Keeping financial goals

Since I have started this blog, writing down my goals for the coming year has become increasingly important. For one, I have a place where I can reread what I am focusing on. Two, detailing the goals for someone more than myself is extra motivation to keep on task. This year is no exception and here is my progress:

1. Fully fund my 2010 Roth IRA ($5,000) in a calendar year.
Accomplished! I funded the balance not covered by my automatic monthly contributions using 2009 tax refund. Assuming I keep making my contributions, my Roth IRA will be maxed out by December 31, 2010.

2. Save $3,000 for purchase of a newer vehicle.
Going into 2010, I thought this was a stretch goal and my savings account reflected I was not track to reach the goal. However, my merit increase + promotion increase has increased the amount of my automatic transfers plus there are two more "extra" pay periods this year so I have hope I can reach this number.

3. Have $2,000 in my farm savings account at the end of 2010.
As with my car savings, I was pushing myself to make this number. However, this looks to be within reach now that I have a larger paycheck from which to save money. Depending on how it goes this year, I might increase this goal.

4. Save $700 by the end of August 2010 for a potential vacation.
This goal was on track from the beginning of the year as it was based on what I had been saving. Since I have now committed to the trip, I plan to keep on my budget.

I am also hoping to turn my furnace off permanently on April 15, but weather determines if this is a realistic goal. Despite a run of unseasonably warm weather, my region was also hit by colder weather that resulted in my house becoming cooler than 54 degrees Farenheit, an uncomfortable level for me. Therefore, after having turned off my furnace for a week, I resorted to turning it back on.

What progress have you made on your goals?

Figuring out what to do with a salary increase

I am quite meticulous about planning what to do with future money. Everything from small bonuses to merit increases are carefully assessed to figure out what best aligns with my financial goals, whether to spend or save. However, there is planning and there is something that blows all projected plans to heck.

Yesterday, I was notified that not only did I receive an annual merit increase but an unexpected promotion as well. Notably, this position change came a further salary increase. Since I was not expecting to be promoted,I was unprepared for the change in my salary. Prior to my notification, I worked on a number of scenarios to figure out how much I could add to my various savings accounts if I received anywhere from 2%-4% increase. (In fact, I felt the high number was too optimistic.) All told, I received a nearly 10% increase in my salary. Therefore, I have some work to do on figuring out how to distribute my new salary.

My first priority was restoring the level of automatic transfers to my various savings accounts (emergency, house and car). This year, we are on a 27 paycheck cycle (rather than the normal 26) that reduced the amount of the individual paycheck but totaled the same salary as a 26 pay periods. The first place I compromised was how much I added to my savings accounts rather than changing my spending levels. Being able to fund my savings at previous levels makes me happier as I can reach the goals I am striving for sooner.

Furthermore, I dedicated more money to my future farm account. I have been considering a second job to add more money to this account so with my new salary increase comes along, I can afford to put more money toward this savings goal. In fact, I am now saving 6.5 times more for my future farm than I could before. I am rather pleased I can advance this goal more rapidly without finding alternative income sources.

Finally, a fraction of this new pay level will go to various spending categories. Most are small increases in the monthly allocation. However, some of my spending categories I felt confined by the numbers I allowed myself. Therefore, I believe a tiny increase in the amount I can spend will be helpful without much lifestyle inflation.

I am a numbers gal so as soon as I learned how much more I would be earning with my salary, I had to figure out what to do with it. I cannot let any money just sit there without determining how I can make use of it. With a plan in place, I feel calmer and more in-control regarding my spending allocations and my savings goals.

How do you handle similar situations?

Funding ten hungry savings accounts

I have many goals in my financial life including saving for a newer used car, saving for a future farm in the country, saving for charitable donations and saving for life's unexpected events. This requires various levels of funding, all of which are important. How the heck do I deal with the demands of ten different accounts?

