I didn’t want to hijack Crowbar’s thread on budgeting, so I started this one.
My husband and I are both getting a little antsy. Basically, we have certain nebulous financial goals, but no specific plan to meet them. We both save, we both have 401(k)s and outside investments, but we don’t have a specific household budget. We also haven’t sat down and specifically indicated certain things like when we want to retire, how much we want to set aside for our kids’ college (though we have a fund I put money into), etc. We know we probably need a budget and an independent financial advisor, but we haven’t yet gotten beyond that.
So, I’m curious: do many Dopers have specific financial goals? How do you plan to meet those goals? When did you formulate your plan and how long did it take you to create it and put it into action?
Money isn’t really a huge problem for us - we don’t live paycheck to paycheck and we pay off all credit card debt religiously every month - but we know we need to do more than we are now.
Yes my wife and I do have a financial plan in place. The only way to meet a goal is to plan for it. We are currently still on that goal and I don’t see any reason we can’t meet it (retire in a couple of years from now). Frankly we could do it now but part of the plan is her obtaining her pension at her job and we are close enough to that, we would be stupid to not finish this out. We max out each year both of our 401k plans as well as fun both of our ROTH IRA’s. We also have purchased our daughters 4 year education using our states equal to the 529 program.
Our financial plan in no particular order:
- max out my 401k pre tax as it reduces my taxes so it is a guaranteed return. Plus my employer matches the first 6%, again free money.
- max out my ROTH as taht is something I can draw on when I retire before my 401k and it has already been taxed.
3.Pay myself first. One thing I see consistently is that most people get a raise and then turn around and raise their standard of living. We have consistently put that money away, in other words we pay ourselves first.
4.Pay no credit card debt, I use my card every month, but I consistently pay if off each month. If you really look at how much credit card debt costs you it is amazing. You can pay the min each month on say a $2000 debt and then when Christmas comes around and the nice bank gives you a free pass since you have been paying so well all year–well if you do that, you go back to the debt you had in January! Nice job Mr Friendly Bank.
- Buy major purchases with cash when/if possible and if not bought outright pay off as quickly as you can.
- Enjoy life. Don’t put away everything for the future as you are living a life now, but do plan for both. We have great vacations but we plan them and they are for the most part paid off before we take them. The money for the credit card bills is set aside before we go on vacation.
- Don’t try to keep up with the neighbors or coworkers. Just because someone looks rich it is even more likely they are mortgaged and in debt up to their eyeballs! Having a big house with a fancy car, the latest clothes, etc does not equate to being wealthy. Anyone with that much debt has to pay the piper and thus has to play the game so they don’t lose their job and thus all their toys. Frankly to be honest I could lose my job tomorrow and live comfortably for many many years before I had to go back to work. But I like my job and as I am so close to my wife hitting her pension I will stick it out. But it is nice having the knowledge that I could tell them to stick it if I truly wanted to!
- Set up a budget! You can’t know how or where your money is being spent unless you do. It will help you find out what is important and what isn’t. We spend over $2k on coffee in a year–but we can afford to. But if I wanted to cut that out I could by buying a machine and making it on my own. Right now in my life that isn’t as important as the convenience of my americano I can get from the local coffee shop. So even though that many (probably me included!) would consider that a total waste of money, it is one I can make knowing the ramifications of it. Without a budget I am not sure of how you can do that.
I am sure more will come to mind. It isn’t like I hava a ‘set plan’ per se–I have financial goals that I strive to meet. But first in mind is having a goal and finding a way to meet that goal. Good luck!
Cool - thanks for the response! I appreciate all the suggestions. May I ask how old you are? And when you started planning? Also, do you have an independent financial advisor or rely on your ROTH & traditional 401(k)?
Yes and no. We have a plan, but we also change the plan often.
We have priorities. Those priorities have goal dates.
Priority one was to live within our means, done…and continueing
Priority two was max out 401ks. That’s done and still in progress.
Priority three was paying off the house. The goal was by my 40th birthday. We did that about six months early.
Priority four: We have two children to put through college. I’d like to save $350,000 towards this before they start college. That will give them flexibility to choose a private school without being ears deep in student loan debt (though if I send two to Princeton or something - unlikely - that won’t cover it). In progress and on track. Right now, they’ll have no problem living at home and going to the state university.
We don’t use a financial adviser, but I do have a degree in accounting with finance coursework.
