What’s the Plan, Man?

What to do…what to do? Sometimes the mental torture of trying to make a big decision is liable to send the average Frugal on a spending binge at the nearest mall.

This recently happened to me. Not the binge! - the mental torture. With mortgage interest rates at the lowest I’ve ever seen them I really needed to give a good think about refinancing our current mortgage.

On the face of it refinancing to a rate that’s 2 percentage points below our current rate seems like a real no-brainer. After all, that’s what the “experts” tell you to do. But I think all of us know by now that we can pretty much take the advice of “experts” and put it in the pooper scooper. (Alan Greenspan!!! Aaarrggh!).

Anyway, if you feel you can’t trust the experts, and you’re not sure what to do, you might give a go to trusting yourself. Yeah, I know it’s a revolutionary thought. But, heck, you can’t do any worse than the Ivy League MBA’s who ran Washington Mutual into the ground, right? Stupid Ivy League! (By the way, I went to a state school. Plus I have a BA in English. Double Plus, I’m a housewife. So you know for sure you can trust my financial advice. Kidding! kidding!).

But trust is not built on thin air. It has to be earned. It has to be based on something concrete.

That’s why it’s a good idea to have a Plan. I capitalize it because it’s really important to me. Let me tell you a little bit about the Big Guy (I like to anthropomorphize things I’m really fond of. Like my piggy banks - meet Senor Pig and Hamletta).

Every year around this time I make a Plan. The Plan talks about what we MOST want to accomplish in a given year, given our finite resources. I think about it a lot, probably for a good two months. I talk about things with the hubby, add some stuff, discard some stuff, and then I sit down with pencil and paper and begin to write.

I actually do write it in pencil, on a real piece of paper. My Plan is serious stuff, but it’s flexible, so the ability to erase is a must. I’m usually ready to commit my ideas to paper by the end of January.

But just like Trust, the Plan is not based on thin air either. It’s based on a Budget. That’s because there’s only so much to go around. I need a Budget to help me figure out the best way to allocate my finite resources to meet our goals for the year.

For instance, this year we REALLY want to go on a nice vacation. The last time my husband and I went on a vacation together was on our honeymoon. It was a great time, but those happy vacation memories have had to carry us through 14 years. So I think it’s about time we took one again.

Another thing I want to do is fully fund our Roth IRA’s. We max out the work stuff; they match 6% - that’s FREE money!  Oh and by the way, the contribution limit this year has increased $1,500. That’s GOOD news. Roth IRAs will really oomph up our retirement savings.

These are nice thoughts to have in my head. But thoughts can only become reality with some action. With the Plan, I actually write down, in black and white, how I’m going to do this. That’s the engine that drives the Plan so I will more than likely accomplish my goals. Let just rephrase, ’cause it’s super important: I not only say WHAT I want to do, I spell out exactly HOW I will do it.

Though the Plan is an important document, it’s really not very long or complicated (think Declaration of Independence.  I can just see it now - my Plan enshrined in the National Archives).  It’s short and to the point and it’s selective; I know I can maybe do 5 big things well, rather than 100 little things mediocre with my moolah in a given year. Like I said, there’s only so much to go around.

Now, I don’t have a crystal ball. I don’t know what will happen in the future. The Plan helps me there, too. It tells me what I need to save to make up for the unexpected things that can happen in the Unknowable Future. Experts say a good rule of thumb is to save up 3-6 months living expenses. That seems reasonable to me, so I’ll make sure to not throw this bit of advice into the pooper scooper. ( But that was MY decision!). Plans can change, as we all know.

So when I had a hard time deciding whether or not a re-fi was a good idea for us, the Plan was a big help. And our decision? Well, you’ll just have to wait for a future exciting episode of ideasforfrugalliving.com. Cliffhangers rule!