Sure Chase, I’ll Take Some Free Money

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Six months ago, Chase Bank had an interesting promotion I just had to take advantage of.  With the opening of an account, they were going to give me $200!  I researched the fine print which was simple, so I signed up and collected the free cash.  To qualify, I had to route two direct deposits a month to my account, those deposits needed to equal at least $500 a month, and maintain a balance of $1,500.  After following these terms for 9 months, they would deposit $200 into my account.  There was an opportunity to earn an additional $300 if I had a total of $25,000 deposited within the Chase system (these were products like a checking account, savings account, CD’s, and money market accounts). I didn’t have that much at the time, so I settled for the $200.

When I opened the account, they gave me the $200 within the first 10 days.  If I did not follow the term of their promotion, I’d have to pay back the $200.  That was fine with me.  What did I do with the money?  The answer might surprise you a little bit.  I invested it in a Robinhood account.

6 Months Savings

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In my house, we are on Dave Ramsey’s Baby Step 2 ½.  Baby Step 2 is “get out of debt” and Baby Step 3 is “have 6 months’ worth of expenses in savings”.  Let me explain.

By paying off the van in February, we checked off Baby Step 2 and were working to save 6 months’ worth of our expenses.  We calculated it to be about $12,000 and were putting about $400 a month in a savings account.  We were about two-thirds of the way done when things drastically changed for us: I enrolled in an MBA program. 

What is my Long-Term Financial Plan?

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In my house, we follow the Dave Ramsey plan.  He calls them Baby Steps.

1. Save $1,000 cash. This is because something bad will always come up in life.  A broken transmission, a busted hot water heater, or preschool tuition fees.  This $1,000 is a little buffer to life.
2. Get out of debt. Spend any amount of extra cash to get out of debt.  This does not include the house.  Get rid of that pesky credit card debt, car payments, or student loans.
3. Stash away 3-6 months of living expenses. If you get fired from your job, you’ll be able to float for 6 months while you find a new job.  This isn’t really meant as an account to build wealth, but it’s a larger insurance policy than Baby Step 1.
4. Invest 15% of your income into a retirement account. Most people have a 401K account with their employment.  By contributing 15%, you can really start to build up some wealth for the future.
5. Save for your children’s college education. There are tax advantage accounts that allow you to invest for the future.  By saving for college now, you can help give your children a head start in their own financial journey.
6. Pay off the house. For most of us, our monthly mortgage payment is the highest expense we pay every month.  Imagine what you could do with that extra cash.  Just make sure your extra payments are going towards the principle and not the interest.
7. Build wealth. The last and final step is to build wealth.  With the house paid off, there is significantly more income; use this money to build wealth.  Wealth might mean different things to different people.  Maybe you want to take some of that money and invest it.  Maybe you want to travel or give it away. You’ve worked so hard to get to this point, have a fun time with the money.