Well, each account is for a different purpose.
1 and 2. General savings: This funds emergency spending overages even if the fault is only mine, large veterinary bills, larger-than-expected car repairs, maintenance and upgrades to the house, or any other unexpected event that required money. This is funded in three different ways: a savings account at my credit union, three CDs at my credit union and a savings account with Emigrant Direct. I allocate money every pay period to add to the savings account and when it gets large enough, either fund a CD or transfer it to the online Emigrant Direct account.
3. House savings: This funds my basic home needs including gardening supplies, outdoor appliances (e.g., lawnmower), tools and low-cost house maintenance and repair (e.g., paint or energy assessment). Any costs over and above this account will draw from my general savings account. I fund this account with an automatic transfer each pay period.
4. Gasoline hedge fund: This fund is for money leftover in my gasoline spending allocation that is subsquently split between this account and my car savings account. Rather than worrying about increasing my spending allocation as gasoline prices go up, I can use the money saved in this account to supplement my spending allocation until the price per gallon goes down far enough the spending plan covers it.
5. Car savings account: This fund is solely for buying a newer car. My current vehicle is running well, but I would rather have money and possibly avoid a car payment than be caught without a plan. My car has 136,000 miles on it and is 13 years old. It has some time left on it (my goal is to reach at least 150,000 miles) but I allocate money each paycheck and each month add to the funding with half of the remaining amount in the gasoline spending as well as odd bits of money here and there from rebates and small bonuses.
6. Charity savings: This fund is for any charitable giving. It is much easier for me to give spontaneously if I know I have x amount in my charity savings account. I am able to fund three charities regularly and still have extras for unexpected giving. I save a small amount each month and sporatically add money in small amounts.
7. Car mainentance: The money in this account solely arises from extras in my spending plan. When I had over $200 available from not spending anything, I decided to open a savings account to earn a bit of interest. This is the first line of defense against car repair expenses and hopefully will mitigate any demand on my regular savings.
8. Found money: This is a catch-all fund. I have purchased a chest freezer and partially funded a new computer purchase with money from this account. The current goal for this account is a potential vacation later this year. Funding comes once a month and looks to be on target with the $700 goal I set.
9. Utilities fun: This is also an account funded by leftovers from my spending plan. This collects money from my natural gas and electric/water utilities if I spend less than I allocate. Winter I typically use the full amount I allow in my spending plan and even had to use some of the money in this account twice. Like the gasoline hedge fund, this account holds money I can apply to any unexpected utility expenses.
10. Future farm: This fund is for the farm in the country I would like to find and buy. This goal is two years away so I wish I could save more. However, I allocate money monthly and have been sending more irregular income (refunds, temp job money) to this account. I would like to save more as I suspect my needs will be great in this area, but so far have done well for being one of many goals I am funding at my current income level.

The main drawback to so many accounts is having multiple demands on a finite amount of money whether it is my regular or sporatic bonus income. Balancing all of them is a delicate act, but I manage to see positive growth in all of them. My main concern is the farm savings account and what I can do to increase the amount in there. This may mean a second job where the money will only go to the single account.

Do you have any thoughts on my strategy?

Debating the allocation of unexpected money

Part of what motivates me is my plans for the future. However, my finances require a balancing act. For example, I received a little extra money this month. Do I:
1. Add to my car savings account?
2. Add to my future farm account?
3. Contribute to my charity account?
4. Donate to my regular (emergency) savings account?

This necessitates some negotiation with myself. What is my priority? Well, the car and future farm are my main priorities. What to do with the extra money? Well, I can add it to either account or split it between them. What if it is only $2? Then I will put the money in my future farm account and next time there is extra money, add more to the car savings account.

Striking a balance is hard. I debate which account is more deserving so many times, the extra money gets shuttled to a different account each time, to make it more "even" or "fair" in my mind. It is easier to keep focused on a single goal, a single account. I feel I sacrifice saving for other things if I only put money in one account. And life, like everything else, is a balancing act. Funding that life is no different.

In total, I have ten different savings accounts, all for different purposes and funding different goals. More than half my money is in ING Direct accounts and the rest split between a brick and mortar credit union and a second online bank. Many more accounts and I may get overwhelmed, but I see the progress in each account albeit slowly when I do my monthly net worth calculation.

Next post, I will break down my savings accounts and what purposes they fulfill.

Second quarterly update for my 2009 financial goals

Net worth: Since I last reported in April, I have seen my net worth increase each month. My focus on saving and consistently contributing to both my 401(k) and Roth IRA have given me a 12.6% increase in my net worth since April 1. This is much better than I ever expected especially in the face of losses in late 2008.

1. Fully fund my 2009 Roth IRA with $5,000.
I am 47.7% to my goal. With the 1.9% merit increase in my pay check, I placed most of this new money toward my Roth IRA. With a little help from my regular savings account, I am on track to nearly fully fund my account by the end of the year. Plus it is nice to see the balance this account back above five digits and moving fund worth closer to amount I contributed (although still lagging).

