Reworking My Savings Goal And Thinking About Buying A House
Currently, we live in a house provided by my employer. We love our house, but at some point in the future, we’ll want to buy our own house. To that end, I’ve created a new savings goal.
For the past six months, I’ve been tracking housing costs in our local area. We have picked out three or four subdivisions that we really like, and we’ve calculated our ‘maximum amount we’ll pay for a new home’. While I’d love to pay cash for the house, that may not be realistic. But, I do hope to put at least 20% down so that we can get a conventional loan and avoid PMI.
I have run several calculations, including pricing the loan for 15 and 30 years, raising and lowering the interest rate, and manipulating the down payment. For our price range, the ‘worst case scenario’ for our mortgage payments would be roughly $2,000 per month. (The actual payment would be calculated when we took out the loan, and would be based on exactly how much we borrow and rates at the time we take out the loan. According to my calculations, the monthly payment will be somewhere between $1200 and $2000.)
For the next twelve months, I’ll ‘pretend’ to have a mortgage. By paying myself $2000 a month - stashing it away in my ING Direct Savings Account - I’ll accomplish two goals. First, I’ll prove to myself that I can make these payments. And, second, I’ll rapidly build a substantial down payment. Win, win!
If I save $2,000 a month for 12 months, I’ll have $24,000. If I add that to the $7,000 already in my non-retirement savings, I’ll have $31,000. But, since I’m not a fan of the number 31, I’ll fix my goal at $33,000. My actual monthly goal will be $2166.66.
I’ll track my progress over at the No Credit Needed Network. Here’s my current chart - SavingsNCN. This new goal replaces my old goal (of saving $16,000 this year). I just never could get excited about that old goal, but I’m stoked about the new one.
Do you create goals? If so, how agressive are you? I like to set super-agressive goals and then push myself.
Creating My List Of Financial Priorities
I want to once again thank those of you who arrived here via this Money Magazine article about families who are living without credit cards.
If this is your first visit to my site, welcome. I hope you will take a few minutes to read a bit more about me and about how and why I live without credit cards. Now, today’s post:
Creating My List Of Financial Priorities:
It is vitaly important, to me, that I:
Live On A Budget - No matter how much money I have (or don’t have), I will always use a written budget to manage my finances. Over the course of the last 3 years, I’ve used very complex and very simple budgeting techniques, but my goal has always been to crate a clear picture of how money flows into and out of my life. My budget - which is my financial road-map - keeps me on track. (I’ve written several articles on budgeting, including this popular one about budgeting when you have irregular income.)
Purchase Adequate Insurance - I have health, life, dental, disability, and property (renter’s) insurance. Once a year (or more often, if the need arises), I reassess my financial situation and purchase insurance accordingly. (For those new to my site, when you read the word “I”, feel free to insert the word “we”. Whatever I do for myself, I do for my wife and our three kids.)
Maintain Adequate Cash Reserves (Emergency Fund) To Cover Six Months Worth Of Expenses - I keep enough money, in my savings account, to cover the cost of food, shelter, clothing, and utilities, for six months. In the past, I was more willing than I am now to dip into my emergency fund. But now, especially with the state of the economy, maintaining a fully-funded emergency fund has become a very high priority. (If you haven’t done so, consider adding your input to this poll I’m conducting about emergency funds. In a few days, I plan to summarize the feedback and write and article about the poll results. It should be interesting.)
It is very important, to me, that I:
Fully-Fund Our Retirement Accounts - Currently, I am fully-funding my 403(b) and my Roth IRA. My wife is fully-funding her Roth IRA and her pension plan. We plan to fully-fund these accounts, year after year, until we retire. By fully-funding my 403(b) - (similar to a 401(k), but for non-profit organizations) - I reduce my annual tax bill and save for the future. Roth IRAs provide an opportunity for tax-free growth.
Fully-Fund Three Education Savings Accounts - I have three small children, ages 8, 4 and 2 months. I plan to fully-fund ESAs for each of them. My goal is to assist them when it comes time for them to go to college. I will expect for them to work, while in college, but I do plan to pay their tuition (and living) costs.
