Friday, September 20, 2013

My Disposable Income Reevaluation

Now while I still have France and Spain to report on, I wanted to take a second to share with you our recent re-evaluation of our disposable income. We are currently going through the home study of Dave Ramsey’s “The Legacy Journey” (review on the way shortly) and a lot of what Dave talks about in this series has lead us to take a re-examination of our household’s disposable income.

Now without going into too much into detail as I’ll save the in depth look for an upcoming review, but “The Legacy Journey” is geared towards those in between baby steps 4-7. Essentially the audience is out of debt for everything except their house, investing for retirement, savings for their kids’ college, paying off their home mortgage and building wealth while giving.

In one of the lessons there’s a fascinating concept presented that covers the size of one’s cup (cost of living), filling that cup up and creating an overflow. This particular imagery really made my wife and I take a careful look and re-examination of our cost of living, what we want our normal expenses to look like and challenged us to be more intentional with our disposable income. Up to this point we have been in a debt free marriage for over a year, are steadily saving for retirement and are saving to pay cash for our first home together. And we’ve taken this as an opportunity to take a second look at how we would want to change our monthly cash flow and savings goals.

For starters, during our search for a new apartment, we’ve decided to raise our rent ceiling by a few hundred dollars as we look for more elbow room in a more family friendly Chicago ‘hood. We have also decided to use a sinking fund to buy a used car. On this particular note our savings goal is a little shy of $5,000 by the end of the year and I am going to lobby that we buy a used car that costs no more than $3,000. With the arrival of a vehicle I personally will have gone 10 years living without a car, a feat that I am particularly proud of. But also we are ready to take on the added costs of car insurance, maintenance, parking and gasoline. While we will still not surrender our bus passes, it will be nice to have options and the luxury of using a vehicle to go grocery shopping, thus rendering our portable grocery cart useless.

But the largest of all issues was what to do with our disposable income after all of our expenses were met. Believe it or not but the largest piece of that puzzle was easy to answer. Nearly 60% of our disposable income will be allotted to long term investing through our taxable brokerage account. This account that holds some of our superstar mutual funds, is more than just our house savings account. One day we will redeem shares from this account to adopt a child or two, give on large scale projects such as building schools and clean water projects overseas, use as a piece of our retirement income, maybe make a large gift to our kids for their weddings and for general spontaneity to give and spend in the future.

We also decided to send just a bit more money to our regular give account to give ourselves the opportunity to do more spontaneous giving throughout the year. But that still left us with almost 40% of our disposable income to decide what to do with. So we went to the drawing board and started adding “wish list” items. Between my wife and I, we listed out some items, ideas, vacations and general grab items that we would enjoy purchasing in the future. For me this list includes a spiffy looking watch, a portable dishwasher if we move to an apartment that does not have one included, dance lessons, a bike pump, some books and a carafe – because in France I learned that I drink more water when a carafe is readily accessible.

 This wish list is also where our car is listed out. I feel that this re-evaluation of our disposable income is helping me to enjoy spending, giving and saving even more than I have before. Truth be told I am just now starting to come out of “gazelle intense” mode after personally being debt free for 4 years, and my wife for one year. I was in attack mode and did not want to take my foot off the pedal, and my wife would merrily agree, that for quite a while I had not been enjoying my spending, saving or giving as much as God calls us to. So now I actually physically feel like we are taking our foot off the fiscal pedal and are starting to see the world around us. Our financial future is on cruise control and now we are starting to see the world around us. So we are left asking ourselves some important questions that in a roundabout way define our family values. What does a reasonable increase in lifestyle look like in our family? What kind of spontaneous gifts do we want to make throughout the year? How do we want to spend our investment income 20 years from now? Thankfully these are questions that we get to define for ourselves and you get to define for yourself. I used to think that getting out of debt and the adrenaline that came along with it was a ton of fun, and now I’m thinking that learning how to balance giving, saving and spending in a post credit apocalyptic life might just be even more fun! 

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