Teachers Stacking 10's

Category: Budgeting & Cash Flow

Practical strategies for managing income, eliminating debt, building emergency funds, and creating financial stability on a teacher salary.

  • Using Magic and Math to Grow Your Money!

    Using Magic and Math to Grow Your Money!

    So how can someone who is an average wage earner grow their money like a rich person? The answer lies in… math!

    We’ve all heard stories about how some little, old lady with no family and worked as a librarian all her life passes away and leaves behind a $2,000,000 estate! People far and wide wonder how could this woman who earned at most $35k in a year could accumulate that much money! The reason is the power of compound interest!

    Compounding Interest

    Interest is the money you earn from financial institutions for allowing them to use your money to loan out to their clients. Banks can pay you this interest because they charge higher interest rates to their clients. So what is “compounding interest”? Compounding interest is how your money grows each year. Look at the following example.

    Let’s say you deposit $10,000 into a savings account that will pay you 2% interest each year. This is a very realistic rate that you would earn from a savings account from an online banking institution. What’s not realistic is we are not going to be adding anymore deposits to this account during the year. At the end of the first year, the bank adds your 2% in interest to your account. Again, they will usually do this monthly or quarterly, but we are going to keep it simply with yearly interest. So they add $200 to your account. Now you have $10,200 in your account. At the end of the second year, they add another 2% in interest, not just on the $10,000, but on the $10,200 that you now have. So at the end of the 2nd year, they add $204 to your account. Now you have $10,404 in your account. End of the 3rd year, they add another $208.08 giving you $10,612.08. That is compounding interest. This might not seem like great growth, but that’s the process. The better return you can get from your money, the faster it will grow.

    The Rule of 72

    We’ve looked at compounding interest. There is a simple way of calculating what your money will do over time. You look at your rate of return and see how many times it will go into 72. The total will be how many years it will take you to double your money. So in our previous example of 2% interest, we would double our money every 26 years. Not a great rate of return. Let’s say we take that same $10,000 and invest in the stock market that will return on average 7%. We should double our money in 10 years. Everything rounded to the nearest whole dollar.

    Starting money – $10,000

    Rate of Return 7%

    Year 1 – $10,700

    Year 2 – $11,449

    Year 3 – $12,250

    Year 4 – $13,108

    Year 5 – $14,026

    Year 6 – $15,007

    Year 7 – $16,058

    Year 8 – $17,182

    Year 9 – $18,385

    Year 10 – $19,671

    So you can see that after 10 years, even with you doing absolutely NOTHING, you have doubled your money! This is without you adding ANY more money into your account! This is the power of compounding interest! 

    Now let’s look at an that same scenario except that we will continue to add $100/month to that account since we should constantly keep saving.

    Starting Money – $10,000 adding $100/month

    Rate of Return 7%

    Year 1 – $11,900

    Year 2 -$13,933

    Year 3 – $16,108

    Year 4 – $18,436

    Year 5 – $20,926

    Year 6 – $23,591

    Year 7 – $26,443

    Year 8 – $29,494

    Year 9 – $32,758

    Year 10 – $36,251

    So just by adding another $100/month into our account, we have increased our total savings by another $16,500. This is something that you can achieve! Now let’s imagine you have followed the T.A.’s advice and have become a super saver $500/month. What would those numbers look like?

    Starting Money – $10,000 adding $500/month

    Rate of Return 7%

    Year 1 – $16,700

    Year 2 – $23,869

    Year 3 – $31,540

    Year 4 – $39,748

    Year 5 – $48,530

    Year 6 – $57,927

    Year 7 – $67,982

    Year 8 – $78,741

    Year 9 – $90,253

    Year 10 – $102,570

    This is where you can really start to see why we need to work on that savings rate and how we can start to build true wealth. So as you continue to build your portfolio, you can start to project the money you will have as you go through the years.

    Keep stackin!

  • Top 5 Areas to Cut Your Expenses

    Top 5 Areas to Cut Your Expenses

    We’ve spent a lot of time talking about investing, but you might be saying, “Professor, I’m living paycheck to paycheck. How do I find any money to invest?” This is a great point. I was in the same position 2 years ago. I lived the paycheck to paycheck lifestyle. I didn’t think it was too bad, but I knew there had to be a better way.

