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Archive for the ‘Goals’ Category

We’re back from vacation, and waiting on the kitchen table were about 20 pieces of mail. It took a bit of time to work our way through the mail, sorting the junk from the bills and paychecks. There were quite a few bills in there, including… our annual homeowners insurance bill!

I can’t tell you how excited I was to see this bill.  I know, I’m weird. But my husband and I are just so proud to have bought a house, and this bill marks our first year as homeowners!  Our actual closing date was August 24, so we’re really only celebrating 11 months. Still, time really does fly.

Trent at The Simple Dollar recently discussed the problem of homeowners walking away from their mortgage. I guess our family still considers home ownership a part of the American Dream, and we’re working very hard to stay comfortable in our home while still saving for other goals. I do feel sad for those who cannot afford their dreams, or who chose to be so short-sighted as to walk away from their home.

On a positive note, our annual insurance premium went down by $120.  I think it’s a combination of our age (?), a year without insurance claims, and the fact that we added a life insurance policy with the same company. In any case, that’s $10 a month left in our pockets!

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Updated goals

A lot has happened since I first posted our goals in April!  The Husband and I finally sat down and discussed our long-term goals, including retirement and early retirement. 

The Husband wants to retire at 45.  I’m not sure if we can do it, but it’s certainly an admirable goal!  We’re both fully dedicated to this goal now.

Because we only make so much money, we cannot continue to aggressively pay down our mortgage and student loans while still saving for an early retirement. Thus, our goals have somewhat changed.

Old goals
Goal 1: Build our retirement fund
Goal 2: Pay down the 30 year mortgage in 15-20 years
Goal 3: Pay down student loans

New goals
Goal 1: Build our retirement funds

We still plan to set aside $50 or more each month into a Roth IRA.

Goal 2: Invest for early retirement
We’re now setting aside $100 each month to invest in an S&P 500 index. We don’t want to touch our Roth until age 60 or older, so we need investments outside of our retirement accounts.

Goal 3: Pay down the 30 year mortgage in 22 years.
This coincides with our 45th birthdays, around the time we would like to slow down.

Goal 4: Pay off student loans… eventually.
My loans are now at 4.25%, down from 5.25%.  We will pay the minimum each month.

I sometimes feel like we are micromanaging our finances and goals.  Am I the only one?

Have you examined your goals lately?  Have they changed in any way?

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As I discussed yesterday, our income-to-spending ratio is about equal: We spend nearly every dollar that we bring in, although we do budget a few dollars for retirement and extra debt payment.

For a recap, our income each month:

Husband’s salary: $1793

My minimum income: $600

Total income: $2393

There have been a lot of blog discussions lately on the “spend less than you earn” OR “earn more than you spend” philosophies. In our case, earning more than we spend is the key to making our budget work.

Before I gave my 2-weeks notice at the retail job, we sat down and figured out how much money we spend. (It’s about $2,385, including the mortgage and necessities.) Then we added our income, and saw that our income and expenses are pretty darn close. We can make it work, but there might be some tight months.

The great thing about being a freelancer writer is that I can always ask for more work. If my income for the month is falling short of what we’re spending, I can increase my workload. I consider myself fortunate that we have such flexibility.

That being said, I’ve already asked for a bigger workload. My goal for the next few months is to make $800-1,000 monthly, although if I fall short of that goal the bills will still get paid.

My long-term goal is to be making $1,500 per month by the end of 2008. Meeting that goal will take some hard work, and I’ll have to reach out of my comfort zone in terms of selling stories and larger workloads.  But if I can meet my goals and use our money to tackle debt and improve our long-term lifestyle, it will be well worth it!

Do your income and expenses mesh well together?  If not, what are you going to do about it? 

 

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Each month, we spend a bit less than we budget. I’ve vowed to roll this money into our debt and see how much faster we can pay down debt.

We’ve tallied the numbers.  Are you ready?

This month, we’re $203 over budget.  😀  We made $56 more than expected (the hubby got a small raise), and spent $147 less than planned on food, gas and house expenses.

Since the mortgage is our highest interest debt, we’ll apply the whole thing to the house.

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I am fascinated by snowflakes.

No, I’m not talking about snow and blizzards. (Although I do love snow!)  I’m referring to financial snowflakes.

I first heard about snowflake’s from PaidTwice’s snowflake primer here. But I’ll do my best to explain it as well.

Snowflaking is a spin on the popular snowballing method, where you take any extra income each month and pay down debt. (I’m simplifying things here, because snowballing doesn’t really apply to us.)

The principle for snowflaking is simple: Each snowball is made of snowflakes, or small amounts of extra cash. 

But small amounts of money can add up quickly. Take any money you can find, no matter how small, and apply it to debt. Saved $2 by buying something on sale?  Snowflake the savings, and add it to your debt payment. Found a quarter on the ground?  Snowflake it.

This would be great for us, if we used cash.

We don’t have much of a cash system in our house.  We budget x dollars for food, gas, ect. Everything goes on the credit card, we track how much is spent, and the card gets paid off each month. When the budgeted money is gone, we put the credit cards away.

But now that we’ve been working with a budget for a few months, something strange and wonderful has been happening. Each month, we spend a bit less. There’s always a few dollars leftover in each budget. I’ve been rolling that money into the next month’s budget, but it’s starting to add up.

Today, I vow to USE my snowflakes to better our financial picture!  I’m thinking we should send 75% to the mortgage, 25% into student loans. (Check out my goals for reasoning.)

We’ll sit down and finish our budget tonight. Check back tomorrow and see how many snowflakes we found!

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We recently sold a bunch of stuff on Ebay, and were all set to make over $100 profit after shipping. Terrific!

Then we got the bill for shipping…  thanks to a $5 gas surcharge and a $44 “oversized box” surcharge, our profit margin shrunk dramatically. (I talked about this earlier this week – we’re so disorganized, we didn’t even realize this was a bill!)

Ready to admit defeat? No way!

I called UPS and politely asked why we were charged an extra $51. It turns out that the second-longest length on the box was more than 30 inches, so we got hit with an oversized box fee. Huh?

I explained that this had never happened before, and we were loyal UPS users. He appologized, waved the fee as a one-time courtesty, and explained how we could avoid the fee in the future.

It pays to be polite, and to take the time to call when you’re unsatisfied! That $44 (we still had to pay the gas surcharge) is going right into the hubby’s “new toy fund.”

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Goals

It’s time to spell out my financial goals, both short- and long-term…  I am a firm believer that we must clarify our goals before we can meet them.

After paying the essentials, we have about $200 each month left over.

Goal 1: Build our retirement fund

We’ve got time on our side. We plan to retire in about 40 years, depending on the circumstances such as health, finances, the existence of Social Security, ect. as that time approaches. We are NOT depending on Social Security as we plan for retirement.

We will add $50 a month to the IRA for now until our incomes increase. If we earn an average of 6% over the next 40 years, we should have almost $425,000. (We’re starting with a modest nest egg.)

As our incomes increase, we hope to add a few dollars more each month. But the important thing is that we’re starting now, while time and compound interest can really work for us.

 

Goal 2: Pay down the 30 year mortgage in 15-20 years

Paying bi-weekly will knock 7 years off the mortgage, to 23 years.

In addition, we also want to pad the mortgage payment a bit each month, with at least $100. With an extra $100 each month, we should pay off the mortgage in 19 years.

Goal 3: Pay down student loans

This is our least-urgent goal.  My student loan interest is much lower than the mortgage. The interest is also tax deductable, without having to itemize.

We’re adding an extra $50 each month, and should have this paid off in 6 years. As our income increases, we might add more each month to this as well.

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