Archives For Finances

Helping a Spender Learn to Save

As our children grow, it has been such a joy watching their personalities develop. It’s amazing how children who have the same parents, live in the same home and spend almost every day together can be so different. Our boys are complete opposites, especially when it comes to money.

Paxton (6 years old) is a natural spender. If he earns or receives a money, he wants to spend it. Over the past year, he’s purchased several small Lego sets, random items at thrift stores and even vending machine stickers. Saving his money for a larger purchase is not something he’s naturally drawn to.

Our Weston (4 years old) is a natural saver. If he earns or receives money, he wants to save it. He’s such a simple boy, he has very few wants and rarely purchases anything. Most of the items he has purchased he has saved for or he has found an animal to go with his farm. Lately when he gets money, he tells us to just put it in savings (referring to his savings account) because he’s saving up to buy a farm and a tractor. He’s thinking about the future and not worried about material things in the present!

We want to raise our children to be wise when it comes to finances so they hopefully will be financially free their entire lives. And, we also know that just because a person has a natural tendency, such as the tendency to spend, it doesn’t mean that they cannot learn to change their ways.

Around Christmas, Paxton found a Star Wars Lego set that he really liked but it was way out of his spending money price range at $59.99. He talked about it for several weeks and pointed it out when we would look at toys.

We thought it would be a great item to set a savings goal for and encouraged him to save his spending money to purchase the Lego set.
Lego Savings Goal

We created a savings goal chart as a visual that we hung up in his room so he could glance at it and see how far he was progressing towards reaching his goal.

We set a goal of saving $70 to cover the Lego set and taxes. Each row on his chart represented $2 but we also allowed him to fill in half a row when he put $1 into his Lego Savings jar.

He had some Christmas money that he decided to go ahead and put towards the goal so he started out with $22 which was a great jump start towards such a lofty goal for a 6-year-old.

At the beginning, he started out slow, putting just a little bit of the money he’d earn or receive into his savings. He preferred putting more of his money into his wallet for spending. Every time he decided he wanted to spend money, we would remind him that he could use that amount of money, even if it was only $1, towards his Lego savings and get closer to his goal. Then, we’d let him make up his mind if he wanted to spend his money or not.

He chose to purchase several small things over the first few months and then he started to get more serious. He received some money from grandparents and great grandparents for Valentines Day and put all of that into his Lego savings. Then he earned some money when he, his daddy and brother helped our neighbor with some farm work and put all of that money (minus his giving) into his savings. After earning that money, he started asking about ways he could make money and we gave him some odd jobs to do to earn a little money.

As his savings grew, his spending decreased and he starting putting more and more of his money towards his savings. With his birthday money, he was able to reach his goal of $70 and he was so excited to finally be able to purchase his Lego set.

Paxton's Legos

We completed the chart and then starting looking for the best deal we could find. We knew the Lego set was $59.99 at WalMart and ToysRUs but we wanted to shop around. We first checked out Craigslist, hoping to find a used set (we always try to buy things used instead of new), then we looked on eBay. With no luck there, we saw that Amazon had the best price online at $54 (it was around $57.50 after tax).

I told him that we could go to WalMart that day and purchase the Lego set for $59.99 plus tax or we could order it on Amazon. By ordering it on Amazon, he’d have to wait 2 days but would save around $6. He decided to order online, save the money and patiently wait. We were a little surprised and very proud that he chose to delay gratification!

We placed the order together and he handed over all that cash. Then we counted up what remained and he had $12.50 that he can apply towards his next savings goal (which we’re not quite sure of at this point).

Opening Legos

Paxton was so excited while waiting for his package to arrive. The day that it arrived, the mail ran very early and we were in the middle of our lessons. That was motivation, he’s never done his math faster! He was so excited to open up his Legos and start building.

This was the biggest set that he has received or purchased and it took him a while to get it all together. I sat with him and helped him build for awhile (and he loves when I play Legos with him since his love language is quality time!)