    I did some research into how to increase your free income. Most of the sites I found made it seem to easy! You just walk into your boss’s office and ask for a $25,000 pay increase. I actually found that advice. Well, it was a little more technical than that. You proved your value to the company, found a competitor that paid more, and then discussed the increase with your boss. Imagine doing that as a teacher. You find another district that pays $5,000 more per year than your current district. You walk in to your superintendent’s office and say, “I have accomplished great scores on our yearly assessments, and I know that I can make $5,000 more per year at district X. I’d like you to match that pay or I will leave.” Undoubtedly, your superintendent will thank you for your service and wish you luck at your new job. As a teacher, we don’t have some of the luxuries that the private sector does when it comes to salary negotiation. Of course in other posts, we have also pointed out some of the advantages we have over the private sector.

    So we could look for ways to increase our income outside of teaching through the use of side hustles or summer jobs, but in this post, we are going to look at the other side of the equation. So what areas can we cut our costs?

    1. Housing – When we look at where we can cut costs, we want to start with the biggest areas first because they will have the biggest impact. Housing is most people’s biggest expense each month. It can also be difficult to change due to family situations. If you are able, you could look into smaller houses or apartments to lower your rent or mortgage. You could also look into renting out a room on your property if you are comfortable with that. This would be a great option for a younger teacher that could rent to another teacher in their district. We were not able to change our housing expense at all. With a wife and two teenage girls, we were definitely not comfortable renting out a room in our house. The TA, on the other hand, was able to rent out a room to one of his friends. This is a great financial move for him!
    2. Cable/Internet – This is another area that can be a huge expense each month. Before our cost cutting moves, we were paying $150/month to Dish Network for our cable alone. I looked at our list of channels and cut our bill down to $100/month! I then called last month to say that I felt we were still paying a little too much and they lowered our bill down to $70/month for being a loyal customer. This is something that everyone can do. EVERYTHING is negotiable! Companies spent incredible amounts of money to attract new customers. They claim that those “specials” are only for new customers, but if you call, and calmly discuss the fact that you have been a loyal customer for many years, they will pass you along the chain until you reach the customer retention department. They are the ones that have the power to authorize these “special” rates. Ramit Sethi in his book, I Will Teach You to be Rich, has scripts that he uses to help you negotiate lower rates on everything from cable to car insurance. Very useful tools! I know, I know… There are many different options for TV online, such as Netflix, Hulu, etc. We haven’t quite gotten to that point yet. If you live in a large city, you also have a variety of options for your internet service and speed. Living in rural Minnesota, we are stuck with our current ISP. If you have the options, this can be an area to cut a good amount of money.
    3. Groceries/Food/Dining Out – This area can vary drastically from person to person. If you are young and single like the T.A., your grocery bill is probably fairly low, but your dining out bill might be sky high (damn parmesan-garlic wings)! My grocery bill dwarfs his each month, and with two teenage girls, my dining out bill probably isn’t far off of his. Really, the only way to cut this area is to track your spending each month. A tool like YNAB (You Need A Budget) is a great tool to use to track these expenses. A quick way of saving money in this area is to eat at home more often. This can be a very easy change, but many times, change can be difficult. Even with a laser focus, we have had a difficult time trying to cut our costs in this area. It is SOOO convenient to stop at a fast food place or a restaurant instead of eating at home. You actually have to stop, think, and plan your spending!
    4. Cell Phone – This is a huge area of expense for a lot of people. In our family of four, our plan with Verizon was a whopping $250/month. This is a huge kick in the ass for your budget. I looked into it a little bit and noticed we were paying insurance on our phones that were already paid off! I went online to our account and removed that insurance and immediately knocked $25/month off of our bill. Super easy! I have also looked into doing Verizon pre-paid as I’ve heard that it is sometimes up to 50% off your bill. I haven’t been able to take that step. There are also other plans out there likeStraight Talk, Republic Wireless, Google FI, among others. I will not speak directly to these yet since I have not had any experience with them. Once our kids are off our plan, I will definitely look into these other options to cut costs even more!
    5. Insurance – Insurance, or “in case shit happens”, is really a necessary evil. Think about all of the different kinds of insurance that we have. Health, life, auto, home, dental, umbrella, that’s quite a list! Now, not everyone has to carry all that insurance. We won’t cover which of these insurances you should or shouldn’t carry, but we do want to look at how you can cut costs. The first step is to look at how much coverage you have. You could save money by raising your deductible on your health or auto insurance. This will save you some money, but the bigger savings will come from shopping around. The longer you stay with the same insurer, the more they will automatically raise your rates. I learned this firsthand last year when I shopped around for new auto insurance. I had been with the same national agency for my entire driving life (almost 30 years). I knew my agent very well and could talk with him whenever I needed. I sat down with him to see if I could lower my costs. He punched some numbers, but there wasn’t much he could do. The computer just kept spitting back the same premiums. I visited with a couple other insurance agents, and I was shocked at the difference. See the numbers below to how much we saved.