It is important, to me, that I:
Continue To Live Without Borrowing Money - So far, I have managed to live more than three years without borrowing money. During that time, I’ve purchase a newer automobile and several furniture pieces for our house. But, if I plan to continue to live without going into debt, I must be sure that I -
Save For Future, Major Purchases - Currently, I live in a house provided by my employer (as part of my compensation). In the future (near or distant), I plan to purchase a house. I would love to be able to do so without borrowing any money. This may, or may not, be possible, but I am going to try. Even if I am unable to purchase a house without borrowing money, I do plan to save up for a substantial down-payment.
It is cool, to me, that I:
Live Without Using Credit Cards - While it might come as a shock for some to read, living without a credit card is pretty easy, once you get used to it. When I want to purchase something online, I simply use a debit card (which is associated with a separate checking account, dedicated for debit card purchases). I also use a debit card for groceries or gasoline. For most other purchases, I carry cash. But, No Credit Needed isn’t, primarily, an anti-credit cards site! While I do like to write about my life without credit cards, I realize that most people will use them. I want my readers to know, my primary goals isn’t to convince you of the ‘evils’ of credit cards. No. My primary goal (for the site) - is to promote the idea that credit does not have to be the default option. You can save up enough money to purchase an automobile. You can pay cash for a new television set. You can go to college without accumulating massive loads of debt. You can live debt free.
I realize that most people will borrow money when they purchase an automobile or buy a house. And, I realize that many people use their credit cards ‘responsibly’ - and pay them off at the end of the month. But, there are millions and millions of people who are over-their-heads, who continue to borrow money, always putting of tomorrow what needs to be dealt with today.
Credit, like anything else, is just a tool, to be wielded by its owner’s hand. For me, I choose not to use credit cards, because I just don’t like dealing with credit card companies. But, credit isn’t’ the real issue - personal responsibility is! Each one of us must look inside ourselves and determine those things that really matter. So, today, I’ve listed what matters (in the financial realm) to me.
As you read my blog, please don’t get hung up on the ‘He doesn’t use credit cards” bit. That’s such a small part of what I’m trying to do. I’m trying to shape my financial destiny, and the destiny of my children and their grandchildren. My ultimate, long term goal (for my life), is to be a blessing to other people - financially, emotionally, and spiritually. Not using credit cards is just one ’small tree’ in the very ‘big forest’ that is my financial life.
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Confession Time: I Lost My Focus And I Am Ready To Get It Back
Every day, I write about personal finance.
Every day, I think about personal finance.
Every day, I check my blog stats, link to my fellow personal finance writers, answer emails from readers, and think about ways to motivate, inform, and inspire.
But, recently, I haven’t been focusing on my own finances.
I’ve been paying my bills and funding my retirement accounts, but I haven’t been paying much attention to my budget, I haven’t been looking for opportunities to save and/or make more money, and I haven’t been sitting down regularly with my wife to talk about our finances.
I’ve been in a ‘personal finance funk’ and it’s past time that I break out of it!
As of right now, I’m back in the game, big time -
I made a mid-month transfer to my savings account, something I haven’t done in four months.
I just logged into all of my retirement accounts and recorded my current balances.
I just opened my favorite budgeting software - You Need A Budget - and created an ultra-specific budget for June.
I wrote a list of items to sell on eBay, once we get home from vacation.
I just ordered Investing For Dummies
I’ve been on a bit of a ’spending spree’ - and I’m tired of wasting money. Now, don’t get me wrong, I haven’t purchased anything that wasn’t in our budget, but I have purchased a lot of things without which I could have done. And, now that we are on vacation, I’m reminded of my desire to retire and live at the beach. The decisions that I am making today will go a long way towards determining where I end up, financially, in the future.
If you are like me, you might be in a mid-year slump. So, instead of looking back and making excuses, let’s all decide to gather ourselves and move forward!