My wife and I just turned 50. We do have a financial advisor. My wife got the bug much earlier then me (prior to our marriage) but luckily for me my employer had a good pension/profit sharing plan that helped supplement my 401k. So when we combined the two retirements and really looked at it and realized that if we really focused on it we could retire early, I got the bug as they say. That was about mid 40’s and we both started maxing out then. I frankly stopped talking to my friends and coworkers about it because it became clear early on that most people put very little away for their retirements. I know of no one here at my office who puts away the maximum besides myself.
There was a great book I read at that time (I can’t remember the title–I will look when I get home) that really helped me get this in perspective. I will look for that when I get home and post the author then.
We have a couple plans - several have changed over the years due to changing priorities and circumstances. Final back-up plan involves the car, a hose, and a garage, so as long as we can afford those when we are too old to work, it’s all good.
Seriously, right now it involves finishing off the existing debt (about 2 years), maxing 401(k)s, a couple annuities, sell the house & pay off chez singlewide well before retirement age, and hope nothing happens to wipe it all out in one fell swoop. We both come from very long-lived families and have no health issues (both pushing 50, still not on any meds), and both plan to work in our respective fields until they won’t let us.
When our first kid was about two I went to a seminar at Merrill on college planning. Best thing I ever did. We immediately started saving for college outside the saving we were already doing with our 401K. But, most important, I used him as my financial adviser, so when I got a good chunk of money from a buyout I had someone to advise me how to invest it.
We didn’t, and don’t, have specific dollar goals, but rather general principles. No credit card or auto debt. Max out 401K and SEP. Be frugal. Look for good mortgage rates and refinance when it makes sense. We put both kids through college without them owing anything, and just paid off our last kid’s fairly small loan with the money we got from our last refinance - which left us with a smaller monthly payment and an interest rate lower than the college loan rate.
We don’t budget, since we naturally save and have money left over.
An example of goals: my last company had a Stock Savings Plan which bought stock at a 15% discount. My new company has only a 5% discount. We decided that this wasn’t worth the risk of having too much stock in one company, so I’m taking the money I would have spent on the stock and putting it into my more general investment pool.
So, our basic plan is to have no debt but mortgage debt, or debt that has a lower interest rate than investment alternatives, have a good financial adviser and listen to him, and not get anything we can’t pay cash for.
I have to admit making a decent salary helps also, but plenty of people who make more than I do are in debt. All I can say is that at 58 I’m not worried about retirement, and our financial adviser thinks we are in good shape.
This works for us, but I can see the benefits of a budget for people who get pleasure from buying things.
I just remembered the book and author
http://www.gailmarksjarvis.com/
“saving for retirement (without living like a pauper or winning the lottery)”
I thought this book had some good general financial advice and would recommend it.
My plan was simple.
I began preparing for retirement in my 20’s and put aside a little more than I thought I could.
I planned to have $100 million by the time I was 40, retire, and live off of 1-2% annual interest. I’m a bit behind.
Did you have a plan, or just the objective? Cause I think the objective is a good one, but damn, the devil is in the details on an objective like that - unless you plan on inheriting a LOT of wealth or discover you have Joe Mauer’s talent.
(We actually have plans behind our objectives. For instance, with the house we saw it was a reachable goal if we paid extra each month (that we could afford by not doing other things) and if we applied our bonuses from work to it - which we did. It meant giving up some other things - I drove my car longer than I wanted to - and had some dependencies - we’d have had to slip the schedule if bonuses hadn’t come through. The kids college is being funded by moving that mortgage payment - including the extras and bonuses - over to their college funds. And to illustrate how plans change - the original plan was to have the house paid off before the kids went to college, the use the house payments to send them to a state school, plus money we’d been setting aside in deferred compensation. The deferred comp is now targeted for our retirement and our goals for the kid’s college funding have changed.)
Thank you very much for all the responses! And Hakuna Matata, thank you for the link to the book. I’m definitely going to check it out.
Also, Voyager, I went on Merrill’s Web site and they have some pretty good interactive tools on college planning, too, though a seminar sounds better. I calculated how much I’d need to save to pay for both my kids’ college education and it scared me into defining our monthly expenses.
My husband and I had been talking really vaguely about, “Oh, we should be on a budget,” or, “We need to fund our retirement,” but we’ve been too apathetic so far to put together an actual plan. I know it’s something that really concerns my husband, but he’s the type of person who takes years sometimes to research something before finally coming to a conclusion. He wants to get everything just so before actually beginning to plan. I, on the other hand, usually plunge headlong into long-term projects. This dichotomy is probably why we work so well together as a couple - he’s great at pointing out long-term problems and all the angles; I’m impatient and want to do something now.
