Archive for December, 2008

2009 financial goals on the table

Okay, so I warn you. These 2009 financial goals are pretty out there. Of course, if we manage to meet them we will be beyond happy, and even though the bar is almost too high to see over, I still think these might be achievable. Even if they’re not, I’d rather set my goals high and miss a few, than set out easy-to-meet goals that don’t force me to think outside the box.

One other niggling worry I have about these lofty goals. For the first time in years we will have a little (actually, a lot) of extra money coming in. Scrimping before didn’t worry us much because we knew we were on one income and so did everyone else. Now I’m a bit worried that one of us might rebel because of how strict the budget will be, or that people will expect us to be different now we are on two incomes. It could be my husband who struggles, or it could just as easily be me. We will have to figure out if any of these should be renegotiated along the way.

I’ve already stated that my overall goal in 2009 is to get our net worth above $100K. If we meet these goals, we’d more than meet that target.

Some of these goals are included here to counteract problems we’ve experienced in this past six months – since becoming `debt free’. Others are ones that you’ll recognise me talking about non-stop. But let’s cut to the chase – here they are:

Goal 1: Billpaying account `buffer’ – $500

This is here because I find that if we get a lot of bills all at once, our billpaying account plays it pretty close to the bone. With $500 sitting as our new `zero’ point, we shouldn’t be at risk of dishonour fees if a direct debit hits at the wrong time and it will also help us handle things if a bunch of bills come in at once.

Goal 2: Our own personal `credit’ account – $2000

This might seem like a stupid goal but we have continued to live beyond our means since becoming debt free, and therefore I’m going to try it. Since July, we have still carried a balance at different periods on our credit card (if only for a short time). Usually this is not because of frivolous spending but because of circumstances somewhat beyond our control. For example, I am currently awaiting a refund of $900 from the university for the travel costs of my elective. They were supposed to pay it back immediately but it didn’t happen and now the lady who handles these things has gone on holidays. So I can’t sort it out till she returns. Consequently, $900 is sitting on our credit card awaiting an interest fee! To avoid such problems, I would like to establish my own $2000 `credit’ account (really just a personal savings account) that is separate to my emergency fund and from which I cover such `problems’. I want to keep it separate from my emergency fund so that the e-fund does not get touched unless the emergency is real. And if I am in a situation where my `credit’ account gets eaten in to, I know I have to pay it back just as I would a credit card (minus the interest fees!).

Goal 3: $1000 voluntary superannuation contribution (me)

In Australia, our retirement system is called superannuation, and it is compulsory for all workers. As an incentive to put extra after-tax dollars away in our retirement accounts, the government co-contribution scheme will add up to $1.50 to the account for each $1 the low-income earner puts in (up to a maximum of $1500 from the government). You can read about it here. Because I will only be working this second half of the financial year, I should fit the bill. The amount the government will contribute starts getting reduced after $30,342 and I think I will earn just under that this financial year. So we need to find $1000 to put into this scheme, since the bare minimum return in one year has to be 150%, and this is virtually impossible to beat on any investment type.

  Goal 4: $1000 after-tax superannuation contribution (husband)

While my husband isn’t eligible for the scheme outlined above, he is eligible for an employer match system on voluntary contributions. We aren’t sure of the limits for this, but think $1000 is about right.

Goal 5: $200/wk savings to emergency fund

We aim to put $200 week aside because we think with discipline this is achievable and it represents just over 10% of our combined income. This is important to me in terms of security and because I don’t want to buy a house and not have any cash available to us once we put the deposit down. When we do buy a house, we plan to leave our efund in an offset account attached to the mortgage, to `offset’ the interest. I’ve heard that this is not offered in the US and if it is, it only became available recently? Some people overseas refer to loans with this facility as `down under’ loans because they originated here. The grand plan is that our emergency fund will total $10,000 by the end of 2009.

Goal 6: House deposit savings of $650/wk

Between this goal and the one before, my weekly wage is (more than) wiped out, so you can see that we really are planning to continue to live on one income into the future. One benefit is that my husband has recently secured a large payrise, so we will still have a little more money than we do now. If everything goes right, we should have just over $30,000 for a deposit by year’s end.

Goal 7: Salary sacrifice $25/wk from my wage 

The government in Australia allows workers to `sacrifice’ some of their wage to superannuation before tax is taken out.  When it goes to retirement, it gets taxed at 15% instead of our usual tax rate (often 30% or more), so `more’ of our money goes to these savings. Of course, the tradeoff is that you can’t get the money back till you’re 65 (not even on loan). A small extra amount every week of my working life should make a big difference to my overall retirement package. (NB: To be honest, and without going into too many details, I won’t even really miss this money because I will be working for a benevolent organisation (a hospital) and therefore there are some small tax concessions that would have given me about $25 a week more in the hand than other employees in other industries on a similar wage).

Goal 8: Salary sacrifice $50/week from my husband’s wage

Hubby is a bit closer to retirement than me and needs to boost it pretty quickly. So we are making it a priority to send a bit extra to his superannuation accounts.

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So these are the big goals. However, I’m not done yet! I have two smaller goals that I would like to record, but which I don’t yet see how to make happen. I know I should open myself up to possibilities, so in a `Pollyanna’ moment, I am going to add:

Goal 9: Contribute $5000 to the share market/managed fund

I would LOOOVE to do this but don’t see where the money will come from. If we received a lump sum from somewhere, we would probably actually do this since the market is currently so low. I have been researching companies like crazy and following their progress but don’t have any cash to send that way. So many really good companies are `on sale’ right now. Oh well, more opportunities will come, and hopefully something amazing will happen to make this happen.