2. Save $2,500 for purchase of a newer vehicle.
I am pleased about my progress towards this goal. To date, I have an additional $1,454 in this account. Much of this increase is due to systematic contributions but leftover money from my gasoline spending category has helped. This month, I will have additional savings from my extra paycheck. With more than halfway to my goal, I am confident I will reach this goal.

3. End the year with $1,500 in my farm savings account.
With monthly transfers to this account, my savings has reached just over $807. I plan to contribute some money from my extra check (three pay periods instead of the usual two this month) so this should push me closer to my goal. This goal seems to be within my reach.

4. Accumulate $800 toward buying a new computer.
Unfortunately, I was unable to hit this goal. With my trusty iBook G4 losing its cooling fan and me being addicted to Apple laptops and surfing the Web, I purchased a refurbished 15" MacBook Pro for $1528.70 with a $262.67 AppleCare Plan, and had to use $1,100 from my regular savings account to fund the purchase. This meant I did have just under $700 saved for the computer purchase. Because I owe myself money, the money I get from selling my iBook G4 and the final installment of my internet funding award in 2010 will go toward mitigating the raid on my savings account.

4. Save $600 by August 2010 for a potential vacation.
This is my replacement goal and one I should be able to fulfill. My monthly contributions will get me to $533 and I had a few dollars extra from my FSA account that I had subtracted from my spending plan. With at least two more pay periods before August that have a bonus check, I should be able to reach my goal with little stress.

Overall, I am doing better than I thought I could be. While a positive trend is nice in the stock market, good old-fashioned savings is also boosting my bottom line. How are you doing financially?

A change in my savings goals

An opportunity to visit a part of the United States I have not see before has arisen. My dad's mother's side of the family whose German relatives hosted the family reunion in Germany in 2007 is now looking to gather in Missouri in September 2010. While I have not committed myself to the trip, I am interested enough that I started looking at where I could save money for this trip. My reasoning is twofold:

1. Saving money for this trip means it does not come out of my emergency funding nor steals from my other financial goals.


2. If I decide against the trip, the money can be redistributed or used for other purposes.

The drawback to my savings plans: I have no idea how much I need for the trip. My mother suggested I aim for $500. Starting with that number, I carefully analyzed my spending plan and my current savings amounts. This is what I have decided:
$10 from my monthly cat care allocation (I have only one cat to care for)
$10 from my personal care allocation (my spending has decreased in this category)
$1 from my gift spending account (buying secondhand and making items has given me more breathing room here)
$10 from savings (I reduce the amount to savings by this amount every month)
$10 from house savings (I decrease my contributions by this amount each month)
$41 total

Since there are 13 months between now and September 2010, I estimate that I can save $533. That does not include money from extra checks (there are three between now and then) or any other sources. This is a good start for my vacation fund and an extra cushion if something else arises. I may change my mind after I see the estimated price tag for the family reunion but more savings will help fund my other financial goals.

What do you think of my changed plans?

Being safe in a turbulent world

During a recent family gathering, my siblings and I were discussing crimes. I mentioned that a couple years ago, my city had a rash of home break ins where teenagers were getting into homes through unlocked sliding glass doors and taking purses from kitchen tables. Since I emphasized the unlocked doors, my brother commented "So are you saying they asked for it?" My response: "No one asks for that but I believe in being cautious."

What do I mean by being cautious? For example, placing a sturdy piece of wood or length of metal pipe to prevent the sliding door from opening more than a few inches is a good precaution to take to deter intruders and still get the air circulating in the home. If a person might be looking for a crime of opportunity (e.g., unlocked door and visible purse), making it more difficult to get access to the home may help prevent your home from being invaded.

What does this have to do with money aside from the obvious? Having a savings account and spending less than you earn is one way to be safer in a world determined to part you from your money. By playing defense with your earnings, putting away the extra and accumulating a stash of money over time, you can reduce and eliminate debt, cover unexpected emergency expenses and even support yourself in case of job loss or injury.

No one likes to consider the worst case scenario. Despite my own health scare a year ago, I still have not put together a will. However, I could cover my living expenses for at least 10 months if I became sick and unable to work. I also have disability insurance through my workplace that would cover part of my salary during my illness or injury.

By earning more than I spend and saving what I can, I have built up a cushion of money that can help me through many obstacles. While contemplating the loss of a job is no fun, I know I have some time before money gets critical, which is better than losing my job and wondering how I will pay all my bills next month.

Like keeping a length of wood in a sliding door to deter thieves, a savings account can alleviate some of the anxiety of financial emergencies or job loss. The risk is not eliminated as I could be searching for a job longer than my 10 months worth of savings, but I can minimize the effects of a turbulent job market (and reduce my stress) by having money to help me through any rough spots I encounter.

