By no means do I mean to offend anyone trying to diet on a new years resolution or whatever resolution you chose to do, nor do I mean to offend anyone with lofty goals. If this method works for you, you are a better man/woman than I am.
It seems like everyone is talking about new years resolutions and goals these days. I guess it got me thinking since we are changing our course in debt repayment right that I need to contemplate what we want to accomplish this next year.
First of all I don’t believe in new years resolutions. Here’s why: you resolve to make some change in your life (usually far to drastic to stick to) and for the next 3-6 weeks you suffer trying to attain this unreachable ideal. Then you fail miserably and end up in worse shape than before. Be it personal finances or dieting, it never works. The reason it never works is these major changes aren’t just a change that you make to do something different, they are complete lifestyle changes and take commitment beyond just saying your are going to loose 50 pounds and throwing away potato chips and buying carrot sticks. You have to devote your life to this change and change your whole fundamental thought process to make it work. To do this you have to make all facets of your life conform to this and this takes time, not just deciding that starting Jan. 1st you are going to diet.
The other thing that gets my goat is the notion of goals. I see people set goals all the time, usually lofty goals stating that this year they will do this and that. They always put some time frame in, but the problem is that most people make their goals so lofty and ambitious that they aren’t actually realistic. While it works for some people, the concept of goals has never worked for me.
Instead I prefer to set a plan of action. I use logical figures and facts and estimate where things are going to end up on a time line, so that at any given moment I know what my progress is and how far off I am from my estimate. I guess what I am saying is that to me it makes more sense to plot an expected target and realistically (with rough numbers to back it up) make out a plan to follow. Sort of my brain’s roadmap or instruction set of how to accomplish the task it set out to do. Maybe it’s just my engineering background or project management, but I like to have a course of action and be able to know where I am at any given time.
So with that said, 2008 came to a close just as we got the truck paid off. So in 2008 we paid off the last of the sallie mae private student loan, paid off the siding loan from the house and paid off the pickup.
- Item 1: Continued Debt Reduction:
For 2009 it will be a short list for debt reduction as the house is the next target. The mortgage is currently at just over 33K right now.
Our plan is to add the $800 a month we were putting on the truck and put that on top of the mortgage payment, making it out to a nice even $1200/month starting in February.
So taking out the interest, taxes and insurances… it should track as follows:
January – $33,300 starting balance
====Start $1200/month payments
February – $32,400
March – $31,500
====Call and remove PMI, saves us another $20/month
April – $30,580
May – $29,660
June – $28,740
July – $27,820
August – $26,900
September – $25,980
October – $25,060
November – $24,140
December – $23,220
Now these are just rough numbers, but planning things out, we should at around a $23k balance by the end of the year. That’s motivating. Hopefully we can keep this up, if so we should have the house paid off around the fall of 2011.
- Item 2: Start a savings account:
In the past we were also adding snowflakes on top of the debt snowball. We will not be doing this from now on as dealing with the mortgage company is a PITA. Instead, since we do not have any savings other than the extra $1000 we have in the checking account for emergencies, we are going to put any extra money from paid surveys and our free money endeavors, selling stuff on ebay/half, birthday money and overtime money into a savings account. While we don’t plan to religiously add to this, we will periodically re-balance the checking account and transfer the excess over the basic $1000 dollar float into that new savings account.
- Item 3: Funding the HSA medical expense account:
Since my employer has us on this horrible HSA account with an insane $6k deductable, I was putting $240/month into this health savings account just for paying medical bills. We basically broke even in 2008, so I am going to continue to put $240/month in there this year hoping that since the kiddo is at home with momma now he won’t get as sick this year.
- Item 4: Funding the 401K
It’s really hard to force myself to put money into this knowing that every time I log on nowadays the balance is down about 10% from the last time I looked. However my employer matches 35 cents on the dollar up to 10% so I need to take advantage of that. While I can’t afford to put in 10% right now, I am going to stay the course from last year and continue putting in 4%. After we are debt free in a couple years I am going to make this a priority, but for now paying off the debt is the priority and we are still putting some in there.
Well, that’s the plan. So long as nothing drastic happens financially, I can look back at the plan and know what has to be done.