We’re nearing the end of December, and as we do, Julie and I are preparing to revamp our monthly budget for 2010.  One of the biggest changes that we’ll make will be to add a “retirement contributions” line-item.  We’ve completed Dave Ramsey’s Baby Step #3 (a fully-funded emergency fund), and up next, we’ll be figuring out what portion of our income will be dedicated to investing in retirement.  With that in mind, here are the main points from Chapter 9 in DR’s The Total Money Makeover (affiliate link):

• Once your emergency fund is complete, don’t blow the extra money you’re saving by not contributing to it—it’s time to put that same energy in a new direction.
• Retirement is about having security, and having the opportunity to choose what you’d like to do during that time of your life
• 15% of your annual income is a good goal for retirement investing, and it leaves room to fund college education for the kids and to start thinking about paying the house off early.
• Invest retirement funds in growth stock mutual funds, equally divided among the following types of funds:
  • Growth
  • Growth and Income
  • Aggressive Growth
  • International
• If your company offers a match to you 401K or 403B, do that match first.  Then, invest in a Roth IRA to gain the advantage of the investments being tax-free.
• The rest of this chapter includes some excellent worksheets for calculating retirement goals.

Our advice? This is just one way of thinking about the business of planning for retirement, and we certainly wouldn’t recommend that you simply take our endorsement of it simple at face value.  Do some research for yourself and continue to become financially literate.

However, if this approach is making sense or is exciting to you, Dave’s book is really a must-read and a must-own.  The principles he suggests have changed the way Julie and I think about our money (this may be obvious at this point ).

If you have additional questions about any of the terminology included in this summary, you’ll find it well-explained in the book.  You might also consider enlisting the services of a financial planning professional.  There are people out there who have made these issues their career, and some are even endorsed by Dave Ramsey himself.

Have thoughts on this topic?  Leave a comment below.  We’d be glad to hear from you.

With all the gift buying and giving that this season brings, we find it a little silly to purchase gifts for each other on top of it all.  Not that we don’t want to show  our love and thoughtfulness through gifts, but we’d like to think we do that year round!  For our first Christmas together we weren’t going to do gifts for each other at all, but after strange looks from co-workers and scrooge-like guilt, we decided to exchange gifts in some capacity.  Since we were working on Baby Step #2 (our “debt snowball”), we didn’t want to spend much on each other.

Our solution was to fill each other’s stockings with “odds and ends”-type gifts.  The stockings are handmade by my mom and have always been a special Christmas decoration around the house.  Since we’re past the days of our parents filling our stockings, we decided to do it ourselves.  For the month of December, Andrew and I forfeit our fun money from the budget to buy each other’s gifts.  That way, I don’t feel like I’m paying for my own present but instead know that Andrew had to sacrifice his apps and Taco Bell runs to buy something special for me .

So what kinds of things do we fill the stockings with?  Last year they were filled with things like Burt’s Bees Chapstick, Every Man Jack Face Lotion, popcorn seasoning, our favorite SET card game, and gum.  Nothing too extravagant—just little things that say “I thought you might like nacho-flavored popcorn.”  And this year’s stockings?  I can’t tell you that!  We’ll have to wait and see…

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Want to see our official stockings?  They’re right here!

Our man Dave Ramsey has put out several awesome holiday wallpapers this season, and each is a great reminder of one aspect of Christmas which is easy to forget, that we should “give like no one else.”  It’s an obvious take on DR’s main philosophy which is that if you live like no one else now, you’ll definitely be able to live like no one else later on.

We had to share the wallpaper below, since it’s the intersection of two things which we know and love, Hope (get it?) and the principles that guide the way we think about money:

Make it (or one of the others) your desktop background—if you’re working on the computer all day, you’ll be glad for the not-so-subtle reminder!

We’re in the process of wrapping up our Christmas shopping for this year, and we thought it would cool to share with you our process for staying sane (mentally and financially) during the holiday gift-giving season.  So here’s a quick overview of the tricks and tools we use to ensure materialistic success!

