I have now managed to categorize and budget my expenses, long term and short term savings accounts, and I have begun to understand tax rules and how they affect investment accounts and options.
Nonetheless, I still find it difficult to determine the order and priority to assign to saving, paying off debts, investing, and business start ups.
There are so many competing philosophies on this topic, and I believe that there truly is not any one answer. Most advisors and financial ‘gurus’ will base their recommendations for you based on your risk tolerance, age and stage in life, and other factors. Lately, many advisors are much more conservative in their recommendation that you save and save and save your money for emergencies.
Here’s a look at what our short term plan is to balance all of these categories:
Short Term Savings for Spending: I am doing a better job of setting aside small amounts towards short term savings goals including a wedding gift fund, a car maintenance fund and a tuition fund for my husband’s college.
Long Term Savings: We also are saving towards longer term savings goals such as our contingency fund, software business expenses and my daughter’s education fund.
Pay Off / Reduce Debt
We are selling out house in an effort to reduce our debts and get to a level where we are more comfortable with our savings options. It hasn’t sold yet though (bummer!). I’m also looking forward to renting and not owning for a while so that we have a bit more flexibility with where we live.
Besides this, I used some of our tax refund to go towards our car loan. One of our goals is to pay off our 7 year car loan in 1.5 years. That will involve some aggressive payments. According to the calculator I used something like paying $150/month more than what we owe. I am considering setting up a bi-weekly payment also for this to help reduce the balance and interest paid. This will allow us to begin paying off our new student loans for my husband’s college expenses. They aren’t huge, but we’d like to be able to make that transition. So, paying off the car loan debt is definitely a focus for us.
I invest in my 401k, but it mostly depresses me to follow it. No matter how I allocate it, it vastly under peforms the S&P 500 index fund.
Beyond that, I am in the process of transitioning my Traditional IRA to an online brokerage. I also am opening up a Roth IRA, but realistically won’t be able to contribute to it until our home is sold.
I’ll be moving my daughter’s certificate to a 529 College Invest plan in April.
I don’t plan on building just one business, I plan on having multiple, including the consulting business that I already operate. I want to focus my efforts on business opportunities but once they are developed and running well, I would like to diversify and branch into other businesses (hopefully product based) for multiple income streams. This is not an overnight thing, but I firmly believe that this is possibly the most valuable thing I could be spending my time and some amount of investment on. Plus, I think this is what America needs right now. More start up small businesses, more entrepreneurs to get things moving.
As much as I am happy to be making efforts in many financially-savvy categories, I do still struggle with balancing and prioritizing them. I’d love your insight on this.