This time last year, my husband and I were high-fiving over his awesome new job and $8,000 raise. I wish we hadn’t stopped there, though.
While the celebrations were totally justified, it would have also been an ideal time to assess our big-picture money situation and look at where we could put that extra income to the best use. Instead, we entered 2017 half blind, focusing more on our ability to better handle everyday expenses than on our overarching financial goals.
Here’s what I’ve learned in the year since, and what we’re doing differently this time around.
1. Planning ahead for non-monthly expenses.
Our biggest non-monthly bills this year included $1,000 for kids’ summer camps, $500 for our dog’s annual vet visit, and another $1,000 in projected holiday spending.
We managed to save almost 50 percent for each target by funneling leftover cash into savings after paying our bills. But failing to get to 100 percent in advance resulted in fewer camps for our daughters — which made summer break a little less fun — and the need to dial down our holiday plans because we’ll only have $500 set aside come December. It also meant we had to postpone a trip to visit friends in Pennsylvania until next year.
“The end of the year is the best time to look back and identify the non-monthly and one-time expenses that caught you off guard,” Shashin Shah, a Certified Financial Planner at SFMG Wealth Advisors, tells me — so we decided to turn this year’s letdowns into a learning opportunity.
Shah recommended adding up all non-monthly expenses for the year, dividing by 12, then factoring in automatic savings transfers into our monthly budget. I did this a few weeks ago to recalibrate our budget for the end of this year and into 2018. I accounted for a family vacation, school fundraising events, and birthday gifts — on top of next year’s camps, vet visit and holiday plans. We’re making little tweaks, like downsizing our cable plan, to accommodate the outlay.
2. Prioritizing emergency savings.
I have all our bills on autopay, including a $25 monthly transfer to our emergency fund. Better than nothing, but I wish I’d upped it to $100 after my husband’s raise — a totally doable number that would’ve boosted our savings by $900. That definitely would have been nice to have, considering Hurricane Irma made a $600 dent in our savings, thanks to a last-minute evacuation. Rebuilding our safety net is my top priority right now, so we’re better prepared the next time we’re hit with an unexpected expense.
3. Dialing up retirement contributions.
When it comes to building our nest egg, we did a lot right this year, like kicking in enough to my husband’s 401(k) to get the full employer match. But since we’re paying off some debt, I’ve been dragging my feet on opening my own Roth IRA — an excellent investment tool that allows me to save for the future and grow the money tax-free.
We probably wouldn’t have been able to max it out, but contributing just $50 a month could have given our nest egg a $65,531 boost come retirement time, assuming an average of 7-percent annual returns. It’s on my to-do list for 2018.
We’re also upping my husband’s 401(k) contributions another 2 percent this quarter — a move that’ll benefit us down the line, of course, and also lower our taxable income.
4. Prioritizing the most important goals for the coming year.
Forty-four million Americans supplement their take-home pay with side hustle income. My husband and I are among them, bringing in around $3,000 this year teaching local storytelling and improv workshops. The work fell into our laps, and we happily ran with it, but we can’t help but wonder — would a more focused plan of attack have helped us get out of debt faster? We’re already looking at how we can add a few more steady teaching gigs to the mix to bring in an additional $500 per month.
Which brings me to one of the biggest lessons I learned: not waiting until January to start making resolutions. By making headway on our important goals now, we’ll actually have a good chance of keeping our resolutions next year.
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