Fabulous Financials

As a supplement to my 2008 goals, I also created a “to do” list for the year.

I’m so anal…

2008 “TO DO” LIST

• FINANCES (Personal)
  • Hire an accountant
  • Consult with an attorney to finalize living will and revocable trust
  • Determine exactly what is needed to retire by age 55
  • Tell Ver.izo.n Wireless to KMA in May
• CAREER
  • Increase salary by 7-10%
  • Attend at least 4 leadership seminars - See “plan” below
  • Seek out next high profile project
  • Strategize to pursue next promotion in early 2009 - Plan Completed 1/15/08
• FINANCES (Business)
  • Create Fabulous Financials, LLC
  • Apply for EIN - Completed 1/5/08
  • Open a PO Box - Completed 1/4/08
  • Separate business and personal finances
  • Open a home equity line of credit (??)
  • Sell rental property (??)
• BLOGGING
  • Share link love more often with fellow PF bloggers
  • Increase subscribers (email or RSS) to over 1,000
  • Increase revenue and traffic
  • Purchase private domain name - Completed 1/11/08
  • Purchase a fabulous custom design (??)
• BEING MAMA - BABYGIRL
  • Plan “Sweet 16″ birthday party
  • Tour 3 college campuses (Spelman, Howard, Princeton)
  • Register for practice SAT or SAT strategy course
  • Find at least 3 ‘hidden’ scholarship opportunities
  • Put all allowance/rewards on USAA pre-paid MC
  • Allow BabyGirl to budget/spend at her discretion
• HEALTH
  • Get full body massage once per quarter
  • Manage stress - yoga and/or therapy
  • See PCP for annual physical and tests
  • See Dermatologist for new skin regime
  • See Dentist for long overdue exam
• PERSONAL
  • Update Voter’s Registration for VA - mailed 1/10/08
  • Find a local women’s shelter to volunteer
  • Explore the DMV: men, unknown restaurants, jazz clubs, comedy clubs, spoken word venues, wine vineyards, fashion events, cultural events, and other age 30+ grownfolkbidness.

I plan to monitor this “to do” list throughout the year and mark things off as they are accomplished.

I’ve alluded to my resolutions my goals before, but I must admit, they were extremely vague. I mean, how useful is it to say I’m going to do x, then y, then z, blah, blah, blah. Yea ok, and we’re all going to be millionaires by the year 2010. Ya know, I really like the number 2010. It’s so pretty. Did you know it was an even number? I bet you didn’t know even numbers were good luck? See, don’t say I never taught nuttin’. Wow, three negatives. I should be an English professor!

If being a millionaire is what you want, set it for a date with a pretty even number and consider it done. How do I know? Well, because I’m psychic of course…and a genius…and because I said so! Trust me. Wait until 2010 and watch it come true - right along with the other RESOLUTIONS you just made last night.

And if you believe any of that, call me quick!

1-900-single-ma

[insert Jamaican accent] I have more wonderful things to tell you. LOL

For the rest of us to have a reasonable chance at achieving our GOALS, we must “define” them so that they are SMART: Specific, Measurable, Achievable, Realistic, and Time-bound.

My ultimate financial GOAL is to establish a $1M+ net worth, but I thought it was a bit much for one year. Ya think? So I decided to spread the love over the next 12 years and apply the SMART principle to my (short term) goals for 2008:

1. SAVE 6 MONTHS CASH RESERVE

• Specific - Currently, my emergency fund balance is $12,461. However, my goal is to have a cash reserve of at least $15,000. This would be approximately 6 months of very basic living expenses.
• Measurable - To make this happen, I will save an additional $2,539 and monitor my progress in monthly net worth updates.
• Achievable - This goal will be my #1 financial priority. A few weeks ago, I set up a payroll allotment of $600/month to my emergency fund. I will also deposit any windfalls (e.g. bonuses, tax refund, etc.) if I’m so lucky to receive them.
• Realistic - See summary below.
• Time-bound - I will have a $15,000 emergency fund by 30 April 2008.

2. INVEST MAXIMUM 401K CONTRIBUTION

• Specific - As mandated by the IRS, the maximum tax deferred retirement contribution is $15,500 (excluding catch up) for 2008. Therefore, to maximize tax benefits and adequately plan for retirement, my goal is to invest $15,500 in my 401k. This will be my first year maxing out! Yay!
• Measurable - I will contribute a fixed dollar amount through automated payroll allotments, which is a simple way to guarantee success. This will also serve two purposes: 1) take advantage of dollar cost averaging and 2) avoid maxing out early to ensure the 5% employer match throughout the entire year. I will monitor my progress in monthly net worth updates.
• Achievable - Since my last paycheck of 2007 will be dated and deposited on January 3rd, there will be 27 pay periods in 2008, instead of 26. So I set up a payroll allotment of $574 per pay period (574 x 27 = 15,498).
• Realistic - See summary below.
• Time-bound - Max out my 401k on the last payday of 2008.