    Category

    Company A

    Company B

    Difference

    Monthly Premium

    $178

    $85

    $93

    Deductible

    $500

    $500

    0

    Coverage Amounts

    $100k/300k

    $250k/$500k

    DOUBLE!

    I couldn’t believe it. I cut my monthly cost in half AND doubled the amount of coverage I had. I wish I had shopped around for insurance years ago. Think of how many hundreds, if not thousands, of dollars I had lost over the years. It was incredible! Definitely shop around for your insurance. Now, things like healthcare might be tied to your employer, so you might not have the option of shopping around with different carriers, but if you can, DO IT!

    There ya go. Five HUGE areas that you can cut a great deal of expenses to allow yourself more money to put to work for you! Don’t tell yourself that it can’t be done! Get out there and try. I didn’t think it was possible either, but it is. You just have to make the effort! Now get to work and…

    Keep Stackin!


  • 5 Ways to Automate Your Finances

    5 Ways to Automate Your Finances

    We all know how busy life gets Once August and September roll around. Do yourself a favor and takes these 5 financial steps now to help automate your finances for the upcoming school year.

    1. Set up an automatic deposit into a savings account with a decent interest rate. 

    At the very least start having money automatically pulled from your checking account into a decent (greater than 1% interest) savings account. I started just by having $50 automatically transfer at the start of each month. It sounds small but pulling that money out of your checking account each month adds up in a hurry. If you are like me, I tend to spend whatever is in my checking account. It is crucial for my savings to have that money come out right away to the point where I basically never see it. I forget the fact that I am saving money first. 

    2. Check to see that you are getting a real interest rate on your savings account. 

    Four years ago I, like most people, had a savings account through my local bank. Turns out that savings account was earning a whopping .05% interest… What a waste! Currently I have a capital one 360 account (affiliate link). It’s not extravagant but it earns 1% interest. That is 20x the rate of my local bank! You can find some banks out there that will offer up to 2.5% but as long as you are up over that 1% mark at least your money is doing something while it is sitting in the bank. Personally, I don’t keep a large sum in a savings account. I prefer to have that amount invested, but it is nice to have a little cushion in cash available. 

    3. Increase your contributions to your investment accounts (403b, HSA, Roth IRA, etc.)

    You should have some kind of an investment account that you contribute money to. At the start of each school year, I slightly increase the amounts I contribute to each of those accounts. I like for my increased contributions to match whatever my raise will be for the upcoming year. I have figured out the monthly allowance that I can live very comfortably on ($2,600). At the start of each school year, I will increase my 403b, HSA and Roth contributions so that my take home each month is roughly $2,600. Doing this prevents me from getting the lifestyle inflation that comes from earning more money and beefs up all of my investment accounts. 

    4. Automate your bill paying

    Paying your monthly bills can be time consuming, and if you’re like me, another thing that you can potentially forget. Go through all of your accounts – Internet, Electric, Gas, Trash, Mortgage, Car Payment, Student Loan, etc. and set all of those bills to auto-pay. It might be nerve-wracking at first but in the long term it saves you a lot of time and mental energy to automate all of those bills. Typically, if you go under account settings there will be an option to auto-pay. For me it has freed up time and has reduced the amount of stress in my finances. Knowing that my bill will automatically be withdrawn from my checking account is one less thing I have to worry about during the school year. 

    5. Establish a preferred way to track your spending

    If you aren’t tracking your spending and your net worth, then you aren’t paying attention to the number 1 factor in your journey to your financial freedom. There are a lot of services out there. A lot of great ones are free. I personally use Mint and Personal Capital to track my spending and my net worth. I feel like those do a nice job of tracking all my finances. I like having Mint to track my day to day expenses and I primarily use their monthly spending categories feature. I use Personal Capital to track my net worth. I feel that it does the best job tracking all of my accounts collectively and giving me an accurate look at what my net worth is and is the site that I reference when I set my net worth goals for the year. 

    After all of that is said and done, I still like to use a spread sheet that helps track spending and net worth over time.

    Keep Stackin!


