Mr. BFS and I finally sat down last weekend and prioritized those New Year’s resolutions that I keep mentioning. We have a ton of financial goals, but those were the most important to both of us this year.
Specifically, we wanted to know what we wanted to fund first and came up with this breakdown:
- 2012 Roth IRA’s (needed $8800 more)
- Rent House Mortgage Payoff (need $23,500 more)
- 2013 Roth IRA’s (need $11,000 apparently)
How We Decided
It took us about an hour to come up with what we’d fund first since paying off the mortgage on the rent house is actually the most important thing for us this year. We finally decided on funding the 2012 Roth IRA’s before anything else simply since it has a hard-and-fast deadline…we had to fund them before April 2013 or forever hold our peace about 2012. Plus, you can withdraw your contributions from a Roth IRA anytime – you just can’t put it back afterwards and can’t touch any interest earned without penalties.
That said, we funded our 2012 Roth IRA’s at the end of last week with $8800 from our investment cash. Yay, one resolution checked off!
Now we have less than $3000 of investment cash left, so we will have to save like crazy to hit the other two goals this year. That means that we’ll need to save more than $30,000 in pure cash by the end of 2013 in order to pay off the rent house mortgage and fully fund the 2013 Roth IRA’s.
Is a $30,000 Savings Goal in One Year Realistic?
It’s doable but we will need to keep our income at or above what it has been and spend based on our budget. Since we do pay 25%-35% in taxes, we need at least $8000 a month just to cover our basic, budgeted expenses like income taxes, mortgages, property taxes, insurances, food, utilities, etc. So we will need to make a minimum of $130,000 in 2013 just to have a shot at hitting our last two financial goals.
It’s insane to me to think $8000 is our new minimum per month just to live without touching savings, but the last few years have taught me that you shouldn’t just concentrate on one part of your financial equation. If you spend $3000 a month but make $2500 a month, you are still worse off than spending $8000 a month and making $10,000. It’s a matter of income vs expenses and what you do with the difference.
I am logical and smart enough to get that, but $8000 is still an OMG number for me. I cannot wait until we have both mortgages paid off, but we’ll still be operating at $6500 a month, which is still above what I’ve grown used to…owning two homes just naturally comes with two sets of expenses. We do make more than we spend, so we aren’t looking into debt solutions or anything, but I was very used to living on $3000-$3500 a month. I’ll get my head wrapped around the new numbers eventually. It’s just new. Rental income helps soften the money blow, lol.
How are you tackling your resolutions this year? Any big ones on the hit list for 2013?