Being prepared in an unstable world

The only debt I currently hold is my mortgage debt. I live off less than 50% of my gross income from my current job and can comfortably afford my mortgage and other expenses. If the worst comes along, how prepared am I to pay for my necessities?

Keep an emergency savings of at least three month's expenses.
This is in place with additional savings if I raid the accounts that are funding my savings goals. This means at my current expense level, I can afford to draw down my savings before I run into financial troubles. Of course, there are expenditures I can cut in the face of no income that would also help stretch my savings.

Update your resume.
Unfortunately, I am not prepared. I have two things working against me: complacency in my job and laziness. While I have thought about updating my resume, I have not translated this into action. There are always other things (gardening, my cats, other issues) that arise and distract me from this task. The way to turn this around: decide to take action and make it a priority.

Maintain your network.
Keeping in touch with your neighbors, friends, acquaintances, current and former colleagues will only help if you lose your job. The more people you can ask for help, the more likely you are to find something because they know something of you. My network is rather small but I leverage it as well as I can when I need help. While I have yet to do this, make sure your LinkedIn profile is up-to-date and your virtual network ready to tap. In this market, the want ads are sparse and finding job leads are difficult.

While I believe my job is secure, it behooves me to be prepared in the event I am downsized or I find an opportunity I want to pursue. A current resume with a great network and several months of expenses saved are a good basis for continuing that mortgage payment and other financial obligations without wondering where the money will come from.

What works for me

I have not been writing much about frugality or my money. Gardening, which is part and parcel with self-sufficiency and frugality, has taken much of my time. My current situation has a good-paying job that looks fairly secure, a lack of consumer debt, and always spending less than I earn. I keep my strategies simple:

• Transfer money automatically from my checking account to my savings accounts every pay period.


• Pay my bills immediately using electronic bill pay.


• Subtract any spending from my budget within two days.


• Spend no more than I allocate for each spending category.


• Contribute to my retirement accounts regularly.


• Keep a well-funded emergency savings account (at least two months worth of spending).

My emergency savings has come in handy as one of my cats was extremely ill. With all her treatments, an emergency over a holiday, room and board for several days stay at the veterinary clinic, the costs really added up. My emergency fund was able to cover this unexpectedly large expense.

Being a homeowner is an expensive responsibility. The lone mature tree on my property has never been in good condition but looked to have some years left. A recent diagnosis left me with a shortened life span and the need to plant a new tree close by as soon as possible. My house savings account has enough money to help me fund this unexpected expense.

The bottom line is I spend less than I earn by keeping myself on track with automatic savings and a spending plan. What have you found that works for you?

Deciding how to allocate my pay increase

I have just received my newest paycheck with the added 1.9% merit increase. While this number is not impressive, I had been wondering if my new iPhone was my merit increase for 2009. I even thought that maybe I would not see an increase. My boss assures me that the number is not based on my performance but on guidelines from the company. I told her I was happy to see an increase and appreciated what she could give me.

Still nearly 2% means a little more in my paycheck that needs to be distributed. My main financial goal is to increase my contribution to my Roth IRA. To me, my Roth IRA is hedging my bets that taxes will go up in the future when I need to withdraw the money. Since the money is tax-exempt and my 401(k) and rollover IRA are tax-deferred, I think of the Roth IRA making up for the money lost to taxes when withdrawn from my tax-deferred accounts.

However, with the small increase in my salary, I need to figure out how to distribute the addition to my paycheck. It breaks down as follows:

• 90% of my raise goes to Roth IRA contributions bringing my monthly investment to $390.


• 5% of this new money will be a monthly transfer into my future computer fund.


• 2% of the raise goes to my charity savings account once a month.


• 2% of the paycheck increase goes to my farm savings account once monthly.


• the remainder disappears into my checkbook as a small hedge against paycheck fluctuations.

All the money is going to savings accounts and my allocation for spending remains unchanged. Lifestyle inflation is not a good thing especially as I suspect my lifestyle change from suburb and good salary to country existence with fewer job opportunities will drastically decrease my income and ability to spend. My future plans make it even more important to save now so I have more money to buffer me for the future whether I make the transition to the country in three years or five.

Have you decided what to do with your (potential) pay increase?

Getting a shiny new piece of hardware and saving money!

