Monday, November 4, 2013

2 Cents About Finances

A while ago, Pam and I were with friends and she said, "Let's talk to them about finances".  That send an immediate panic attack flashing through my mind!  My reaction was, "What!? The number one thing you should do is never get financial advice from your friends."

I still think that is true.

Another thought was, "What the heck do we know?" - we aren't financial people...we're just regular folks.  But the more I thought about it, - she probably didn't want advice on the latest stock picks.  Or where to buy gold.

I think she might have meant:
"How do you handle finances in retirement?"  
Or, 
"How do you manage your finances now?"

I should have a better answer to those simple questions.

The more I thought about it, here are 6 things I came up with:

  • 1 - Expenses 
To get a handle on our expenses, you need to know where it is all going.
We decided to track them.  It took a few months of stops and starts.  And a 'process' to develop some easy habits.  But we did it and now it is no big deal.
Some suggest you track expenses for a month - 30 days.  Then you know where the big checking account drainers are coming from.  
(My guess is eating out.  A hamburger here or there, a dinner now and then etc etc -- it adds up for us to be one of our biggest expenses.)
  • 2 - Income
Next is the income stream.  What is filling my bank account each month?  Hopefully it is two or three things.  For us it is:
- retirement:  USAF and a modest EDS (now part of HP) pension.
- online income:  I work 30 or so hours a month.

Your situation is probably different, but I share this to say there are many many ways to live the RV lifestyle.  Ours is just another situation.
  • 3 - Insurance
We decided to forego any life insurance.  We needed it to protect our family for a length of time.  If something happened to me, we had a policy that would take care of Pam until after the kids got out of college.  And we had a policy that could cover day-care/after-school expenses in case something happened to Pam.  
We also moved from whole life to term life insurance policies.  We also carried mortgage insurance to pay off the house.  But those days are over. 

Now we carry two vehicle policies:
- RV insurance
- car insurance
We use USAA for our car insurance and Blue Sky for our RV insurance coverage.  Every year we look around on the RV insurance and see if we have the best value, so we have been with three different RV insurance brokers.  Seems like the insurance there goes up every year even with out any claims.

Our medical is covered by Tricare, the military insurance for active and retired folks.  Since our next birthdays will be #61, we have a few years before we move to Tricare for Life and Medicare.

When we die, since we are planning to have our ashes rest in a Veteran's Cemetery.
  • 4 - Savings/Investments
Our 'savings' revolves around our 401(k) nest egg and what we have in the bank.  
401(k) - we consolidated our various 401(k) accounts from the companies I worked for after I left the U.S. Air Force in 1995.  We moved all that into USAA who manages that for us.  I look at it every few months but don't get hung up on the ups and downs of the stock market.  
In fact, we live as if we don't have it and don't plan on touching it for another 10 years.

When we sold the house, we bought the RV and the car and put the rest into a bank account.  We carried way to much in their and finally decided a few months ago to move most of it into a IRA type of account.  We can get access to it by going online and transferring funds from it to our checking account if we need to.  But it is getting a couple of % points more than our bank account.

We decided we want our savings account to grow to $10,000 if we can, but I don't know how realistic that is.  We put money in there each month if we can.  Dave Ramsey (who is a no-debt and emergency fund believer) says everyone (if possible) should have that much in an savings account emergency fund, so for now we are pursuing that.  The month long vacation in Hawaii or the cruise down the Danube will have to wait. 
  • 5 - The Number
Now and then when you tell someone about the RV lifestyle, they through out a question or say something that causes me to think, "I should know that cold.  I should have a better answer for that."  Such was the case about five years ago when we went out to dinner with Ron and Gerry.  He asked the simple question:  "What is the number you need each month?"

Ugh.... - $2,000? $7,000?  I really didn't have a good idea of how much it was going to cost us to live on the road.  So I started looking at budgets from other RVers.  There were 3 or 4 online that I found helpful.  From there I put together an example budget.  One of the many conversations we had on the back porch before we started doing this was the 
- categories or things we should track, and then 
- how much should estimate and allot in each category.

One of the best and most freeing things we did was to create a budget and track our expenses.  

If you'd think it might be helpful or are just curious, I'd be glad to send it to you.  You can also do a search on the blog here with 'finances'.  A number of posts should come up.
  • 6 - Next Steps
After all this - what are the next thing to do?  It may be to find a person (financial advisor/accountant/friend) and take action.  Do something even if it is only to get some ideas.  You don't have to buy insurance or pick a mutual fund when you talk with folks.  But decide if you really want to (or need to) get a better handle on finances.  

We talk about it every few months and see if we have gaping holes or if we are happy with what we are doing.  My guess is that there is something that you have been meaning to do and haven't taken the next step.  

I love this time of year because I can look at some of those items in my life and plan for my January 1  new year changes.  I am in the middle of working through some things now.  

So, even if we aren't financial people, we all have to manage our finances to a degree and keep learning what else may work for us.
We are always interested in learning something that may fit and may help us do a better job of it.  

But we don't want to be dragged down into the grind of a paper tiger and have endless and confusing personal 'financial' tasks we don't see any use for.

Just as we once downsized, we are always trying to weed out those things that are no longer working for us.  And doing those new things that have more potential impact.

While I didn't have a good answer at the time, talking about finances with friends spurred us to get a better handle on where we are with our own.

Thanks for joining us today on the Roadrunner Chronicles!  Hope you have a great week.  Until next time...

7 comments:

  1. Very nice blog Randy. We will be completing our first year of FTing very shortly and actually used a lot of your "line items" from your budget to help us set up our budget. We've tracked all of our spending throughout the year and it can be very eye opening to see where the money sometimes goes.

    ReplyDelete
  2. Great Post!! Absolutly true...you must know where your money goes!!! You can't fix it until you know where the leak is;o)))

    ReplyDelete
  3. Great Post!

    Your budget you post has helped two old coworkers of mine. It may have helped me and I just did not think about it. It appears most people live by what is left in their checking account each month or perhaps their credit limit on their card.
    I kept a budget record for year one and then did quarterly checks in year two. Year one = $ 4600 a month. Year two = 3900 a month. I run my years from 1 Oct, old habit I guess. I have been amazed at the change in taxes from the 28% working bracket to the 15% retired bracket. I have more money to spend not working than I did working. ( May not apply to everyone and past performance is no guarantee performance ). Thanks for all you posts.

    ReplyDelete
  4. Always good to know where the money goes...We like to keep up with that, for sure!

    ReplyDelete
  5. Thanks for the information. One of the first things our Financial Planner told us to do was track our expenses. That was 10 years ago, and its worked well for us. You may surprise yourself on were some of the money is spent. We still do it today. One of the first things she told us to do was pay yourself first. That was while we were still in the working world. Take 10-15-20%, set a amount and put it in a saving you do not touch. Then pay your bill and what ever is left you have to live on till the next pay check. It was fun to see the saving grow, and almost became a game for us to see how much "extra" we could add to it to reach a certain goal faster.

    ReplyDelete
  6. Thanks for the great information and we look forward to receiving your budget worksheet!

    ReplyDelete