We're heading back into our school year routine which will hopefully include weekly coffee dates and a clean kitchen. Chris reveals his trick for convincing his students that he's brilliant and our baby has been super cute this week.
In money discussions, we give some details of our budget including our monthly income, biggest expenses and where we've found big savings.
Several listeners have asked how to balance saving versus paying down debt versus retirement contributions.
Our approach has been to first identify life goals and opportunities. Our two main goals are to (1) build a strong savings that will (hopefully) enable early retirement and (2) maximize flexibility in our time.
To support these goals our financial approach has been:
Step 1. Build some emergency savings. Which Kelsey occasionally refers to as a peaceful cushion of cash. We used to maintain an emergency savings of living expenses for 3 - 6 months, but with Chris getting tenure in 2013 we've felt comfortable with just a couple months' worth.
Step 2. Eliminate expenses. For us this has included a mix of big and small savings. We've found big savings by refinancing our mortgage, being a one-car family and paying off one of our student loans. Smaller savings have come from switching our cell phones to an MVNO (we use a company that isn't taking new residential customers at this time, but check out Republic Wireless), not having cable and not using paper products in the kitchen, among other things.
Step 3. Invest. Debt reduction versus savings can be a tough decision. It depends on goals, but comparing what you’d lose to interest on debt payments vs what you’d gain on returns with investments can help answer that question in a lot of cases. We strategically reduced debt to start and since have gone to town on investing.