  • Credit Cards – The Good, The Bad, and The Ugly

    Credit Cards – The Good, The Bad, and The Ugly

    Credit cards… For some people, they are a symbol of debt, despair, and frustration. For others, they are a symbol of income, joy, and motivation. How could a small piece of plastic stir such different emotions in people. For this answer, we need to analyze how people deploy these cards in their lives.

    The Good

    Let’s start with those people that use credit cards to the benefit of the holder. In recent years, credit cards have worked hard to recruit new card owners by offering some great sign-up bonuses. These various bonuses include; cash-back and match rewards, travel miles, and card points that may be redeemed for gift cards or other redemption portals. Some of these bonuses are one-time hits for meeting certain spending requirements. For example, I just recently met my spending requirement on my Chase Sapphire Preferred card. The spending requirement was $4,000 in the first 3 months of card ownership. By meeting this requirement, I was awarded 60,000 bonus points. (I will do an in-depth case study on this card in a future post.) Others are continuous bonuses that are earned each time you spend money on the cards. My case study on the Discover It card was an example of a cash-back card. These people are go-getters that think about what they want and find a way to make it work for them. Credit cards are a means to an end for them. The most important thing about these people is that they pay their statement balance in full each month. They do NOT pay interest to the credit card companies. That would defeat the purpose of getting those bonuses because the company might pay you a 2% cash-back match for your spending, but they will charge you in excess of 25% interest if you carry that balance forward!

    I am one of these people, but I wasn’t always….

    The Bad

    The next group of people are those that use cards to pay bills, expenses, and other items both necessary and unnecessary. These people do not plan their spending on their cards. They lose out on getting great bonuses. These aren’t bad people. In fact, I used to be one of them, and I’m not half-bad (at least according to my wife). They just need a little guidance and direction. One important thing that this group needs to improve upon is creating and sticking to a budget, as you can see here. This step in the process can be a very difficult one because people at this stage have probably never used a budget before. They have just spent money as they needed it. This is the point where you become proactive instead of reactive with your money. These people end up paying that 25% interest on their cards because they can’t quite afford to pay the full statement balance. They “justify” carrying that balance because the interest might only be $25/month. This is the “monthly payment” mindset that I will touch on more later in this post.

    The Ugly

    This final group of people are ones that take spending on their credit cards to the extreme. Not only do they pay their bills on their cards, but they also put unneeded expenditures on them. The biggest problem is that this group has one or more maxed out credit cards with not enough cash to pay them off in the next month, or in some cases, in the next few years! They end up paying hundreds, or even THOUSANDS of dollars every year in interest! They are GIVING money to these credit card companies. Credit cards for this group cause fear and anxiety. You can’t talk with these people about credit cards and responsible spending because they become angry and defensive. I’ve tried to have small conversations with some of my closest friends about this, but I’ve learned that it’s not a topic that people are comfortable talking about. I’ve gotten to the point that I don’t even talk about our financial situation with others unless they ask, and even then I just say that we don’t have any credit card debt and if they ask, explain how we were able to accomplish this.

    I feel bad for many of the people in this group, and I don’t want to come across as callous, but honestly, it’s usually their own fault. I realize that there are things like medical emergencies that can destroy and families’ financial future, but those are the exceptions and not the norm.

    So how did we go from the ugly to the bad to the good???

    The Process

    The first step for us was to actually realize what we were doing was stopping us from doing the things we dreamed about doing and our retirement goals. I studied our monthly spending and realized that we were losing over $250/month to credit card interest!!! We were so stupid, but the thing is.. we could afford our monthly payments. We weren’t adding anymore to our debt, but we just weren’t really digging our way out. This is true of most Americans. We have been trained to think monthly payments are required. MONTHLY PAYMENTS are bullshit! If you want to gain financial security, you MUST eliminate the term monthly payment from your vocabulary! The only monthly debt payment you should be making is your mortgage.

    Once we admitted our problem, we developed a debt payment plan. We chose a debt snowball strategy. This is where you list all of your debts on a piece of paper in order from smallest to largest. We then proceeded to pay the minimum payments to all debts except for the smallest one. We put as much as we could until it was paid off. We then took that “extra” money and added it to our next smallest debt. We did this for 3 years until we had paid off all $18,000 in credit card debt we had. Now, people will tell you that you should pay off the highest interest debt first. This is really the most efficient way of paying your debt, but my wife and I needed the emotional “win” to keep us motivated in paying our debts. If we would have started with our $9,000 credit card, it would have taken us over 20 months to pay it off. This would have been a long time to wait for a “win”. We may have lost our motivation and slipped back into paying the monthly minimum. We’ve all seen those minimum payment graphs on our credit card statements, so I won’t bore you with that, but you MUST find a way to pay more than the minimum each month on at least one card. 