As part of the ongoing changes at my workplace about developing new and interesting ideas in a digitally based world, my entire department was supplied with iPhone 3Gs. Now, as much as I love Apple hardware, the expense of the iPhone itself coupled with the expense of the voice or data or both plans was out of my personal reach. However, when my work supplies me with an iPhone that has both voice and data plan, I say thank you and happily play with my new toy.

I had been considering changing my personal cell phone plan from a monthly plan to a pay-as-you-go plan. I do not use all the 200 anytime minutes in my plan and consider it a busy month to reach 200 total minutes usage. I received an 8% discount because of the company I worked for, but I was still paying almost $40 a month. However, when I called Verizon Wireless about converting to a prepaid plan, I was informed it was not possible to keep my phone number. This was important enough to me I needed some time to think about how to proceed. (I had the number for 7.5 years.)

In the end, I decided that I would rather cancel my service than juggle two cell phones even if one was a prepaid plan. So, I have until April 20 until my personal cell phone service runs out.

However, there was an issue with canceling my cell phone plan: Roadside Assistance. I had added a roadside assistance option with my cell phone plan that cost me $2.99 a month. I thought this was good insurance for any potential issues that arose and added up to less than the $54 per year for a AAA roadside assistance policy. However, I was eliminating a $40 per month bill for a $54 per year out of pocket expenses. I signed up for a AAA roadside assistance plan and canceled my cell phone plan the next day.

So, by removing my cell phone plan as a monthly expense, what do I plan to do with the extra money? After some thought, I decided to break the $40 down as follows:

• $10/month goes to savings


• $10/month goes to house savings


• $10/month goes to car savings


• $5/month goes to my AAA yearly fee


• $3/month goes to farm savings


• $2/month goes to charity savings

Having a work cell phone is all new to me so I plan on being conservative in my usage. However, it benefits me by giving me a way to contact people in case of emergency and saving money from my income. Even if I do not receive a raise, this is a way to cut my living expenses at least until they take my new iPhone away!

Quarterly update on my 2009 financial goals

At the beginning of the year, I stated what my financial goals were for 2009. Basically, they came down to saving and funding my Roth IRA. Plus I wanted to share a quick update of my net worth.

Net worth: Up 4.8% from January 1. I did not expect to be typing positive movement for this measurement. However, I am still below the mark set when I started monitoring my end-of-month net worth October 31, 2007. The mortgage keeps going down, my savings accounts keep going up and if the volatility in the markets has calmed somewhat, my investments will hold and even gain some value.

1. Fully fund my 2009 Roth IRA with $5,000.
My 2009 contributions have me 16.5% to my goal. I have increased my monthly contributions through changing my deductions and the stimulus plan adjusting the federal tax tables. I will find out later this month if a merit increase will occur or not.

2. Save $2,500 for purchase of a newer vehicle.
I am doing well on this goal. So far this year, I have contributed $827 to this account. My automatic transfers brought me to $429. The rest was excess from the gasoline allocation (split between my gas hedge fund and my car savings), a refund, bonuses from work, and selling a couple items on craigslist. While I am uncertain if this pace can be maintained through the year, I am pleased that I am one third of the way to my goal.

3. End the year with $1,500 in my farm savings account.
I started out with $415 in this account January 1 and have added $330 to give me $745. The recent bonus really helped bump up this amount, but I have also made adding funds to this account a monthly deposit.

4. Accumulate $800 toward buying a new computer
This is a new goal, but has become more important to me as the technology and operating systems I have are bogged down by the newer web servers I need to connect with. On January 1, I had $262 in this account; my current total is $482, a significant fraction of my goal. I am pleased this number is moving higher. While both my computers work just fine, by 2010, they will be nine years old (G4 Quicksilver Tower) and five years old (iBook G4). This will eventually be an issue of access on the web and compatibility with software. I want to be able to purchase the MacBook Pro without compromising my other savings goals.

What to do with a surprise bonus

When unexpected money comes into my life, it is easy enough to think "this is outside my usual money so I can treat myself and spend it whatever I want without guilt". I received a bonus in my latest check as a reward for pitching in on a departmental project as well as for an individual project. This was the largest single bonus I have ever received and upon learning of said bonus two days before payday, I became anxious. Despite all my preparations, my saving priorities and all my fiscal awareness, I thought "now what do I do with this?"

Saving for a newer car is my most immediate savings goal therefore, it should take the majority of my bonus money. However, I found myself baulking at putting the entire amount of my bonus into a single savings account. I can do this for smaller amounts of $30 here, $25 there, but add a zero or two and gut told me no.