Rebuilding My Non-Retirment Savings (January Update)
I have updated my No Credit Needed Network Chart so that it reflects my progress as I rebuild my non-retirement savings.
I managed to add a little to my savings account, bring my total saved for 2007 to $2638.
Contrary to popular financial advice, I actually ‘pay myself last’. I deposit our paychecks at the first of each month. I then pay all of our monthly bills and we live off of whatever amount is ‘left over’. If we have money left at the end of the month, it gets ’swept’ into our savings account on the last day of the month. This goes against most conventional ‘wisdom’ - But, it works for us.
Quick note: Not every dollar that gets deposited into our checking account ’sits’ there for the entire month. I transfer to savings the portion of our income that is allocated for annual, planned-for, expenses like automobile insurance and life insurance. And, if it becomes evident that we have ‘over-funded’ a particular budget category, I’ll make a mid-month transfer to savings. The main point, however, is that we keep enough cash ‘on hand’ to cover monthly expenses. One of the keys to the ‘No Credit Needed” lifestyle is to avoid a situation where I am ‘low on cash’.
Rebuilding My Non-Retirement Savings (Formerly Known As The Emergency Fund)
Back in December, I set some goals for 2008. Since then, I went ahead and fully-funded my Roth IRA for 2008. That decision, coupled with our recent van purchase, has put a rather size able dent in our non-retirement savings. So, I’ve decided to focus on rebuilding our non-retirement savings.
I have created a new chart over at the No Credit Needed Network page. Feel free to click-over and check out my progress. I’ve also added a new NCN Network mini-chart to my sidebar, here at No Credit Needed.
I have also decided to refrain from calling my non-retirement savings an “emergency fund”. Why? Well, the money in my savings account is for ‘emergencies’ and for ‘non-emergencies’, so, from now on, I’m just going to simplify things and refer to all of it as ‘non-retirement savings’, or just ’savings’ for short.
The Power Of Having A Plan - And Knowing When To Ask For Help
My dad and I are watching the BCS Championship. He’s been at the house all day, installing a set of doors for the baby’s room. Tomorrow, we’re going to finish the playhouse! (Longtime readers will remember that I started building a playhouse for my daughter last spring. I completed about 85% of the playhouse, but then I got ’stuck’. Frankly, I just didn’t have the skills required to finish the project. Luckily, my dad is a carpenter, and he’s going to help me finish up tomorrow. Click here to see a few pictures of the playhouse, as it stands today. I’ll take a few more shots, once it’s completed.)
As I sit here watching the game and thinking about the playhouse, I’m reminded of the power of having a plan. I had a plan for the playhouse. I created a budget. I bought materials. I worked hard. I measured, cut, nailed, sanded, and leveled. I did my very best. And, if push came to shove, the playhouse would be “O.K.”. The windows open and close. The door swings open and shut. The roof repels water. The floor is solid. The walls are square. But, as serviceable as it is, it just isn’t ‘complete’. I want the playhouse to be finished - painted, decorated, and furnished. I want it to have an electrical outlet, trim around the door, and carpeted floor. In other words, even though I had a good plan - I had to recognize when to ask for a little help.
It’s cool to admit when you “don’t know how to do something”. One of my favorite comedians is the late, great, Jerry Clower. He used to say, “There ain’t no shame gettin’ the seven year itch… the shames in keepin’ it”. The same holds true as we plan for our financial futures. There’s no shame in “not knowing”. The shames in “not knowing” and being content “not knowing”.
As I move forward, I have a general plan for my financial success. But, I also know that I have a LOT to learn. Instead of throwing my hands up in frustration (or burying my head in avoidance), I choose to acknowledge my ignorance - AND - I choose to seek guidance from trusted sources.
The third quarter is about to begin, but before I go, I wanted to share a link with you, from Gen X finance. Gen X always has a unique take on things, and I found this post about avoiding bad decisions to be very, very interesting. I must admit, as the market moves up and down, it’s easy to get frustrated. Gen X reminds us to stay focused on the long-term. Great, great post!
