financial reflections

Yesterday’s post went over the various predictions people had for 2006, and where they thought you should (or shouldn’t) put your money.  After my head stopped spinning, I wondered what my financial goals for 2006 were.

It’s halfway through January - perhaps a bit late to make resolutions - but I thought I’d state my financial goals anyway.  From what I’ve read, those who manage to accumulate wealth do so by setting goals.  Anyway, here it goes…

While reflecting, I realized that (for now) I have one general financial goal:

INCREASE MY NET WORTH

All the other goals are simply ways I accomplish that biggie.  One might point out that such a goal is obvious, but let’s look at what my previous (unwritten) goal was:

BUY LOTS OF STUFF

That goal hasn’t gotten me far.  Most of the stuff has worn out long ago.  I don’t have anything against “stuff” in general, but it is easy to get too much of it.  And I have this feeling that people who accumulate a bit of wealth are able to buy the “stuff” they need when they need it.

And that first goal, although admirable, still isn’t specific enough.  Here’s how I refined it:

INCREASE MY NET WORTH BY $50,000

That’s an ambitious goal, but I do have sub-goals to go along with it.  They primarily center on the age-old strategy of shedding liabilities and acquiring assets - especially shedding the liabilities.

1. Pay off all credit cards in full and close them all.
2. Pay off the auto loan.
3. Establish an emergency fund.
4. Start a Roth IRA for myself and my spouse.

Wow.  I expected that to be complicated.  It wasn’t.  Of course the implementation of each step isn’t trivial.  I’m paying off my credit cards from smallest balance to highest, ignoring the interest rates on the cards, per Dave Ramsey’s recommendation.

That’s a form of a “debt snowball.”  The other way is to pay the highest interest rates off first.  That way, one doesn’t pay extra interest while getting out of debt.  My reasons for doing it the other way are:

• I’m going to kill it all off in less than 12 months anyway
• My interest rates aren’t that high on any of the cards.
• I’m incredibly impatient.  I want to have the satisfaction of cutting a couple up right away.

Then I’m going to kill the auto loan off.  Of course Dave Ramsey probably would have told me to sell the SUV, but if I can actually own the thing by 2007, I’m just going to go ahead and pay it off.

Once those pests are out of the way, I actually should be set up in the auto department for a couple of years.  Then I can work on building assets, like the Roth and savings.

Well, that’s my financial goals for 2006.  It will be interesting to look back in December and see where I landed.