After crunching the numbers and mulling over what is “aggressive but realistic” versus what is “wishful thinking,” I’ve came up with a short but ambitious list of S.M.A.R.T. goals. The big picture is simple: I will focus on saving for short- to mid-term goals (down payment, grad school, car, etc.) and continue to save for retirement. My goals are specific, measureable, attainable, realistic, and timely, and I’m going to get it done. (And YOU are going to hold me accountable. 
)
Short- to Mid-Term
Save $21,000, with $12,500 in regular savings (money from my paycheck), and $8,500 in “extra” savings (bonuses, raises, tax refunds, gift money, etc.) Right now my goal is to save $800 for January, $1,100 for February and March, and $1,050 from April ’til December.
Retirement
I’ll max out the Roth IRA ($5,000 a year). I’ll have to save $500 a month from February to Novemeber. (I won’t be eligible for a 401(k) until 2009, and its hard to save money during December/January… all those presents!!). This is a perfect opportunity to concentrate on pulling together a down payment.
Debt
My only debt is my student loan, at $160/month. Because it’s an interest-free loan, I am not going to pay it off early. Instead, my money can work harder for me elsewhere. Eventually I’ll buy a new car, but the down payment comes first.
Spending
Who can forget about this category? Heehee. All save and no spend is a sure way to derail a budget, so I made sure that I left room for fun stuff. My top non-negotiable: massage! I’ve been going to a massage therapist regularly for the last several months, and I love her.
Bottom Line: I will save/invest $26,000 this year. Stretch goal: if I hit all of the above goals and still have money left over, I’ll… put more money into the down payment fund (or go on vacation. Hmm… the vacation sounds better, no?). It’d be sweet if I can save $25,000 for down payment, or $30,000 total. But that’s obviously above & beyond and pure gravy.
Related posts:
Sounds like great goals–good luck!
When did the Roth IRA change to 5k?
You obsess and plan just as much as I do about retirement and savings. I love it!
Good luck with your savings goals! It sounds like you have your work cut out for you!
If you want to save more for retirment after you max out your Roth IRA, you could always open a traditional IRA…just a thought!
Parker – the limit is $4,000 for 2006 & 2007, and increased to $5,000 for 2008. (http://beginnersinvest.about.com/cs/iras/a/iracontribution.htm)
SavingDiva – there is one limit for traditional AND Roth IRAs combined – you can split the $5K contribution however you’d like between a traditional and a Roth, but you can’t contribute over $5K to your IRAs. (Self-employed IRAs have their own set of rules).
Great goals, and well thought out. I have often thought how much I could’ve saved, if I started earlier. You are wise beyond your years, keep up the great blog.
I wish you success in all your affairs, Happy New Year.
For the most part those are some great (and very ambitious) goals. Good luck with them! However, I did see one red flag. You list a tax refund as “extra savings” on par with a bonus or gift. It’s not, and you shouldn’t think of it that way. Think about it like this. The government takes out a certain amount of money from your paycheck every month, then at the end of the year when you file your taxes, they count up how much you owe. If you owe more than they’ve already taken, they ask you to pay them the difference. If they’ve taken more out of your paychecks than you owe, then they’ll give you back your money. That’s a refund. So if you really think about it, what you’ve actually done when you get a tax refund is given an interest free loan for the government. Now, for someone without willpower that would have spent that money, that might be a good thing. But based on the rest of your goals, I don’t think you fit into that category.
There are penalties for underpaying your taxes, so you don’t want to pay so little that you get hit with those. So ideally, what you need to do is set it up that you and Uncle Sam are about even at the end of the year, or with you owing him a little (but not a lot). How do you do this? Take a look at the withholding calculator at irs.gov. Then make sure you update your withholding through the HR or Payroll department at your company. Since you’re being so financially savvy in other areas it’d be a shame not to take these very easy steps to net you some more cash (and interest on that cash).
Excellent on the 5k Roth IRA in 2008!
I am doing auto-payments monthly from March of 2008-March 2009.
Addy, that is something I do. At my company we can update our deductions on a daily basis via the intranet. During OT pay periods and the end of the year is when I jack up the deductions. I rather get 0 back each year and have all the extra to invest than pay Uncle Sam to much.
One thing to keep in mind when converting from a traditional IRA to a Roth IRA is managing when the taxes will come do on the converted amounts. It can be a good idea to spread out the conversion over several years so as not to burden yourself with the entire tax bill for the conversion in one year.