    At the end of those 3 years, we had reached the top of the mountain, or so we thought. We had eliminated all of our credit card debt. We had moved from the ugly to the bad. How did we move into the good? I had read various websites like Mr. Money Mustache, and realized I wanted those credit cards, who we had paid so much in interest to, to actually pay us! I chose to start with the Discover It card. I was approved for the card and began paying all of our monthly bills on it. Each month, we paid off the card in full. The KEY is that you MUST pay your statement balance in full each month. If you cannot have the discipline to do this, DO NOT attempt to use this strategy. You’ll end up paying more in interest than you will receive in benefits. 

    Finally, we had turned the tables on those damn credit card companies. For 25 years, all the way back to that Citibank card that I signed up for on Spring Break back in 1993 (but I got a sweet T-shirt!), I had been paying interest. Now the credit card companies pay us. And you can make your credit cards work for you too! Take that ugly situation, analyze what you can do to fix it, and turn it into a win for you. It may take some time and discipline, but you can do it!

    Keep Stackin!

  • Credit Card Case Study – Discover It

    Credit card hacking made easy!

    So there is a little secret… Credit cards can actually be great! This goes against what we have talked about in regards to using credit. This is an advanced technique that should only be used when you have no other credit card debt AND you will be paying off your card in full each month.

    Once my wife and I were able to pay off all of our credit card debt, I thought I would give this credit card hacking a shot. I had done some research and thought I would try a cash back card first. The first card that I decided to try was the Discover It card. The card will match 1% of everything you spend on it. It also has quarterly categories that will match 5% of your spending.. Sometimes the categories are great. One of the quarters was 5% on grocery stores. The catch is that you have to make sure that the store is listed as a grocery store or supermarket in the “Credit System”. For example, if you shop at Wal-Mart or a Super Target, they are not listed as grocery stores, so you won’t get the 5% match there even if you are buying groceries. I did my grocery shopping at Hy-Vee for that quarter to get the match. Some quarters I didn’t use the 5% at all. This quarter is gas stations, Uber and Lyft. I don’t use those categories, so I don’t get the benefit.

    Now for the BIG benefit. After one calendar year, they will match 100% of the cash back that you earn! Finally! Earning some money back from those companies that I’ve paid so much interest too over the years.

    Let’s take a look at our numbers below.

    Money Spent on the Card – $33,683.98

    Cash Back Earned $437.59

    Cash Back Matched$437.59

    Total Cash Back $875.18

    Cash Back Percentage 2.6%

    That’s not a bad return on money that I would be spending anyways. We used the card to pay anything that would allow us to use a card. Electric, phone, grocery, insurance, etc.. One of the big things that you need to be careful of is to not increase your spending just to get more cash back. There is no amount that is “required” to earn cash back, so only purchase items that you would get anyways.

    I would say that this card was a resounding success for us! I will be getting that $875.18 check from Discover in a couple of weeks and will be salting it away in my Vanguard Investment account. Now I will keep this card, but I will only use it for the 5% categories. I will be using my next card in my case study, the Chase Sapphire Preferred. This is a travel card!

    Keep Stackin!

  • The Secret to Starting a Budget

    “Don’t buy shit you don’t need.”

    Truer words have never been spoken.

    During my first few years of teaching, Minnesota would administer 6th graders a statewide writing test. The students were required to write an essay choosing a topic from a predetermined list. After the papers were finished, the teachers had to gather all pre-writing notes and make sure that the students had included their names on the forms. Going through one of the tests, we found one that was written beautifully. It was organized. It had a thesis and strong supporting details. The student explained how their neighbors had lots of “junk” in their yard that they never used and it looked terrible. He mentioned how they never had money to buy things they needed.

    His closing statement was the truest thing that I’ve ever read. “Don’t buy shit you don’t need.”

    Budgeting 101.

    As you begin your teaching career, there are three rules that you have to establish. I have these three rules on my board for my 6th grade social studies students.

    Rule #1 – Earn money

    This rule should seem easy enough. You make money. The key to this step is that your income should grow over time. As you progress in your career, you should get steps each year. You should also examine how your district handles lane changes. This is something you should look into doing as soon as you are set in your position. Hopefully within the first 5 years of your career. If you don’t, you are leaving a lot of money on the table. You may add to your income by coaching sports, supervising groups, etc.. You may also pick up some work in the summer, BUT be sure to read this post(backlink) before you do.

