Help Me Decide: 2010 Financial Goals

Readers! PF Bloggers! I’m pretty terrible at making a decision by myself and I’d love your help and opinions. You all helped me decide whether to buy shoes and how to allocate raises, and even extra roommate rent. As I begin to make my 2010 goals, I’m faced with a few option for the Savings/Debt money I have each month. I will do my best to explain the status of it all.

Top Priority in 2010:

My #1 top priority for the year will be to pay off my debt, which should be done April 2010.

January to April 2010:

  • $700 to Debt
  • $25 to Car Repair Fund (I’ll probably continue this throughout the year)
  • $100 to Roth IRA
  • =$825 per month

Next Priorities:

After I pay off my debt, the focus changes a little bit. Here are the three things I’m debating about right now: Emergency Fund, Wedding Fund, or Max out the Roth IRA. Right now with $825 flexibility each month, I don’t have enough money to fund all three goals in addition to my debt.

Here’s the status of each:

  1. Emergency Fund at $6,000
    I’d have to add $3,600 to reach this goal since the account already has $2,400. That would mean approximately 5 months of $700 savings. If I start in May, then I could be done with that in September, or $450 each month until December.
  2. Roth IRA at $5,000
    I will continue with $100 per month January to April. If I want to max out the Roth next year, I’d have $400 and would have to contribute $575 each month for the rest of the year to reach my max.
  3. Future [Wedding] Fund at $5,000
    I want to have at least $5,000 to pay all (or most) of my wedding whenever the time comes. Read more about this account here. I already have $1,000 in this account and would need to save $4,000 in order to reach my goal in 2010. To be honest, I don’t expect to get engaged in 2010 but it certainly could happen if J moves here in the next few months. This may seem like a silly or premature goal, but it’s really important to me. Hmm perhaps I could reevaluate this once J and I live in the same town? I’m hoping that happens in 2010 also.

Other Factors to consider:
–Tax Refund: I got $1400 this year and that money could be used for some of these.

–Extra income: I could designate all extra income to go towards a specific goal in addition to what my top priorities are.

What do you guys think?
The Roth IRA is what is getting to me. I know I should max it out, but if I didn’t have that there, then I could easily save the entire amounts for the Emergency Fund and the Future Fund.

I know that in the scheme of things this is really not a big deal and I can always reevaluate things in the future, but I’d like to get my 2010 financial goals ironed out before the year so I can plan accordingly.

Pay debt, then…. Roth IRA, Emergency Fund, or Future Fund?

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  • What’s the status of the emergency fund now? I try to save 6 months worth of expenses. In my opinion, that always has to come first, and anything else after that.

  • It’s currently at $2,400 and has been on hold until I pay my debt first. My goal is to reach $6,000 and then up it to $12,000. I guess I’m not sure where my Future Fund and Roth IRA fit in with the E-fund goal.

  • MMP –
    I think that once you’re done paying off your debt, you should start a little fund called the “me”
    fund. Every month I think you should put in $25 – $50 in it. In six months or so, I think you should buy yourself something really nice to reward yourself for paying off all your debt. I’m think a new purse, a classic pair of shoes, a piece of jewelry, something to remind you, for years to come, of how hard you worked at paying off your debt. Obviously, this isn’t the most practical thing to do, but I think that people, if they’re in the right circumstances, should do it more often. Life is short, and I think doing things like this help to rejuvenate the soul.

    In answer to your real question, here’s my answer – Emergency fund first, then Future Fund, then Roth.

    The reason I think it’s important to put more towards your FF than your Roth next year is because you’re going to need the money in your FF before you need the money in your Roth. Not that you shouldn’t be saving all you can for your retirement, but the money for a wedding is going to be more of an immediate expense. You don’t know when you’re going to get engaged for sure, but what I’m saying is that when you get engaged, you’re going to need the money for the wedding right away. Even if you want to have a casual wedding, you’re going to need all of the money you’ve saved. I’m telling you as someone who’s pulled out all the frugality strings there are for her wedding, you are going to need that $5,000 for your wedding and probably more.