So what are my alternatives? There were a few things tugging me in different directions. I have been thinking about my charity savings account and how much I would like to give this year. I would like to match the amount I gave in 2008 and challenge myself to give more. By taking part of this bonus check and funding the charity account, I would still have money leftover from my bonus to fund other accounts.

I have been contemplating the acquisition of a new MacBook Pro. My iBook is still working well but I am considering a replacement in the next year or so. Of course I would like a bigger screen, faster processor, more RAM and hard drive space. However, I am being strict with myself and saving for this purchase. Right now, I have $300 saved for a new computer. Saving all or most of my bonus for this purpose would bring me to nearly 50% of the price of refurbished MacBook Pro in my savings account. While not an immediate gratification of my Apple hardware desire, I would be months closer to buying a new laptop. This is an option I could pair with my charity account funding.

Despite some clear cut priorities for saving, I had to seriously consider what to do with the unexpected money. I thought about paying my mortgage down a bit or buying a nice piece of jewelery, but I prefer keeping my assets liquid. After thinking about it and writing down multiple options for dividing the money, I settled on my final strategy:

• 18% was earmarked for charity; some of the money was used immediately for a donation


• 25% was added to my car savings account


• 25% was saved in my found money account (likely for my future MacBook Pro purchase)


• 25% was transferred to my farm savings account


• 7% I could spend how I like

I was able to save for all the items that matter to me, make a donation to my favorite local charity to celebrate my unexpected windfall and spend some on myself for pure indulgences of the food kind. I am pleased with the outcome and am grateful I have money I can both save and spend.

What do you think of my final action plan?

Getting started is half the battle

When discussing my financial situation, I approach it in a slow and steady fashion. That is, create a spending plan, account for every penny, spend less than I earn, set goals for savings and fund these goals automatically. This is not a fancy method and you will not get rich quickly. However, years of living this way have given me a CD ladder, several savings accounts with specific goals in mind, enough money to cover all monthly, semi-annually or irregular bills, and a retirement fund however depleted with the current market in a downward trend.

How did I get here? I eliminated all credit card debt, paid my student loan and car loan in full, kept my car for years after being paid off, bought a home well within my budget and chose a 30-year fixed-rate mortgage. This is boring to discuss, but again, no fancy methods, money manipulations or lifestyle envy. I made consistent, automatic contributions to my retirement funds and savings accounts. I paid all my bills on time missing only a few times in ten years. And I strictly followed a spending plan, ensuring I could spend without raiding my savings accounts.

Why am I telling you this? Because looking at where I am now, it all seems easy. However, getting started took some false starts and overcoming inertia. I got along just fine without automatic transfers from my checking account into my savings account. I did not save as much as I wanted, but I did not spend more than I earned. Then I made a commitment to buy a house, something that requires maintenance or replacement of items. And I had to make a downpayment on said house. Suddenly, letting money slip through my fingers just because I could spend it seemed like a poor plan. At this point, I decided to change my saving habits to include more strict adherence to my spending plan and removing "savings" as an item in my spending plan. Instead, I just starting setting up an automatic transfer from checking to savings.

Wow! That automatic transfer was a revelation! Suddenly, my savings account was growing faster than I could imagine and having a greater cushion for unexpected expenses seemed within reach. But to get started, I needed to do two things: 1) change my thinking and 2) do something about it. Both of these are easier to write or say than do. For example, I know that I have too much stuff in my house--too much clothing, too many books, CDs and DVDs, more stuff than I need in my day-to-day living. I know I need to sort through it and determine what stays and what goes. But it is easier to say "Oh, I need to do that" than to actually get off the sofa and do it. I have the best intentions, but still, nothing gets done.

However, when I do sort through it all (and I will!), having all that space back, having fewer items to clean or dust or maintain will give me more control over my life, lessen my burden and mean fewer things to pack and move in the future. I have learned my lesson with my finances but have yet to apply it to all parts of my life. I know I need to work on my health goals and sheer amount of stuff I live with. Progress always comes slowly so I will remind you do not look at what you have not done (e.g., the dishes); look at what you have accomplished (e.g., expanding the garden for the growing season). The positive feeling will help carry you through the challenges of getting started on that next project that seems insurmountable.

Where did this money come from?

Well, my most recent paycheck had a solicited and unsolicited addition to my salary. The solicited one was a small bonus paid by my company. The unsolicited one was the federal government trying to get me to simulate the economy. The difficulty is trying to decipher how much was the bonus and how much was the stimulus money. This is important as the money from each source is designated for a different purpose.

