Today the couple saves 15% of their income toward retirement between two separate Roth IRAs, Kyron’s 401(k) plan, and Portia’s 403(b) plan, and have approximately $100,000 combined. Kyron receives an additional 6% match from his employer, and Portia gets a 4% contribution from her employer. “We also trade options to build up additional capital for purchasing passive income investments,†Portia says. They sock away another 5% in an ING account for expenses that don’t fall into the day-to-day budget but aren’t emergencies either, such as cash for minor car repairs. Then they create small savings accounts for minor goals, such as one for travel expenses and another for classes Portia is taking to become a financial planner. “This is money that is being saved to be spent,†Portia explains.
While allotting money to so many different accounts might seem confusing, “it’s easier to see that we have X amount for travel or we can spend this much on an investment,†Portia says. She keeps track of it all in a spreadsheet. “We know the maximum that we can spend for any of those categories as opposed to having it all in one bucket and then trying to mentally figure out what happens if the car breaks down,†she adds.
HOW THEY DID IT
Put a plan in writing. Money is an emotional topic, but by laying the numbers out of how much Kyron would have if he paid off his debts and how much the couple could save over a year’s time, the process was much easier. Portia and Kyron depend on a simple Microsoft Excel spreadsheet. “When I saw it in the spreadsheet and the numbers made sense, I could deal with it logically,†Kyron says. While a financial adviser handles their retirement accounts, the couple decided on their own how much they would allot to their other financial priorities.
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