    In conclusion – pay off your debt, start a “me” fund, max out your emergency fund, save all you can for your Future Fund and continue your monthly contribution towards your Roth.

    Hope this helps :)

  • In my humble opinion –

    After the debt is paid off, fund the ROTH and the Emergency Fund. Then you can designate all extra unexpected income straight to the wedding (future) fund. I’m recently married and I would have L-O-V-E-D a plan like this. Plus, knowing the extra money goes towards you wedding is a HUGE incentive!

    Love the blog,

  • My priorities are always:

    1. Debt
    2. EF (mine is 10 months)
    3. Retirement
    4. Other savings

    Nice job!!!!!!!

  • Definitely the E fund. If anything, this could be a combination of the Wedding Fund and the E Fund. However, if you and J have sat down and seriously discussed dates for engagment/wedding, etc, then maybe you should be bolstering up your Wedding Fund.

    Eitherway, I think you should take care of yourself first by making sure your E fund is in a good place. Then the rest can go to other things.

  • I’m going to offer a different opinion.

    Let’s assume you have $800 that is “flexible” ($700 from debt and $100 from Roth).

    I would do the following:
    $300 to E-fund
    $400 to Roth
    $100 to future fund

    And then any addition money you get put in your future fund or the E-fund.

    This will get your Roth to $3,600 by the end of the year. Not maxing it, sure, but still getting a VERY substantial contribution. The % that you can gain on this is the greatest, which is why I would put more to do.

    Your E-fund will get to $4,800. That isn’t your $6,000 goal, but that is a sizable fund. Any extra money you get (including your tax refund) I would put in here. That will still get it to $6,000 by the year’s end (most likely) without sacrificing on your Roth.

    And you’ll get $800 in your future fund. Since you’re not engaged yet, I would keep this going but “in the background” until J pops the question. Then you can reassess where you allocate your money. And hopefully he’ll also be saving money for the big day as well. =)

  • You might want to take a look at a book I just read called “The Debt-Free Millionaire” by Anthony Manganiello. He outlines a 5-step process that has really helped us put our financial planning and goals in order.

  • Ooooh I love your strategy for a “Me” fund. I think I may do that AND have an idea of my Debt Free purchase! I also like your rationale for the order. That’s what I’ve been feeling with the Wedding fund. Even though time is on my side for the Roth, it’s important to me that I have a good chunk of change “just in case.” Thanks for the insight. :)

  • Ugg, I’m in the same type of dilemma! I’m just not sure what to tackle first. The truth is, I HATE saving for retirement. It’s so boring, and I’m afraid that I’m saving up all this money for a time when I might not be in good health to even enjoy it. Or, the market might take a nosedive (a la 2007/2008) and I could lose all that money that I could have been spending on travel and fancy shoes in my carefree youth! Haha, can you tell I’ve thought about this? :)

    I think you should remember that regardless of what you choose, none of the options are bad. No matter what, you’re being SUPER responsible with your money, so you should feel good about that.

    After paying off your debt I would focus on building up the E-fund, using the extra income you earn to build up your wedding fund, and contributing about $100-$200 per month to your IRA.

  • My answer’s not going to be as fun, but it might be equally satisfying! :)

    The $1400 refund goes to the efund = 3800.

    Then I’d do a 60/20/20 split: 495 to the efund/month
    247.50 to Roth and Future funds.

    You’ll have that $6000 in the efund, $1513.75 in the Roth and $2113.75 in the Future fund within 4.5 months (mid-Sept).

    Then you can go 60/40 on the Roth and Future funds through the end of the year, adding another $1732.50/1155 to each account bringing the final totals to:
    $6000 efund
    $3246.25 Roth
    $3268.75 Future

    Personally, I might go with a 50/50 split at the end of the year for simplicity’s sake.

