My wife, the secret weapon to our financial success

I always tell my wife she is the secret weapon to our financial success.

When we got married 8 years ago, we were not only broke, but hopelessly naive about our dire financial situation. Thankfully, with the help of Dave Ramsey and his lessons on basic personal finance, we were able to pay off all our student debt, save for the future and build a strong financial foundation for our family.

I couldn’t have done this without my wife.

 
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Dual income, same level of expense

It may sound very unromantic, but one of the immediate benefit to our marriage was our ability to almost double our household income while maintaining a pretty similar level of expense as when we were living separately. Unless you dramatically increase your lifestyle, you can maintain a fairly similar expense level married as when you were single.

Housing - The apartment that we moved in together cost about the same as the apartment that I was living in alone prior to getting married. I was living in a high cost of living area near UCLA and we decided to move to a lower cost of living area near my wife’s work. When you can go from having one income, one housing payment to two income, one housing payment, it makes a huge difference in your savings rate.

Transportation - Living close to my wife’s work not only cut down on gas cost but it also gave us opportunities to carpool few times during the week saving us additional money on transportation.

Food - We were able to purchase larger quantity of food that we would cook for the week; both at home and work. This was also the time when I ‘perfected’ my $2 lunch with much experimentation.

Willing to cohabitate with my parents

One of the amazing things about my wife is her ridiculous level of grit. Angela Duckworth discusses in her best selling book, Grit: The Power of Passion and Perseverance, how grit is one of the best predictor of success in life. I really lucked out having met and married a woman who can teach me this everyday.

Not many people are willing to live with their parents as adults. Especially not if they had a choice and even worse if it was their in-laws. However, when my father approached us about the idea of cohabiting as a mutually beneficial arrangement for both our childcare and minimizing their overhead cost, my wife thankfully didn’t run out of the room. After much deliberation, we agreed and it’s been six years and counting.

There’s been many times when we doubted our decision and after a tough day of cohabiting, we’d even looked at other living options. However, despite all the ups and downs, my wife stuck through all of my parents peculiar nuances with patience, understanding and grit.

From a financial perspective, the cohabitation arrangement has allowed both of us to continue to work in our high demanding jobs and acquire a home that we couldn’t have afforded if my parents didn’t help with the equity - on the condition they came with the house :)

The best partner

When we think about our personal finances, we tend to fixate on and over emphasize the end goal. How much do I want to save? How much debt do I want to pay off? When can I retire?

We think and believe that when we reach that goal, we’ll be happy. But how many of us have reached the end of a specific goal only to realize that we aren’t as happy as we thought we’d be?

Life is a journey. Goals just help us to know which direction to move towards.

My wife is my secret weapon because the best part about our financial journey is the fact that I was able to do it with my best friend and life partner.

Accountability - When one of us would think about making a ridiculous purchase (mostly me), we would keep each other accountable on what our financial goals were. So… you are telling me you need the new $2,000 mac book pro to write better blog posts? I’ll let you think about that.

Motivation - In our many carpool rides together or late night walks around the neighborhood, we would talk about our financial future. What would it be like once the debt was paid off. Or what about once our home was paid off! Could one of us stay home with the kids? These discussions motivated and kept us on track towards our financial goals.

Enjoy the Process - The most enjoyable part of our financial journey has been the fact that I’ve been able to do it with my wife. Going to work, paying off debt and saving for the future is not easy. It can be stressful and emotionally draining. However, when you have the right partner, the challenge can be an enjoyable and a rewarding process!

Do you have a secret weapon in your financial journey? Who or what is it? Why is it your secret weapon?

Are you a Sandwich Generation?

Do you have children and are fortunate to still have living parents age 65 or older?  Guess what? Welcome to the Sandwich Generation. 

The term "Sandwich Generation" was first introduced to the social work and gerontology communities in the early 1980’s to describe adults who were sandwiched between raising their children while taking care of their aging parents.  

Today, the Sandwich Generation make up a sizable population as noted by a 2013 Pew Research Center survey.  According to this study of 2,511 adults “Nearly half (47%) of adults in their 40s and 50s have a parent age 65 or older and are either raising a young child or financially supporting a grown child (age 18 or older).”

I can only speculate this number will grow in the near future as people live longer and college graduates struggle with career search overburdened by student debt.  

 
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Emotional and Time Challenges of the Sandwich Generation

Caring for multiple generations is challenging.  My wife and I’ve struggled the past six years raising our two young children while cohabiting with my parents.  Thankfully both our children and my parents haven’t had any major health issues except for type 2 diabetes for my dad.  In addition, the joy of seeing the precious interaction between our children and my parents on a daily basis has been priceless.  

However, the emotional and time stress of being the caregiver for two generations take toll and I’d be lying if I was to say that we didn’t have doubts about our current living arrangement on multiple occasions:

  • Do I have enough time to make it to the work on time after dropping off my father at his physical therapy session?

  • Why do my parents leave the kitchen so messy after breakfast?  Don’t they know there are other people in this household?

  • How many times have my mother woken up our baby from her nap because she forgot to silence her phone?

  • I’m barely learning how to be a parent to my own children.  I don’t need unsolicited advice from my own parents!     