    Rule #2 – Spend less than you earn

    This is the rule that seems to elude most people. It sounds really easy to do, but trying to keep up with everyone else is the most American thing you can do. It’s also the dumbest thing to do when it comes to trying to become financially free! By trying to keep up with others, you could end up spending more than you earn by using credit cards. Credit card debt in America has reached all-time highs. And your debt is definitely an emergency according to Mr. Money Mustache, the guru of Financial Independence. Read about proper credit card use in this post.

    Start this process of spending by laying out your necessities such as housing, vehicle, and food. These are necessities and usually your biggest monthly expenses. If you can lower these bills, you will be starting out ahead.

    An especially dangerous area for many people is vehicle payments. Monthly payments to debt obligations are the devil. Literally… They will drag down your budget to the point of causing you great stress. Ask yourself if you really NEED that new vehicle. What value will it add to your life? Many in the “Financial Independence” community believe that you don’t even need a vehicle and you should just bike everywhere. The T.A. and I don’t believe that idea is reality for most people. If it is, great! You are way ahead of the game. But think about the purpose of your vehicle. A newer vehicle will cost you more in monthly payments and insurance. We will talk about the impact of a new car in a future post.

    The next step is to examine your insurance, cable/internet, and phone bills. These bills fall in between the need/want areas. They can balloon in cost very quickly. The big key to this is to shop around for a better deal when possible. I was able to lower my auto insurance by $100/month and double my amount of coverage by switching companies last summer.

    The final step is to examine your wants to see if you they are costing you your financial freedom. Restaurants, fast food, chicken wings, etc.. All of these things can derail your future. An easy way to track this spending and budgeting is to use a software program or app. There are many of these things available today. I used Microsoft Money and Quicken in the past. The T.A. and I both use You Need a Budget (YNAB) to track our spending and set budgeting goals. An important step that you will need to do each year will be to analyze your spending to make sure you are not succumbing to lifestyle creep. We also use Personal Capital to keep an overview of all of our accounts. It does a great job of giving a snapshot of your overall net worth and progress.

    Rule #3 – Save the rest

    This is where automating your paycheck is important. There are many different accounts you can put your extra money into. Retirement, savings, taxable. All have their pros and cons. The key is that you are putting your extra money into these accounts on a monthly basis. Have portions of your check directly deposited into these accounts so you aren’t tempted to spend them.

    As I mentioned in a previous post, I have $200/month sent into a savings account that takes some work to withdraw money from. I’ll admit. I’m like most Americans. I like the dopamine rush you get when buying something new. Buying new things actually gives off a chemical in your brain! Automating that savings makes it much easier and much more effective!

    The goal of budgeting is to give yourself financial security. This means you are no longer in that paycheck to paycheck cycle of just making the minimum payments on your debt obligations. Once you break that cycle and get your finances in order, you will be able to build your savings and create that financial security. Then you can move on to working on that next step, which is financial freedom and financial independence!

    But remember that lesson taught to me by a 6th grader, budgeting can be very simple.

    “Don’t buy shit you don’t need!”

    KEEP STACKIN!

  • How Can a Teacher Save Money

    Extra money? Give it a job!

    Now that you have gotten your budget laid out, it’s time to determine what you are going to do with the money beyond your expenses. The first step is to establish an emergency fund (EF). When life happens, you need to be prepared. The size of the emergency fund will be different for everyone. Some people feel that you have to have 3-6 months expenses in an EF. Others feel that $1,000 is enough. It all depends on your comfort level. The TA and I both feel comfortable with $1,000 in our EFs. We typically can access money from other accounts or investments within a week. You just don’t want to back to living on credit! Once you have this EF set up, move on to the next step.

    This step will require you to think about what your goals are. Sit down with your significant other and determine what you want your future to look like. Some questions that you should be asking each other:

    • How many pots will you fill?
      • This could be like setting money aside for a replacement vehicle, updating an appliance, a date night….
    • How will you handle big expenses?
      • Things always come up in life. If your vehicle springs a leak from your head gasket, how will you cover that cost?

    It is SUPER important that you are both on the same page. If you aren’t, it will feel like you are swimming upstream. It could also create feelings of resentment. My wife and I went through a rough patch that lasted several years of not being on the same page. Fortunately, we came to an agreement on our financial future and path.

    All of this savings involves money that you plan on using within the next 6-12 months. Once you have these savings goals funded, it’s time to look at the next step. Investing….

    Keep Stackin!