  • Love the idea of a wedding fund. I was thinking about doing the same once I finished my debt and got some savings started. It’s been 6 years with my BF!

    I like Revanche’s idea or SS4BC. Put most toward your emergency fund and then the rest split between Roth and wedding fund. Then once you feel comfortable with your e-fund split the extra income between the Roth and wedding fund. Hopefully your BF will be saving as well! $5000 each, you can have a pretty nice wedding for $10,000! Don’t forget about the honeymoon ;)

    I also like the idea of a small ME fund as well!

  • Although I understand your need to fund other goals, please, please remember that once the opportunity to fund the Roth IRA is gone, it will never come back. Also, you can withdraw your contribution to the Roth penalty and tax free, so it can be used as an EF if required. Of course the idea is NOT to dip into it, but it is an option if you really need to. So my vote goes to maxing out Roth, then remainder split between EF and wedding fund. Good luck! Whatever you decide, the choice to save is never wrong.

  • I’m in complete agreement with SS4BC. At the moment (as our economy has shown us) your EF should be top priority, you just NEVER KNOW what will happen.

    Second the Roth, yes saving for retirement can be boring, but you’re in a great place right now to save a decent amount with the bonus of years of interest.

    Third the future fund. I completly understand where you’re coming from in that you want to have money saved up for when you get engaged but the fact of the matter is, you’re not engaged yet and as you said yourself, you dont’ really see it happening this year. Therefore I don’t see it as something that should be your top priority at the moment. A priority, yes. Just not the most important one right now. Plus you’re forgetting that when you and J get engaged you’ll BOTH be saving up for the wedding, not just you.

    Last point, love Chealsea idea of a “me” fund. You’ve done an AMAZING job at clearing your debt and you should totally congratulate yourself with something shiny.

  • I really Revanche’s idea of the 60/40 split and of putting your tax return into an e-fund. I also like the idea of putting together a “me”fund suggested by Chelsea Bea.

  • Max out the Roth IRA first. Why? Because you can withdraw original contributions from your Roth IRA tax-free and penalty-free at any time for any reason. It’s only the investment gains which get pinged for taxes and penalties. So, in effect, your Roth IRA contributions can double as an emergency fund.

    But more importantly, if you want to have more money in retirement, you need to take advantage of compound interest over time. Right now, you have time. A year from now, you have 1 year less of time working on your side. Retirement should be your #1 priority, then in a TRUE emergency, funds are available in your Roth IRA.

    Anyway, that’s my two cents!

  • Personally, I think you should start to do some research about how much weddings cost and what you’d like yours to be like if that is a saving priority for you. I think it’s really important to have an estimate of what goal you’re saving toward (since I am reading between the lines that the $5,000 was a rough estimate) before you’re able to properly rank-order your priorities.

    I understand what people are saying about the ROTH and the E-fund, but I’d also like to point out that if an emergency came up before your wedding, you could use this money if you absolutely had to. It also might ake you more cautious about dipping into it, since you know you’re taking away from a priority that is very important to you!

    That’s my opinion, but whatever you decide, best of luck!


  • I just found your blog tonight. Love it! Since I’m going to write up my financial goals for 2010 I was thinking of what to write, however, my goals are pretty simple now since I only have a mortgage, and I’m saving up for my daughter’s college fund and saving up for future investments.

    First, congrats on paying off your debt it is the right thing to do and you will feel so FREE! You can then do just about anything!

    I agree with SS4BC. The only way I was able to pay off my debt, get my emergency fund fully funded is to “pay myself first”. I like Chelsa Bea’s comment about the “me” fund BUT I kind of think of all of the accounts as “me” accounts because it will help you and feel good when you have completed them. You can create any goal you desire!

    I suggest you split your “payment” into payments similar to what SS4BC suggested because you will pretty much meet all of your goals this year and then some! I prefer to save each of them all at the same time NOT one at a time.

    Good Luck!