Suri gives her Personal Finance 101 lesson for moms, on the basics of budgeting, saving, retirement planning and wealth building. Join in the conversation by leaving a comment or sending in your questions.
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- Judge-Your-Neighbor Worksheet by Byron Katie
- Anterior Deltoid Strengthening Exercises from NHS Greater Glasgow and Clyde (the shoulder exercise I’m using)
- To learn more about my money philosophy, check out my resources section: 13 Money Lessons Every Parent Needs To Know (And Teach Their Kids)
TRANSCRIPT – edited for clarity
INTRO: Hi again friends. Welcome back to Doing Things On Purpose, the podcast that empowers women to take charge of their time, health, relationships, and money by doing things on purpose. I’m your host Suri. Thank you so much for joining me again this week.
So this week, I’m going to give my Personal Finance 101 lesson for moms, on the basics of budgeting, saving, retirement planning and wealth building. And why I say it’s for moms is because I’ve tried to keep everything simple. You can always go deeper or optimize things as you go along, but I’m simply offering a place to start.
You’re more than welcome to join in the conversation by leaving a comment on my website at suristahel.com/11 , or sending in your questions to firstname.lastname@example.org.
CHECK-IN: Before we begin, let’s start with this week’s mom check-in.
- How has your self care been this past week my dear friends? I really hope it’s been going well, or better for you. Personally, I had some off days, but mostly I could get my morning yoga in. On top of my usual daily yoga practice, I added some light weights to my routine as my weak right arm was starting to act up again and I do not want to spend money on physiotherapy just because of my laziness.
Another self-care practice I’ve been meaning to do, is to fill out a Judge-Your-Neighbor Worksheet a day from Byron Katie. Which I’ve miserably failed to do in the past week. I‘ll include a link to that in the show notes if you’re interested, because it’s really been a super helpful tool that’s helped me so much to pass through any stressful or judgemental thoughts that are quite sticky, just by writing it down and questioning it on paper. But that’s a topic for another day.
- Second check in question: Have you had time to get your life a little more in order this week in terms of your schedule, or the calendar on your phone?
If not, come on what are you waiting for? Your life will not just magically organize itself. Just start the habit of adding things to your calendar as events come in. It’s my best tip to help ensure that you don’t overextend and overbook yourself.
I hope these check-ins help to support you in some way, to feel more in control of your life.
So let‘s get started on today‘s topic which is Personal Finance 101 for Moms.
SURI: Last week, I shared with you my philosophy about money – how it’s just another tool that can help us support our loved ones, ourselves, and the causes that we care about. And this week, I promised I’d talk about the how of it.
So let me start by sharing a little bit about myself, and how we got started as a family, when it comes to our money story.
Where I Come From
I come from a middle class family in Malaysia, which is in Southeast Asia above Singapore. Both of my parents worked full time jobs, and we were raised by a series of maids who lived with us, cooked and cleaned. In Malaysia, this was just what many normal, middle to upper class families did. Because of the relatively cheap cost of labor, this lifestyle was sustainable to a point.
In the modern western world though, this was not normal anymore. In Switzerland where I now live, help at home is just for rich people. None of our friends have nannies or helpers living in their homes. It makes sense because labor is so much more expensive here. But even if it was affordable, I personally think it’s a moot point because many parents in my generation (I’m a Millennial or Generation Y by the way) have shifted values. We prefer to be more hands-on when it comes to our families and our homes, and we also value our privacy much more than past generations.
For me, this means that the new generation of parents who choose to stay at home, need to think about their work at home, as actual work. There are so many articles and group chats of parents wanting their work as stay-at-home moms and dads to be validated. But internally, as a generation, we parents are also still struggling ourselves with that feeling of ‘not being enough’ and not valid in the work that we do. I think this is something we need to look at, and work on to improve. Because every job that serves is valid. Every job that serves is valuable.
As stay at home parents, we have to be willing to grow and learn the ropes ‘on the job,’ just like we would be doing in a traditional workplace. We have to learn:
- how to care for children
- homemaking skills like cooking and cleaning
- how to be respectful parents
- how to work as a team with our spouses – maybe it’s taking turns putting the kids to bed or attending social gathering in support of your partner’s work
- how to nurture mutually supportive structures, weather it’s through friends or family connections and organizing gatherings
- how to manage our stress and stay healthy
- to embrace experimentation and lifelong learning to have a thriving career again later on in life.
- to also keep an eye on the financial health of our family.
That’s a lot on our plate. But it’s also very exciting and meaningful work.
So let’s stop thinking about staying-at-home as just a pastime or a ‘time-out’ while waiting for the kids to grow up. Because if we don’t pay attention, life happens to us, not for us.
The Wake-up Call
It must’ve been around ten years ago in 2013, that we got a sum of money, maybe about 10 to 15 thousand from my husband’s parents, as an advanced inheritance, so he could ‘buy in’ as a partner in the company that he was working in at the time. Long story short, the plan didn’t work out and my husband ended up changing jobs. And so we didn’t need to use the money that was given to us.
