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?

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.

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?

February means No-Spending Challenge Month

Today was the first day of my No-Spending Challenge Month. Interestingly, enough, I did spend some money--to fill up my gas tank. However, the main goal is to minimize any unnecessary spending. That means I can buy gasoline and groceries, but no new clothing or furniture.

Regardless of my best intentions, there are a few spanners in the works.
1. I have my appointment with my hair stylist this month, scheduled back in November.
2. I have potential lunch plans with a friend in the next week or so.
3. My department has a birthday lunch this month which means going out to eat and splitting the bill.
4. I spent some of the money in the February spending plan while still in January.

With these factors, I cannot claim a No-Spending Month, but aiming for a Reduced-Spending Month. In January, I added about $35 to various savings accounts with unspent money in my budget. There was additional money carried over into the next month like car insurance and gift money that just add to the balance for the next use.

Looking at my various spending categories, my goal is to save an extra $100 in February to distribute to various savings accounts. My strategies for not spending include not visiting the charity thrift shop (save money, gasoline and wear-and-tear on my car), not looking at craigslist or ebay (definitely reduce my opportunities to spend), and bringing a lunch every day (always good for the bottom line). I have been getting lazy about bringing lunch and intend on buying more frozen entrees so I do not succumb to purchasing a lunch at work.

Here is hoping I can keep my money to myself!

Financial Goals for 2009

While thinking about setting financial goals for 2009, I discovered I am focused on saving money. Last year, my goals encompassed net worth, saving and alternative income. This year, it is all about the savings accounts. Yes, I plan on keeping track of my net worth monthly with reports on the blog quarterly, but I will confine my financial goals to saving money.

I fell short of most of my 2008 financial goals due to things outside my control (e.g., my investments in the stock market) and lack of interest and motivation (e.g., starting an alternative income stream). This year I am going to state items I have more control over and get me closer to future plans including a newer vehicle and saving money for my future farm. With the exception of the first, the goals are to be completed by December 31, 2009.

1. Fully fund my 2009 Roth IRA with $5,000.
I am on track to fully fund my 2008 Roth IRA with a little help from my likely tax refunds. However, I had some extra contributions from a life insurance policy I cashed in and the tax rebate. This year, my shortfall will probably be greater, but I also plan on increasing my monthly contributions. Any increase will be based on any merit increases I receive, but is unlikely to be more than another 2% of my gross income. Any potential pay increases will not be known until April 2009.

2. Save $2,500 for purchase of a newer vehicle.
At my current savings rate, I am have a guaranteed savings of $1,860 for 2009. However, extra money from bonuses, unspent gasoline allocation and other sources will add to this amount. I am stretching myself to get to $2,500, but I came close in 2008, saving about $2,200 for my next vehicle.

3. End the year with $1,500 in my farm savings account.
My savings account holds a bit less than $425 right now. That means I need to save over $1,000 to get this goal. While money from my extra checks will partially fund this account, other money sources will need to be found. I want to push myself to get alternative income streams started and this would be one way to counteract my inherent laziness with my future dream of a farm.

These are the goals most closely aligned with my interests and future goals. I may find something else becomes a priority and add to these goals, but these three are currently the most important to me.

Analyzing my goals and finances for 2008

While my December 2008 net worth increased compared to November 2008, my first full year of net worth calculations demonstrated I was down 6.2% for 2008. I will not belabor the point that the stock market drop for 2008, ~38% overall, meant my investments took a major hit. Instead, I will do my year-end review of my goals and see where I stand there.

1. To reach a net worth of six figures ($100,000).
I looked to be on track to reach this goal until June 2008 where there was some downward market changes. However, I nearly recovered my May 2008 position in August 2008 before the market truly plummeted. In fact, I have ended the year with a net worth less than $80,000. I plan to keep this goal for next year and hope the market performs better and I save even more money to make this happen. Hitting the six-digit figure would be a great psychological boost for me.

2. To have $15,000 in liquid savings for emergency expenses.
I fell short of this goal by $1,300. I did not think I was too ambitious, but I had a major car expense in April that was large factor in holding up this goal. I also had several veterinary bills that caused me to dip into savings several times this year. Smaller, less necessary expenses did not forward my bottom line either. However, I ended the year with $3,760 more in my savings accounts (including Certificates of Deposit) compared to December 2007. This is an accomplishment well worth the time (and money) invested in it.

3. To have $500 in my "found money" account.
I have ended 2008 with $261 in this account, failing my goal. However, if all the deposits were totaled for the year, I would have nearly reached the $500 goal. When creating this goal, I wanted to see how small amounts of money (odd numbers from bonus paychecks, money from items sold on ebay and craigslist, and rebate checks) would add up over the year. These contributions alone netted almost $250. I paid for a Wills and Trust class and my chest freezer from this account. I will continue to add odds and ends of money into this account in hopes that I will save enough to buy a new (or nearly new) MacBook Pro in the future. I may modify this goal, but need to think about it more.

