We changed the plan because after looking at our financial priorities, I realized the original plan didn’t quite match what we wanted to accomplish. I wanted to go ahead and explain why we changed the game plan and what we’re going to do now.
The Original Plan
I can’t believe how quickly the year is going. If you remember in January we had 3 financial goals for 2011:
- Bumping Up Our Savings for the Baby: Looking at the baby’s arrival this summer, we wanted to go ahead and increase our emergency fund. We’ve been comfortable with our account, but we’re now going to move in a more conservative direction and try to get up to a full six months of expenses.
- Build Up Our Car Fund: We specifically want to save $5,000 this year to our car replacement fund. Repairs are becoming more frequent with the Jetta, while they have been manaageble with our budget, we know that they will continue to increase and we are going to need another car in the future.
- Pay Down the Student Loan: It’s our only non-mortgage debt left and we would like to pay it down a bit this year. I listed it as a reach goal that I really wanted to meet.
The original plan included putting 50% or more of windfalls (like a tax refund) towards the student loan principal.
Savings More Important Than Debt Reduction (For Now)
While paying down the student loan a bit faster would be great, I think for our family’s situation it would be better to meet our savings goals first. I realized that paying down the student loan would be an emotionally satisfying goal, but it wouldn’t necessarily be the best move for us.
Something that surprised me as I was looking around at different personal finance writers and bloggers was Dave’s Ramsey’s take on preparing for a baby. If you’re not familiar with him, Dave’s approach involves being 100% committed to while in the debt elimination phase. He calls it gazelle intensity and for some it means getting down to the basics until all your non-mortgage debt is paid off. The exceptions to that rule is when you’re expecting a baby or a job loss.
Here’s his explanation:
When a couple finds out that they are going to be parents, they often wonder if they should stop the debt snowball to save up for the baby. The answer is yes. Save as much money as you can in case something happens and you need the money immediately. Once everyone is healthy and home from the hospital, you can take that saved-up money and put it toward paying off debt if you didn’t need it for the baby.
I think it’s reasonable and fits our circumstances. I think it’ll be a few months once the baby’s born to figure out our new monthly budget. I’m curious, though – how long did it take you to adjust your budget? Was it a big change for the family?
New Financial Strategy
While it’s not a huge change in our goals, it does mean we’ve adjusted the plan. Here’s how we’ll focus for our goals:
- Bumping Up Our Savings for the Baby: Since this is the biggest priorities, we’ll put the entire tax refund into the account. Once that’s done, we’ll have our buffer in place slightly ahead of schedule and it will allow us to focus attention on the two other goals.
- Build Up Our Car Fund: Still the same plan-wise. We’re going to need another vehicle in about a year or so. Saving in advance makes it less painful financially.
- Pay Down the Student Loan: Believe it or not, the extra payment won’t be addressed until the end of the year most likely. As we’ll be adjusting to the expenses associated with babies, we’ll keep money in savings. Once we get a better grip on what to allocate into the monthly budget, we can then decide on how much to send as a lump payment to the student loan lender.
Thoughts on Changing the Plan
Adjusting financial goal posts and strategies happens time to time for us. How about you? Have you ever changed your financial strategy or goals? Was it hard to do or did the switch come about easily?
Photo Credit: Marion Doss