Step 1: Know Your Condition

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From the time I was a broke college student, I wanted very much to achieve the American Dream of home ownership and financial security for myself.  I was passionate enough about the topic to make Finance my college major with a Financial Planning specialty.  Once I graduated, much to my dismay, I learned that no one in their right mind wants to take financial advice from a 23-year old.  My career naturally progressed in banking since I was already working for an up-and-coming regional bank while I finished my degree.

Brett had waited to propose until the weekend after I graduated from college.  He knew me well enough to know that I would be more interested in being Becky Home Ec-ky than a student if we had tied the knot sooner.  We were married just three months after I graduated in August of 1997.

Here I was with my newly acquired knowledge, broke, with student loans and credit card debt, marrying a man who had always lived a very disciplined life where money was concerned.  For all of the teasing his friends dished out about his cheap habits, his ways gave me the “stick-to-it” my plans lacked.  For him, every decision we made was a financial one. 

Brett had saved a down payment for a new 1994 Jeep Cherokee when he was first hired as a new police officer and then saved a down payment for the land that we would build our dream home on in the future.  Once he paid off the land, he bought a modest home, taking in roommates to pay extra payments to reduce his debt.  He asked me how much I owed before we were married but I didn’t want to know.  I hadn’t sat down and actually added it all up.

When Brett and I set up our financial “housekeeping”, we made some basic decisions that have served us well ever since.  We decided early on to adopt these financial principles

  • Make all accounts joint, avoiding “mine” and “yours”.  This was a pretty good deal for me at the time.
  • Set financial goals together, prioritizing which ones to tackle first.  We would begin with paying off our debts and building a new home. 
  • Live on only one salary, using the second to achieve our goals.  For us, this decision was made so that I would be able to stay at home with our children one day.  Many people have no choice because of circumstances like:  injury or illness, loss of a job, children with special needs, divorce, death of a spouse. 

Then, I gritted my teeth and made a list of all of my pre-marital debts, including balances, monthly payments, and interest rates.  Facing your financial facts is an emotional process, but nothing will foster teamwork in your marriage like being honest and working toward a common goal together. 

If you want to achieve your financial goals, you absolutely must know the truth about where you stand today.  Whether you are just starting out as a new graduate or newly married couple, your finances need a major overhaul, or you are just looking to make some small changes for a big impact on your future, my challenge to you is this: 

Step 1:  Find out how much you owe and what you are spending every month. 

If you haven’t already, take out a notebook or create a simple spreadsheet for all of your family’s debts.  It should include columns for:

  • Creditor
  • Description
  • Current Balance
  • Interest Rate
  • Monthly payment

Family Debt Worksheet

Look back at what you have spent in the last month and assign it into spending categories.  Do the best you can.  If you have not kept sufficient records to determine where your money went, begin today to track your family’s spending for the next month.  You may use the Family Debt Worksheet for monthly debt payments and make a separate sheet for expenses breaking down spending into categories.  Typically, they are something like this:

  • Clothing/Dry Cleaning
  • Utilities
  • Entertainment/Meals Out
  • Exercise/Sports/Lessons
  • Gas
  • Gifts
  • Groceries/Household
  • Haircuts/Makeup
  • Healthcare/Prescriptions
  • Home Décor
  • Home Maintenance
  • Insurance-Homeowners’
  • Insurance-Vehicle
  • Miscellaneous
  • Pet
  • Phone/Cell/Internet
  • Postage
  • Taxes-Property
  • Taxes-Income (don’t list payroll deductions, only if you have to pay it out-of-pocket)
  • Taxes-Vehicle
  • Vehicle Maintenance

Family Monthly Spending

This is not just necessary for those who are just starting out.  It is always the place to start when things change in your life.  We have done another check recently to determine what we need to change to live on retirement income and how much income we will need to supplement that.  There is value to this anytime you want to test your financial health. 

Once you get a clearer picture of where things stand today and what goals you wish to work toward, we will work together to set financial goals, create a spending plan (looking for ways to save money as we go) and move on to finding the financial freedom that comes from having ENOUGH to meet your own needs and find the joy of giving to others.

Check back next week for Step 2 as Finance Fridays continue.   

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