It’s time once again to review our annual savings goals. Hard to believe, but it’s our 9th year of chronicling our goals like this. You can peek through each year by using the navigation below.
Briefly, we met our savings goals from last year. We maxed out our Roth IRAs ($5,500 each), contributed some excess income to our Solo 401Ks, and effectively saved for the following one-time, annual expenses: real estate taxes, home owners association dues, car and home insurance, Christmas gifts, travel, and car maintenance.
One area where we failed is saving enough for business (payroll) taxes. This number is hard to predict each year with two businesses with variable income. But we weren’t even close (about $4,000 shy) and so I need to ensure we automate more savings deposits from the business income to a separate account for taxes.
Why Share Savings Goals?
I do this – create savings goals – for several reasons:
One, I believe in the power of goals (cue Huey Lewis’ Power of Love).
Two, it helps me implement something I believe in more than goals – and that is systems. That is, we attempt to automate each one of these goals with automatic savings deposits so that it’s not left up to chance that they are achieved.
The reason I’m so open with our goal setting process is that I’ve come to believe in the effectiveness of story in personal finance. And this – saving consistently – is one of the best stories that Mrs. PT and I have to tell. I hope our story is both educational and inspiring – leading you to take action on your own annual financial goal setting process.
As an aside, we used to also create annual debt reduction goals (find those here). But since we are debt free except the mortgage (just refinanced for 15yrs), we have decided to use all of our excess funds for saving for our goals.
Our Savings Goals for 2016
Emergency Savings – We’ve got a fully-funded emergency fund (here’s how we decided on how big it should be), so we won’t be contributing to this fund routinely. But I am going to explore the Betterment overflow account to capture excess emergency savings account funds.
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Retirement – Saving for retirement has been our #1 goal for several years now. We place it ahead of short-term savings goals as well as saving for college expenses for our kids.
We currently have a solid amount of money in our Traditional IRAs and 401Ks (deferred accounts). So we prioritize our Roth IRAs and contribute the max each year. We’ve set up an automatic deposit from our checking account each month for a number that will ensure we reach the max at year’s end.
Our contributions to the Solo (or Individual) 401Ks – these are 401Ks we’ve setup through Vanguard for our two small businesses – will not happen monthly or routinely. We will only contribute to the Solo 401Ks if our income reaches a certain threshold.
Short-Term Savings – These items are significant enough to warrant a separate savings account (using our Capital One 360 account). We automate the deposit into these accounts and make sure we reach our goals at just the right time.
- Income/Payroll Taxes – $10,000
- Real Estate Taxes – $7,000
- Travel – $3,000
- Vehicles – $1,200
- Auto Insurance – $960
- Home Insurance – $800
- Gifts/Christmas – $600
- HOA – $515
College Savings – We love our kids – 6, 4, and 1 – and hope they are in a position to choose to go get a college education when they reach that age. But we do not intend to pay for their entire college experience.
We are contributing $25 a month per child into a 529 account ($900 annually) and look forward to being able to give them a few semesters of tuition coverage. We’ll let them handle the rest with scholarships, income, and yes, some student loans.
We use the Ohio college savings plan since (1) they have Vanguard funds, and (2) we are in Texas (without a state tax) and would have no benefit from using a Texas college savings fund.
Health Savings (HSA) – Finally, we’d like to be able to contribute to our HSA (held at a no-fee local credit union). But because we use Medishare we cannot, yet. So, we are just spending from this account regularly and hoping the laws will change before it runs dry. Tax free medical savings is awesome!
Want to see our goals from previous years? Click to the next page.