Less work, smarter saving

July 20, 2008 at 12:20 am · Filed under home ownership, savings

I track our net worth on NetworthIQ – one day I’ll get the graph up on this site but it is a little too complicated for reasons I won’t go into again. Anyway, our NW currently stands at $59,950, which is not too bad. More importantly we are moving in the right direction – we’ve improved our net worth by 7.8 per cent so far this month, which is great!

I have some mini-goals to share at the moment. I’ve decided to cut back on my p/t job permanently – from now on, I’m only working one night a week. That’s because I only started working two nights a week to help us get debt-free, and it really has been to the detriment of other parts of my life – including university work and time with my husband. As far as uni goes, it would be bad to let faster financial success get in the way of actually graduating (clearly failing at the final hurdle would be a very bad financial idea!), so I think it’s reasonable to do this. On the other hand, if I am going to cut back my earnings, I think some of my less frugal habits are going to need attention. These include:

• buying lunches most work days
• buying soft drink relatively regularly
• allowing a lot of things to come under the banner of fun/miscellaneous in the budget

I’m going to have a think about prepping some meals tonight ready for the coming week. I’m also going to figure out a bit of a  general weekly meal plan, which will include a big drop in snack/softdrink consumption, which will help with the budget AND my waistline. As for the fun/misc budget category, I am going to have a look at that and see how planning our good times in advance might help me free up more cash weekly for emergency fund savings.

And now to the issue of that emergency fund. Yes, I have $5000 here as my short-term goal till the end of the year. But we are now on to Baby Step 3 (since we are loosely following Dave Ramsey’s financial system). That means we really need 3-6 months expenses, which I have calculated to be about $35,000. That’s a lot isn’t it? But I’m really thinking ahead here and to last 6 months, assuming we would still need childcare (ie if one of us was sick or had to search for a job for a long time), we would really need a fair bit of cash. A few people have told me keeping that much cash is `dead money’ and we are better off putting it into investments. However, my goal over the next 3-4 years is to save this $35,000, plus about $90,000 for a home deposit. This should be relatively possible because we would both be working and we are already pretty aggressive savers. If we managed to get an offset facility on our mortgage, that $35,000 would sit there reducing our mortgage for the life of the loan, but would be easily accessible if we actually needed the money. I don’t think of that as `dead money’, so I think it’s a pretty reasonable plan.

These are scarily big numbers, I know. But a girl’s gotta have a dream! I think if we work hard – and don’t go for too much lifestyle inflation when I start working – we will manage it.

Why such a big deposit? Homes in our area (where we would like to live for the rest of our lives) start at $330,000 for very basic models. We would like to save a 20 per cent deposit for the home we will have for the rest of our lives, so we are aiming a bit higher while we’ll have the capacity to save aggressively. 

In a perfect world, house prices here would come down as they have in the US, but there are conflicting indications abou that in my area, which is in a long-term mining boom with huge numbers of workers and investors continuing to move here. I guess the only good thing about being in our position (yet to save our deposit) is that I would feel very uncomfortable about buying right now. There are some signs the market has hit its peak and I think it will take a while to figure out whether it will continue to soften or stay about the same – or even rise a bit more. I would hate to buy now and then find my house worth a lot less in a years’ time, but I could possibly cope with a small rise in values before we buy.

Anyway, those are my random thoughts for now. My goal remains an emergency fund of $5000 for 2008, and that’s all I need to worry about in the short term!

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