Wednesday, January 21, 2015

Debt Free...What's Next?

I thought after we finished paying off our debt, I'd feel a little less stressed about money. Living with the Debt Beast for so many years (since I was 18!) felt suffocating, disempowering, horrid. I don't feel that way anymore. But I don't quite feel liberated, either.

We're throwing a party for our friends and family at a fancy restaurant in Seattle to say thank you for the support and spoil them a little because we suddenly can. That's all the reprieve we're really giving ourselves, and we're already plotting out the next steps in our financial future.

I have a tendency to enjoy Extreme Budgeting, the sort of no-forgiveness, no-sympathy, no-messing-up sort of budget that causes a certain amount of stress. This is one of the reasons we were able to pay off our 66K+ debt in five years while living in two different countries, taking vacations, and managing our special needs menagerie of pets.

And it's that sort of manic energy I'm rolling into our future financial plans.

Thankfully, G's a little more sedate about these things, though he's also changed more towards my side of the world than either of us would have guessed. These last five years have turned him into a financially savvy budget guru.

He'll temper whatever rigid crazy I decide to stir-up, and I ever have plans now that we're debt-free.

First on our list is, of course, paying for the party we're hosting for everyone, but a peek at our future financial obligations reveals we have a long way to go and no time to rest. One party, one bit of spendy fun, and then it's immediately onto the Next Stage. We've moved from repayment into savings.

A quick search of the internet, or a browse through any number of finance books, will present you with a number of options designed to fit a multitude of personal situations, beliefs, morals, and obligations.

There's the Zero-Sum Budget that has you allocate all of your money into particular payment categories (everything from rent/ mortgage to savings) every month with goal of reaching $0 at the end.

Elizabeth Warren, a financial guru, suggests a 50/30/20 division of your funds between Needs, Wants, and Savings.

The 60% solution promotes the idea that all your living requirements should total no more than 60% of your total budget and that the remaining 40% should be allocated towards retirement savings, long-term savings, short-term savings, and fun money.

There are many other budgets out there, but those are the three I like the most. Of course, each one needs to be tweaked to suit our needs.

For our household, my current idea is to aim for a 50/20/20/10 budget.
- 50% towards NEEDS
- 20% towards WANTS (with the goal of minimizing the wants where possible...but TRAVEL)
- 20% towards SAVINGS

Yes, ideally both G and I want to donate 10% of our household income. This is a goal I've had for many, many years. Additionally, it's a fundamental tenet of Judaism; it's known as Tzedakah (charity). This is a duty that cannot be avoided, even in times of crisis. One is to give as they are able, and I was delighted to learn 10% is what Jewish law mandates one should give (and it's 10% of your NET income, in case you were curious). Both G and I feel this to be incredibly important, and we have yet to reach this goal. At our current income, this money would make a significant difference to whatever organizations we choose to support.

But who do you support?

For us, as with many others, who we support comes down to what causes are important to us. We donate to a number of organizations already on a monthly basis, including Plan International, Planned Parenthood, S.A.I.N.T.S., Feminist Frequency, and Northwest Harvest. We also donate as events and fundraisers come up throughout the year.

But it's hasn't been to 10%, and I want to change that this year.

The monthly breakdown of this money ends up being a little wonky, as we have a few three-paycheque months that give the appearance of increasing our income. If we want to maintain a 50-20-20-10 division, a bit of creativity is going to be involved, but I think we can do it, and I think it's worth doing. And that, really, is the first step.

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