267 - Reviewing My Personal Finances with Kristy Runzer of OnRoute Financial
On today's episode of the podcast I do a deep dive into the personal side of my finances, my income allocations, my financial goals and how my business goals can make this happen.
Much like last week's episode with Claire Pelletreau, I'm sharing an interview in my podcast that I recorded for someone else's. Kristy has a podcast where she provides personal finance coaching to guests (often anonymously) on her podcast. With personal and business finances going hand and hand and transparency being one of my core brand values, I went on Kristy's podcast to share my own finances.
Jumping into personal goals, I share with Kristy it's been a goal of mine for the last few months to pay off my credit card. I get into an up-and-down cycle of paying it off then buying something then having to pay it off again and I want to get back to paying it off every month and having a $0 balance.
I am working my way up to paying 50% of our household expenses because my husband is the primary bread winner. My husband and I have an understanding that once I'm contributing that I can buy whatever I want, no questions asked. My husband and I each have our own things that we are interested in spending our own money on or investing in. For him, it's more spending money on work clothes and essentials. For me, it's more shopping and home decor. I can I also need to save for my self-employment retirement account and of course, student loan debt is the bane of my existence.
Priority number one for me right now is paying off my credit card by March, which right now has about a $7,000 total balance which includes a lot of start-up costs for a project I haven't launched yet.
I have a set amount of money that I contribute for the household expenses and that will stay the same for the rest of this year. After the credit card is paid off I want to increase my salary and pretty much all of that increase will go into a simple IRA and I'll need to balance that with student loan debt.
How I have my payroll currently set up is I get the same amount paid twice a month. One payment goes to me and my stuff like my car payment and one goes to my husband toward household bills and then the business profit goes to me and some months that's $0 and some months that's $5,000. After taxes, I get $1,500 in salary twice a month so about $2,200 before taxes. I plan to increase it pre-tax by $500 a cycle so $1,000 a month and that will be what I put into my retirement starting around March when I pay the credit card off until student loan payments come back. My goal is also to build a business savings account and get that to three months of business operating expenses, so about $15,000 and then the same for personal savings account. I prioritize business savings because it means I'll at least have money to pay payroll if something goes wrong.
Diving into retirement accounts, I ask Kristy what would be best. With a SEP or a simple IRA you have to contribute to employee retirement and now that I have employees, would I need to do that? Because my employees are very part time, I would most likely not have to. For example a Simple was $13,500 and is adjusted for inflation each year. My five year goal is to offer an employee benefits package. Right now the plan is for me to invest in my own IRA.
Moving on, I ask Kristy her view on the Dave Ramsey approach of paying all debts off first versus balancing paying and saving at the same time like save $500 in retirement and put all discretionary in student loans versus paying the minimum on student loans and put all discretionary in retirement savings and other investments. Kristy says you need to consider the interest rates of the debt compared to investment payoffs. Looking at a credit card versus an investment account, maybe because credit card interest rates are so insane. Something like a student loan, the rates aren't as terrible and you'd earn more interest on investing then what you're paying in interest. With investing it's important to ask yourself about earning potential with compound interest.
Five years ago I told myself I was going to have a seven-figure business. Five years later I certainly don't have that yet but I do see if happening in five years and as Kristy points out, I'm investing in unlimited earnings potential.
Our future goals include moving to a new house in five years, my husband would like a vacation property, and I, instead of putting all my money into retirement, would like to invest in real estate either as land ownership or flipping properties and being able to decorate them. My five year goal would be to start saving for these and my ten year goal would be to start doing this. Kristy recommends I start looking into a brokerage account to make this happen because they are fully liquid. The tax rate on the growth is capital gains rates, making it a better version of a high yield savings account in a way.
The game plan is:
- Pay off credit cards in a month or two
- Put $500 a month into a regular IRA account for the foreseeable future while I start paying student loans
- Get three months of business operating expenses into business savings
- Start contributing more to household expenses until we work our way up to 50%
- Start feeding a brokerage account end of 2024/early 2025
For me, it's easier to save money to spend money even if it's on a fun investment like real estate because when things are fun I'm more likely to do them.
Get in Touch with Our Guest Host
Kristy Runzer, Owner of OnRoute Financial