FOOL ON THE HILL
A Couple's Manifesto, Revisited

More than two years ago, a Foolish couple drew a road map of their financial future. Thirty months, two kids, a minivan, a house, and a few illnesses later, they grade their performance. The biggest lesson: Plan for the unexpected.

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By Robert Brokamp (TMF Bro)
January 13, 2003

Though my wife, Elizabeth, and I vowed to stick together for richer and for poorer, we figured the former would be much more fun. So in July 2000, we wrote our Financial Manifesto -- our financial plan as a recently married entity. The Manifesto had five tenets:

  1. Put first things first: Set goals and fund them accordingly.
  2. Track inflow and outflow: Know where the money goes, and control it.
  3. Don't eat your money: Save your capital for things that will last.
  4. Comparison shop: Don't buy anything without looking for a cheaper alternative.
  5. Talk money once a month: Review accounts, goals, and the budget the first Thursday of every month.

In the closing paragraphs of the article, we said, "No doubt our Financial Manifesto, like our marriage, will undergo numerous transitions in the years ahead." However, using the term "transition" to describe our past 30 months is like saying Nasdaq's trailing three-year performance was a "hiccup."

Here's a summary of how our lives have changed:

 

Item                            Then                     Now 
Residence                       Rent apartment           Own home
Number of children              0                        2
Nasdaq                          3,982                    1,448
Transportation                  Economy car              Minivan
Median area housing prices      $216,500                 $270,000
Cell phone                      No                       Yes
Number of hospital visits       0                        8
Free time                       Hiking, movies, travel   Free time?
Most expensive food purchase    Fresh tortellini         Baby formula
Color of family-room rug        Red                      Milky pink
Favorite TV couple              Monica & Chandler        Bert & Ernie
Prevailing aroma in residence   Cinnamon                 Pampers

With so many changes -- and with the New Year upon us and resolutions in the air -- we thought it was time to grade how well we followed our Manifesto and see where it required amendment.

Our goals: A+
We've done a good job of focusing on the important stuff. Our priorities were 1) retirement, 2) kids, 3) a house, 4) Elizabeth's Ph.D., and 5) travel. We've continued to contribute to our dwindling retirement accounts, we own the roof over our heads, and we've populated the place with a couple of kids. But we're not done yet. We'd like to have another youngster, and we're going to need a bigger house.

Elizabeth left her Ph.D. program in clinical psychology -- I think she was done in by sitting in a child development class two weeks after our son was born, and learning about the "good breast" and the "bad breast." But we're still investing in our careers by working on a professional designation for both of us. And our travel plans have been scaled down from Paris to the playground. However, visions of Christmas in Europe still dance in our heads -- but that's a few years down the road.

Tracking cash flow: C
We started off with a bang on this one, using spreadsheets to see whither flowed the dough, and coming up with six-month averages for each budget item. But it was hard to keep it up. Plus, once you've done it a couple of times, you've probably learned what you need to.

Where we really fell short was using the information to change our spending habits. We had it backward, trying to control our spending so we could save more. We've decided that if we really want to increase our net worth, we have to save by getting the money out of our hands (through paycheck deductions and automatic transfers from our bank account) and manage our spending using what's left over.

Buy only the important stuff: B+
Fortunately, our tastes are pretty simple. (Just give me a cup of Dunkin' Donuts coffee, and I'm happy.) Or so I thought. Last weekend, I cleaned out the shed. Stashed among the bikes and lawn supplies were all kinds of gadgets, doohickeys, and power thingamajigs that caught my eye during my too-numerous trips to Home Depot (NYSE: HD) or Lowe's (NYSE: LOW). I find it very easy to convince myself that a tool will be useful, yet only to use it to weigh down my shed in case of a tornado.

Elizabeth's weakness was, and continues to be, gifts. Every year, we agree to limit our spending at Christmas. And every year, she goes overboard, and I look like Ebenezer Husband by comparison. (Though I do love my new PlayStation2.)

Look for cheaper alternatives: A
We've done well here, aided by friends and family with older children. We've had to buy very little for our kids, thanks to loads of high-quality hand-me-downs. When we do have to buy something, we make great use of the Internet, scouring the Web for bargains. Our favorite sites are MySimon.com and Half.com, but we also found a well-maintained, decked-out, attractively priced used minivan by cruising dealers' websites.

Discussing money monthly: C-
Though we're good about regularly discussing our financial situation, we're horrible about making it a formalized and productive practice. Our original idea had us going to a coffee shop, important papers in hand, to review our spending, net worth, and investments, as well as the schedule for the next month. Yeah, right.

Well, for the New Year, we've mapped out a weekly schedule, allotting time on Sunday nights to discuss the week ahead (strategically managing time is as important as managing money when you mix kids and careers) and money matters. Did it happen last Sunday night? Um... maybe we'll start the new schedule after football season.

What we couldn't have planned for
If there's one lesson we learned over the past couple of years, it's this: Stuff happens. Of course, we knew this -- but we figured it applied to people who drink, smoke, and illegally park in handicapped spaces. We had too much good karma going for us, right?

Riiiiiight. Though we could list several "surprises" from the past couple of years (who plans for an 80-year-old woman to drive through their yard and knock down trees?), the biggest was the difficulties we've had with pregnancy. During her two pregnancies, Elizabeth spent more than six months on strict bed rest: no working, no walking, no waddling. Her world was the family room, the bedroom, and the bathroom -- that's it. If it weren't for the kindness of friends, she would've had to eat my cooking for half a year. Amnesty International would have stepped in. Furthermore, our second child has had a series of health problems -- nothing currently life-threatening, but nursing, sleeping, and even breathing was difficult for the little peanut.

Besides the emotional drain, illnesses put a lot of strain on a family's finances. Disability insurance replaced a good portion of the income Elizabeth lost while on bed rest, but our medical bills and other associated costs increased. The practical effect of all this is we recognize the need for an even-larger emergency fund, especially before we try for Baby Bro No. 3.

Someday soon we'll officially update our Manifesto -- perhaps the Sunday after the Super Bowl. If you're married or in a relationship where you share finances, or if you belong to a hippy commune where ownership is meaningless but someone still has to pay the electric bills, consider writing your own Financial Manifesto (or Declaration of Financial Independence, or Finance-ipation Proclamation, or Moola Carta). It's a great way to get you and your partner on the same page about money. Once you've reached an agreement, revisit your plan regularly, or when major life changes occur -- and plan for the unexpected.

If you're looking for a reason to put off getting your act together, delay your discussion until you can consult The Motley Fool's Guide to Couples and Cash, available in April.

Robert Brokamp is the co-author of The Motley Fool Personal Finance Workbook and The Motley Fool's Guide to Paying for School, which will also be available in April.