Importance of Having a Strong Financial Foundation

On top of emotional and time stress, many households struggle with the financial stress that comes with being the Sandwich Generation.  According to the Pew Research Center survey “about one-in-seven middle-aged adults (15%) is providing financial support to both an aging parent and a child.”  As you can imagine, paying for your own household needs, plus your parents medical bills on top of your kids school tuition can create some serious financial stress.

We Want to Not Just Survive but Thrive as the Sandwich Generation

My wife and I’ve had many conversations about our careers, our finances and what means to be this “Sandwich Generation.”  As children of 1st generation immigrants, we are very thankful to have reached our current career status in our thirties.

Growing up near a small South Korean fishing community in the 1980’s, I remember my mother commenting about how if I studied hard and did well in school I could one day work in an office that had air conditioning instead of just an air fan (as you can imagine, air conditioning was a big thing back then).  As I now sit in my downtown corporate office and look up to see the air condition vents, I can’t help but smile as I recall that memory. How how proud my mother must be!

I recall this story because despite the challenge of being a sandwich generation, we are thankful for the opportunity to be the sandwich generation.  It affords the opportunity to not only honor our parents for the many years of sacrifice they made for us, but to pass onto our children the importance of family and taking care of our elders.  

In addition, such memory solidifies for us the importance of being even more serious about managing our finances - because the money is not just for us, but for our children as well as our parents. Being healthy in our thirties and being able bring in a sizable income is a blessing.  And we know that the financial need for both our parents and children will only increase with time. Aging is already an emotionally tough process for both the aging and their children.  Our hope and desire is that when that time comes, instead of focusing on our finances, we can focus on each other.

Do you consider yourself a sandwich generation?  Have you experienced any emotional, time or financial stress associated with being the sandwich generation?    


How to get an "A" on your Credit Score

As someone who is wary of debt, I don’t advocate obsessing over your credit score. However, I also don’t advocate not paying attention to it. A good credit score is essential to functioning in today’s modern society and therefore should be indicator to keep an eye on.

A good credit score enables you to…

  • Access to key life stage loans such as home and student loans

  • Qualify for the best interest rates so you aren’t paying more on interest rates than you have to

  • Get approved for high benefit credit cards such as cash back or travel rewards credit cards

A bad credit score can create unnecessary barriers in your life and also cost you thousands of dollars in your lifetime. Let’s not obsess over getting the perfect credit score, but also let’s not ignore it.

In this post, I want to share with you few quick and easy tips to getting an “A” in your credit score!

 
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Named after the Fair Isaac Corporation, the FICO score is the type of credit score most commonly used by lenders. The score ranges from 300 to 850. If you can maintain a score of 700 or higher, you will be looked favorably with most lenders.

The FICO score is made up of five categories:

  1. Payment History (35%) - This is the most important category you should pay attention to. Are you paying on time? Do you have any missing payments?

  2. Debt (30%) - Credit Utilization. How much debt do you have? What percent of available credit are you using? High credit utilization could hurt you here so don’t max out your credit card every month.

  3. Credit Age (15%) - How long have you had your accounts? Usually an average of your oldest and newest credit accounts.

  4. New Credit (10%) - Did you open a lot of new credit accounts in a short period of time? Try not to open too many accounts too quickly.

  5. Credit Mix (10%) - Do you have different types of credit accounts? e.g. home mortgage, credit card, student loan, etc. Good to have a mix, but don’t overthink it.

Image Courtesy of www.myfico.com

Image Courtesy of www.myfico.com

Now that you know what makes up a credit score, here are few simple tips:

1) Automate Your Payment

Pay your bills on time. Never be late with your payments because this will have the biggest impact on your credit score. The easiest way to do this automate all your payments through your credit card or checking account.

If you are struggling to pay your full bill every month, stop reading this post because you shouldn’t be spending your time thinking about your credit score at this life stage. I recommend you spending your energy on personal finance fundamentals such as cutting down your expenses and living below your means first.

2) Keep Credit Utilization Ratio Below 20%

Utilization ratio is the amount of credit you use compared to the amount you have access to. For example, if you have a credit card with a limit of $10,000 and you on average use $2,000 monthly, you have a utilization ratio of 20%; $2,000 / $10,000. Lower this ratio, more favorable your credit score. 20% is a good rule of thumb, but lower is even better. Don’t be the guy or gal that “maxes out” his or her credit card every month!

3) Don’t Open Too Many Accounts

Whenever you apply for a loan or a credit card, you get an inquiry against your credit report. There are two types of inquiry; a soft inquiry and hard inquiry. A soft inquiry is when someone looks at your credit report as part of a background check or when a mortgage lender pre-approves you for a loan. However, this doesn’t affect your credit score. You want to be mindful of hard inquiries which occurs when a lender checks your score in response to your application. It is a necessary part of getting a loan or a credit card approved, but having too many in a short period time will negatively affect your credit score. You want to avoid multiple hard inquiries.

4) But Once Open, Don’t Close Your Accounts

15% of your credit score if made up of length of credit history. As you are cleaning house, you may be tempted to close your old underutilized credit cards. If they have high annual fees and no longer adds value, go ahead and cancel them. However, if they can still provide some function, I recommend keeping them. Closing old accounts can reduce your overall credit age and lower your credit score.

When was the last time you checked your credit score? Is it a positive rating? What can you do today to improve your credit score?