Although I have very low costs and very few bills to pay, I have still failed to set goals for myself. Maybe in a few months I’ll have a stronger grasp on exactly how much I am able to save each month, but even my pen and paper calculations show me having over $1,100 in extra money each month. I know that’s I’m supposed to be setting up an emergency fund, so right now, that is my first order of business.
Starting in December, I will be put on an automatic savings plan for my student loans, so my goal until then is to pay off the 6.8% part of the loan, or about $1,400. Finally, my other short term goal is to set up a Roth IRA for the calendar year of 2009, which I can contribute to until April 15, 2010 and still have it count for my 2009 year. The reason I’d like to do this is so that whenever I do decide to buy a house, no matter how far down the road it may be, I’ll be able to take out money from my Roth IRA (If I need to).
Planning
After I finish building up 3 months of savings, an estimated $3,500, I guess since my loans have an interest rate of about 3%, I should build up some money to invest. At this time, the market seems like it will continue growing, and a 7% or 8% seems very reasonable. So why not make the minimum payment and earn that 4% or 5% instead of paying off my student loans? I’m still researching some investment options, I’m thinking of a mutual fund, either through Vanguard, where I have my Roth 401(k) or possibly in a Sharebuilder account, through ING, where I currently have my savings account.
Flexibility
In a few years, I’ll probably start to accumulate larger bills, pay more for housing and utilities, and I’m sure there will be various additions to my monthly bills. Automatically saving now will lead me on a good path and get me in the habit of saving money without having to think about it. I don’t need all this money now, but in a few years, I’m sure that I’ll be spending much more than I do now.
In 3 or 4 years, I’ll have the flexibility to buy the car I need, I’ll be able to start thinking about buying that house, and I’ll be prepared for all of those life events that people talk about. I’ll be able to go on vacations without having to worry about paying rent, and I have to believe that it will be nice not to worry about finances. Or more likely than not, I’ll probably just be worrying about other types of finances. Instead of worrying about how much I should be keeping each month in my checking account, maybe I’ll be worrying about my asset mix.
