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I’ve spent the morning reading budgets sent to me after the open invitation in yesterday’s post.
I think we’re all going to love reviewing and discussing a different budget every week (or so).
I’ve had budgets from a single person with two dogs, some Aussie DINKs (dual income, no kids), an Aussie couple with kids, a German family, a military family, a young couple wrestling with debt after a business failure, a high-earning couple of Baby Boomers with two kids at private universities, and a couple of families with kids here in the US. All generously shared the details of their budgets, and some even laid out the details of their incomes.
Many conspicuously failed to mention any goals.
I’m still pretty new to the budgeting game, but it seems like one of the biggest benefits of using a budget is how it helps you set and accelerate the achievement of goals.
Now that I’m living within my means I’ve stopped worrying about keeping the lights on and shifted focus to my (and my wife’s) short, mid, and long-term financial targets.
Let me share my top six financial goals with you, then ask for your feedback.
1. 1-month buffer: $5,100 lets me live on last month’s income.
2. 3-month emergency fund: ~$15,000 to give us peace of mind in the event of home, car, and non-catastrophic medical emergencies.
3. Pay off all debt, other than primary mortgage on the house: roughly $72,000.
4. Finish my basement and make other home improvements: ~$40,000 to $50,000, depending on how much work I do myself and how much labor I can get by bartering copywriting and web work.
5. Save for kids’ college: I don’t know whether we’ll want to help the kids with school, but we want to be able to. $100,000 to get three or four kids through college?
6. Save for retirement: I’m also fuzzy on this number. $1,500,000 seems like a reasonable target, based on previous discussions.
I feel firm on the amounts and order of goals 1-3, less so on goals 4-6.
I welcome your comments and feedback, and I’m looking for discussion on one key point:
Is it smart to work on these goals in strict sequence? In other words, am I savvy or silly to hold off on retirement savings until goals 1-5 are handled? What about the sequence of the rest of the goals?
You’ll notice I left time frames out of the discussion. The rate at which I accomplish these goals will depend completely on my income growth. My brain is hard-wired to seek an income in the $200,000 per year range. If all went according to plan, I’d be earning at that level again with about three years. If all didn’t go according to plan, I’d still be living within my means and chipping away at these goals, however slowly.
Remember, budgeting is not restrictive. You won’t be spending less, you’ll be spending right. You can do this! Today. Right now. What do you have to lose? Except all that debt and stress. (Ok, so kind of a lot.)
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