Thursday, May 22, 2008

Madd Money: Ten Years of Spending and Saving

A number of blogs in the Personal Finance blogosphere are asking a key question this week… How are your finances different today based on what they were ten years ago? I decided for this point in time I wanted to participate in this, and write down my feelings on these topics.

Ten years ago our finances were totally different than they are today. Here’s some of the significant differences:

1. Housing
Ten years ago…

Christina, Nicholas and I lived in a house in San Francisco that we were renting from my parents.


Christina, Nicholas, Karina, Amber and I now live in our San Bruno home. We have owned it now for almost nine years and we *love* it. We were blessed to buy a house in Christina’s original home neighborhood (her parents live a ½ mile down the street, in the house Christina grew up in). We also made, what I hope, were some wise choices along the way, such as putting a very large down payment on the house and having taken out a very small (relatively speaking) mortgage. While it was an inconvenience to me commute-wise when we first bought it, today it’s perfectly situated, and we totally love our neighborhood and neighbors. we have already made most of the major renovations (remodeled kitchen, new windows, upgraded central air and A/C, and an updated guest bathroom). We also made a commitment to own the house free and clear as soon as possible. We made our final house payment on December 14th, 2007, and I am not at all ashamed to say it is a wonderful feeling to have that monthly payment out of our lives forever!

2. Spending

Ten years ago…

We were fortunate in that we went through the pain of our significant debt pay-down (not counting a mortgage) early in our marriage. By 1998, we were debt free. Still, we had some big appetites and were willing to go and do and buy a lot of things that, today, look a bit silly or we don’t even have anymore. Still, it did feel really good to go and buy a brand new car for Christina for Valentines Day and pay cash for it (even if the cash was spawned from selling stock options I had at the time).


We have made great strides towards changing the way that we use and spend money because the days of rapidly appreciating stock options are a thing of the past. In fact, the shares that I used to own were liquidated and the cash was converted into ROTH IRA’s and our kids 529 plans. Without the friendly cushion of stocks we could raid whenever we felt like it, we’ve had to be more disciplined in our approach to spending. We use one credit card that gets paid off every month for convenience and shopping online, but most of our purchases are handled through an old fashioned cash and envelope system. We set aside a certain amount of money in key categories, and we use that money until it’s gone. Once that money is gone, that’s it for that category until the next pay period.

3. Retirement Planning

Ten years ago…

I had been contributing the maximum allowed by my company to our 401K plan (15%) for years, so I was doing what I thought at the time was the best I could do (and frankly, it was really all I wanted to put away at that time).


I’m not going to write down specifics or numbers, but compared to average 40 year olds, we’re doing pretty good (there were three years where my being out of active work because of my choice to go back to school caused a pause in my contributions, but I’m back in the saddle again). The one difference is that, instead of putting all of my retirement money into my company’s 401K, I now put in enough to get the matching that my company provides, with the rest of the money being saved for retirement going into two self directed ROTH IRA’s that my wife and I have set up. We’ve agreed to keep to the 15% of gross pay marker for the time being, since we have some other savings goals that we want to meet as well, but we feel that 15% over continued years will have us in good shape by the time I’m 70.

4. Tithing

I found it interesting that this category was included, and through additional reading, I was pleasantly surprised to find out that Latter-day Saints are not the only active and conscientious tithe payers out there. Many church denominations pay tithing and are just as devoted to the principle as Mormons are.

Ten years ago…

We used to pay tithing with the stock options that I was granted. To some, that may have been seen as cheating, but it’s a perfectly valid way to pay tithing, and I would annually make up a form letter for my brokerage and the Church’s financial organization in Salt Lake City to make this transaction. Still, while I felt I was living up to the letter of the law, I often felt that the spirit of the law was not quite being followed, in that it didn’t seem like I was making much of a sacrifice. It also had a net effect that we didn’t live by any kind of a budget at the time.


No more stock transactions; our tithing is a check that we pay at the beginning of each pay period, and we have made a commitment to make it the very first item that we pay (i.e. the “first fruits” of our labors). We make sure that it is 10% of gross pay each time (I work hourly, so we calculate it each pay period and then write a paper check for it each time). The effect of this change has been dramatic, not so much with the way that we pay it, but in the testimony building opportunities it has provided to us; since we take the first 10% each pay period to pay tithing, it makes us much more aware as to how we use and budget the remaining 90%. More to the point, it helps us keep money into perspective better as it relates to our lives. Paying that 10% reminds us that God owns all, and that we are meant to be good stewards with the resources we are given. Making that 10% gift first helps us keep that in perspective.

5. Attitudes Towards Money

Ten years ago…

We were both lucky and foolish in these years. We had a lot of money relative to our peers and we were more than happy to spend it. While we didn’t have credit card debt or any loans at this time, looking back I realize so many things that we did just on whims that, if we were to gather all the money we spent and count it, the amount would be staggering. We had fun, to be sure, but we could have been in a much more solid place today had we been less free-spirited with what we had and managed it better.


Now that we have three kids that are growing up very quickly and the possible costs that we will be facing in the future for things like college and missions, we have made a commitment as a family to be a family of “savers” rather than a family of “spenders”. We look to have fun when we can, and try not to be super austere in our measures, but we have turned a corner in our lives where we care much less about things like what people think about the cars we drive or the furniture we have or if we own the latest gadget. More to the point, today, we sit down together, take our paycheck, spend every dollar on paper up front, and work hard to not deviate from that plan. The net result is that we are able to save much more than we used to, and when we want to have some fun, or we want to buy something for ourselves or the family, we plan it and save for it, and we make sure that we can allocate for it and afford it *before* we go out to do or get it.

Bottom line:

My wife and I have changed a lot over the past ten years, and we have made a lot of progress over the years in key areas, but we still have a long way to go before we reach our “Pinnacle Point”. Ultimately, our goal is to save and invest enough so that we reach a point where the interest and dividends of our investments could replace my income. That goal is a*long* way into the future, but so far, we are situated in a way that we will be able to take advantage of good opportunities, and weather most down periods without too much stress or worry.

What about you? How are you different financially-speaking than you were ten years ago?

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