"Thank you Mario! But our Princess is in another castle!"
If you're anything like me, you played Super Mario Brothers at some point while you were growing up, and you probably played a lot of other video games, too. Almost every game (sorry, Temple Run) has a primary objective- an end goal- that you pursue throughout. Save the Princess. Protect the planet from alien invaders. Take the enemy base. Crush all the candy. Completing this objective means winning the game.
Many games also contain secondary objectives that lead the hero along alternate paths for a time. These "side quests" enhance (rather than replace) the primary objective and come with a special reward. When you complete them, you are back on track and better prepared to deal with your main quest.
Our side quest
God has given us a side quest. Along the way to bringing a child home (our adoption quest), our agency asked us to take a deeper dive into our finances (our money side quest). We each have a good job, pay our bills on time each month, and have some savings and retirement set aside. We also have a mortgage, student loans, a car payment, and credit card debts. The overall picture is one where we are getting by, but not thriving. The agency's concern is that paying the adoption fees and adding a child to our family might do us more harm than good (financially speaking) if we don't make some changes now.
Other couples have asked us for advice or insight as we progress along our adoption path, and I think this is a great place to start. We've taken three important steps on our money side quest, and we're already seeing greater freedom, reduced stress, and progress toward our ultimate goal.
Make a budget
In ten years of blissful marriage (and nearly seventeen as an adult) I have never created a real, working budget. We go to our jobs, deposit our cash, and spend it "as necessary" on whatever fits in our cart at Target. It's a great recipe if your only goal is living paycheck to paycheck, and we have succeeded.
That's no longer good enough. In January, we created accounts with Mvelopes - free personal finance software and that uses some basic budgeting techniques to give us control over our finances. The idea is that you identify your income and then assign every dollar an envelope, or purpose. When an envelope has dollars, you can spend them only for that purpose and when the envelope is empty, you need to stop spending. Apps on our phones make it easy to keep track of everything.
For example, we put money in our mortgage envelope, our groceries envelope, our auto maintenance envelope, etc. A week ago when my headlight burned out, I used $17 from the auto maintenance envelope to buy a replacement. I felt free knowing that we had intentionally set money aside for that purpose, and I didn't have to second-guess whether that meant we could afford other bills.
Cascade your debt payments
I used to work with someone who had the worst name imaginable- Deb T. Debt. (True story. Sorry, Deb.) She was a good worker and friend. Debt is neither.
Regardless of how we acquired it, we agreed that debt needed to go, and go quickly. Cascading debt payments is easy and effective. We determined our minimum monthly payment for all of our debts, and will pay that every month. Notice that I said payment, not payments- the total we pay stays the same, even as the balances drop. As the first debt is paid off, that amount is added to the next payment in line, and so on. We'll cascade one payment into the next until by the end, we'll tackle each remaining debt with ginormous payments.
For our family, the biggest "Aha!" moment came from adding in the payment amounts for mortgage, auto, and student loans together with our credit cards. I had always dealt with them separately. I realized that sadly, one whole paycheck each month goes to paying debt, in all its forms. Thankfully that's not the end of our story.
Looking over our situation and applying cascading payments to our entire debt portfolio shows that we could be entirely debt-free - including our mortgage - in just over ten years. That's eleven years ahead of schedule, saving tens of thousands of dollars in interest. A month from now, we will already have eliminated our first two credit cards.
Get help planning
I think I'm pretty good with numbers, but you can see that I'm far from perfect when it came to finances. Our counselor asked us to meet with a Certified Financial Planner (CFP), someone with the tools and experience to keep us heading in the right direction. So far we've talked about our short- and long-term goals, and they're helping us formulate a plan for how we will get there.
We want stability for adding another child. Within a few years, we want to thrive on one income. We want to save for college, and maybe someday retire early to tour the national parks. If you had asked me two months ago what our financial goals were, I wouldn't have thought past one or two paychecks. Now we're looking out several decades, and with the help of our CFP, we may get there.
Get started
While we didn't think we'd be on this side quest, I can already see how God is orchestrating it for our good. Although it is delaying our progress on adoption, it is also something we desperately needed, and we wouldn't have done it on our own. As we work through these lessons, we're already starting to thrive. If you are adopting, or thinking about adopting, I wholeheartedly encourage you to get started on your financial quest now.
-Adam