Sunday, February 10, 2008

Reevaluating my fiscal policies

My mind has been preoccupied with fiscal matters. My recent health diagnosis has been a shock to my system and is motivation for getting my finances in order. In addition, I need to consider the next steps. That is, not only have a list of my savings, checking and retirement accounts, but ensure my beneficiaries are named and everything is organized in one location. Right now, a divided accordian file is my collection tool.

However, I am also thinking of more than the immediate future and this affects some of the fiscal choices I have made. What exactly has my mind been churning over?

My Roth IRA
While I indicated for my financial goals for 2008 that I would add $3,000 to the account this year, I may be able to add more. I plan to do my taxes today and therefore, will learn exactly how much I may have to pay to the feds and what I will get back from the state. Generally I do get a state refund and that was intended for my Roth IRA plus my monthly contributions. In addition, most of my tax rebate, slated to arrive May 2008, will also fund my Roth IRA.

However, as a single person, I do not need life insurance other than the policy through my workplace. My parents took out a term life insurance policy when I was young and I have been contributing to it for the last few years. I have decided to cash it out and will receive $1,800 from it. Depending on when I am mailed the check, I intend on adding this money as a 2007 Roth IRA contribution. I can do this as long as the money is added to my Roth IRA before taxes are due in 2008. This means more money in my account and I will consider either a more aggressive mutual fund or moving my money to Vanguard since it will meet the $3,000 threshold. I need to explore the returns and the fees between Vanguard and T. Rowe Price, my current Roth IRA custodian.

My found money account
I noted in my goals post that I wanted to keep adding money to this fund to open a nonretirement Vanguard account. Since my financial advisor encouraged me to max out my Roth IRA before considering such an account, I will continue to add to this account but not earmark it for risky stock investments. I have no specific goal for the Vanguard investment other than I wanted to create an account where I could potentially have greater returns than my online savings accounts. However, I am considering that this money might go toward the purchase of my next computer. My technology is more than adequate right now, but I might feel differently in a year or two. Since it is an irregular savings account, I will also have to consider when would be the right time for me to buy and if it is important enough to use standard savings for the purchase

My mortgage
An earlier post about the Fed rate cuts had me musing that I would consider refinancing if the rate dropped to 5% for a 30-year mortgage. I have been reconsidering that position as I am not sure how long I would stay in my home. If I would be staying another four to five years, a refinance would likely make sense. I could not only recoup the cost of refinancing but also make a bit of headway into my mortgage. However, if I consider selling my house in two or three years, this would not be fiscally prudent. I am reconsidering for a number of reasons including this record-snowfall winter, wanting to be in the country, owning only half of a duplex and where my thoughts on what I want to do in my career take me. This will require additional thought on my part and I may end up refinancing regardless.

Early retirement
This is a thought I have considered and dismissed many times. I do not have the savings or investment portfolio for this. However, there is a part of me that is drawn to this idea, to being able to explore as I want without a 8-5 job pulling at me. The feasability study still has to be done and I would need to really bulk up my savings, but I am attracted to the idea and am more willing to explore what I might need to do to get to this point. This goal may be incompatible with my previous items but I will have to examine this more closely.

Alternative income streams
Right now, this income stream is only a few droplets. I have sold a few items I no longer need, but then I purchased a bike and that took away the gain. I have posted a few items to craigslist and if they do not sell there, they may only be charitable writeoffs. I have other items that I intend to sell on eBay, but am uncertain how much money I will make on those transactions. I have not sold anything on eBay for years so this will be interesting. I have another idea in the back of my mind, but this is the wrong time of year to consider offering my services. Other than selling my clutter, I am not sure how to generate additional income so this may be a difficult goal.

This is where my mind has been for the last week. A busy little place and I still need to explore and make some decisions.

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