Here’s a quick recap in case you’re not already up to date. At the end of July, we moved out of our apartment and in with my parents to start saving money for our first house. We’re planning to close on our house the first or second week of September, so we don’t have much time to save a lot of money.
The other day I wrote about preparing our finances for home ownership because that was the first step to creating this plan. Right now, our only bill is our cell phone (which sucks—thanks T-mobile) and our storage unit, which I forgot to mention the other day.
Our storage unit is paid through August, so we should only have to make a partial payment for September. My point here is that we aren’t paying rent or bills (for the most part) and we need to take advantage of staying with my parents and the delay between closing on our first house and the first mortgage payment (estimated for November 1st).
Temporarily Reducing 401k Contributions
I already mentioned this the other day, I know…but it’s part of the plan. A couple of weeks ago, I decided to reduce our 401k contributions from 8% to 1%. The extra little bit of cash is going to help us save money quicker and be better prepared for the transition to home ownership.
We do not receive any employer match on our 401k contributions at all. If we did, I would only reduce it down to the amount of the employer match to take advantage of free money. Really, who could pass up free money? Not me.
Daily Transfers to CapitalOne360
I will continue our daily transfer to our CapitalOne360 (formerly ING Direct) savings accounts because it’s fairly essential. We have a total of 3 transfers set-up for each business day (Mon-Fri) and the total is $20 per week, so it’s not going to make a huge dent either way.
1) Emergency Fund: $1 daily. This helps us build up our emergency fund little by little and is only a total of $5 per week.
2) Christmas Fund: $1 daily. I was hoping to save up money ahead of time for Christmas this year and figured starting to save $1 was much better than nothing at all. Total of $5 per week.
3) Car Insurance Fund: $2 daily. This is a big one and even if I wanted to, I couldn’t cancel it. We pay our car insurance in full every 6 month to take advantage of the discount. Since we transfer money each day (or Mon-Fri), we don’t have to worry about coming up with the money when it’s due. Total of $10 per week.
Roth IRA Contributions
I also plan to continue our $25 Roth IRA contributions every paycheck. It was hard to finally get into the habit, so there’s no way I’m going back. Plus I already cut back dramatically on our 401k contributions.
The last time I actually updated our root income it was $1,100 biweekly and I’ve been using that number ever since. I’m hoping to be able to off the bat save 50% over our root income into our House Fund. I don’t know how this is going to work when I have to pay the partial payment for storage or get another moving truck, but I’ll try my best.
In case you don’t want to go read root incomes and blissful budgeting, I’ll sum it up real quick. Irregular paychecks can suck, so by taking the lowest paycheck amount (ie: $1,100) and pretending that’s what you always get…anything over that amount is extra. So if we got a $1,200 paycheck, 50% above our root income would be $50. It makes it much easier to live below your means and to budget with irregular paychecks.
Pretend Rent & Bills
In preparing our finances for home ownership, I overly estimated our new mortgage and bills amounts to be on the safe side. I also mentioned that part of my plan was to start pretending we’re already paying all this now to help us get used to our new budget. So, I’ll just shove the money into our house fund and get myself into the habit.
After we move into our house, we are going to have to pay for setting up utilities and services and begin paying our bills, but not our mortgage.
So while we won’t be able to save the entire amount from the time we move in to the due date of our first mortgage payment, it’ll still be more than we’re used to saving.
I’m a big fan of living paycheck to paycheck on purpose. I’m not talking about spending every last cent we have, but starting fresh on each payday.
The night before we get paid (bi-weekly), I transfer any money leftover to one of our savings accounts. That way, the next day, our checking account starts at zero and we saved a little bit more.
Some people just keep this money in their account and therefore have more money to spend. Sometimes, if we barely have any money leftover, I’ll just keep it in our checking to help build up a buffer, but I still pretend it’s gone and start the account back at zero.
Normally, we just eat out too often for our budget. So we’re going to try to limit our dining out to only once per month or less.
This is going to be really hard around moving time, and I might have to adjust it since there will need to be pizza for the helpers. Other than that, I think we’ll be fine eating at home more.
No, I’m not going back to the whole Extreme Couponing thing, just a nice balance. I’m going to make sure that I check for printable coupons before going to the store…every single time. Then I can just print out the coupons we need and increase our savings a bit more.
It sounds like a pretty good plan to me, hopefully things will work out. If not, then I’ll just have to come up with a Plan B.
I should have included paying for things with a rewards credit card to get more rewards later on, when we’ll really need them.
Have your plans to save a lot of money ever worked out?