How We Prioritize Our Finances
If you follow me on Instagram you may have seen me share about finances. I have a highlight on there called “Money” for anyone that wants to check it out. It’s one of the things my husband is passionate about and has influenced me in especially after I became a stay at home mom. One of the questions that was asked was, “How do you prioritize you're finances?” So I thought I would share with you how we choose to do just that. Finances can be a very personal subject, but I am so thankful for the many mentors in my life who have helped us with our finances so I thought I would share with you all what we are currently doing to help us reach our financial goals. I do want to say that what I share here doesn’t mean that you need to do it exactly as we do, but hopefully it can help your family come up with how you want to prioritize your finances to help you reach your goals. This was originally written 5 years ago in 2016 so I have made a couple updates in asterisks.
In order, here is what we have currently decided to prioritize:
#1 Giving.
We are only care takers of this money God has provided for us and he is the one who has blessed us with this money to begin with! So we made giving priority #1. In Malachi 3:10 it says: “Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the LORD Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it.” How much should you give? Well, ultimately that is up to you and your heart. The scripture in 2 Corinthians 9:6-7 says, “Whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully. Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver.”A tithe is generally a tenth or 10% of your take home pay before taxes are taken out. You can figure that out by taking 10% of your pay and then dividing by how many weeks are in the year (52) and give that amount weekly. Or some people like to give monthly as well. If you do not go to church then you can still give from your heart to various charities, causes or people that are meaningful to you. The point here is to give whatever you have decided in your heart to give! It really does help us stay humble, learn to trust and see God’s blessings, and is good for the heart. I truly believe that when we are good stewards with what God has given us that he will entrust us with more. We have seen Gods blessings in this area and are amazed by how He has taken care of us.
#2 Investing/Saving.
the second thing we focus on is making sure that we are investing and saving for our future. It is recommended to put away a minimum of 15% of your income for your retirement. If you are not doing this it’s important to really take a look at your finances to see how you can make this happen. Having this money saved will help you be able to live comfortably in your retirement and not have to struggle. If you can save more then the 15%, even better! It will allow you to retire earlier! Remember, if you are able to live off of 25% of your income and invest the rest then you can retire in only 7 years!? I know that may seem dramatic, but people have done it! If you want to retire early or even retire at all take a look at this post from Mr. Money Mustache entitled “The Shockingly Simple Math Behind Early Retirement” and you can see the percentages that I mentioned there. He says that “simply cutting cable TV and a few lattes would instantly boost their savings to 15%, allowing them to retire 8 years earlier!! Are cable TV and Starbucks worth having two income earners each work an extra eight years for???” Something to really think about, right!? Also, if you will live off of less in retirement then that will also shave years off.
#3 Our Health.
I make this one of my top 3 priorities because I feel very strongly that good health (mind, body soul), will help me live my best life possible while here on this earth. I choose to buy the best quality food that I can within my budget. I buy mostly real, whole food and organic whenever possible. We also don’t eat out nearly as often! This will save you lots of money and it’s WAY better for your health too! We also have a great medical team behind us should we need their assistance. I found a great team (naturopath, holistic doctor, holistic dentist for kids + I buy natural remedies and supplements that we use at home). Because we choose to use holistic doctors, for the most part we do spend a little more up front for that if we visit them. Knock on wood, but I feel like when you take care of your health sooner you will be at the doctors less which has shown to be true in my family! So overall I feel like I am saving money by doing these things. Of course there may be some circumstances you can’t control and if that is the case if you prioritize your finances you will be able to go see the best doctors to help you get through it and recover! In the end I feel it is worth it and I end up spending less over the long haul. I feel like we are going to pay now or pay later, so we decide to pay now for our health!
#4 Experiences/Time
Once those things above are taken care of we then like to prioritize experiences, time and travel with our family. This is one of the main reasons I wanted to become a stay at home mom. I put this BEFORE mortgage because it is more important for us to have more time together than to work more to have a bigger house. This may not be true for everyone and just because you have a bigger house doesn’t mean you don’t spend time with your kids. But when we live in California and send our kids to private school, want to eat good food and be financially independent within 10 years than somethings gotta give! If you find yourself really desiring to spend more time with your family see where you can make cuts. A really cool perk is that my husband works close to home and chose a great schedule. He works from 7-4, comes home for lunch most days and is home by 430 to spend time with us. How did we make that happen? By really living below our means and making sacrifices. We decided that the house was last on our priority list for the time being. Does it mean we will never have a bigger house? I am still debating on that one, because I am not sure I want to clean one haha. But for now this is what we choose to do. We really enjoy traveling with the boys as well. We went on our first family trip to Hawaii this year and created some amazing memories. Experiences and time don’t have to be expensive though. We also love to go on bike rides, hiking, the beach, and exploring our town. But, experiences and quality time with your kids doesn’t have to be expensive. If you are working and feel like you haven’t been spending the quality time with your family that you’d like, maybe you can change your schedule a bit, get a more flexible job, work from home, or cut down on some expenses so you can work less and be able to spend more time with your family.
