Wednesday, February 8, 2012

Savings Goals update

My biggest financial goal in 2012 is to save or donate a combined 50% of my take-home income. The savings are split among a handful of smaller goals. I keep these tickers going for inspiration, but here's a little more detail about each one.

Wedding Fund:

This is the most urgent goal, because it has the closest deadline. I've been setting aside biweekly payments to our SmartyPig fund since last year. Earlier this month, I closed out a savings account my parents started for me when I was a kid, for my birthday money and such. It sat there for maybe 15 years -- I'd actually forgotten all about it. But it makes up a big chunk of the budget -- basically all the stuff that my sweetie and I found necessary for our ceremony and reception. The additional savings we're building up is about equal to the old birthday money, and we'll use it for our rings, the church coffee hour, and our honeymoon.

Emergency Fund:

This is obviously an important goal for anyone to have, and we're building it up over time. Each paycheck I have money transferred automatically from my Chase checking account to my Chase savings account. That means it's easy to instantly transfer money (online or from an ATM) back to checking in case I need to pay for an emergency with my debit card. We should have a full 6 months' worth of necessary expenses saved by the end of the year (sooner if we stay in the current apartment with lower rent).

Xmas 2012:

This worked so well last year that I'm doing it again in 2012! Every week, I send $10 to an ING savings account. (If you have a large family or plan on a big party, you can of course save more -- just use what fits into your budget.) By the time holiday shopping season rolls around, I make my purchases on a credit card for the cash-back rewards, and then I know I have enough to cover the bill when it comes due at the end of the year.

Grad School Fund:

This is the largest short-term goal I have, and it also has a deadline: November 2013, when the interest-free period on my student loans runs out. I paid off my undergraduate loan in 5 years (including one year it was in forbearance while I was unemployed, so 4 years of payments) by paying several times the minimum payment each month. Once I paid it off in full, I applied to grad school, and I kept making that same monthly payment to a savings account. In addition to that regular savings (which I increased by ten percent when I got a raise at work; the rest of the raise went to retirement savings), I'm snowflaking all the little bits of money I save, find, or am given into the grad school fund. On top of that, I have some Series EE bonds that my grandmother gave to me "for my education" when I was just a baby (several over 3 or 4 years -- I'm not sure, but I think she might have bought some of the bonds with tax refunds). None are fully mature, but because they were purchased the year I was born and just after, they've achieved most of their 30-year value. I'm really grateful for her foresight, and I'm happy that I have the bonds to redeem for summer session tuition (which isn't covered by financial aid). Every month, I transfer a small amount from my checking account to a Chase savings account (to pay for incidental expenses like textbooks and anything that isn't covered by my financial aid disbursement, and to keep up the minimum balance that avoids bank fees), and a larger one to an ING savings account (so it will earn interest over the next year and a half or so).

House Fund:

This is a longer-term goal. I have been saving for a down payment since before my sweetie moved up to live with me. When her debt is paid off, she will also contribute to this fund. If we move upstairs to the new apartment, our rent will increase (although it's still reasonable for the high-cost area), and savings will probably be reduced in this area. That's okay, though, because if we have this larger space, I don't think we'll want to move for several years. Even if one or both housemates moves on, we could choose to replace them or pay more for the rent. Right now the plan is to split the total rent 4 ways (filling 2 bedrooms out of the 3 with housemates). If, say, we added a baby to our family, or we wanted to create a separate office, we could rent the third bedroom only to someone who would be okay paying a higher rent for more space (or trading child care for rent, depending on the situation).

Roth IRA:

I have multiple retirement accounts: a 401(k) with my employer, a Roth IRA through ING Direct, and a small starting investment at Betterment. I haven't saved a lot toward retirement yet, and that makes me nervous, because I know the value of compound interest. When I got a raise last year, I increased my 401(k) contributions to 4% of my gross income. (My company doesn't offer a match, so I'm not losing out on any "free money" by not contributing more.) This year I am determined to max out my allowed contributions to the IRA. Some of the extra funds from each paycheck go into the IRA, and I have a few chunks like expected bonuses and "extra" paychecks (the third in a calendar month when paid biweekly) that I've planned to add. If I come up with a surplus at the end of the year, I might add it to the Betterment account, or I might roll it over to a different goal, depending on what's needed then.

Other savings goals:
My laptop, which was a birthday gift in 2010, has been having difficulties for about a year now. Everything works fine except that it doesn't cool correctly. To keep it from shutting down with no warning, I have it on a chillpad with external fan, AND I point a desk fan at the overheating section (which means I'm always cold when I use the computer at home). Since I'm not just blogging or checking email, but also taking my grad school courses online, I need a reliable computer. So I've put some money aside to replace the laptop when it dies. It's over at Betterment with a high ratio of stocks to bonds, so that it will aggressively earn value (but I can adjust it if it starts to fall).

My sweetie and I are planning a roadtrip in 2014 (already! more on that later), and I want to save up for it. While it's not a pressing need, and I only have a basic estimate of what it might cost, any extra money that the household receives (gifts for the two of us, selling household items during the declutter challenge, etc.) will go toward this goal.

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