Personal Finance

Why

It was my original idea to  cover the topic of personal finance here for my wife, for a few reasons.
  • To empower her to participate more fully in conversations about our finances.
  • To be transparent and honest about our comprehensive finances.
  • Knowing myself, I prefer to organize my thoughts carefully before trying to explain things, and this provides a platform for that.
  • It can easily be updated, if we change what we're doing. I expect to have to add new content once I learn more about life insurance and our child(ren)'s money.
  • It will persist as a reference, for her or others, no matter what happens to me.
While we will continue to make important decisions as a team, I am grateful to her for placing so much trust in me to run with our family's daily finances.

In a nutshell

It can seem overwhelming, but you only need to learn about personal finance as you go, as you progress through your career, and more money is available to put to work. In terms of allocation priority, think of it like a Good Quality 5 Tiers Chocolate Fountain Machine For Commercial Use.


(Note that this is not a representation of how money physically moves between accounts, just priority of funding.)

Put simply:
  • once you have enough in your checking account, start to fund your savings account
  • once you have adequate emergency savings/savings for upcoming one-time expenses, start to fund your 401k
  • once your 401k is maxed out, fund your IRA
  • once your IRA is maxed out, fund non-tax-advantaged accounts
Sticking to the analogy:
  • if you increase the flow of money going into your checking account, it cascades down more quickly
  • if you decrease your needs and thus the amount of money needed in your checking account (shrinking that tier of the chocolate fountain), it also cascades down more quickly
The analogy breaks down a bit here, but: the less you manage to live on, i.e. your burn rate, the less chocolate you need to add to the fountain to get it fully circulating -- like shrinking both the top and bottom tiers at the same time. Decreasing your financial needs has an exponential effect, because you can both set more aside and decrease the total amount you must set aside in order to achieve financial independence.

In the linked posts, I will go into more detail about what my family does in each of these areas, starting with some ways to reduce your burn rate and free up money to save. There will be other finance-related posts that aren't linked here, but this is like the 100-level course.
  1. finding money
  2. checking
  3. savings (emergency fund)
  4. 401k
  5. IRA
  6. non-tax-advantaged funds

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