** Its so crazy to read this and see where our life is at now. Here I was talking about our home in California and a vacation in Hawaii. We ended up selling that home, going tiny and started homeschooling. We bought an Airstream travel trailer and had a fun adventure in that for a year before moving to Hawaii and buying a home here. So very interesting where life took us. By living below our means and making sacrifices it has allowed us a little more flexibility and freedom. After putting in a lot of hard work at his job, my husband was able to make the decision to start his own company and work from home and create a schedule that provided us with the extra time we were looking for. He works from about 4am-12pm and then has the rest of the day to choose what to include in his schedule. It has been a blessing to have him at home to help with some of the boys extra-curricular activities, sports and homeschooling and traveling for at least a month or two out of the year.
#5 Mortgage.
We decided that the house was last on our list for the time being. I put mortgage after health because even though I want a nice roof over my head it is still not more important to me then the health and well being of our family. We would rather prioritize our money to go towards good quality food, health care, giving and savings then owning a larger home. We currently own a sweet small home in Hawaii and love the size of it. Does it mean we will NEVER buy a larger home? I am still debating that one, because I am not sure I want to clean one haha. But for now this is what we choose to do and it has worked great for us. It gives us peace of mind and helps us reach our financial goals much quicker by being able to pay off our note quicker and save more. On a side note: Owning a home is not for everyone. It is a major investment and does require some thought. I’m thankful for my husband and the guidance from mentors who really helped us in the purchase of our home. It’s a small place, but it is well under our means and we don’t have to stress about the money and can pay it off quick. If you are looking to cut down and are trying to figure out how much you should spend you can ask yourself these questions below before purchasing:
Can I make at least a 10% (preferably 20%) down payment?
Can I afford a 15-year fixed rate loan?
Can I keep the house payments at or below 25% of my monthly take-home pay?
If you answered “yes” to all three questions, then you can afford a house. Otherwise, Dave Ramsey strongly suggests you wait to buy a home. “You want your new home to be a blessing, not a curse, right? Follow these simple guidelines and you’ll keep Murphy and his 3 cousins Broke, Desperate and Stupid from moving in.” Via Dave Ramsey here.
This is a conservative approach and may be hard if you live in a more expensive city like Los Angeles, Hawaii or New York, but yet it is still possible to accomplish if you save up enough for the down payment. In another great article (which I highly recommend reading), the author makes a great point about that topic and writes, “While it may be possible to buy a decent home in a small midwestern town for $100,000 (and well within these ratios), workers in New York or San Francisco will need to spend five times that amount just to get a hole in the wall. Yes, people tend to earn more in these high-cost-of-living areas, but not that much more. Does it mean they shouldn’t buy a home? Not necessarily. They’ll simply have to make trade-offs to buy in those areas.
Just remember that when you obtain mortgage pre-approval, lenders will likely approve you for a loan amount with payments of up to 30 or 35 percent of your pretax income. That may tempt you to take on more home than you should. Don’t just assume that just because the bank approved it, you can afford it. They are two very different things.” So really think carefully before you decide how much to spend on a home. Especially if you want to stay at home or retire early.
We can learn a thing or two from Carlo Slim Helu, a Mexican billionaire worth $52.4 billion. He is considered to be the first “world’s richest man from a developing nation.” He has lived in the same modest home for the past 30 years. His wealth is equal to 5% of Mexico’s economic output yet he earns almost $30 million a day!
6. Everything Else
This includes entertainment, clothing, furniture, and anything else not included above.
This leads me to my last point:
Stop Caring About What People Think
The last piece of advice I wanted to share on helping you hit your financial goals is to stop caring what people think about you! So much is ingrained in us about what we think “success” looks like. Most people picture millionaires as the doctors, ceo’s, and actors. In actuality today’s millionaires in the U.S. are made up of managers (17%), educators (12%), corporate executives (7%), entrepreneur/business owners (6%), and attorneys and accountants. The $5 million+ group is made up of corporate executives (17%) and entrepreneurs/owners (12%).c
Common Characteristics of Millionaires
Live below their means
Lead frugal lifestyles
Are self-employed or own their own business
Plan and study investments
Are not always at the top of their class (some didn’t even go to college)
Are self-made
I was blown away when I read the book The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. If you haven’t read it you should! It talks about some of the common characteristics of millionaires. The research for the book is the most comprehensive ever conducted on who the wealthy are in America, and how they got that way. The book talks about how many times people can put on the fasad of being “rich” just for the social status, but in reality they aren’t truly wealthy. Even white collar workers or professional athletes can feel the need to keep up with their colleagues and seem like they have it all, but in reality many are in so much debt, miserable, and stressed out because they work too much, and are not ready for retirement at all! What the book discovers in all of its research is that building wealth takes discipline, sacrifice and hard work. Do you want to become financially independent? Are you willing to reorient your lifestyle to reach your goal? If you are willing to put in the time, effort and change your consumption habits then you can be well on your way to becoming a millionaire. Another cool thing that they mention in the book is that most of the millionaires they surveyed are self made. They were not born wealthy and they did not inherit money, but had confidence in their abilities and worked hard to reach their goals.
I hope these tips have helped you begin thinking about what you can do to realize your financial and lifestyle goals. It will take focus and sacrifice, but will be well worth it in the end.