I made it! Last year, I became debt free (except for my house) in January 2012. I made it an entire year remaining debt free. Yes!
Being debt free this past year has been wonderful! I’ve been able to save more money, worry less about debt, and enjoy life better.
But I’m not satisfied yet.
I’m not doing very well at using a written budget and sticking tightly to it. I need to practice better financial self discipline. That will help me reach my savings and investing goals more quickly and be better prepared for unexpected emergencies.
So for 2013, I’m updating my goals. I’d like to build up enough cash/cash equivalent savings to cover a full year of living expenses for my emergency fund. And I’d like to set a very long-term goal of accumulating a portfolio of investments such that upon retiring, I could withdraw 2.5% of principal each year (annually) and that would cover my year’s living expenses.
Here’s where I’m starting 2013 from:
As you can see my current level of cash savings is severely inadequate. And my accumulated investment portfolio for future retirement is far, far too small for a person at my stage of life. I’ve got some big-time catch-up to do! Hence my need to buckle down and live more carefully and frugally, live within my means such that I can save more each month.
So here’s where I’m at as of February 2013:
- Vanguard (includes very small quantities of cash in money market funds): $63,527
- Roth IRA: $26,902
- Traditional IRA: $27,111
- Taxable: $9,514
- ING (Capital One) ShareBuilder (two bond funds–taxable): $1,144
- Betterment (90% stocks/10% bonds–taxable): $4,499
- Fidelity SIMPLE IRA: $72,675
- Loans to Others: $40,746
- Personal Loans: $37,660
- Prosper Loans: $140
- Lending Club Loans: $2,946
- Cash Savings: $4,824
- House (owned, with mortgage): $120,000 (est. value) – $35,698 (mortgage liability) = $84,302 in equity
- Total assets in IRA retirement accounts: $126,688
- Total assets in taxable stocks and bonds: $15,157
- Total loaned to others: $40,746
- Total cash: $4,824
- Home equity: $84,302
- GRAND TOTAL (Net Worth): $271,717
That’s a net increase of $20,958 since my previous Autumn Update post three months ago. Not bad. Much of it is thanks to stocks increasing in general. But I’d like to put more away from my income each month and ramp things up more quickly. So time to buckle down and budget, budget, budget!
Now in calculating my one-year emergency savings goal of $50,000, I’m combining my total cash of $4,824, my taxable Betterment value of $4,499 as it is very liquid (though much more at risk), and my taxable bonds at Capital One of $1,144, and taxable investments stocks at Vanguard of $9,514, for a total of $19,981. So I’m roughly 40% of the way there. But I want actual cash assets (not stocks/bonds) of at least 1/3 to 1/2 of that, which means I’m only 19% of the way to that sub goal.
And for my retirement goal, I need at least $2,000,000 in investments in order to pull out $50,000 each year (2.5% of total capital). That’s NOT accounting for inflation which will mean I’ll need much more by then as my living expenses aren’t going to remain at $50,000 per year. So my total retirement and investment savings of $182,591 is a meager 9% of the way to my goal. Ugh! Sooo very far to go!