Savings Priorities

[klarose]

How do you choose what to save for in what order?

Everyday it seems like I think of things that I need to save for, and they all seem like things that need to be saved sooner rather than later.

Right now it's easy, I've got clear important goals.

1.) Pay off my recent non-mortgage debts.
2.) Finish funding my EF.
3.) Continue to put in desired amount to retirement.

But what about next year, when I'm debt free again and have an fully funded EF. Obviously I will continue putting money towards retirement, but it seems like there is a giant long list of stuff that I should be saving for, and not enough money to go around.

Here are some of the most important goals I think about.

Saving up for a Baby

We want to have children in the next few years. I am fine waiting 4 or 5, but husband wants a baby in no more than 2 or 3. I'd like to have at LEAST $3,000 set aside for this, due to healthcare unknowns.

Home Remodel

We NEED to add an addition to our house. It is going to cost around $30,000. The problem with this is that we need it preferably before the baby. Which makes things difficult.

Newer Car

Husband's car is older than we are, and in the 200's for miles. It's only a matter of time before it needs replaced, and we will have to get a new one. He has his eye on a truck. Which after looking around we are guessing will be around $7,000-$8,000.

These are the three main BIG expenses in our not too distant future. But this is on top of other things, like smaller home repair, furniture, small trips, etc. Which already eat up a lot of our cash flow.

This is how I feel.

How do you ever decide what comes first?

[klarose]

Here is what I am currently thinking.

For 2015

Remodel Fund Goal of $5,000 for the year.

$400 monthly

Car Fund Goal of $600 for the year.

$50 monthly

This year, focusing on the remodel, but still putting back a little tiny bit for the car to get a jump start on it.

For 2016

Baby Fund Goal of $1,200 for the year.

$100 monthly

Car Fund Goal of $1,200 for the year.

$100 monthly

Remodel Fund Goal of $3,000 for the year.

$250 monthly

Putting a little extra to the car, and also starting the baby fund.

For 2017

Baby Fund Goal of $1,800 for the year.

$150 monthly

Car Fund Goal of $2,400 for the year.

$200 monthly

Remodel Fund Goal of $1,200 for the year.

$100 monthly

This year I would guess we'd be pushing for a baby. The car will probably die by this time, and we will have to scrounge to finish the car fund, or take out a small loan which is what husband wants to do.

We would probably get a HELOC for the rest of the remodel, and just make small payments at this time until baby stuff is settled, then knock it out asap.

[Nika]

I think it is all very relative. If you live in a house, I doubt your house has less than 1br. In which case, what does it mean that you NEED an addition? It is more likely that you want an addition. And my guess, after all said and done, it will be significantly more than 30K.

[Petunia 100]

The remodel is to correct some structural issues, if I recall correctly? Personally, I would not have any qualms about borrowing to fix structural issues. It does not make much sense to put them off, as the problems can only get worse over time.

[disneysteve]

We NEED to add an addition to our house.

what does it mean that you NEED an addition?

The remodel is to correct some structural issues, if I recall correctly

There is a big difference between repairing structural issues and building an addition. Can you clarify that klarose? If you are building an addition, I'd agree with Nika that that belongs lower on the priority list.

[LivingAlmostLarge]

Priorities are what you make them. But I kind lean towards Nika, what do you mean by addition? Need or want? You don't need anything more than a bedroom for kids. Many here probably like family of 4 in 2 bd and I know many couples who had 1 baby in a 1 bd.

For me?

Retirement
Car - gotta get to work
College
House

But House goes to top if it's structural and going to fall down. If not? Well then I can limp along. Trust me we've done all we can with insulating our house without tearing it down.

[klarose]

It's a want and a need.

The house has structural issues that need to be addressed. We also want to add a basement before kids come along. (I live in tornado alley, and it just really isn't safe to go without a basement with kids. Especially since some close friends had their house destroyed in the past few years.)

The foundation is only damaged on one side. So we can jack up the house to fix it $$$$ or add an small addition on that side, with a basement underneath, which is actually the cheaper option even though we will be adding more square feet.

Both are pretty common options around here. Husband's parents recently added a very large addition with a basement for the same reasons. And we also know several friends that lifted their houses and put in basements. Originally we wanted to jack it up. But now we have been advised that adding an addition would be the better choice, and it seems like a good idea since we desperately want another bathroom and a closet. It's a four bedroom house with one closet, and one bathroom!

We can live without the closet, and another bathroom for a long time. But the basement is a necessity. We even looked into just buying one of those underground storm shelters, but it ended up being such a large amount, it would be silly to not just put that money towards a basement. Which will raise the value of our home.

The house isn't going to fall down in a couple years, but it does need fixed. Chances are we could go without a basement, but I'm not sure if it's worth the risk the worry. Besides I think we would be better to live through the remodel now than it would be after kids. We can afford the payments, I just hate the debt. Although we bought the house with the knowledge and full intention to put in a basement. So this isn't unexpected. We figured it into what we could afford, when we bought the house.