But a year and half or so later, my husband was telling me about how frustrated he was that our savings account balance hadn’t grown, since the time we left Hong Kong and moved back to Switzerland. The balance was the same after three years or so of being back.
Then I asked him, “What happened to the money that your parents gave for the partnership? Shouldn’t that at least, have made our savings balance higher?’
But he didn’t know. To be clear I didn‘t and I still don‘t blame him. It takes two to tango.
We‘d just been living our lives. We weren‘t particularly big spenders.
On top of everyday expenses like buying kids‘ clothes, diapers, food, or going to the dentist once a year, we also went on holidays when we were stressed like anybody else.
We ate out in restaurants every so often, we sometimes offered to pay for drinks or pick up the bill when we were with friends, we bought good clothes when something nice was on sale, we were generous with presents, we bought nicer furniture for our home and I spent time and money obsessing over stainless steel pans, self watering pots and beautiful wooden cutting boards.
I mean, when you earn quite well, what‘s the point if you can‘t enjoy it once in a while, right?
Don‘t get me wrong. These were all nice things to have, and I don‘t regret most of the things we spent our money on. But what I’ve also learned over the years is that we need to put our money first according to our priorities, and be content with spending with what we have leftover, or saving for the nice-to-have things that we want, but don‘t need in our lives.
As Paula Pant says: You can afford anything, but not everything.
So that’s what made me wake up, and realize that if one of us didn’t get it together and make a plan for our money, we’d be in big trouble a few years down the road.
And that‘s how we started thinking about the different things that our money has to pay for. We started opening sub accounts or new accounts to set aside money in specific buckets for specific purposes.
The key word here is automation.
We automate everything that we can. And that‘s how we’ve paid the bills, funded our holidays which is a big value item for us, and how we‘ve slowly growed our savings over time.
So if you‘re a new mom, this is where I want you to focus your attention on. This foundation piece.
Because for me, automation allows me to plan a strategy once, and let it run and work for me for years, before I need to look at it or tweak my strategy again. And as a mom, you know how precious your time and attention is.
Less time thinking about money because it’s all taken care of, equals more time thinking about other things in your life.
So let’s dive deeper into some real actionable points.
The first thing I want you to focus on, are the types of buckets you might need to prioritize, to keep your family‘s expenses and savings in check.
Here I’ve outlined 12 money buckets that we use as a family.
But if you’re just starting out and still uncomfortable discussing the topic of money with your spouse, just focus on the little wins. Maybe just having that conversation can be a small win.
Remember that new ideas often need time to rest and get processed, before you or your spouse are finally ready to take action. But please take action, even if it’s just one tiny step at a time.
Suri’s 12 Money Buckets:
- Salary account: A checking or current account with a debit card, where the salary comes in.
- Emergency savings account: This is preferably a high yield savings account without a debit card. Aim to slowly save up to 6-12 months of your monthly expenses in this account if you’re in the US, or 3-6 months of your monthly expenses if you live in Switzerland due to our more robust unemployment benefits system.
- Spouse expenses account: Open a separate partner account, which is a current account with a debit card, for the spouse who’s staying at home. Set up an automated transfer each month from the salary account to this account, with an agreed upon sum for ‘fun’ money. For a middle class family like ours, this could be anywhere from $200-400 per month depending on what you can afford. And this is to pay for things like hairdresser’s appointments, a night out with your girlfriends, clothes, shoes and other personal expenses. This will really help you pace out your spending.
- Household expenses account: Open a checking or current account with a debit card. Set up an automated transfer of an agreed upon sum from the salary account, into this groceries account (e.g. $1000 to $1500 per month), and use it whenever you or your partner buy groceries, medicine or pay for minor transportation costs as you go about your day.
- Housing payments: Set automated payments for rent, water and electricity to be paid the day after your salary comes in. As your biggest fixed cost, make sure your rent is less or not more than ⅓ of your gross income.
- Credit card payments: Make a habit of always paying off your credit card fully each month. If you don’t know if you are, just ask your partner. Spending more than you have is a recipe for disaster. If you already have credit card debt, keep the card at home and focus on paying off your debt steadily, month by month.
- Taxes sub account: Open a sub account with no debit card, to save up for your taxes on a monthly basis. Use last year’s tax amount and divide it by twelve. If you or your spouse got a raise or bonus (yay you!), increase your tax allocation proportionately as well. Automatically transfer this amount each month, from the current salary account, into this taxes account, the day after your salary comes in.
- Health insurance sub account: Whether you have health insurance or you‘re funding your healthcare on a case-by-case basis, set aside the amount required to keep your family protected, in a separate sub account.
- Holiday or dream account: Whether it‘s vacations, a house, a car, a monthly massage or whatever else that gives you and your family a sense of enjoyment in life, set up a sub account where you transfer monthly savings to fund that dream.