Goal 10: Buy a late-model petrol-efficient vehicle

With little or no public transport in our city and a toddler to get to childcare each morning, my old car is dying a slow and ugly death. But I just can’t make myself buy another depreciating car when we essentially don’t have any real assets to our name. Maybe this will change and I will have to shuffle the goals a bit, but right now, I just can’t make it a priority.

So that’s where I’m at. I welcome comments and feedback. I also know that I am very lucky to be in a position where I might even come close to meeting so many goals in one year, but I will still have to work hard to get there and my little family will have to make  lot of sacrifices to do it.

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Christmas spending

Happy Christmas everyone! I hope everyone is having a great holiday season (though I can’t quite get used to that very American saying `Happy holidays!).

I have had some lovely downtime with the family, though I have to admit my financial mind never stops ticking over, even at this time of year.

We had a very low-key Christmas and it was lovely. It was partly an enforced situation because we had been concerned about graduation right up until December 21. My family decided to swap no gifts, except that my son received a gift from all the usual quarters (he’s the only grandchild in the family). Although this gift embargo might seem mean-spirited, it’s really not, as our family commonly bands together at some point in the year to buy something for someone in the family when it comes up (ie if their favourite musician is coming to town and they’d like to go to the concert).  This way, we tend to give gifts the person actually wants.

As for hubby’s extended family, we do continue to buy gifts for the children. This is an enjoyable arrangement and not too costly in the scheme of things. Also, this is the final year we will probably do it for some of the `children’ as they just graduated university and are about to move out of home – at 24, 23 and 21 they don’t really qualify anymore!

Anyway, this is what we ended up spending this Christmas:

Hubby: $100 for a fishing reel he has wanted for 6 months. On the plus side, it was marked down from its usual price of $139.95.

Me: Not sure exactly but suspect hubby spent about $80 on two lovely good quality candles and six Royal Doulton wine glasses.

Our son: We spent $50 total on a 36-piece animal farmhouse, two books and some stocking fillers.

Nephew: $35 for a bottle of spirits (don’t worry, he is over 21!)

Father-in-law: $20 for `scratch-it’ lotto tickets.

Niece and nephew – family #1: $50 (total) debited to parents account to spend in post-Christmas sales. 

Niece and nephews – family #2: $60 for two ties (the boys are about to start work). Our niece received her Christmas present earlier this month as part of her birthday present.

Parents – family #2: $10 for a box of chocolates as they do a lot for us.

Food and alcohol: $100 – we bought all of the food and some of the wine for our champagne breakfast with the family on Christmas morning. We didn’t need to buy Christmas wrap or cards as we already had a stash.

Our total Christmas spend was $505 which represents just over half our usual Xmas budget. The funny thing is, it was by no means a less enjoyable Christmas for the reduced spending. This year, it was somewhat necessary to reduce the budget since I haven’t worked over this whole final semester of uni and we have had lots of added expenses over the last six months (my island elective plus graduation are just two that come to mind).

It is worth considering ways to keep our Christmas spending low in the future. I think I’ll keep the usual $1000 budget but if we can pull in the actual spending below that again in 2009, I would be very impressed.

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Ambitious financial goal for 2009

While I haven’t worked out the details for exactly where the money will go, the experience of revising my net worth chart this morning has informed me about what my overall goal is for next year.

I hope to boost our current net worth of $59,390 to over $100,000. That’s a massive increase, I know. But I think it’s achievable in a few ways:

1) Hopefully, we won’t see further retirement account drops, and if they do happen they won’t be so severe. Because of my aggressive portfolio type and the fact I am not working therefore not contributing so far this year, the value of my retirement went from around $27,000 to $19,000 and was only partially saved by the government co-contribution scheme her in Australia, which effectively added $2500 in after-tax money. If anything I hope our retirement accounts remain stable at the least.

2) We’re planning to effectively bank my whole income this year and then some. Since I’m supposed to earn $57,000 (and this could be as much as $70,000) gross, the after-tax portion should be applied to savings and the like.

So you see, it should be achievable as long as we use discipline. I am looking forward to the next phase of our lives.

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Grad over, now it’s Christmas

Oh my God, graduation is finally done and suddenly I realise it’s Christmas. We had a great weekend and we have all been super-focused on grad, but then I woke up and realised Xmas was just days away. We are doing low-level Christmas this year – a gift for each other and our little one, plus a few cards for the rest of the family. We had 4 graduations in the family so everyone is a little bit over the present thing.

I don’t think I really understand the momentous nature of having graduated just yet, but it does feel nice that I can really be called `doctor’ now!

I can’t wait to start work in January.

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Aaargh! Finances in disarray!

I can’t stand it! I have more bills than cash coming in and most of them are one-off bills!

Academic gown hire!

Graduation ball tickets!

Frame for graduation certificate!

Shoes to go with grad dress!

Aaargh! I wish that elusive financial fairy godmother would make an appearance. In her absence, we’ll have to make do.

The path from debt freedom is a slippery slope, that’s for sure.

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Not much progress …

Haven’t gotten far on the goal of making up that money – worse, my family decided to get my nan a group gift and it cost $150. I went and got it, but forgot to collect the cash from everyone … hmmm, I wonder if they’re good for it … 🙂

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He got the job!

Hubby just called and informed me that he has won the position, and is not only now in a managerial role but is up for a $20K pay rise, plus extra superannuation!

So it seems that 2009 might mark a financial turn-around for us – wouldn’t that be fantastic?

I am going to do something nice for him tonight to celebrate!

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