HOW ARE YOU GOING TO MEET YOUR FINANCIAL GOALS?

When I look at my goals for the three and six year time frames it seems a little daunting to me. I ask myself "Is this really possible?" I went back over the numbers and decided that I really could meet these goals without cutting myself short in my everyday life.

I actually think that if I follow my plan, and we don't have another complete meltdown in the stock markets. So, what am I going to do?

1. Maxing out my Roth IRA: This in by far biggest monthly investment. The maximum amount that can be invested for 2010 is $5,000. I started in February so i take $5K and divide it by 11. Each monthly payment is $454. To me, maxing out the Roth is my goal that has the biggest priority. 
2. Non-Retirement Investments:  My plan is to dedicate $50 per paycheck. That with my current balance will come out to $8,100 over 6 years without any appreciation. Since this is a hobby for me, I'm positive I will be making random deposits as I save money. I don't think 10K will be a problem
3. Reduce my credit card debt to $2,000 in 6 years. I currently make a set payments of $325 a month regardless of the minimum payment. Given this plan, I will be debt free (assuming I don't use the cards) in 6 years and 7 month. 
4. Workplace Retirement to $66,000: My current balance is about $9,000. I contribute 5% of my income and my work matches 5%. Assuming a small appreciation, I should be able to meet this.

Like I said, these goals are ambitions, but they are not out of reach for me. Each one of you will need to take your situation into account. Your goal might be to pay $20 more than the minimum on your credit card and put 1% into retirement. The point of this exercise is to figure out what is possible for you.

Two days ago, we looked at your expenses. Is there somewhere you can find a little to trim in order to help you work towards something better. 

This is the last post that focuses on preparation. Since almost everything financial happens during the week, I will not be posting until Monday. That is when I will begin focusing on topics that might help you find that little extra money that will help you out. Or, I might give you alternative ways of thinking about your goals and processes. 

Give this a try and see what you come up with. See you on Monday with some more information. Hopefully I'll get a couple more readers by then!

Cheers,

Jasper

WHAT ARE YOUR FINANCIAL GOALS?

Now that you have taken a look at where you are financially and how you spend your money, it's time to think about what you want. I'm not going to explore material things in this post. I'll tackle that soon in another post.  I'm talking about money goals. How do you want to look on paper.

Whatever your planning, it should always include staying out of the red. That means that you are, in some way, saving more money than you are spending, or reducing your debt more than you are acquiring it.

Let's look at your goals in three ways. There should be a Short Term goal, a Mid-Term goal and a Long Term goal. Since we are just getting started I'm going to think of short term as the end of this year. Our mid-term goal will be 3 years and our long term goal will be 6 years. You can reevaluate these goals on a yearly basis and adjust your projections at that time. Hopefully your new projections will be as good as or better than your initial fiscal goals.

Here are my goals:

Short Term -  by 12/31/2010

1. Max out my Roth IRA ($5,000) - current investment $2,272.70.
2. Non-Retirement Investments - Have a balance of $2,000
3. Reduce Credit Card debt by $1,800 across all 3 cards.
4. Workplace Retirement - Have a balance of $12,500

Mid Term - By 12/31/2013

1. Roth -  $20,000 balance
2. Non-Retirement Investments - $6,000 balance
3. Reduce Credit Card Debt by $6,000 across all three cards- Remaining balance $14,000
4. Workplace Retirement - $39,000

Long Term - by 12/31/2016

1. Roth balance of $35,000
2. Non-Retirement Investments balance of $10,000
3. Reduce Credit Card Debt by $12,000 - Remaining Balance $2,000
4. Workplace Retirement balance of $66,000

For me, these goals are ambitious, but not beyond my ability. Your goals should push you to do better than you currently are, but not completely overextend yourself. You should not make your goals are not so difficult that you leave yourself struggling in your everyday life. Ask yourself, "Are you enjoying your life today? You have to think of your future, but it shouldn't be the only thing you think about.

Take a few minutes and think about some of your goals. Where is it that you want to be??

Cheers!

WHAT ARE YOUR SPENDING HABITS?

In order to set your financial goals, you need to take a look at your financial expenditures. Once you have a picture of your expenses you can analyze and try to figure out where you can make changes. Below I have outlined the categories where I make my spending. Like most people almost all of my pay is used for something.

1. Mortgage/Taxes/Condo Fee - $2,050
2. Credit Cards - $325
3. Student Loans - $669
4. Electricity - $65
5. Cable - $85
6. Cell Phone (2 lines) - $160
7. Roth IRA - $450
8. Gym (2 people) - $120
9. Car (Payment/Insurance/Gas) - $470
10. Savings - $500
11. Food - $600
12. Entertainment/Eating Out - $200
13. Misc - $200

My monthly bills come out to $5,694. Wow, once I put that down in writing it seems like so much money. Luckily I'm a two person income family with no children. Now that I have everything down in writing I can look for areas that can be trimmed. Unfortunately for me, I've done this several times over the last year, so I've trimmed off most of the fat. 

