One of my main goals is to live the rest of my life without having to borrow any more money. At present, my wife and I are consumer-debt free and we are working hard to pay off our mortgage.
In order to remain debt free, it is important that we think both short-term and long-term about our savings goals. I have created a list of our goals and ranked them by priority. I use the list to help guide us as we budget for monthly savings and plan annual retirement contributions.
Emergency Fund – We will always maintain enough cash reserves to pay for a minimum of six months’ worth of expenses.
403b Retirement – I will have regular contributions taken from my salary each month, increasing the amount of monthly contributions as salary rises and mortgage decreases.
Major Purchases Replacement Savings – If I plan to live without borrowing money, I need to prepare for and save for the future purchases of newer automobiles, furniture, carpet, etc. These savings will be kept in our online savings account and transferred to our checking, if needed. Right now, saving for a newer automobile is higher on our list than aggressively attacking mortgage debt.
Roth IRAs – With my 403b and my wife’s pension, more than ten percent of our gross income is going towards retirement. Once we own fifty percent of our home, we will again focus on funding our Roth IRAs. For now, we have stopped funding these accounts.
College Savings – We have three children and we are working hard to fund ESAs for each of them. Right now, our goal is to pay off the mortgage and then focus more attention on college savings. We are also comfortable knowing that some college expenses will simply become parts of our future monthly budgets, once our kids are actually in school.
Knowing when-to-save-for what can get tricky. For the next five years, basic retirement contributions, automobile replacement, and mortgage reduction will be some of our top priorities. Over time, I’m confident we’ll shift towards more retirement and college savings.