Money is this weirdly taboo topic in most circles. Personal finances, I mean. Money that other people have or companies or the government have are free game, conversationally. But when it comes to personal finances, it’s a different a whole different arena. The thing is, though, I’m pretty sure that most people are thinking about money a lot more frequently than they are about other conversation topics. We just don’t feel comfortable talking about it.
Well, personal finances and small business planning are the two topics that have been big and heavy on my mind lately. So, taboo or not, I’m going to talk about money.
I used to think it was sinful to want to have more money. “The love of money” and all that. I thought that being poor and not worrying about money, just ignoring it, basically, was the appropriate, Christian thing to do. That was why I didn’t really think about it much when I was living in northeast Georgia, making $1000 a month, half of which went into rent. I thought it was appropriate, that I shouldn’t want more, that I should be content with my situation.
It wasn’t until I got employment in Savannah that I realized how much money I could have been making and how little I had been getting paid and started to think about the whole situation. And I still felt like thinking about money was sinful and that I shouldn’t work too hard to make more money, that I should work hard to be a good employee and do good service for my employer and take whatever they gave me.
Hello, my name is Kylene and I am a financial doormat.
And it wasn’t that I handled my money poorly. I’d balance my checkbook regularly, I’d track my spending, I knew how to handle the necessary expenses and balance the unnecessary splurges. But I wasn’t planning. I reacted retroactively. I took what I was given and spent what was necessary, spent the rest on other things if I wanted to, stuck some into savings, and that was it. There really wasn’t any thought about the future 5-years down the road or more.
I wish I could remember when I started to think that maybe there was a different way to look at the whole thing. It might have been after Justin and I consolidated our finances and I started looking at how we each handle everything in that. But it might have been right after we bought my car. Yeah, not the best time to have the whole revolutionary thinking thing, but considering my history, it makes sense. I’d been handling my school loans for a while and dealing with them just fine. I was used to them and they weren’t very scary anymore. Adding another loan didn’t necessarily mean that I’d think about my debt level any differently. But it did. Suddenly we had this enormous debt and it made me pause and think about money. I wished I understood it better. I wished I’d known how to handle buying a car more effectively. I wished I knew how to make that debt go away as quickly as possible because it was kind of freaking me out.
And I started thinking about other money things. My credit card debt. My savings account. My current pay level through the temp agency. Investing. Retiring. There were so many aspects about the money in my life that I didn’t understand and didn’t have good control over. I wanted that to change.
And part of my brain still kept saying that it was sinful. “Cannot serve both God and money” and all that. And to be perfectly honest, it’s still something I’m struggling with. But I know deep in my core that I don’t have to live in a trailer park and make minimum wage until the day I die. He doesn’t want us to be miserable. It’s okay for me to want to have a good situation, be able to retire eventually, be able to have children and care for them. As long as I’m serving the Lord and not the dollar, then I can think about money and investing and all those things and not be sinning.
So, all that said, I’ve been working on having a well-rounded view of finances. I still balance my checkbook and track spending. I have a plan in place to decrease our debt load. And while I’m working on those retroactive situations, I’ve also been working on setting up a Roth IRA and learning about my 401(k). I actually have a 401(k) now that I’m employed directly at my company instead of through a temp agency, which also gives me loads of other benefits. And at the beginning of next year, I’m going to negotiate very hard to get an increase in pay appropriate to the amount of work I’ve been doing for the company.
Here are a handful of things that I’ve learned lately, many of which are from Suze Orman’s Money Book for the Young, Fabulous, and Broke.
Increase your credit card score. This mystical number is crazy important and if you don’t know what it is, you’ll want to find out and then see if you can get it up higher. People who are going to give you money or big item purchases or interest rates are going to know it and so should you. And did you know that there are three different companies tracking this and that you should look at all three? I didn’t know that; I thought there was only one. And I’ll be honest, I still don’t know what my scores are because I haven’t wanted to pay for it or put the mark on it that I’ve looked just before we went to get a car for Justin. But I did get a copy of our credit reports—lists that you can get for free once a year and lists lots of interesting information, like payments that you should be making and whether you were late on any of those. Being late will make your score go down, just in case you didn’t know that. I want to know our score, but I know enough to know that it’s not very good right now and that we should just be working on getting it higher in any way we can. Like being prompt on payments and getting our credit card debt down to a lower level.
Credit card debt is a ratio thing. Your score is going to look at how much you can have in debt compared to how much you actually have in debt. So if you only have one card, but you’ve maxed it out, that’s bad. But if you’ve got several cards and they’re all pretty empty, that’s good. Keeping several cards is actually good, especially if you have a long history on them, so don’t pay it off and then close the account. Pay it off and then keep it so that ratio of how much you can have and how much you do have in debt is a much prettier number. And the companies can look at how long you’ve had a history, which also helps your case.
