I thought I had goals. But it turns out, I have mostly hopes and dreams when it comes to personal finance. Paying off our mortgage in the next 10 years isn’t a good goal. Staying out of debt isn’t a good goal. Increasing my net worth isn’t a good goal. They’re undoubtedly important aspirations, but they’re not measurable. They’re also quite vague.
For someone as fond of spreadsheets as I am–I love them, I do, I do, I do–you’d think that I’d be all about SMART goals. The more specific the goals, the more observable the metrics. Hello, spreadsheets. For too long, I’ve let fears prevent me from setting specific goals. Fear of failing and fear of investing have kept me locked in a holding pattern of saving but not really allowing our money to work for us. So here’s to shaking off the fear and setting some real goals for once and for all.
Debt Pay Off
Last year, I finally fessed up to the fact that we paid not $18,000, but $24,000 towards our debt. That included our six-figure mortgage and Mr. P’s car. Now that we own both cars free and clear, we’re comfortable doubling our mortgage payment every month. Even so, that won’t take us to $24,000. Still, if we came up with $24,000 last year through trimming our budget and side hustling, I’m hoping we can do the same–if not a bit more. So, I’m going to set this debt repayment goal at $24,000 by year’s end.
Investing – Roth IRAs and Beyond
For the past two year’s, we’ve maxed out both of our Roth IRAs. Prior to that, I would put some money in mine…and Mr. P didn’t even know what a Roth was. So, we’ve made progress. I also plan on fully funding both of our Roth IRA’s this year. The catch is I’d like to do this in increments. Because I’m still the type of investor that holds her breath and tries not to pee her pants whenever she logs onto Vanguard, I’ve waited to make the fateful “transfer money” click once a year. This is really stupid. I don’t know how much I’ll be able to part with every month, but I’m determined to part with something. By the next IRA deadline, we’ll have to sock away $11,000. Since that’s over a year from now, I’m going to aim for steady, consistent action in whatever increments we can fund. Since I’m not doing the vague, loosey-goosey thing anymore, let’s say I’d like to have $4,000 put towards these accounts by December.
By my birthday, I’m going to open some type of investment account outside of my Roth IRA and deposit $1,000. I was pretty well set on Betterment or Wealthfront, and I’m still thinking I’ll go that route. However, I did just have a fascinating conversation with my parents about money, and my mom waxed poetic about bonds. Then Vanguard announced this. Coincidence? Yeah. But, still. I have some thinking to do. For simplicity’s sake, the easiest move is probably to set up a small account with a robo-investor. Then, I can either keep adding to it, or I can venture into other possibilities. Of all of my goals, this is the one that I feel least comfortable with. As a result, I’m making myself take action on this goal the soonest. By the end of next month, expect a report on this move of at least $1,000 into an investment account.
So there you have it. One specific goal for debt repayment and two more goals for investing. Hopefully, this is the start of me adopting the practice of setting measurable goals that will move us further along our financial journey.
So Tell Me…What are your goals? How do you track them?
The first step is to make the jump, so you’re already half way there! Good luck! You are so far ahead of everyone else. I wish I had a home and a mortgage, and none of this other debt I have dug myself in. You are doing great!
A mortgage can be pretty soul crushing sometimes. But. I love our house, especially now that I’m gearing up for our garden again. We are really fortunate for the circumstances we inherited and created. That’s why I get really mad at myself for letting my fears stall our progress. Here’s to jumping in!
I have to say, I’ve been pretty bad at setting goals beyond my lofty “save 50% of my monthly income” thing (which oh my god I am so close to doing this month cross your fingers nothing happens in the next two days!) I think the next best goal I have is to save $20K for a house downpayment over two years, but otherwise my goals are of the “my bank asked me to set a goal for this account so I wrote down a number and never looked at it again” variety. This is a good kick in the pants to actually set some time-bound goals to work towards, other than just the house thing!
For a while, getting into investing was a (super vague) goal, but I really can’t say enough about how the Canadian equivalents of Betterment and Wealthfront have helped ease my investing anxiety! My biggest worry is that I am sure I don’t know what I’m doing, and they help with that by taking care of the “What” that goes into my investments. All I have to handle is the “how much” side of things!
As always, I’ll be here cheering on the sidelines for yay investing, haha.
Thanks, Des. You truly are the best. I hope you’ll share your time-specific goals once you set them. I love that description – I just handle the “how much”. I think I’m ready for that part!
If you set up with the robo-advisor, they will likely have you in bonds as well as stocks. And if you notice, the minimum purchase for the VG Core Bond Fund is $3K. So if I were you, I would go with the robo-advisor for now, particularly since all you want to put in this year is $1K. I love Vanguard, but the minimums to purchase their funds tend to be $2500 or more.
(Personally, I like individual in-state muni bonds for my brokerage account. The rates aren’t great but the interest is not taxable on either the state or federal return, which I figure inflates the stated interest a bit compared to taxable interest . But generally you buy munis in $5K increments, and it can be difficult to find good ones without a broker.)
I did see their minimum is $3k. We have probably $10K we *could* play with. But I’m such a scaredy-cat. I’m going to hate myself looking back at these posts in my old age. I’m hoping a toe-dip with a robo account will be the start I need. I will also look into your bond advice. I’m about halfway through the Bogleheads’ Guide to Investing and am trying to soak up as much information as I can this spring break!
