Mr. BFS and I have been in a holding pattern with our money stuff for more than 2 years. I stopped tracking every single expense in a monthly budget, but we did have a general one to guide us. We have been faithfully maxing out both our Roth IRA’s, covering our bills, putting another $10,000 or more a year aside for future investments, and sort of just doing what we usually do.
Too Much Cash on Hand, Not Enough Leverage
The problem was that we were building up a ton of cash and then doing nothing with it. We already have 3-6 months of cash padding, so the extra cash was being saved to put down on a new rental home. But rental homes are hard to get loans for when you are self-employed. So Mr. BFS and I sat down last week, reviewed our situation, and decided to change up our budget to fit our current lifestyle.
The quick summary is that we are pausing on the rental property idea and are opening a SEP IRA for 2015 before April 15, 2016. I’ll be rolling my old 401k into it and we’ll be contributing 20% of our pre-tax income up to $14,000 each year. That plus our $11,000 into Roth IRA’s should add up to $20,000-$25,000 each year, which will amount to 25% or more of our pre-tax income. That’s always been a solid target for me.
We are also buckling down once again on our expenses, specifically food. We had started creeping up again with our restaurant expenses, so we are knocking off the majority of our fast food spending and concentrating on grocery shopping and specific, planned nights out with friends.
In the end, we realized that we had not been efficiently managing our money for a while. We had a landlord dream and just put everything on pause for it. Saving cash like a money-hoarding squirrel is fine, but investing it in our future (especially when we already have a lot of built in cash padding) is better.
Do you review your budget and general finances very often? Have you ever caught yourself being silly?