Saturday, October 20, 2012

Searching For New Financial Goals

I need some new financial goals.  I'm not particularly motivated to find any, though, as I discussed in my last post, "Higher Income Dampens Financial Discipline."  However, I can't escape the fact that I have to look forward to doing something with my money, even if it's just to let it accumulate in cash for the time being.  Here are some things I have thought about lately:

Pay Off Car Loan
One obvious goal is to pay off the car loan I got in December when I bought my new car.  I have never had any consumer debt of any kind, and so having this loan is not entirely comfortable.  I had planned to save up and buy a car in cash for my 30th birthday, but totaling my old one just before Christmas made me bump up that goal by a couple of years.  I got a 3.5% rate initially and financed 2/3 of the purchase price.  Irritated by relatively high payments though, I paid down the loan by half and refinanced it at 2.78% two months ago.  

I planned to make double payments and then pay off the balance in a year when I get my annual bonus; but after making a few extra payments I decided to stop.  Since I am paying it off next spring anyway, extra payments in the meantime will save me almost nothing in interest.  I discovered this after tinkering with my amortization schedule.  So I might as well build up a cash cushion instead.  Flexibility (i.e. cash in the bank) is worth paying a few extra dollars in interest to me anyway, I have learned.  Though I still can't help but pay an extra $100 here and there at least once a month.

Buy New Home
Next goal would be to buy a new house - to upgrade from my small condo to at least a town home or even a bigger condo (though I'm kind of tired of HOA dues and would just as soon buy a little house or half duplex nearby).  I searched for one last fall and even made an offer on a town home, and this was before I got my new job with the 30% raise.  I could certainly afford a bigger place now - my income has nearly tripled since I bought this place 6 years ago.  And my current condo could be my next rental property, adding diversity of location and price-per-square-foot along with property type to my rental portfolio.  Plus rates are low and prices will probably start to tick upward again soon.

However something is holding me back.  There is security in having such low fixed costs.  Even with my car loan I could literally work at Starbucks and pay all my bills if I had to, and after being shocked by the fact that my position was going to be eliminated last year (the fact that I already was interviewing for my new job notwithstanding), I'll never have the same sense of job security.  What do I really need a bigger place for anyway?  Why double my housing costs just for a bit more space?  I love my neighborhood and have quite enough trouble keeping the place organized and clean already.  Plus having plenty of disposable income to save or spend is not a small perk to minimizing housing costs.  

Besides if I ever do marry it will probably be in the next 5-7 years, and I'd rather buy and decorate a dream house with that theoretical spouse than liquidate my savings to do it by myself just in time to meet him.  Of course if I'm still single at 35 all bets are off and I'll be whisking myself and my corgis to a luxury town home with a fenced in yard.  By then I should have lots more savings anyway.

Increase Savings Cushion
This is imperative, but boring.  "Boost reserves" is not the kind of goal you can get excited about meeting and tracking. Any number I pick is an arbitrary target since I am not saving up for anything in particular.  My regular income now covers all the expenses I used to have to dip into savings for - travel, shopping splurges, Christmas gifts.  And I have the car now too so that's out as a savings goal; in fact I may trade it in for something cheaper sooner than later.  

At the end of each month I move leftover money from checking to savings, and so far this year that's been over $1000 each month despite my above-average spending (which has already gone back to normal).  I'll continue to do that indefinitely.  

I'd like to have $25,000 in savings before paying off my car note in a lump sum.  That shouldn't take long; I'm on track to have over $20K by year end and then I'll get a minimum bonus of $25K in March 2013 which will be more than enough to pay off the car after taxes.  Then I'd like to have $50,000 in savings before buying a new place.  

So I guess that's my goal for the foreseeable future: stockpile as much cash as possible so that one day when you do stumble upon a goal or desire, be it a new house or starting a business or running away to live abroad, you'll have the money to go for it.

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