As I have discussed before, the stimulus money would help fund my Roth IRA for 2009. This is an ongoing stimulus that decreases the amount of federal tax I am paying to encourage me to spend a bit more than I normally do. I hope my index mutual funds appreciate it.

The bonus money would be added to my car savings account and the leftovers added to either my found money account (likely for a future computer purchase) or my farm savings account. After some calculations comparing my most recent check with the previous, I came up with a number for my bonus and used that to pad my car and farm savings accounts. The remainder was the economic stimulus money and was added into the spreadsheet for my Roth IRA funds. The next paycheck should confirm whether my calculations were accurate or not.

Now, how my taxes will fare next year, that is another question. Have any American readers seen the effects of the Obama stimulus plan in your own paycheck?

The end of the no-spending challenge

My no-spending challenge was not only a way to save a little extra money from my spending plan, but seeing how easy or difficult it was to spend less, especially in categories like eating out, miscellaneous (yes, I have such a category), personal care and clothing. Right now, I am looking at how much more I can save because I do have a job with a steady flow of money coming in. However, if the situation changes and money is no longer coming in, I know which categories are easier to target for elimination or immediate reduction, and how much lower my living expense can be. Shaving another $75 or $125 from living expenses will stretch my savings that much further. Limited finances are extra incentive to turn down the thermostat in winter, turn up the air conditioning in summer or see how long you go without turning on said appliances.

This month really challenged my thinking about what I needed to buy and what I could make for myself. Touting self-sufficiency and practicing are two different things. While many times it takes hearing a comment or reading a blog to open my mind to possibility of doing something differently, this challenge had a few self-generated moments of thinking creatively (e.g., making a catnip-stuffed toy for the cats).

In the end, I had $226 leftover in my spending plan. For many of the categories, the money was carried over to the next month (e.g., car insurance and cat care). The car insurance and registration is a known, regular expense while cat care is sporatic but necessary when the cats need supplies or to visit the vets.

Some of the leftover money was used to finance future goals. This included:
$53 to regular savings (some remaining from gas category for future hedge against gasoline prices and from unspent eating out category)
$23 to car savings (other half of leftover gas category plus some from miscellaneous allocation)
$8.26 to found money (from phone/DSL and miscellaneous allocations)
$4.78 to farm (change from gas category and grocery leftovers)

The total leftover money was $73 more than in January. Other than a lunch out with a friend I had not seen in months, I managed to keep expenses in necessary categories rather than fulfilling wants this past week. Furthermore, I did not overspend into the next month for any category so I start off March on a a good note. Still, I am looking forward to going to the thrift and hardware stores in the near future. The former I miss and the latter has a few things I need to buy (bolts, washers, nuts and furnace filters).

Planning for my share of the economic stimulus package

The only thing that seems directly applicable to me from the economic stimulus package is the $400 tax credit that will be dispersed via my paycheck. Sure, if my state uses some of the money it receives on road work, my car's tires and suspension will be happy, but most of the plans apply to people in circumstances that do not affect my current situation. I am thankful that I can calculate how to best use the stimulus money for my own benefit.

While $400 is not a lot, it will be given to individual taxpayers over a long period of time. It is easy enough to spend an extra $35 or so a month. It is just one more night eating out that month, a few extra treats at the grocery store, a nice mix of songs, movies and TV shows from the iTunes Store, one more tank of gasoline or a nice shirt on sale.

However, my priorities this year are on saving money. Specifically, completely funding my Roth IRA for the third year in a row, saving for a newer car and putting money toward my dream of a small farm in the country. In light of my previous post, I am planning on adding the stimulus money to my Roth IRA funding.

I estimate between the extra money from my change in payroll withholding and the stimulus funding, I will fall short of funding my Roth IRA by ~$800. Assuming no other financial disruptions, this means the smallest shortfall since I have tried to fully fund a Roth IRA. If I do get a merit increase this year, I am hoping I can fully fund my Roth IRA in the span of a single calendar year rather than needing additional time as in the last two years.

While I am counting my money before it is in my hands, I found having a plan to handle windfall money allows me to deal with it more gracefully and more appropriately than being blindsided with unexpected money. Keeping my money usage in line with my goals helps me fund my future and move plans closer to fruition.

What will you be doing with your $400 or $800 economic stimulus?

