My 2007 Goals for Financial Prosperity
Feb 19th, 2007 by Jennifer Lynn
Strategic Planning and Foresight Can Go A Long Way
Although I’m currently burdened with car and student loans, this year I’ve decided to juggle my income between paying off my debts, saving for myself and investing toward the future. Therefore my financial goals for 2007 are to establish a small emergency savings and begin funding a Roth, all while paying down my debts.
Here is how I plan to accomplish all of this.
- Baby Step #1 – Stop incurring more debt. I’ve stopped the habit of borrowing to pay for things with money I don’t have. Now I’ll only use a credit card with cash currently in the bank. This will ensure my ablity to pay off credit card balances in full each month to avoid interest penalties.
Now I can begin focusing on completely eradicating the debt I owe.
- Baby Step #2 – Always pay yourself first. I’ve been involved in the workforce for ten years now and it saddens me that I don’t have a penny to show for it in savings. Even if I had put a mere $1 of each paycheck aside in savings these past ten years, I’d be in a more secure financial situation than I am now.
I’ve become wiser and now automatically deduct 15% of my paycheck to shuffle into savings each week. From today forward, I will always pay myself first before I pay anyone else. This includes paying into others’ hands for debts I owe, splurging trips to the mall, eating out, anything.
If money is particularly tight, everyone should strive to set aside at least 10% of their earnings for savings. If you choose not to, financial comfort may always elude you.
Once out of debt, I will bump it closer to 20% and establish the habit now as I continue on through my adult life.
- Baby Step #3 – Fund a Roth IRA. Since my company offers no match incentive for a 403(b), instead I’ve chosen to open a Roth IRA to begin funding for retirement.
Although I still have debt to pay off, my decision for this is rather simple. I can always make more money to pay off debt, but I will never have the benefit of time again.
- Through paying myself first, I will use 15% of each paycheck to establish a small emergency savings of at least $1,000.
- Then I will use half of that 15% to slowly continue building a nest egg savings of at least six months worth of expenses. The other half will go into funding my Roth IRA.
- Eventually I’ll have a brimming nest egg established and can thus concentrate exclusively on funding my Roth to the max each year.
- Any unexpected gift of cash I come into during the year (such as a raise or a tax refund) will go exclusively toward the above goals.
How To Make Your Nest Egg Flourish
I love the simplistic egg basket illustration used in “The Richest Man in Babylon” by George S. Clason.
If you put ten eggs into a basket each morning and take out nine each evening, what will eventually happen to your egg basket? It will in time become overflowing because you’re putting more eggs into your basket each day than you’re taking out.
Use this simple analogy to help build your own financial blueprint for wealth. Don’t foolishly labor for others without paying yourself at least 10% of your income first. As Clason states,
… for every ten coins placed in your purse take out for use all but nine, and your purse shall begin to fatten immediately
Always remember that a portion of what you earn is yours to keep, no less than 10%, no matter how much you earn. Pay yourself first.
~†~ Baby Steps Are Key ~†~
What are some of your financial goals for this year?
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** If you’re uncertain about the imperativeness of funding a retirement now while you’re young, I strongly recommend taking time to browse through these articles by Ramit Sethi, The World’s Easiest Guide to Understanding Retirement Accounts and why It Never Gets Easier Than Now.
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Ack, and if anyone can help me restore my sidebar from the bottom of the page, it would be appreciated. This post seems to have made it drop down in IE.
*desperately tries to coax it back up from the abyss*
(Update - thanks to Adam and Dwane for your help in resolving the issue. We used surgical pliers and went in and restored the damage. All should be intact now.)
Glad to see those goals and best of luck! I have to admit that I haven’t been very good at saving 10% of my paychecks… I think I am much better at putting any bonus/surprise money into investment accounts than it is for me to put a little bit aside from every paycheck. The danger is, of course, that the bonus/surprise money can’t always be counted upon.
Great blog.
This is really good advice. I think I will do that… once I start to earn money, that is. I don’t have a job yet…
Very nice article and your plan sounds like it will be very productive. Something I have been challenging my readers with is to create an automatic savings plan with at least $1 per week going into savings. Too many people feel they have to hold off on savings until they can *afford* it. As you said, pay yourself first.