Pay off credit card debt first before anything else. In my situation, I should pay off my credit card debt before I even start putting money into savings. Once we’re out of debt, we’ll work on savings, but until we’re above ground, money is much better spent being put into paying things off than sitting static in a savings account. Just compare the interest rates if you don’t believe me.
Before Justin’s car died, I was planning to take almost all the money we had in savings and almost completely pay off our cards. Because we need that money now to put a down on a car, I’m glad that we have it, but getting that debt down would have been helpful in getting a better interest rate and dealing with our debt situation.
Instead, what I’m doing is this. We have 3 cards. I paid off one a few months ago and started putting the amount that I had been paying toward that one toward one of the other cards, so suddenly I’m paying almost double what I had been paying. The balance on that card has gotten small enough now that I’m going to call and talk to my 3rd card about transferring the balance over to that card because it has the lowest interest rate. Oh! That’s another thing—pay off the card with the highest interest rate first. So, after I check into how much I’m looking at for fees to transfer and make sure that my interest rate won’t go up, and actually ask if they’ll make my interest rate even lower because I’m bringing in this balance, I will, hopefully, only have one card left to pay off. And I’ll be putting into that card each month the money that I had been paying toward the 1st and 2nd cards.
Once I’ve gotten those all paid off, I’m keeping the cards and I’m using them occasionally, but I’m paying off the balance at the end of each month so I never have a balance that carries over. That’s the goal anyway. And because all these cards are in my name, Justin is going to open a card in his name so he can establish a credit card score, too.
And then we’ll put the money that we’d been paying toward the credit card debt into the car loan debt. Our school loans are smaller, so it seemed like we should take care of those and just get rid of them as quickly as we could, but nope. There’s a tax break on interest applied on school loans. There’s no such thing for car loans. So keep the tax break going and pay off the other debt first. And because we’re putting in the normal payment plus the payments that had been going toward the credit cards, it’ll go down pretty quickly.
So that’s what we’re doing about debt. On to the other half of things. When I was at my job in northeast Georgia, I had a 401(b) that I had no idea what to do with. It collected a little bit of money while I was there, and when I left, it just sat there. Because it was less than $500, every quarter or half-year or something, it took a hit because it didn’t meet requirements. I’m currently in the process of moving it to another company and making it into a regular IRA. Once I get it moved, I’m going to roll it over into a Roth IRA. And then I’m going to start putting $50 a month or so into it, until we get out of debt at which time I can start putting more money this direction.
I’ve also got a 401(k) through my company and they do a percentage match, 100% to a certain level and then 50% from that level to the next level. I am contributing up to that highest level so I get the 100% match for the first percentage and then the 50% match for the second percentage.
What I’m getting at is this: I have two different kinds of retirement plans going on right now, or at least in progress. This is a Good Thing. Diversity is the name of the game when planning for retirement. Also, time is on my side right now. Interest on the dollar, I think was the phrase. I have at least 30 years before I’m going to retire, probably, so I’ve got at least 30 years to put money away and for that to mature. The crazy difference that a few years can make when looking at interest is staggering. If you haven’t started putting money away, and I’m not talking savings accounts but actual investing, you should start RIGHT NOW. I wish I had started 10 years ago.
So #1—Be investing already. #2—If your employer has a match for your retirement plans, match them. It’s free money, people. Take what they’re handing out by matching it. For too long I was sitting at the lower level of the match, where they met 100%. Now I’m at the full 100% plus 50% and the difference in how fast that is going to increase my 401(k) is surprising. And looking at that over the length of the time that I’m employed here is staggering. And that’s at a fairly low pay grade compared to other people at the company. So match whatever the company is offering.
Now, I’m still learning, but from what I understand a 401(k) is money taken pre-taxes. So when you retire, and there are so many rules about this that I haven’t even touched because I’m so far away from needing to know, you’re going to have to pay taxes on that money. It’s tax-free right now, but it’s not tax-free forever. You pay the tax on the other end. But not all retirement plans are this way. Traditional IRAs are, but Roth IRAs are not. With a Roth, you pay the tax now and don’t have to pay it when you take it out later on. Again, diversity is the name of the game. This applies to what your money is being invested in under these plans, but also in the types of plans. So right now I’ve got a plan that’s taxed when I take the money out, and I’m working on setting up an account that I’ll pay taxes on as I put the money in.
Now, because it’s a 401(b) moving into a traditional IRA and then rolling over into a Roth IRA, I’m going to have to pay taxes on it when it rolls over. But because there’s only like $300 in there right now, it’s not going to take a big hit. But if it had been something larger, I probably would have just left it as a traditional IRA.
And good gosh I’ve written a lot on this topic and I should stop before you all fall over from boredom. But if you find this as interesting as I do, please let me know your thoughts or if you have any questions.