Getting my 2009 tax refund now

With my 2008 Roth IRA fully funded with about 20% of the money coming from my federal and state tax refunds, I decided that I would rather have more of my money now to fund the Roth IRA than give it to the government. The tax refund I received this year was the result of three deductions for payroll tax purposes. I just submitted paperwork to increase the number of W4 withholding to four to keep more of my own money.

What are my plans for this money?
Since I used the tax refund to contribute to my Roth IRA, I will use the increase in net pay to add to my monthly contributions to my Roth IRA. I have been planning on increasing my monthly contributions each time I receive a merit increase. However, with the economy, I have decided rather than counting on a pay raise, I will just have to live with the income I have. With a change in withholding, I can give my Roth IRA a boost and if I receive a pay raise, then I can contribute even more toward my Roth IRA.

I estimate that I should add ~$700 to my Roth IRA contribution this year by changing my payroll withholding.

What are the drawbacks of doing this?
If tax laws change, I may owe more than I anticipated for 2009. My quick calculations based on my 2008 tax returns indicate that I should owe the federal government somewhere between $0-$200, depending on my itemized deductions and credits. Despite decreasing the amount of money withheld, it does not affect my state income tax much at all. Therefore, I anticipate that my state tax refund for 2009 should cover the cost of any federal taxes I owe with a small amount leftover.

If the tax brackets change or I earn more than I did in 2008 or any number of financial or life changes, I might regret changing my withholding. Frankly, I will have to see what happens when I figure my 2009 taxes next year.

My strategy is to get more money in my pocket now for a planned Roth IRA contribution rather than loaning it to the federal government interest-free. I earned it and I would like to put my money to work for me. Are you changing the amount withheld from your payroll check based on your tax refund?

Second update on the no-spending challenge

Another week, another update on my no-spending challenge. One observation: it is so much easier not to spend when I avoid places at which I spend! For example, I am only looking at the free section on craigslist, avoiding the temptation to spend on an item that will likely prove useful but take up space in the meantime. By not going to the charity thrift shop, I will not buy another sweater that I like, do not need and may not get a chance to wear much before the seasons change again.

That is not to say I am perfect. I did have a standing appointment with my wonderful hair stylist for a hair cut. I have been going to him for nearly ten years, he always makes me look good and I enjoy chatting with him. I go every two months for a cut and once every 9-10 months for a permanent. This may change in the future, but this is one item I have not eliminated from my spending plan. I suspect the only way I will give up my stylist is if I move more than 20 miles away from his shop.

Otherwise, my only other spending was on gasoline (creeping up a few more pennies per gallon) and groceries. I keep several denominations of bills in my wallet and the money has barely been used since the beginning of the month. While I am not a spendthrift, I am surprised how being strict about my spending keeps cash in my wallet. Those lunches and trips to the thrift store, my main cash-based transactions, really do add up.

This exercise just goes to show me that staying home and out of stores that can part me from my money will save some cash. I thought I did a good job on spending and saving, but there is another way to keep just a bit more in the pocket. And I missed the thrift store and visiting craigslist less than I thought I would.

Could I give up my spending plan?

My spending plan is very important to me. I have created and followed my spending plan as it currently exists for four and a half years, so at this point in my life I should be ready to let it go and be able to spend without problems. However, when I consider removing my current planning structure, I get anxious. While I do not like change, I believe my anxiety comes from not having the neat little boxes to put my money in and from which to spend.

In contrast, one of my colleagues says she does not budget. She always knows she has money and just spends what she has. In fact, she usually has enough leftover after maximizing her 401(k) and Roth IRA contributions plus her normal monthly spending (mortgage, utilities, food, etc) that she can add to her money market account or purchase more stocks. This freeform lifestyle works for her and she can obviously live below her means. However, this approach is not for me.

With my personality, having specific spending categories each with its allocated money ensures that I do not raid my savings account for incidental expenses. I am far from perfect and do use the savings account for overages, a rare occurrence that does not total more than $20 in a month. With $45 budgeted for eating out, which includes vending machine snacks, I strictly ration the money. This is a category I could easily spend more on, but my long-term plans are more important than immediate easing of hunger.

Structure works well for me. I keep money out of my hands with automatic withdrawals when I receive a paycheck, I allocate funds in various slots for needs and wants, and record each transaction in my notebook (yes, I am old school with pen and paper). I have a running total of what is in my checkbook and what remains in my spending plan. I feel good about the method I use, making me justify the expense as I place it into a category. Furthermore, I have enough flexibility to change the specific amounts allocated if my circumstances change (e.g., gas prices increase or have a few more dollars as income).

What method helps you spend less than you earn?