3. INVEST MAXIMUM IRA CONTRIBUTION

• Specific - As mandated by the IRS, the maximum Individual Retirement Account contribution is $5,000 (excluding catch up) for 2008. Therefore, to maximize tax benefits and adequately plan for retirement, my goal is to invest $5,000 in my IRA. I’m not sure if it’ll be a Roth - all depends on my eligibility - but good news is abound. Per the IRS:
  

  “The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution taxpayers filing a joint return or as a qualifying widow(er) is increased from $156,000 to $159,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $99,000 to $101,000.”Source: IRS Pension Plan Limitations for 2008

• Measurable - I will contribute a fixed dollar amount through automated payroll allotments and monitor my progress in monthly net worth updates.
• Achievable - Since there will be 27 pay periods in 2008, I set up a payroll allotment of $185 per pay period (185 x 27 = 4,995).
• Realistic - See summary below.
• Time-bound - Max out my IRA on the last payday of 2008.

4. INVEST MAXIMUM 529 TAX DEDUCTIBLE CONTRIBUTION

• Specific - As mandated by the state of VA, any Virginia 529 plan contributions up to $2,000 per year are deductible from state taxable income. Therefore, to maximize tax benefits and help BabyGirl pay for some of her college expenses, my goal is to invest $2,000 - the maximum tax deductible amount in BabyGirl’s 529 college savings account.
• Measurable - I will contribute a fixed dollar amount through automated payroll allotments and monitor my progress in monthly net worth updates.
• Achievable - Since there will be 27 pay periods in 2008, I set up a payroll allotment of $74 per pay period (74 x 27 = 1,998).
• Realistic - See summary below.
• Time-bound - Max out deductible 529 contributions on the last payday of 2008.

5. INVEST IN NON-RETIREMENT ACCOUNTS

• Specific - Now that I’m non-mortgage debt free, I would like to focus more on building wealth. Since my 401k and IRA are a given, this goal is specific to taxable accounts. I’m still wet behind the ears when it comes to investing, so my goal is to educate myself throughout the year and build a diversified portfolio with a value of at least $5,000.
• Measurable - I will manually invest a minimum dollar amount every pay period and monitor my progress in monthly net worth updates.
• Achievable - To accomplish this goal, I will:
  1. Invest at least $400/month in my online brokerage account.
  2. Based on what I know today (thanks to JLP @ All Financial Matters), primarily invest in low cost index funds.
  3. Visit more “investment focus” blogs/websites.
  4. Write at least one investment blog post per week.
  5. Read 1 investment book every 2 months and write a review.
  6. Update the status of my portfolio on the blog once per month.
• Realistic - See summary below.
• Time-bound - Over the course of the year, I will learn to make educated investment choices and establish a minimum $5,000 non-retirement investment portfolio by the end of 2008.

6. WORK LESS, LIVE MORE

• Specific - To strike a balance between work and play, my goal is to take three vacations in 2008.
• Measurable - The destinations and budget for all vacations are as follows:
  1. Spring Break
     • Term: 4 day extended weekend
     • Destination: within CONUS
     • Budget: $500-$1,000
  2. Summer Break
     • Term: 7-14 days
     • Destination: Paris, France
     • Budget: $5-7,000
  3. Winter Break
     • Term: 7 days during week of Christmas
     • Destination: Carribean Island
     • Budget: $2,000
• Achievable - I earn 6 weeks vacation per year, so this goal is definitely achievable. The hardest part will be planning for each trip and staying within a $10,000 budget. At initial glance, a round trip to Paris and 7 days in a 4 star is about $4,000 but I’m sure I can find better. Do you know of any helpful travel web resources? I will spend at least 2 hours/week researching options, checking out CC rewards, and planning our itinerary.
• Realistic - If all else fails, the summer vacation is a must and I’ll do without the other two. For the spend plan, see summary below.
• Time-bound - I will book the flight and hotel reservations at least 2 months in advance of each trip and anticipate enjoying my new work/life balance.

7. REMAIN DEBT FREE - no explanation needed.

Are these goals realistic?

By the end of 2008, I plan to save $30,000 (eFund, 401k, IRA, 529, taxable investments) and spend $10,000 (three vacations) for a total of $40,000. This means approximately 40% of my “earned” income has a designated purpose.

After subtracting another 10% for taxes (paid less than 8% last year), I will be forced to survive on only 50% of my current salary. According to my annual expenses (2007 review posts coming soon), this is very doable for required living expenses. It will also motivate me to increase “passive” income for non-necessities.