Financial planning is probably the greatest example of this. Both of us want to be able to retire around the standard retirement age, ideally sooner, but we also want to pay for our kids’ college. I’m all for it and I want to get started now. But my husband has been insisting that we need to have “conversations” before starting a budget. Yes, we do need to talk, but we’ve been talking for almost four years. I think we can start doing something now, and he agrees, but doesn’t know where to start. It’s time to whip out the bills, statements and investments and figure out what we’ll need to save or invest (or where we can invest more wisely) and where we can make cuts and put together a household budget.
When I told my husband what I was doing yesterday, he said, “overly, I’m so relieved you’re doing this. I don’t know where to start and I’m tired of talking about this. Tell me what you need from me and I’ll do it.” Hopefully we’ll get on track soon. Being an adult is scary. It sounds dumb, but sometimes I’d like to be 18 again.
When we were both working we lived off 1 salary and saved the other. This allowed my wife to stay home after our 3d kid was born. Then we focussed on paying off our house and saving for the kids’ college, figuring that what would have been our house payment could go to tuition. Was fortunate that my job has a pension and a 401k which we maxed out on. Stuff like new cars, travel, eating out was WAY down on our list. Never carried a balance on anything other than our house, which we paid off some time ago.
Last year was the only year we will have had all 3 in college at the same time. Looks like we should be able to help them get out of undergrad without them or us incurring any debt. Are looking forward to spending like a couple of drunken sailors over the next couple of decades! 
My plan was to write fiction novels. However, by the time I finished graduate school, my writing skill had deserted me. Now, my writing is rather painful even for me to read, and I can’t find my old short stories either.
Plan A: Be a writer.
Plan B: Teach
I started my financial plan after effing up my credit at age 20 
My father, who is smart with money and has always made sure he and my mother are set, made an offer I couldn’t refuse. He’d loan me the money to pay off my debts if I agreed to work with him to develop a budget and money goals. I paid back every penny (with interest!) and learned a lot from him about saving, investing, and spending.
Once I finished school and started making more money I decided to see a financial adviser to set realistic goals.
Not going to list them all, but a few of mine are:
[ul]
[li]Pay off my mortgage by the time I’m 40. I’m on my way to having this one done ahead of time.[/li][li]Purchase an investment property. (just bought a condo for this purpose)[/li][li]Max out funding 401 and Roth IRA each year (have been doing this now for 5 years)[/li][li]Maintain an 8 month emergency fund (enough to pay all monthly expenses for 8 months in case of job loss)[/li][li]Pay all credit card purchases off each month as not to pay any interest[/li][li]Separate wants vs need on spending. Anything that falls into the want category is okay as long as for every one thing I buy, one thing leaves. I saw my grandparents accumulate too much stuff in their home and I never want to have that be me.[/li][/ul]
Once I pay off my mortgage I’m going to sit down with my adviser to map out new goals.
I do not (and will not) have children so I realize that my priorities and expenses are greatly different than other people in my age bracket.
And although some people like to dismiss her advice because she’s an Oprah person, Suze Orman has a lot of good basic advice for people who are wanting to get started taking control of their money. I think she does a good job of explaining how even small amounts can add up if you get in the habit of saving. A lot of financial advice is geared toward people who have money and not so much to people who are struggling.
The thing that throws people off are “medical” “dental” and “unemployment”
Everyone prepares for “What if I lose my job,” but what if it becomes, “What if I am UNDERemployed for the next three years” Or “What if my new job only pays half of what I’m making.” This is common now and can really effect you.
Dental problems creep in when you least expect it and you have to decide, do I pay for root canals ($1000 - $1500) or just go for dentures.
Another thing is finding out who you can/can’t count on. I knew one man, spent a LOT of money helping his kid through college, nice Ivy League University and he’d joke, “Yeah but now he’ll feel guilty in my old age and take care of me.”
A month after this kid graduated and found a nice high paying job, the kid was hit by a car and killed. To put it blunt, not only do you have the emotional scar but now this man paid a couple of hundred grand to put his kid through college. All that was for nothing and now he’s all alone in his old age.
It’s easy to plan for the big routine things. It’s hard to foresee the unexpected.