I wrote about my financial goals on my site earlier in the year, basically I want to increase my overall net worth by 35% and reduce non-mortgage debt by 100%. This second goal is a piece of cake as my only debt is a 0% balance transfer I have at HSBC earning me 6% APY right now. When the due date comes, it will be paid back.
A little known tidbit:
Other than the fact that Roth IRAs provide a tax-free way to invest, you are also allowed to withdraw money from it early and tax-free if you use the money to buy your first house!
Just to expand on that point a little further, you can withdraw the contributions to a Roth IRA at any time without penalty. The drawback to this is that you cannot replenish the funds at a later date, once you withdraw the contributions those funds cannot be replaced.
I’ve read numerous posts/articles of people using a Roth IRA as a pseudo-emergency savings account when they don’t have enough funds to build emergency savings and fund a Roth IRA.
Just be sure to understand the rules and limitations if you plan on using this approach.
OH crap you moved!
I had a feed through Yahoo and it kept saying no articles in the last 3 days…!
So i am trying to do a Rss Feed through Yahoo and it keeps says “oops error” or something like that. Can you fix that so that I can link up…or maybe its something that I am doing wrong…
thanks
Anyone taking financial advice from this site “obviously” needs major, major help.
Perhaps the title itself might be a clue?
Best,
Marco
Very good advice! I’m also a student, and I’ve been finding that I need an emergency fund, especially as I’m in the process of having a root canal done! Those aren’t cheap. I’m no longer spending on credit (when I can avoid it.)
Ignore Marco. I’ve read through some of the other articles on your site, and they are all great!
Oh the days of poor college life. I enjoy reading your site just to reminisce about those days. The goals you’ve set for yourself are certainly attainable ones and will help you all the days of your life. I have a load of friends that came out of school with $50k-$70k in school loan debt. Most of the cash was spent on ridiculous items since there is really no limitation on how that money is spent.
Well since I am a Christian, I pay a tithe of 10% to the church. Now currently I am paying about 19% interest on a few of my debts. Lets just say I get a 5.25 % interest rate savings and save 10% of what I make. ($19000 annually). Now I know you will be adding in month by month, but to make it simple I am going to assume this is a whole year. Here is my math doing it your way:
$19000×10%=$1900×5.25%$1999.75 =$199.75 “free money”
Now lets say you take your $1900 and use that to pay off your debts at 19% interest, which compounds daily, not monthly or quarterly, ect.
$1900×19% apy(compounded daily)= (about not exact) $2353.57 = $453.57
So I agree saving is good, VERY GOOD, but do the math. One year you would “make” and extra $250.
Jason, my best friend is also a devoted Christian. I just attended a service with her last night, in fact. I think it’s great you’re tithing 10% to your church. Major kudos there!
I agree wholeheartedly with your math. However (and I don’t think it was clear in this post), I also currently don’t have a credit card. So although that 10% would -financially- be better applied to debt, security-wise it would make me very nervous. The savings of 10% is meant to be a safety cushion buffer for myself, especially since I don’t yet have the luxury of being able to throw an unexpected emergency onto a credit card (at least not yet).
=^..^=
Jen,
It is not bad that you do not need a credit card. However, it is definatly not good. A car repair that you don’t have enough money saved up for will be crushing. 100% of my debt was incurred by my wedding and honeymoon, (I am getting married in April, 2007). I should also note that I went to college, and that was completly paid for before I graduated. No, I do not have a portfolio. But within a few months I will be able to funnel a good amount of money into one.
When i was in High School. Durning my Senior year. I saved over $5000 in which I put into the stock market, later than year 9-11 hit. Ever since then, I have been leary about the stock market.
[...] yesterday that I’ve reached one of my first financial goals earlier than expected (see My 2007 Goals for Financial Prosperity.) Thanks to diligently socking away between 10-15% of my paycheck and through receiving a portion [...]
I put 20% in to a savings. But I/We, keeping having to take it out.
Any Other suggestions?