[Petunia 100]

That's more or less what I remembered. And your 30k estimate of the cost includes you and dh doing some of the work yourselves? Myself, I'd just do it. Refi or take a second or whatever makes the most sense, but just get it done. I know you are debt averse Klarose, and I like less debt rather than more myself, but this is an exception, IMO.

[klarose]

Yes 30k is probably just enough to get the foundation, studs, roof, etc. We would finish the interior ourselves later on with cash. The foundation fix and basement is what we need. The interior space is just extra and no hurry.

And yes we are going to get the HELOC and get it done as soon as we save up a cushion. But I didn't really mean to turn this thread into a debate about my remodel. lol

I just wonder how everyone decides what savings come first? There is just too much to save for.... I guess that's why people go into debt.

[autoxer]

Here is what I am currently thinking.

For 2015

Remodel Fund Goal of $5,000 for the year.

$400 monthly

Car Fund Goal of $600 for the year.

$50 monthly

This year, focusing on the remodel, but still putting back a little tiny bit for the car to get a jump start on it.

For 2016

Baby Fund Goal of $1,200 for the year.

$100 monthly

Car Fund Goal of $1,200 for the year.

$100 monthly

Remodel Fund Goal of $3,000 for the year.

$250 monthly

Putting a little extra to the car, and also starting the baby fund.

For 2017

Baby Fund Goal of $1,800 for the year.

$150 monthly

Car Fund Goal of $2,400 for the year.

$200 monthly

Remodel Fund Goal of $1,200 for the year.

$100 monthly

Regarding your savings plan, it doesn't have to be that detailed. Who knows what curve balls you will get along the way? You can't decide when the car is going to die, or how much your medical bill will be, but you can control when you do the addition. My savings plan would be just to save $450/month, knowing that over the next three years I need to cover a car, a birth and an addition. If you get 18 months into your savings plan and your car dies, then you will need to rob from the baby fund and remodel fund in order to cover the cost. Making this savings plan more complicated won't help you make any decisions.

I just use one fund and evaluate the expenses as they arise. The one I'm wrestling with right now is replacing an oven that failed. Not planned, but it isn't a big deal, because I have savings. I am just thinking about how much to spend, and how it might affect my other goals. I might have to delay some other renovation plans, but each spending decision just gets evaluated whether it lines up with my values.

[klarose]

I had not even thought of just putting it in one big pot and just using it as needed. I worry I will spend it for something silly if I don't have it ear marked for something specific though. Although I've never tried just a general savings...



Thanks for the idea. That is something to definitely consider.

[MonkeyMama]

I think setting priorities is very individual. You have to work through what is more important to you.

I definitely agree with autoxer. Just call it a emergency/car/remodel fund, or something along those lines. If those are priorities, you won't be tempted to spend it. (We just save up one pot, which creates a lot of flexibility. IF something breaks prematurely then other things can wait).

Along the same lines, if you don't have enough for the car you want at the point you need to replace it, then I would buy something much more modest. Something to buy you time to buy what you want and to later buy something that will last longer. (Been there, done that. This has been really key for us to stay out of vehicle debt).

[creditcardfree]

I'm going to jump in and agree with Monkey Mama and Autoxer. One big pot works the best. In the case, of your remodel I would likely go with a HELOC for that and pay off as you can, but keep saving for the other two items. The remodel is the most expensive on your list, but seems to need to come before baby which also seems to be the first item to be needed to save for. So I'm suggesting getting the basement in, but borrowing for that, so you can move on to baby and later the truck, and likely still have the remodel done soon after.

[snafu]

Priorities are oh so personal. I'd go forward with a HELOC for the house because interest rates are low, trades and materials will get more expense as the housing market improves. I see this as adding value to your home long term.

Combining that giant project with a vehicle running 200,000 miles makes a new to you truck very practical transportation. I suggest research to find which trucks are more to insure than others, what will meet your needs and what is superfluous. Have you read Lemon-Aid for trucks?

Brilliant to start a baby fund. Aim for $ 150. per month but don't beat yourself up if it's less due to other expenses. You manage your money very well so this will start as eek out... Possibly reduce food budget, home made detergent, dish washing product, shampoo, forgo a celebratory restaurant meal to add to baby fund, spend less than budget on gas but planning errands, use coupons and add teeny sums to a jar called 'baby.' Add change daily. Buy a used item and add the cost differential to baby fund, sell items no longer used, no longer needed to baby fund etc.

...just my .02 cents

[klarose]

Thanks for the input guys.

I think I will just go ahead and continue adding to the same pot once the EF is finished. Then as you suggested take the money out for whatever is needed at the time. There is just no way to tell when we will have to replace a car, or when we will decide to have a baby. So this way makes more sense.

A truck is becoming more of a need. We live on a farm, and need one almost weekly. I used to have one, but traded it to my parents, and so I am able to borrow it when I need it, but its running badly (Over 220k miles), and it is a hassle to go and borrow it, especially if they need it as well. But hopefully we won't have to worry replacing our current vehicle for a couple more years.

A change jar for a baby fund is a great idea, where I can add my extra dollars or small sums of "leftover" money. I have two change jars now that I'm about to cash them in for an upcoming trip. I think when I start them over, I'll put it back for a baby. The small amount will add up, especially if we wait a couple more years.