I think most people would consider $200 for Entertainment/Eating Out to be a very conservative number. Especially if you are living in a major city. We really enjoy staying around the house. My husband loves to cook, so that replaces a lot of the meals that would normally be eaten out. We both pack our lunches.

The Misc category is a complete guess, but you should include something for all of those random purchases that need to be made. For example, we recently rented a carpet cleaner to clean a couple stains off the bedroom carpet. Why we got white carpet with a dog, I'll never know. 

Give this a try. Figure out what all of your expenses are. Take a look at how much you are really spending each month compared to your income. Once you do this it really puts things into perspective.

I know these first few posts are not exactly rocket science, but you really have to start with the basics before you can make any changes. Don't worry, we'll explore some ideas for saving money and many ways that can earn you a few extra dollars!!

Have a great day!

WHAT IS MY CURRENT FINANCIAL SITUATION?

The first step to getting you financial situation in order is to analyze where you are right now. Without knowing the money you have and what you owe, you will not be able to make decisions regarding what you need to do in order to meet your financial goals. Below I will give you a snapshot of my assets and liabilities.

ASSETS

Assets
Cash and Cash Equivalents $ 1,238.66
P2P Lending 3,204.92
Investments 920.23
Roth IRA 2,238.99
403(b) 8,346.63
Real Estate (my home) 257,560.00
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Total Assets $273,509.43


LIABILITIES

Credit Cards $ 19,366.95
Student Loans 99,125.17
Mortgage 265,960.81
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Total Liabilities $384,452.93

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NET WORTH $(110,943.50)
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Yes, that's a negative 111K net worth, but most of it is student loans and my mortgage. That gives me even more motivation to investigate ways to work on my financial position and look at ways to earn and save money.

Now I'll give you some explanation of my finances.

Assets -

Cash - This is for short term needs. We are working on getting three months income for emergencies or if one of us should lose our job.

P2P Lending - This is a peer to peer lending account used for mid term investments. Terms of the loans are three years. A detailed analysis of this account will come at a later date.

Investments - This is an account that I have set up for a hobby. I just started and invest small amounts each paycheck. I will explore this account with you in a future post.

Real Estate - This is my main residence. I calculated the balance by taking the purchase price and reduced it 6% for fees it would take to sell the property. I will look into revaluing the amount annually.

Liabilities

Credit Cards - I refinanced my student loans to these cards several years ago. I was offered a rate of 2.99% on one card for the life of the balance and 3.99% on two other cards for the life of the balance. This was much lower than the 6% I was paying on these private loans

Student Loans - Exactly what they sound like.

Mortgage. Exactly what it sounds like

I'm having issues with the formating of the balances above. I will look for a better way of showing these numbers next month.

That's it for today. Talk to you tomorrow!

INTRODUCTION

Welcome to my financial blog. I'm new to the blogging world, so if you're a first time reader, I'm a first time poster.

A little about myself. I grew up in central Michigan near Lansing. I've always been good with math and, like most people, have had an interest in obtaining more money. I've attended a few colleges and pursued a variety of careers before settling on Finance. Many people have told me that Finance majors are for people that couldn't cut it in Accounting. That does not describe me at all. My work experience has mostly been related to accounting.

In the ten years I've been out of college. I've had four jobs. I've been a Billing Clerk, a Controller, a Director of Finance and currently I'm an Accountant for the Federal Government.

Although my degree from a well know University (at least in this area of the country) has opened many doors for me, it has also left me swimming in an overwhelming amount of debt. After four years of college, I was given two pieces of paper. A degree that would help me make more money, and a bill that would take a good chunk of it away. The average American's student loan debt is $23,200. I've racked up just over $85,000.

Last July, after a long time of saving, I was able to purchase my first home. I think I timed the market pretty well. Prices might have dipped a little last fall, but I got in pretty close to the bottom. Washington, DC has not been known for their cheap real estate and house values have fared much better then other areas of the country. I was able to buy a newly renovated 525 sqft condo with parking and storage for $274,000. After growing up in Michigan, that seems like a fortune.

So, what do I want to do with this blog. As you can see above, I have a little debt and I want it eliminated! Hopefully, I'll find readers that are in a similar situation or people that just want to make their situation a little better. Each day, I will post something that is finance related. I will chronicle my journey to financial freedom and along the way, help you do the same.

Are you ready? Will you join me on this trip? Tomorrow we'll start the process.