Setting My Own Personal Finance Goals

On an earlier post about losing financial focus, Erick left the following comment:

You mention that you are making progress to your goals but still have a long way to go. What are these goals? I assume reaching the “crossover point”? And I know this is nosy but when you say you have enough money in the bank to “easily” do those things, what do you mean in terms of actual figures? I’m not asking what your current bank account balance is or anything but I constantly read about people reaching financial independence what does that mean in general terms of actual dollar amounts for an average person with modest living? $1/2 million in the bank, $10 million, what??? I realize that it depends on what your standard of living is and such but I am just looking for some examples of actual dollar amounts that I can compare. thanks in advance.

Given that, I thought it would be useful to discuss my current financial goals in great detail. We’re basically marching through this list of goals in order, focusing vigilantly on the first one until it is gone, and continuing on with future ones.

Goal #1: Eliminate all remaining student loans

Right now, I have a single consolidated student loan outstanding that has a balance of about $20,000 and my wife has a single consolidated student loan with a balance of about $12,000. They’re both locked in at fixed rates, with mine a bit higher than hers (7.5% versus about 6.75%). Our biggest, most immediate goal at the moment is eliminating those loans, and we’re contributing every extra dollar we can to making both of those vanish. In terms of time, we are hoping to eliminate my debt by the end of 2008 and hers by mid-2009 (assuming no major life changes).

Eliminating these loans will leave us without any debt except for our mortgage. This is important to us, as we have a great desire to minimize our required monthly expenses so one of us could easily make a career change or choose to stay at home if we so chose.

Goal #2: Replace both of our vehicles

Once our debts are gone, we’re going to begin saving to replace both of our vehicles with late model used options. We’re anticipating a cost of between $12,000 and $20,000 a vehicle, as we’re looking for long-term reliable vehicles.

We have a small amount saved for this already, but we’re not growing that money until the student loans are gone. If we need to replace a vehicle before then, we will take out a loan to do it, but we don’t currently anticipate it.

So, once our student loans are gone, we will begin saving a total of $35,000 for two vehicle purchases. We are hoping to be able to pay cash for a vehicle by October 2010, then for the other one by the end of 2011.

Goal #3: Mortgage elimination

Once we have new vehicles, we’re going to focus on eliminating our mortgage, which should have a balance of about $140,000 at the end of 2011. Given that we have no car needs at that point and no other major debts, we will begin eliminating that big debt as quickly as possible, with at least double payments (and likely larger). We anticipate paying off our home in 2019, on our rough timeline.

Future Goals

Once that is accomplished, we’ll be around 40 years old, owning our own home and being entirely debt free. At that point, we have a lot of goals to dig into, from a house in the country to ensuring our children get out the door on their own two feet to an early retirement. We do not have goals associated with our net worth, though it is a good indicator that we are moving in the right direction.

Our route to these long-term “dream” goals is financial responsibility now. We won’t make it there without working hard and having some financial discipline today, so we practice frugality and make diligent, automatic debt payments.

Even more importantly, we find a lot of inspiration in watching our progress towards the goal. It’s a lot of fun to watch that debt go down with each payment, and it feels very good.

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