Tuesday, May 12, 2009

What to do in two years

I just found this post about things to do before you turn 30 over at 20SomethingFinance. It's given me some food for thought.

1. Start an IRA

I did this for the first time for 2008, but only managed to get $1,000 in it. I'd like to contribute again for 2009 but I doubt I can max it out.

2. Start an Emergency Fund

An emergency fund has been my #1 personal finance goal for the last 10 years. I now the recommended 3-6 months saved up (3 now, 6 when Peanut moves in and cuts my living expenses). I'm comfortable keeping it there for now.

3. Get your Employer’s 401K Match

I do contribute up to the match but no more than that. Ideally I want to get to the point of saving 15% for retirement PLUS an employer match but I'm not quite there yet.

4. Eliminate all Bad Debt

Never had any--when I graduate next year and have around $20,000 in student loans to pay off, I'll consolidate them and pay them down quickly. I don't intend to go into debt for anything other than a house.

5. Create a Monthly Budget Plan

I've been living off a budget as long as I've been working on an emergency fund, but over the last year I've started giving myself a little more slack. I set up savings categories (for travel, gifts, medical/dental expenses, insurance premiums and other irregular things) but I'm not being superstrict with what's left over. I used to be an envelope budgeter and get cash out at each pay period and use it for specific categories, and I don't do that anymore. If I need food, I buy food. If I need toiletries, I buy toiletries. If I want a magazine or a soda, I might buy it. I pay myself first and have frugal habits, so I don't feel a need to live with a bottom line in mind.

6. Set Some Serious Short and Long-Term Career Goals

This one could use some work. I will graduate with a master's degree before I'm 30, but I'm still in an entry-level position at my company with no immediate prospects for moving out or up. I promised myself I wouldn't really think about it until I was done with school, so I don't have the stress of writing a thesis and starting a new job at the same time. But I do need to figure out some goals and start networking with the idea of eventually doing something else with my life--three and a half years in this position will be plenty.

G.E. Miller's post reminded me that I need to be working on fleshing out some detailed goals instead of continuing to save without any real end point in mind. Do I want to save for a downpayment already? Do I want to save to put a dent in my student loans? Do I want to earn more so I can save more or spend more? Do I want to have an iPhone more than I want to achieve some other goal?

It's not enough to look at something and say well, yeah, I CAN afford it. I mean sure, I have money in the bank to go on a Caribbean cruise right now if I wanted to. But that doesn't display my goals or values--I DEFINITELY want to go on a cruise, but I want to save up for it, plan for it, wait for it, and then savor every last second of it. But am I saving for that right this instant? Nope. Why not? What else am I leaving out?

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