We hope reaching this financial goal will be remembered in the years to come and that he has learned a little bit about the value of saving.

Related Posts:

Teaching Kids About Money

Teaching Preschoolers About Money

Big Goals

When it comes to setting goals, it’s easy to simply dream about things you would like to do or achieve.

If you don’t make the goals realistic or manageable, they just stay dreams.

I’ve always set SMART goals to turn dreams into reality.

SMART goals are:

Specific

Measurable

Attainable

Relevant

Time Bound

In May of this year, we set a big goal to pay off our mortgage in 5 years (by May 2020).

This goal fit with the SMART goals formula:

Specific – We want to pay off our mortgage in 5 years.

Measurable – Pay off the balance of the mortgage.

Attainable – We knew discipline, frugality and a bit of creativity, this was a realistic goal for our family.

Relevant – We feel like this is a very relevant goal since our mortgage is our only debt and we want to be completely debt free.

Time Bound – We want to do this by May 2020.

We started out very excited and felt like we were working towards an achievable goal. However, since it was such a big goal (knocking out thousands and thousands of dollars in debt), it felt like we weren’t making any progress.

So, we broke the goal down further. In July (2 months into the process),  I divided the amount we owed on our home by 58 months (the time remaining until May 2020). This gave us a monthly goal to work towards.

Having the monthly goal makes our big goal very doable. Each month, we have a specific amount we’re working towards paying off. Reaching this amount each month is still a bit of a stretch but we hit the monthly goal in July, August, September and October!

Working towards the monthly goal keeps the momentum going. Each month that we reach (and sometimes exceed) our goal, we are excited which encourages us to keep going. While it’s fun to see the big number go down, it still seems to move slowly so it’s more fun focusing on the monthly goal than on the total principal that we still owe.  

Do you have financial goals you want to achieve?

Maybe you want to pay off debt, save an emergency fund or start a college fund for your kids. Or maybe you need to finally sit down, create your budget and set financial goals.

 

 

5 Year Mortgage Goal

We have decided to share our goal to pay off our mortgage in 5 years for accountability and to encourage others in their personal finances.

You see, we’re a family of 5 living on one income. While my husband makes a comfortable income, we’re not rolling in money. Our monthly budget is comfortable – we don’t feel we’re doing without but we do have to spend carefully and watch where our money goes.

Managing your money wisely helps you financially.

You do not have to have a large income to succeed with personal finances.

Our goal to pay off our mortgage in 5 years seems like it is an unattainable goal for a family living on one modest income. However, there are several factors that make this goal a realistic one for our family.

How does a young family living on a budget think they can pay off their mortgage in just 5 years?

1. We have no other debt.

We both graduated college debt free and we never have had credit card debt or car payments. The lack of these debts allowed us to focus on saving for a house downpayment upon graduation. 

2. We own our vehicles.

We began our marriage driving vehicles that our parents gifted us before college. We saved for years for ‘new’ vehicles and our savings coupled with the money from the sales of our old vehicles allowed us to pay cash. Our ‘new’ vehicles are both older models, I drive a 2004 model minivan and my husband drives a 2002 pickup.

3. We put 20% down on our home.

A 20% downpayment saves us from paying private mortgage insurance. And, the exciting part of a large downpayment meant that we owned 20% of our home the day we moved in!

4. We currently own almost 50% of our home.

Our 20% down payment coupled with regular extra principal payments for 2.5 years plus refinancing to a lower rate has really knocked down principal. We currently have paid almost 50% of the purchase price in the 4 years we’ve lived in our home. We believe we can buckle down and pay the remaining 50% in the next 5 years.

5. We bought a home below our price range.

We qualified for a mortgage amount that was nearly twice the amount of the purchase price of the home we’re in. Instead of buying a house at the top of our mortgage qualification range, we chose to purchase a modest house. Choosing to live in our smaller home frees up money each month to pay towards the principal.

