Tuesday, November 07, 2006

Tweak Your Financial Goals - 1 Year Mark

After a year of working on my goals, it dawned on me that my goals had changed. Some had been accomplished, others had changed. Let's see how far I've come.

Goal #1: Create Freedom/Smart Accounts ACCOMPLISHED

SHORT-TERM GOAL: Save the minimum amount needed to pay irregular bills ACCOMPLISHED

LONG-TERM GOAL: Increase savings to upgrade coverage and provide a cushion
This Goal has been suspended until after I move. At that time I will re-visit it and determine if it still fits my needs.

My Freedom (Smart Money) Accounts are at INGDirect. I keep just one account and divide them into categories in a Spreadsheet. My Categories are:

AUTO - for Auto Insurance and Tags

PROPANE - for heating gas (I have a note on the spreadsheet to remind me to fill the tank in the summer when prices are usually lower, and that tank rent is due in Oct)

SEASONAL - for seasonal clothes and gifts like Christmas

LIFE INSURANCE - obviously for life insurance premiums

I had several more categories in my Freedom Accounts, but found I didn't need them there. These 4 are the basic necessities.

Goal #2 Create an Emergency Fund


INTERMEDIATE-TERM GOAL: Save 3 months expenses PLUS a typical car repair, a typical home repair, and the medical insurance deductible (
I added this one. I find it more reasonable than a 6 month goal when so many things in the house need to be done) ACCOMPLISHED

LONG-TERM GOAL: Save 6 months expenses PLUS enough to cover a typical car repair, a typical home repair, and the medical insurance deductible.
This Goal has been suspended until after I move (see above)

I have my Emergency Fund in a Capital One Money Market Account. This account pays a little bit more than INGDirect (Cap One 4.8%, ING 4.4%) but more importantly it has check writing priviledges.

If an emergency occurs (as it did when the washer sprung a leak), I want access to the money immediately. I am more likely to need a checkbook for an emergency or a car repair than need cash, and the checks are free. This is why I chose Capital One for my Emergency Fund.

*The only down side to this account was that it was not EFT enabled (Electronic Funds Transfer). Capital One has now encorporated these accounts into their Direct Banking system, so you can withdraw funds to your checking account online, or write a check.

Goal #3 Pay Off Credit Card Debt

SHORT-TERM GOAL: Pay off smallest credit card bill ACCOMPLISHED

LONG-TERM GOAL: Pay off all credit card debt and stop using credit cards unless total can be paid each month
(I have paid all but $560 credit card debt. This will be paid off in 3 months) 83% ACCOMPLISHED

Once the next to last cc debt was paid, I rolled that payment into this one. No backing off was allowed. I didn't even think of having money freed up, I just started sending it all to this last debt. It feels GREAT knowing I will have paid off $3289 in 1 year and 3 months time!

Goal #4 Contribute to Retirement Account

SHORT-TERM GOAL: Contribute at least 1% to retirement.ACCOMPLISHED

INTERMEDIATE-TERM GOAL: Increase contributions to reach employer match ACCOMPLISHED

LONG-TERM GOAL: Increase contributions to 10% - 20%
This Goal has been suspended until after I move. Half-Way ACCOMPLISHED

Start with at least 1%, do more if you can and make it a goal to increase your contribution at least once a year. Roll your annual pay increase into your 401k and you won't even notice it. You will be accomplishing this goal without feeling even a pinch.

If your employer offers a match (most employers will match some portion of your 401k contribution) contribute at least enough to get the match. If you don't have a retirement account through your employer, open a Roth IRA account and contribute at least 1% of your take-home pay.

I contribute 5% to the 401k because the match cutoff is 5% (employer matches 50% of contributions, up to 5%).

Goal #5 Save for Home Improvements

SHORT-TERM GOAL: Decide on most pressing area for improvement and begin saving

LONG-TERM GOAL: Create savings sub-accounts for all improvements

If you own a house you're going to have to make improvements and repairs. All houses will need a new roof, new flooring, fresh paint, new appliances, and maintenance at some point. Saving for these things just makes sense.

Now that I've re-visited my Goals and realized they need a tweak, I've rewritten them, as follows:

New Goal #1: Pay Off Credit Card Debt

SHORT-TERM GOAL: 3 more months till all credit card debt is paid.

LONG-TERM GOAL: Stop using credit cards unless total can be paid each month ACCOMPLISHED

New Goal #2: Save just for Home Improvements needed to Sell the House

New Goal #3: Save for Down Payment and Closing Costs on a Home in the Country.

Remember: studies have shown that happiness comes from making progress on a Goal, Not on reaching that goal. So, always re-visit your goals and create new ones when you've accomplished (or suspended) the old ones. Keep a Goal of happiness and contentment a permanent part of your life.

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