, as soon as I manage to get my name changed on them, anyways. Ugh.  More notarizing.

College accounts for the kids.  Compounding interest, people, compounding interest.  The sooner you start, the better you’ll be.  $50 now could be way better than $100 later.  We opened two different types of accounts for our kids.  A 529 plan, because it has tax advantages, and the money can be used for (and only for) educational expenses.  It doesn’t have to be a 4-year college, but it does have to be educational expenses.  We also opened up a UTMA account, which does not have the same tax advantages as a 529, but use of the money is more flexible.  We have them set up, but they do need to be better invested.  My dad’s rule of thumb growing up was to not do individual stocks, but just buy a market index fund.  For the first 13 years or so, he put roughly 80% of the money in stock index funds, and 20% in more conservative bonds. And just let it hang out, no need to fuss when you’re planning long-term.  When I hit high school, he swapped the balances, so 20% was in the riskier stocks, and 80% in the conservative bonds, since it was going to start being used in the shorter-term. If you don’t know much about investing, that’s a good, easy balance to remember.  80% riskier if you’re doing long-term, 80% more conservative as you approach the time when you want to use it.

Moving our checking and savings. We have regular old checking and savings accounts at one of the big banks that has bought plenty of the other banks.  That’s fine, but it’s not doing anything for us. We aren’t getting charged, but we aren’t making money, either.  So we’re moving to a Schwab checking account.  I’m sure other investment companies have similar deals. This one is linked to an investment account, so we can do more with our money than have it sit in a savings account and earn pennies in interest, but it’s still readily accessible if we need to get at it.  And the checking account earns interest on its own, and though they don’t have any of their own ATMs, they refund all ATM fees.  Not bad!  Might as well have the money doing something for us, other than just sit there.  And I don’t believe there’s a minimum balance requirement, so it’s not like you have to be rolling in the dough to do something like this.

Anyways, that’s the exciting things I’m doing on our summer afternoons: getting things notarized!  Wohoo!  Next up, wills.  I know, Marci, I know.  I still haven’t done it.  I will, though, I promise.  Shame on me for having nearly 1-year-old kids and no will!  Ack!

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9 Comments

Filed under Home, Just me

9 responses to “Mind on my money

  1. Great entry! I’ve been thinking about this, too. we have a 529 account for Jack, thanks to Johnny’s parents. They opened one up for him in his name (and we can make deposits anytime), with an opening deposit of $5,000. Every Christmas and birthday, they will make a “significant” (their words) deposit in there, and give a small token for a gift to be unwrapped. I think that’s smart, since a toy or clothing will be forgotten in a short time, but an education lasts forever! I need to get better about depositing money into this account, though.

    I ALSO need to get a will done. 😦 Another thing to think about is life insurance, especially now that I’ll not be working (it’s the dreaded “what if?”). Johnny just elected the maximum amount of life insurance he can get from his job.

    How do you go about setting up a will, anyway?

  2. Definitely a great post!

    I have one thing to add.. consolidating your student loans. I had no idea that you had to do this (I had about 10K in student loans) and kept my loans with the generic provider for 5 years before realizing that my interest rate was almost 7%!! Yikes!!

    So, I consolidated it (which I guess means that I basically switched to another loan provider with a smaller rate) and saved about 3 years of payments in the process.

    I’d also recommend paying a little extra on your mortgage if you can afford it, because it goes straight to principle. We get paid bi-weekly, which means that there are 2 months in the year that we get an “extra” paycheck. We put that straight to the mortgage and cut 2 years of payments off in one swoop thanks to the power of compound interest!

    Sorry so long…
    🙂 Becky
    http://www.stinkylemsky.typepad.com/

  3. Wills: find an attorney who does trusts and estates and they should be able to walk you through it.

    Mortgage: sometimes you have to specify to the loan company that the extra payment is being applied towards the principal. And if you have a low interest rate and won’t be staying in your home for the full term of the mortgage, it might be worth considering whether your money will earn more being invested as compared to the interest rate on your loan. I was just having this conversation with my mom this afternoon!

  4. The only other thing I see missing from your list is long-term care insurance. Between life insurance, wills, trust, LTC, and LTD we pay a lot every month but it is worth it for peace of mind. We have large insurance policies because we wanted to make sure both spouses would be able to maintain the same lifestyle we live now until the kids go to college. We also do not live a crazy lifestyle (oh wait, I was up late last night watching Weeds on Netflix!) but I would never want my kids to want for anything.

    Jon and I do two very unromantic things together every year. First, we review each other’s credit reports together. Second, every year on Jan 1 we put together a budget for the following year. We make adjustments throughout the year, but that helps us plan for things like vacations, major expenses, etc.

    We did that Jan 1 2006 and had to completely re-do our numbers later that week when we found out on Jan 2 2006 we were having two babies instead of one. Our estimates were SO LOW!!!

  5. Marci

    Liz – shame on you! With minor children and all the traveling you all do, I would venture to say Wills, health care proxies, and powers of attorney should be at the top of your list! Do I need to look up the Massachusetts statutory forms and email them to you… if you’re getting documents notarized anyway….

    Life insurance also key for young parents…

    And Bev, if you need some attorney recommendations, I can get some good and reasonably priced local attorneys who do what I do (this is what I do if you didn’t already know that)… too bad you left NYC, I could’ve done them for you pro bono 🙂

  6. Husband is supposed to do an occassional post on my blog about this stuff. We do a quarterly meeting where we review our assets and whether money has been lost, average interet rate (both earning in accounts and student/mortgage interest rates). We discuss any big expenditures, etc. It’s been really useful and I want him to provide some details so other moms could do the same (since I know often a mom is in charge instead of a dad of this stuff). I have to admit we haven’t had to have a formal budget b/c our earnings have traditionally outpaced spending but with the childcare costs and college savings we will need to start doing that. It’s on my long term list!

  7. cheryllage

    Girl, I’m just thinkin’ ’bout gin & juice with that title! 😉

    No seriously, this is a MUCH needed post (and reminder) to the Lages…won’t go into what all we’ve not done. Too embarrassing…but this is a call to action. Thanks!

  8. wow. great post. I suppose this might get me off my butt and find those floating 401Ks out there…and complete the steps to finish up our will *blush* thanks for the kick in the pants! 🙂

  9. Gulp!

    Too much to think about.

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