How Baby Dickey (And Family) Takes Care Of Money!

April is the unofficial financial literacy month here in the United States and even mommy bloggers can participate. While I am in no way claiming that I’m some kind of financial expert, what I will say is that we do a pretty damn good job of taking care of our money and we’re proud of our conservative approach! After we graduated from college we started listening to a famous financial radio talk show about wealth building (well Steve did at first but now he makes me and I love it!). What we decided to do was build up an emergency fun first, then pay off all of our debt (credit cards, student loans, car loans, etc) and start saving for other things last.

I want to discuss exactly what we did and why in what we’ll call Baby Dickey’s steps to financial something or another…

Step 1: Build up an emergency fund: the rule of thumb is to have a six month emergency fund. This means that should you suddenly be earning no income, you have enough cash that you can survive for six months without having to cancel any bills or making any serious changes. Steve and I took a more conservative approach and have a nine month emergency fund.

Step 2: Pay off all debt. When we graduated our debt was about 70% of one year of income for us, which wasn’t bad at all considering the debt load that some people/families have after college. Once our emergency fund was in place, we were able to pay off our debt in 13 months by putting every non-expense penny towards paying off our debt. One cool thing about paying off the debt is that once the debt is payed off, there is now less money required in the emergency fund because we no longer have those monthly credit card or student loan payments.

Step 3: Everything else! I, of course, wanted to buy a house right away, but Steve has been honestly changed by what happened with the economy in the last few years. What made him that way was the fact that he has a Civil Engineering Degree, still hasn’t found a job in the field and the construction market in the U.S. still probably won’t recover for years. After a lot of consideration we decided that we don’t ever want to be at risk of losing our home and want to put down at least 50% towards a down payment on a house. When you consider the amount of money you’re paying towards taxes on your home, you actually don’t benefit from owning a home until years after your mortgage is paid off.

Drive a car that you can afford. While I would love to be driving a BMW or a new sports car, our 1999 Buick Regal and 2003 Pontiac Bonneville are just great for us. We own both of them and didn’t pay one penny in interest for them!

One big plunge that Steve and I made was to have a joint checking account. Even though it’s frustrating at times to argue about money, this is a great way to increase communication between us and bring us closer together. It’s not all arguing though…we have an equal amount of money that we transfer to our private checking account each month that is “no questions asked” money. Anything over that we disclose to each other and let the arguing begin!

One more thing is to take advantage of any and all tax breaks possible. You are going to pay a TON of money in taxes your whole life so make sure that you know what you’re doing and keep every penny that is rightfully yours. A little research can go a long way!

Was this a good post about financial literacy? I was trying! I just wanted to post about what works for us as we would be going through a tough time (Steve lost his job a month ago), but our emergency fund has kept our lifestyle the exact same. I’m making no claims that this will work for you, but I am hoping that I will hear from you about what works for you.