4. To fully fund Roth IRA for 2008 at $5,000.
My current contributions stand at $3,900, more than twice what I had at the end of 2007. However, I am still $1,100 short. To be honest, I plan on contributing my tax refunds to this account, which should get me to my goal. If I fall short, I will use some money from savings to bring me up to the full contribution. I will keep this goal on my mind (if not listed on my blog) and will joyously celebrate when this is fully funded.

5. To generate $2,000 from an alternative income source.
May I just pretend this goal does not exist? I really did not work hard on this and my final tally of less than $400 shows it. To be honest, I just pulled a number out of the air, but I also wanted to push myself with an ambitious goal. My lack of accomplishment reflects my indecisiveness on how to generate this income and that my sole idea (selling stuff on craigslist) got lost in the sudden increase of postings on craigslist this year. Having an alternative income stream (or two or more) makes me less dependent on my job and increases my ability to fund all my savings goals. I need to reflect on how to better reach this goal in 2009 and will do so in January.

Overall, I did well for my first year of goal setting. No, I did not reach any of my goals, but my financial position is better than it was last year. While my net worth does not reflect that, I am happy the liquid savings is greater than the year before and I will be able to fully fund my Roth IRA for the second year in a row (even if I need more than 12 months to do it). My hope is that in 2009, I will meet or exceed at least two of the goals I set.

How did you fare for 2008?

How my savings accounts work for me

When I save money, I have manyfold goals (and expenses) in mind. Let us break down my myriad of savings accounts to see how they forward my goals for the present and future.

Standard savings account
This is my first line of defense against rainy days, car repairs, unexpected medical or veterinary bills, and even the occasional overspending. I transfer $160 per pay period with a larger amount deposited when I have my extra paycheck month. I recently tapped into this account for medical deductibles and car repairs. This money is easily transferred to my checking account at my credit union, immediately accessible if needed. Less liquid CDs also hold a share of this money that can be used for emergencies. I am working on having CDs due every month so I have a larger pool to draw from without sacrificing other savings goals.

House account
This is where most small expenses associated with the house including gardening and landscaping are drawn from. Each pay check, I transfer $75 for these expenses. Typically, I can purchase small machines like a snow thrower, pay for small electrical jobs like installing a new outlet in the basement, but the window replacement expenses usually end up drawing from my standard savings account. Most of this money is spent at hardware stores with brief stops at a garden store or the thrift store. At various times, I have nearly depleted the account, but winter is generally quiet enough, a nice balance accumulates--just in time for spring!

Car savings
I would like to buy my next vehicle with cash if circumstances allow. However, if the time frame is shorter than I would like, I can at least put a good chunk of money toward a newer vehicle. Each paycheck donates $71.50 to the fund with any bonuses, rebates or other extra money adding to the account balance. In 15 months, I have saved over $2,700. My actual savings account only has a few hundred dollars in it as $2,000 is in two separate CDs with rates of 4.00% APY. I am gambling I will not need the money for at least a year, but having a bit more interest is worth it to me. After the above two accounts, the car savings has the highest priority.

By saving each paycheck, I allow myself to pay less money than a car payment for a future car. If I am forced to buy a car sooner than I would like, I will have to sacrifice money I was saving for emergencies, the house and future goals to make a car loan payment. The faster I can accumulate money for a newer car, the less likely I have to short change other savings goals.

Charity savings
I set aside a small amount every month for this account. Using this method, I can accumulate some funds and chose to send a larger amount to my charity of choice. Since the amount is so modest, my plans are to increase the donations to this funds so I can spread it around to more than one charity in a year. I focus on local charities like the food bank and make sure that I can help others that are not as lucky in their circumstances as I am.

Found money
I started this fund to see how small amounts of money can add up. Since opening the account, I have also added money from an internet subsidy from my employer. The small amounts of money did add up quite nicely and helped fund the purchase of my chest freezer. While the current balance is $256, I am hoping to purchase a computer with the money in a year or two. This means I will need to save more money and I may be more reluctant to part with my hard-saved dollars to purchase new technology as much as I admire it.

Farm account
This is ~4 year goal and lower priority than a new driving vehicle. Right now, this account has been funded by a portion of the last extra paycheck and some stray money leftover after funding the car account. Additional funding will have to come from another source yet to be determined. There just is not enough of my paycheck after funding the other accounts to put a substantial amount here as well.

Conclusion: Each account keeps me on track so I have cash available for immediate use as well as prioritizing my savings goals.

Could you adapt this method for your goals?

Update on my financial goals for 2008

I have not kept up with my financial goals since May 7 so these are in sore need of reflection. My last update I challenged myself to fully fund my Roth IRA for 2008 rather than just $3,000, an amount I have easily contributed, and kept the other four goals the same. How have I progressed in the intervening months?

