That stands for “personal finance” for those of you who may not know.
Last month I earned $44.36 for doing nothing. That’s the interest I earned on my “high interest online savings accounts.” These days, 1.10% is considered high. Sheesh. I could move some of that money to an account earning 1.40% interest, but I’m not sure the small gain is worth the time. We’ll see. Either way, I am reaping the benefits of compound interest. The previous month I made less than that, but every month the amount grows little by little.
The (small) joy of compound interest is one of the things I’ve learned in recent years. As soon as it became apparent that I was headed for divorce, I started searching out and reading personal finance blogs. I wanted to learn all I could about how to budget and live frugally as I was quite intimidated at the thought of handling a house payment on my own.
Before I got married I had very little money saved, although my debts were fairly low, too. As I recall, I had about $2,000 in credit card debt and about $3,000 in student loans. The credit card debt came about because I loved to travel, yet made little money in my job at a non-profit human service agency. I had taken a few (relatively) cheap trips and just charged the expenses to pay off later.
I guess this made my ex-husband nervous, because he was extremely reluctant to establish any joint accounts with me. He reasoned that the most important thing for us to focus on was paying our fair shares towards household expenses and it didn’t matter how we accomplished that goal. He ran some calculations to determine who should pay what so we came out proportionately even.
We had some spats about money and it took five years of marriage before he agreed to open any joint accounts at all. We finally set up a money market account for our emergency fund and then calculated how much each should contribute to it, again based on that proportional formula. We also set up a joint checking account at the same time but he never used it. Since his share of expenses was to pay the mortgage and I picked up everything else (food, utilities, household stuff), he didn’t see the point of cycling his share through the joint account.
I learned about the comfort of having emergency savings from him, but over the years I realized he wasn’t the money whiz I had thought he was. He never seemed to make his money work for him and just didn’t want to set any goals around savings. He just wanted to save, because it was the right thing to do.
Through my judicious reading of personal finance blogs — including the comments — I’ve learned much more about how to make my money work for me. It is a great feeling to have emergency funds available in case something catastrophic happens, but I also have savings goals. In addition to the emergency fund account containing several months of expenses, I’ve created two other targeted savings accounts through my online bank (FNBO Direct): the “big-ticket” fund for the eventual expense of replacing my aging car or the roof on the house, and; the vacation fund, so I don’t fall back into those old, old habits of incurring consumer debt so I can take a nice trip.
I often look at online travel sites to figure out just how much I’d like to accumulate, but despite not having a firm decision on where to take my next big vacation, I’m still adding to the account and enjoy watching it increase over time. Checking my monthly statements and seeing that the account has gone up a few dollars with no extra effort on my part is a very good feeling.
I’m careful not to over-commit in one direction or the other around money, though. One phenomenon I’ve noticed is that some people seem to get a little crazy over number crunching and stockpiling their funds. (Most of these folks are men, for whatever reason.) These people tout “financial freedom,” which seems to mean they have no debts at all. They pay down their mortgages as fast as they can and preach about their money habits and hacks that allow them to squeeze their budgets down to insignificance.
I don’t understand this approach any more than I understand the folks who continue to spend themselves into bankruptcy or keep huge balances on their credit cards. I suppose I’d call myself fiscally moderate: not spending too much, not saving too little. It’s a nice place to be.