Let’s chat about savings goals. I’ll list mine so you can see what’s important to me. You tell me in the comments below what you’re saving for and how you plan to achieve those goals.
This exercise is meant to help me organize my savings goals and also to give you a peek at the kind of things you could be saving for (and the different ways to save).
But first, I’d like to take a moment to look back on some successes from 2014. We saved the maximum allowable amounts in our 401Ks, Roth IRAs, and an HSA. We didn’t accumulate any new debt (still just the house and rental property mortgages). We successfully navigated the health insurance marketplace while having our 3rd child. And finally, we were able to tithe/give 10% of our income.
Not a bad year! We were able to accomplish most of this because we created goals to help motivate us. So let’s dive into next year’s goals…
Our Savings Goals for 2015
Roth IRAs and 529s not shown because they are held in accounts at different institutions.
Retirement – With our 2014 contributions (maxed out Solo 401Ks and Roth IRAs) I do believe we’ve reached the point in our retirement savings journey where we technically have saved enough money such that when we are in our 60s we will have enough saved to live on comfortably for the rest of our lives. While it will always be an annual goal to save the max to our Roth IRAs, I do not feel pressure to save more through our 401Ks, other than as a tax-deferring strategy.
Given these circumstances I believe it’s adequate to only have an automatic saving plan setup for our Roth IRAs to reach their max. If the businesses produce a lot of excess income by the end of the year, we’ll make the Solo 401K contributions, or consider making extra mortgage payments. But I’m just not prepared to make that automatic. Sort of a “nice, but not necessary” approach. The automatic savings withdrawal from Vanguard for the Roths will be $916.66/mo. We invest everything into one fund, VFORX.
Emergency Fund – Our emergency fund is currently well above 12 months worth of expenses. So I have no plans to save more here in 2015. I’ll revisit this account after 2014 taxes are paid and see if it needs bolstering. If so, we’ll do an automatic plan as with anything else.
Real Estate Taxes – We do not escrow our property taxes with our mortgage (we pay them separate at the end of the year). So we automatically save $450 each month into a separate savings account. At the end of the year we have $5,400 to pay our taxes. By saving this amount ourself we accumulate a small amount of interest (roughly $25).
Income Taxes – Since I’m self-employed and really only issue myself a paycheck at the end of the year, I have to estimate and pay my taxes quarterly throughout the year. This is hard to do because my PT Money income fluctuates from month to month, and income from my conference business isn’t known until the end of the year. Just so that I’ll have something tucked away each quarter I am automatically saving $500 each month in a separate account.
College Education – College is a long way off for our three kids, but it’s still something we want to help with. We automatically save $25 each month for each kid into the Ohio 529 College Savings Plan, invested in age-based funds with Vanguard. There are no plans to change this savings goal for 2015. This is automatically pulled from our checking account, thus no separate savings account on the screenshot.
Medical Expenses – While we don’t anticipate any major medical issues to pop-up in 2015, you never know. Could we handle a major medical issue with our finances? Well, our deductible (or “annual household portion”) with Medishare is $10,000, and right now we have around $8,500 in our Health Savings Account (HSA). That’s just enough to give me comfort.
The sad thing is that because I’m on Medishare I’m unable to contribute more money to the HSA – I normally contribute the annual max. Legislation may change that in the future, but for now we will just spend that money until it runs out and then start dipping into our emergency savings. Next year I’ll likely re-consider upping the emergency fund to account for this.
Other Goals – In addition to the above we’re also saving automatically for travel ($150/mo), car maintenance ($100/mo), auto insurance ($80/mo), home insurance ($66.67/mo), gifts ($50/mo), and home owners association dues ($43/mo). As you can see, when possible I like to pay insurance premiums once a year to avoid installment charges.
So what do you think of our current savings goals? Do you see any issues? Should I be saving for anything else?
Want to see my goals from previous years? Click to the next page.
Image by Tony Crider