1. To reach a net worth of six figures ($100,000).
I was feeling quite optimistic about reaching the six figures in May, but seeing that I have $10,000 to go and only four months left in the year, I am not so certain. Just from a cash basis, I would need to keep $2,500 per month to reach this number, but am likely to only see an extra $2,500 for the next four months if the savings is not touched. Extra money would help, but I have not fully explored what I would need to do to enhance my earnings. I am considering a part-time job for extra savings, but it would likely be short term. Since the stock market has been quite volatile, I am uncertain how much I can count on my retirement funds to make up this value in four months.

2. To have $15,000 in liquid savings for emergency expenses.
I have almost reached this number. I currently have just over $14,000 in savings accounts and CDs and will easily reach my goal by November 2008, pending any emergencies. Part of this money is allocated to car savings, but in a true emergency, I would use all resources if necessity required more than the $6,000 in my bricks-and-mortar credit union. I am glad to see that I can reach such a lofty number and may set some specific goals for emergency only money versus other savings I have allocated for a newer car, a farm, utilities, charity, etc.

3. To have $500 in my "found money" account.
My current balance is $257.49. I used some money to pay for a chest freezer, but also had a substantial deposit of money with an internet subsidy from my workplace. I am earmarking this money for a future computer purchase instead. Taxes took a big bite out of the award, but I hope the interest will make up some of it. Otherwise, contributions have been $2 here, $3.50 there. I am impressed how much these small amounts of money can add up. While I do not think I will reach $500 as a balance in this account, I know that total contributions have reached $500. This really shows the power of small contributions giving a good size total over the year.

4. To fully fund Roth IRA for 2008 at $5,500. Since I can add funds through April 15, 2009 for my 2008 Roth IRA, I will need the extra money from my 2008 Federal tax refund. I usually get some money back, but with my monthly contributions, my tax rebate and the cash from my life insurance, I will have invested almost $4,000 in year 2008. This is good for me as it is ~$1,000 more than last year. Money from extra income or the found money account as well as tax refunds will likely help fill out the balance of the Roth IRA for 2008. This is a stretch goal so I will have to see what I need to do to fulfill the maximum contribution.

5. To generate $2,000 from an alternative income source.
Unless I am inspired and can really build up a business in a short period of time, I am unlikely to reach this number. While I sold many things in the first half of the year, getting me to ~$500, I have not done much in the last few months. This means little was added to the balance from my alternative income. In fact, I have been more focused on buying things for my home and garden than finding ways to make money. With winter coming up, I will have time to consider all possibilities and even implement some before the weather gets too awful.

These results are not as encouraging as I hoped for when I wrote down my goals. While I am thrilled at my cash position, I need work on my net worth and ability to bring in income not based on my salary. My next analysis will likely be at the end of December so I hope that my net worth does reach my goal, but some of that is likely dependent on me being able to generate additional income rather than depending on the stock market to increase my portfolio value.

How do I relate to my money?

I apologize for my absence. My mind has been on many things--work around the house, in the garden, in the kitchen and lots of thinking about the future.

Keeping and not spending money is always a battle. Temptation is there whether you expect it or not. For example, I really wanted some chocolate last week. I had even decided to raid the vending machine, but ended up finding a small square of brownie in a nearby counter. I ate that, saving me both money and calories as I satisfied the chocolate craving. Truly, it is the small hand-to-hand combat urges that sabotage my efforts at minimizing spending and saving more. I try to ask myself if I really need that item I want or am craving, and remind myself of my long-term goals.

Although my future plans include buying a small farmette to be as self-sufficient as I can be, I am working with what I currently have to make sure that this sort of living is what I truly want to do. This means I walk around my property with a measuring tape and watch how much sun a particular spot gets during the day. I was committed to my farmette purchase four years from now until my dad tells me of a farm that is on the market--just three miles from him.

You see, this is a real temptation. I wish my dad had not told me of the place because my mind is full of the possibilities with my family nearby to help me out. Now, I have not seen the farm and buildings, and it is likely more than I can handle. The previous owner had been sick for some time and just died, meaning the buildings were neglected for that same period of time, at least two years. But here my dad presented a place, a farm with 10 acres, the minimum size I believe I want at a fairly reasonable price, $250,000. Honestly, I cannot afford this and I am not prepared to buy now, but now I am thinking hard about it. My plans had not included buying a farm in the next year or two. I intended to work at my current job until I found a suitable farm in approximately four years before leaving for my life in the country. Granted, life is not neatly wrapped up in nice packages like that, but four years would give me time to save for the farm. Not only do I have to deal with a mortgage, which means I would have to have an outside job, but I have all the investments to make: renovating buildings, building new facilities, fencing for animals, starting a garden, planting trees, purchasing animals, all things I want to do on my farm. While I may be emotionally prepared for a move, my finances are not.