Step #1: My Christmas Wish List

Julie’s family had been using My Christmas Wish List for some time before we met in 2007.  It’s a website that allows you to create your own Christmas list to share with others, who then have the opportunity to mark items on your list as purchased or as something which they are planning to purchase.  It essentially eliminates duplicate gifts and also ensures that the items you receive are things you actually want.

We use MCWL in a “Secret Santa”-style format.  We draw names (on both sides of the family), set a monetary limit, and go to town!  With a total of 8 siblings + spouses + kids on both sides, this also means that everybody doesn’t have to buy gifts for everyone else.  This makes sense to us, as most of us are working professionals and don’t necessarily need anything when Christmas time comes around.

Step #2: Google Doc

We do an all-cash Christmas, so we try to keep pretty good track of what we plan to spend (our budget) and what actually gets spent.  To that end, each year we create a Google Document with the following columns:

Person   |   Target Price  |   What?   |   Where?   |   Actual Price

It’s the same principle that guides the way we do business regularly: make sure we know where our money is going before it even goes anywhere.

Step #3: Never pay full price (if possible)

‘Tis the season for deals, right?  We take advantage of sites like Retail Me Not (coupon codes for online shopping) and Beat My Price (set a price target for an item, and they’ll go out to the major sites to make sure you find the best price) to ensure that we are getting the very best deal possible.  We also plan to make one big Amazon order every year, since people are usually asking for books, music, and movies and TV shows (affiliate links), although increasingly we’re getting closer and closer to being able to order our entire Christmas list from Amazon!

So that’s our plan! It’s a lot of fun to bless our friends and family during this time of year, but more importantly, the time when we remember the One to came to give us His ultimate blessing.  Our obedience should be reflected in blessing others all throughout the year, not just at Christmastime.  This obedient heart may best be summed up in Mary’s response to the angel Gabriel, found in Luke 1:38,

“I am the Lord’s servant,” Mary answered. “May it be to me as you have said.”

Blessings from Julie and I for an awesome Christmas holiday!  We thank you for being a part of ours.

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So at this point we are looking toward starting our Baby Step #4, or investing 15% of our gross income into our retirement fund.  This is where things get CRAZY exciting as we get the chance to actually put our money to work.  But first, let’s review how we got to this point, and again, we are following what Dave Ramsey refers to as his 7 Baby Steps:

Baby Step #1—$1,000 emergency fund

We were fortunate to have this as we began our marriage in April 2008.  Truthfully, I think that’s about all I had starting off, and Julie had been really successful in saving during her single years (so grateful for that).  The idea here was to have at least this much in the bank so that if something unusual happened, we would be able to handle it and move on.

Baby Step #2—repay all debt, excluding our home mortgage

Once we got this process started and began to think about how long it was going to take us to repay this, we got really serious, really quick.  We started off slowly, but as a dent began to form in the big total and we saw it going down, it was easy to get excited about the process.  We weren’t spending extra money on anything.  My colleagues at Hope know I wasn’t the person to ask to go to lunch, because we just weren’t doing it.  It was pretty challenging, but extremely rewarding at the same time.

Total Time to Complete: about 13 months

Baby Step #3—complete our emergency fund with 3-6 months of expenses

This step was awesome because we saw our tally go in the other direction!  We kept the same intensity and were able to get to fully-funded emergency fund within about 5 months.  That was very exciting, that we I even got a little early Christmas present at the end

So, what now?

Julie and I are going to sit down over our Christmas break and put together our budget for 2010.  Our newest line item will be 15% of our gross income into retirement.  This step is going to require the same discipline as the other Baby Steps because it’s a such significant portion of ours and anyone’s income.  We’re excited, though, and next week we’ll have a post reviewing the Baby Step #4 chapter of The Total Money Makeover [affiliate link].

(Need a budget template?  We’ve got you covered and the templates include 2010.)

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