6. We have budgeted extra principal payments.

We reworked our budget when we set this 5 year goal and have budgeted a couple hundred dollars each month to pay towards principal no matter what. Intentionally budgeting money towards the extra principal is playing a huge role in reaching our goal. 

7. We’re sticking to a budget.

We have a written budget and we’re sticking to it!  We’ve budgeted our entire marriage but we’ve had a tendency to cheat. We’ll overspend in certain categories and then move money around from other categories to cover our overspending. While we haven’t gone into debt doing this, we’ve been ‘stealing’ from other areas that could be used to pay extra towards our mortgage at the end of the month. We’re committed that when the money is gone out of the budget category, there will be no more spending.

8. Shopping is no longer a hobby.

Shopping at thrift and bargain stores used to be a hobby. We were finding all kind of great deals and ‘saving money’ on things we ‘needed’. If you stay out of stores, you won’t be tempted to spend! I’m convinced that succeeding financially has a lot to do with controlling consumer spending on smaller purchases.

We believe that paying off our mortgage in 5 years is possible for our family.

This is a stretch goal for us but we think we can reach the goal!

What’s your goal?

Are you trying to pay off your student loans? Finally ready to cut up the credit cards and get them paid off? Are you saving up for a house downpayment?

No matter where you are in your financial journey, the decisions you make today will have an impact on your future.

Set financial goals and work towards them.

Some goals may seem impossible today but with focus, discipline and a little frugality, they can be achieved.

Do you have financial goals? 

Mortgage Payoff Goal

Writing down goals is powerful and sharing those goals creates accountability.

We’ve been pretty open about our finances because we want to encourage others that it is possible to live well on one income.

We recently set some new financial goals with our big one being to pay our mortgage off early.

In March of 2011, we purchased our home. We put 20% down and financed the rest with a 30 year mortgage. We started making extra principal payments soon after we moved in, with the hope of paying off the mortgage earlier than 30 years.

We refinanced in early 2013 to a 15 year loan with a 3.25% interest rate. The monthly mortgage payment only went up $80 by doing this.

We strategically started paying $300 extra towards our principal each month because we didn’t want to be saddled with a mortgage for 15 years.

In late 2013, we stopped making extra principal payments and started saving the money because we wanted to make some improvements in our kitchen and laundry area. Thankfully we had that money saved because in early 2014, we had to replace our septic field lines (the joys of home ownership, our kitchen and laundry still haven’t been updated!)

Then in April 2014, we put our home on the market and continued saving the money that was budgeted as extra principal money.

Once we decided selling our home wasn’t the best move for our family, we stopped making the extra principal payments – we saved most of it but we also started dipping into that money for other things.

We started to have the attitude that since we’re living in a very affordable home, we can live a little and spend our money a little more freely. We lost sight of the goal of paying off our mortgage early.

In May 2015, we attended a Financial Learning Experience at our church led by Joe Sangl of I Was Broke, Now I’m Not.  We left the event ‘fired up’ again about our personal finances!

We took some time and wrote down some personal and financial goals for our family at the end of that weekend.

The big goal that we set was to pay our mortgage off in 5 years.

This is a bit of a stretch goal but we’re excited about the challenge and focused on achieving our goal.

To be honest, our 5 year goal looks impossible on paper but we know with a little creativity, frugality and focus we can reach our goal.

In the coming months, I’ll be updating you on our progress for accountability, sharing details on how we’re planning on paying off our mortgage in 5 years and posting about different ways we’re saving money to help us reach this goal.

*We’re sharing our story and this goal in a hope to encourage you in your quest for debt free living! We all have different circumstances due to consumer debts, student loans, mortgage amounts and income levels but we all can take steps to improve our finances. Setting financial goals is a great way to motivate you to work towards paying off debts, living within your means and inspiring you to set big goals, like paying your mortgage off early. No matter the state of your personal finances, you can take steps to turn things around!