I like your goal of paying off your mortgage in 10 years, but agree with the fact that goals need to be specific. Since I can remember my father made us right down our goals. We would do 1 year, 5 year, and lifetime goals. Well it has stuck and each year instead of new years resolutions I revisit my goals. It is amazing how they have changed year over year. For example, my goals fresh out of college focused on possessions and now they are focus on experiences. Keep up the great posts.
Those are excellent goals! I still need to max out one more 2015 Roth! But luckily, with the energy audit rebate check I got yesterday, I’ll be able to do that this week! Then start working on 2016…
I have a wildly unpredictable salary, so goal setting is challenging. My goal at the moment is to stick to the same budget that I did when I was in training (completed in June 2015) and to put everything else into RRSPs (the Canadian equivalent of 401k) or towards repaying my student line of credit. At some point I’ll want to buy a house, and in June my LOC turns to a term loans that requires a fixed repayment plan, both of which will require a total revamp of my budget.
That definitely sounds tricky. The only part of my income that isn’t predictable is my side hustle. Fortunately, I (only) use that to pad our extra mortgage payments or save for undetermined goals. It sounds like you have a solid plan and goal system given your situation!
Well now you’ve done it. You’ve forced me to get out that sheet from the beginning of the year to see what my goals were. In fairness, my wife and I set goals for a whole bunch of categories (like health, relationship, spiritual, finance, etc.) so there’s a lot on that sheet. As for the finance ones, we agreed to pay off our credit card debt (0% interest debt meant to be short term), add extra principal to each mortgage payment, and rebuild our emergency savings. We’re on track with the first two, but I think we’re lagging a bit on the savings. The moral of this story is that even if your goals are SMART, you actually need to keep them visible and regularly evaluate your progress (at least monthly or each time another blogger mentions goals).
So glad you shared your goals! And congrats on the progress.
Check out the Bogelheads forum too. You can find answers to just about any financial question. You already recognize fear us holding you back. Try using imagery. Mentally pick up that fear, put it in a box, wrap up the box, tie it with a pretty bow, and put it on a shelf in the garage. Really, just set it aside and do what you need to do. Bonds are good for a portion of your money, but you’re young-most of it should be in equities Pick an index fund that matches the market. Set it and forget it for 6 months.
It can be with Betterment, Wealthfront, anything. It doesn’t matter if you dollar cost average of do lump sums when you have the money. The jury is out on which works better. Just do it.
Keep reading. The more you know the better you will feel. Just don’t second guess your choices once you make them. And don’t be watching the numbers every day.
Great goals! I agree, it can be easy to get lost in the details of daily life or the big-picture dreams and forget to set measurable, specific goals. We’ve been working toward early mortgage payoff for several years but now that we’re counting down the months, it’s time to set some new goals. Which is exciting!
Congrats, Kalie! I will throw some virtual confetti your way when you get to the payoff date. Very exciting! I can’t even imagine what it would feel like to be that close. Can’t wait to hear about your new goals.
I fully support concrete goals! Last year with all the market roller coaster fun, we had to shift our thinking for the first time ever to actual *savings* goals instead of *balance* goals, since we had to accept that we’re in the point in our investing lives when we have very little control over our balances, and the markets have basically all the say. Nice problem to have, but takes some getting used to! But in truth we do still have targets for each year to stay on track for ER, and so far we’ve always hit them… and we’re ahead of schedule this year, assuming the markets don’t nosedive.
As for your investment goal, you’re way too young to focus on bonds. A high bond allocation is for folks close to retirement or already retired who need to protect their capital, and don’t need long-term growth, which you surely do. See page 4 of this doc from Vanguard: https://advisors.vanguard.com/iwe/pdf/ICRPC.pdf. It helped us determine that 70/30 stocks/bonds is the right mix for us because it gives the best average returns with lowest average risk (as in, if we did more stocks, we wouldn’t likely get much better gains, but we’d risk bigger losses). And we’re huge fans of the Vanguard index funds over the robo advisors, just because those fees really do matter hugely over the long term, and the passively managed funds do have the best track record. BUT, the best strategy is one you’re excited about and will stick with, so if doing Betterment or similar gets you fired up, then DO IT! 🙂
I *LOVE* this. I waxed poetic about robo advisors to my dad for a good half hour yesterday (I was testing the waters, I think). And he was really shocked at the low fees and whatnot. But then he asked the magic question: “Why don’t you just open another Vanguard account?” Dangit!
In other news, our target retirement funds are currently 90/10 – because apparently I like my investments with a side of heart stoppage. I keep tinkering around with the idea of increasing the bond percentage, but I don’t know.
I too like my investments with a side or two of heart stoppage 😉
Quite honestly, I didn’t put that much thought into my selections earlier on, I just kept scraping to put money in and that’s all I worried about.
As a fellow spreadsheet junkie, I too felt like a fraud for not being more of a SMART goals kind of person. In my case, though, I think that it has a lot to do with being so intrinsically motivated. When I map something out for the math, that’s one thing. When I map out a roadmap for my goals, it feels like I’ve externalized the goal and no longer feel a bond to it. And naturally I must bond with my goals to achieve them. 😉
I love the idea of bonding with goals. I’ve tried to set some goals in the past because they were the “right” thing to do. Needless to say, those didn’t happen.