- Employee retirement fund: If you or your partner’s employer offers a retirement account with matching contribution, take advantage of that free money and contribute enough to your traditional or Roth 401k if you‘re in the US, or in your BVG if you‘re in Switzerland – to get the maximum company match. If you don’t know what plan you’re on, please don’t be afraid to ask your employer for a copy of the contract.
- Individual retirement fund: This is a tax-advantaged account such as a traditional or Roth IRA if you are in the US, or the 3a third pillar account if you’re Swiss.
- Because these accounts are tax advantaged, there is a limit to how much you can save here per year. In 2023 the annual maximum contribution amount is $6500 (or $7500 if you‘re 50 or older). In Switzerland it is CHF 7056 per year in a 3a account.
- Divide the maximum yearly contribution allowed by twelve, and automate payments from your salary account, into your IRA or 3a individual retirement account for Switzerland, on a month by month basis.
- Individual retirement accounts can be opened within a bank or with a discount broker like Charles Schwab, Vanguard for the US; or VIAC, Finpension and Frankly for Switzerland. If your individual retirement account is in a bank, please consider moving it to a discount broker, in order to be able to access low cost, passively managed index funds or ETFs, along with lower fees than what your bank offers.
- Lastly, consider how your retirement accounts will be taxed when you retire. The rules are different according to the different types of retirement accounts and by country that you live in.
For instance, if you live in Switzerland, my advice is to open multiple 3a accounts (typically up to 5), with the same or a different provider, to help reduce your tax burden upon retirement. This is because individual 3a accounts have to be liquidated on a lump sum basis. So you‘ll pay less taxes when you stagger the withdrawal of this type of retirement account over time (maximum 5 years after normal retirement age).
There are two ways to do this:
- Open a new 3a account when your balance reaches CHF 40’000.
- Open five 3a accounts simultaneously and fund it equally or alternately over the years.
- Standard taxable brokerage account: This is your out-of-retirement-account savings, investments, and assets. In Switzerland this is part of your 3b assets. But no matter where you live, because there is a contribution limit to all tax-advantaged retirement accounts, if you can and want to save enough money to retire comfortably or to fund your child’s education, you’ll have to start thinking about saving and investing beyond your employee and individual retirement accounts.
- These are simply investment accounts in discount brokerages such as Vanguard, Schwab in the US; Interactive Brokers and Degiro in Europe; or even robo advisors such as CleverCircles in Switzerland (many discount brokers offer fairly priced robo advisor options).
- In these accounts, you can still invest in low cost broad-market ETFs and index funds which may give you an average rate of return of 7 to 12% over time, but this is also where you can consider taking a bit more risk, since you already have your nest egg, safe and sound in your retirement accounts and your emergency savings account.
- Here is where I also think about investing in slightly riskier ETFs like blockchain, cybersecurity and artificial intelligence, or even in individual stocks of blue chip growth companies such as Apple or Google, which can give me a larger average annual return, up to 30% or more annually.
- It’s not about calculating your total capital and a 30% growth on top of that as your end number, but investing allows that 7 or 30% average annual return to compound on itself over time. Meaning you earn interest on top of your interests earned. And over time, that adds up exponentially.
But if you‘re new to personal finance and investing, I don‘t want to go any further than that and confuse you. The important thing is to do these things step by step.
Baby steps and just keep going. Just keep learning.
And do what‘s doable for you and your partner because it‘s a balancing act really. Just like parenting and housekeeping – one spouse tends to lead a bit more in certain areas, and then follows more in other areas.
In my opinion, just as women tend to be natural leaders when it comes to parenting, we are actually also natural leaders when it comes to personal finance and managing our family’s financial wellbeing – but only if we choose to learn how to harness that knowledge and apply it in our lives.
I know some of you might think, How can I manage money when I‘m the spender in the family?
But let me tell you something, when you know WHY you’re saving your money and you have a strategy – the things or experiences you’re saving for, the retirement goals you have in mind, the education or dreams you want to fund…
…and when you know the HOW of it: How to save, grow and compound your money over time, you’ll automatically have less desire to browse every season for that new shoe, that new outfit or that new hair treatment that you don’t actually need. And you‘ll have more desire to find a way to make more money, because you know the main purpose of your money.
And don’t get me wrong. You can still enjoy these ‘treats’ – they make life worth living. But you do it more consciously and only with the money that you can afford to spend, and not with money that you don‘t actually have.
OUTRO: So that is all I have for you this week. Remember, don’t get overwhelmed. You can listen to this podcast again.
Start with the first 8 buckets and go from there.
By the way, just a quick side note: If you want to guesstimate how big of an investment portfolio you‘ll need to fund your retirement, assuming that you maintain your current lifestyle, then multiply your current yearly expenses by 25.
You can find this, and more on tips my 13 Money Lessons that Every Parent Should Know blogpost at suristahel.com/money.
And if you need a written copy of this episode to use as your checklist, check out the transcript at suristahel.com/11.
Thank you so much for tuning in. I believe in you. Please don’t forget to subscribe, rate and share this podcast, if you like it.
This is Suri and you’re listening to the Doing Things on Purpose podcast. I can’t wait to catch you again next time.