Now — are my short term goals Specific, Measurable, Achievable, Realistic, and Time-bound? Absolutely! Achieving my goals in 2007 was a challenge, but also a success. Hopefully, 2008 will bring similar results.

Read more about creating S.M.A.R.T. goals for yourself.

- or -

[insert Jamaican accent] You can always call me.

1-900-single-ma

Call me now!

Now that I’m debt free, my next financial priority is beefing up the e-Fund and learning to maximize investment returns. As I was making adjustments to control frivolous holiday spending, I used MS Money to project my disposable income and required expenses for the month of December. Then I subtracted the estimated cost for the rest of my planned gift list. After running the numbers, I noticed a surplus there too. Hmm…

Then it dawned on me!

Without actually using the term, I realized that I was applying the snowball method to pay off my debt. I fondly remember when I had a car payment of ~$380/month. After the car was paid off in June, I applied the same amount towards my student loans. Now that the student loans are paid off, I have an additional ~$380/month that need a place to call home.

Considering my new financial priorities, I logged into my employer’s personnel site and increased my e-Fund allotment from $250 to $600. I’m only ~$3k away from my revised e-Fund goal of $15k, so this change should get me there no later than early summer. Whoa! Then I’d have to really get serious about investing.

As you know, I’m a huge advocate for establishing goals - realistic, achievable goals - and seeing them through to the end. Not only do I say what I’m going to do, but I actually do it. Regular readers, I’m sure this is no surprise to you. But if you’re new to SMFF, see this list of 2007 goals and their status to date, as well as my new goals for 2008.

When my brain is wired, I focus on an end result and don’t stop until I achieve it. Of course I’m flexible enough to adjust to life’s changes but for the most part, when I say I’m going to do something, you can consider it DONE. But enough about me. I’d like to know how my readers are doing and what new goals (short and long term) you plan to achieve in the future. So tell me…

What are your short & long term goals?

Are they realistic and achievable?

Do you have a plan to make them a reality?

Is the plan still in your head or has it been executed?

I want to hear from ALL of you, active commenters AND lurkers. Even if you post anonymously (use any name to identify yourself). You never know when you will inspire others to make a change for the better.

On Sunday, I’ll use a random number generator to select two winners who will receive an autographed copy of Goal Digger: Lesson Learned From The Rich Men I Dated, written by Alicia Dunams [see my book review].

Please, only ONE ENTRY PER PERSON.

The winners will be announced on Monday.

Now let’s talk about your new goals!

*passing the mic*

Edit to Add: I appreciate your emails, but in order to enter the book giveaway, you have to post your goals in the comments. K’thanks!

~*~*~*~*~*~
Work to achieve, not to acquire.
And as always, BE FABULOUS!

To keep the momentum going with my annual goal setting, I’ve added new ‘goal meters’ to the sidebar. Check ‘em out. To the right, to the right…

First Priority

Dump the student loan debt. The balance is a little over $2,400 and I plan to celebrate debt freedom (sans mortgage) when the New Year rings. [done]

Second Priority

Increase the e-Fund. Back in 2006, I estimated our needs for a $10k e-Fund. Since then, our standard of living has changed and I have more at risk in the event of an emergency - rental property. In addition, moving to NoVA caused a spike in monthly living expenses. I tell ya, this city is the (or one of the) most expensive in the DC metro area. Although I have no concerns about job security, life happens and I need to be somewhat prepared. So I’d feel more comfortable with at least 3 months living expenses in the kitty. After the first priority is complete, I’ll put a time frame on this one. Depending on the cost of BabyGirl’s retainers, I’m thinking next summer.

Overarching Priority

Double the net worth. It took me almost 2 years to accrue $126,000 and it may take just as long to double that amount. I’ve never evaluated my annual return, excluding contributions, so I can’t rely on the rule of 72. *shrug* But that’s my new goal - $250,000 NW. We’ll see. In order to accomplish this, I plan to:

1. Become AND stay debt free
2. Max out my 401k
3. Max out my IRA
4. Max out 529 state tax deduction
5. Invest in more non-retirement assets
6. Possibly acquire a second home

Fabulous Fun

2007 was the first year my feet ever touched non-US soil and I plan to continue the tradition every year for the rest of my life (God willing). I have no idea where we will go next year, but international travel and new cultural experiences are now a priority in our lives.

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You know how they say an idle mind is the devil’s playground? Well consider my brain an amusement park. It functions at warped speeds, so I need goals to keep me focused or he’d have a field day. LOL

~*~*~*~*~*~
Work to achieve, not to acquire.
And as always, BE FABULOUS!