Financial Sanity 101: Setting Financial Goals

OK, I know right now we’re all just trying to get through the holidays without spending every last cent we have. So I thought I would talk today about setting financial goals for the new year. Becoming financially sane requires us to set goals and stay on track until we achieve them: it is very easy to get complacent once you’ve reached a certain level of comfort, whether it is to get out of credit card debt, or to pay off your cars, or your house, or whatever. But there is still work to be done!

Dave Ramsey’s program is built upon completing his Baby Steps to financial freedom, which are:

1. $1,000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. Three to six months of expenses in savings
4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give!
8. Invest in mutual funds and real estate

As I’ve stated before, I think Dave Ramsey’s plan is awesome. It saved my life. That said, I have a few issues with it because of his expectation that people can buy homes for less than $200,000. This just is not possible in some areas of the country. And I don’t think that means that you should have to rent forever or move. Similarly, he wants all debt paid off with the debt snowball before you save for retirement or college for your kids, and this includes saving for your own kids’ college funds. Well, that’s just plain old not acceptable to me. My husband and I are still paying off our student loans because of the gargantuan cost of education these days, and I don’t want my son to be in the same boat, particularly since the estimated cost for his education (private school) is upwards of $300,000. (!!!)

So, we are still working the plan but not quite by the book. We have paid off all of our credit cards and cars. We don’t use credit anymore for anything other than the mortgage. But we still have student loans to pay off. Right now, our snowball is being applied to our savings–we have about 3 months but since we are self-employed, we’d like to have six months in the emergency fund. Here are my own financial goals for the new year:

1. Finish saving for emergency fund with 6 months of expenses.
2. Continue to save in Mini’s 529 account every month.
3. Aim to pay off 10% of student loan debt that is left, in addition to regular payments, by the end of the year.
4. Buy a new car in cash.
5. Begin putting full 15% of income into retirement.

These are kind of hefty goals, but I am going to go at them one at a time. Just writing them down makes me more confident we can achieve them. What are your goals for the new year? Write them here, and we’ll all encourage each other to get moving!

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