In fact, I had to perform a reality check, looking at my finances and calculating what four more years at my job would get me. I need to keep working where I am to save the money I need for the farm in the future. Unless a large chunk of money is going to fall in my lap, my plans include the slow and steady course I have steered. My analysis also demonstrated that supplementing my income would help build a larger cushion for the farm purchase and investments.

Generally, I have a good relationship with my money. I may make some compromises with my spending plan that involve borrowing from other categories rather than strictly staying within the allocation. This behavior does shortchange me in the short- and long-term, but if I do not consistently do this every month, I am okay. Then there are the larger temptations. Yes, I can pay $1,400 for a newer laptop, but that would deplete my savings of nearly a month's worth of expenses. The return on investment is important: is this item important enough to sacrifice liquidity to purchase it? And then there is a strong opportunity like this farm. It is a great location, something I can really work with, but not worth throwing over my plans to work and save to do it now.

Therefore, while I live on 40% of my income, save 30% and the rest disappears into taxes, fees and insurance, I still have to be wary of how I spend my money. Sometimes I am less on guard (Oh, it's fine, I'll get that anyway) while other times, I take a harder line (I may want that, but I don't need it). No one can be perfect 100% of the time, that is keeping to the spending plan and not spending money in savings. However, there is always room for improvement. Learning to grow my own food and preserve it eases some of the burden on my grocery allocation even with an initial investment. Breaking sod by hand saves money and gasoline (if not hands or back). I try to make choices based on capability and comfort (e.g., can change an electric outlet but not willing to deal with adding an outlet in a new location) that will help me save money where I can and strategically use the resources I have to increase the value of my property, home and even my savings account.

Managing my income

Despite having a spending plan and savings goals, managing my income is a full-time job. Why? Because I am as tempted to spend on items I do not need like any other American, and new priorities shift the targets for my savings goals.

For example, a share of my paycheck is electronically transferred into my general savings account. Unlike other savings goals, this account holds money for emergencies, overages and large home improvement purchases. Because this account has many potential holes in it (e.g., I had a larger vet bill than expected and and ordered two replacement windows), the reserve amount can fluctuate dramatically. While I have a house savings fund, it does not cover purchases that total more than a few hundred dollars at a time. Among window purchases, unexpected bill totals that my spending plan cannot handle and even overspending, my savings account numbers have dropped in half. This is my most immediate liquid savings and necessary for me to have at least $2,000 to handle most money emergencies.

Despite having 20 categories in my spending plan, I still overspend. I have been abusing the prepackaged food lately, pushing hard against the grocery spending allocation. I needed to use money in my eating out category to cover the money I spent on groceries this month (mostly for snack cravings). I cheat myself of little bits of money, but these numbers do add up. Since I live on 41% of my gross income and save 30% (the rest of my income lost to taxes, FSA, health, dental and disability insurance), I do not want to lose the savings cushion I have because I cannot control my food spending or decide "yes, I want that new MacBook Pro and darn the consequences!"

However, having a plan makes it easier for me. I have no debt but my mortgage, which I can comfortably afford. A spending plan ensures I have enough money for the mortgage, utilities, gasoline, insurance and all the necessities (and wants) of modern life. With the numbers staring at me, I know that I only have $4.25 left in my miscellaneous category so I better keep my spending low for the next five days until August's spending plan kicks in. If I keep abusing a category or two, my 30% savings rate plunges.

A spending plan is only the first step. I also have to decide what to do with unexpected money. This may come in the form of bonuses, selling items on craigslist or ebay, or cash rebates. My current plan includes padding my auto savings account, adding small bits to found money account and starting a farm account to save for my future small farm purchase. Saving for a car is my immediate priority so I make regular contributions, but the found money and farm account are only funded occasionally rather than with each paycheck. Deciding where the extra money goes keeps me from spending it and helps me save toward my future goals.

Since I am focused on saving money not just as a cushion, but also for specific goals, it makes it easier for me to weigh potential choices. While I still need to work on the small things, asking myself if I really need another plastic container, I understand that if I want to go to a Caribbean island for vacation, I have to sacrifice at least one of my savings goals and some of the fun in my spending plan. Am I willing to do this? No, I would rather have replacement windows installed in my home than a trip to Jamaica.

Managing my income is something I do every day. It is not just setting up a spending plan or making sure I save a bit each month. It is automating my savings, subtracting the money I spend from my ledger daily, planning for windfalls and keeping my focus on my short-term and long-term goals. The more I stay on track, the more my income works for me and my future rather than me working for income to support a debt-riddled, inflated lifestyle.

Update: Welcome to those readers from the 164th Carnival of Personal Finance: City Slickers Edition! If you liked my post, please explore my blog or subscribe to my RSS feed.