So we started thinking this morning of what we wanted our long term goals to be. After discussing for a bit, we decided to go back to our five years goals that were created about four years ago. It has been awhile since we had looked at this, and clearly things had changed quite a bit.
This reminded us right off that bat that we should look at our long term goals more often than we have been. I think the main factor that made it easier to look in the short term has been the unknown about the potential of having kids. Now that we are a bit more certain that we will consider having them in a couple of years that makes things more definitive.
Another thing that we learned is that last time around, while we were good at stating general goals, but we didn’t make them very definable. Plus, as our plans had changed, we had reached all of the earlier goals and the later goals had changed course.
For example, we had earlier been interested in saving for a round the world trip and then moving back to Portland, Oregon. With the economy and our careers where they are it looks like we’ll be staying in DC for longer than originally anticipated.
So the process for making our goals went something like this: we started out with our goals for 2009, plugged in the basics of what we are saving already, estimated when James would finish his Ph.D., considered what we wanted our various larger goals to be, and then filled it in according to a five and a half year time line.
The 5+ timeline comes from being so close in the fifth year to reaching our first million that we wanted to stretch it out a bit to see it on paper.
An interesting thing to note is that if we had used the same process detailed above, the last time we set our longer term goals, we would have well and truly blown our goals out of the water. Even having largely rely on one income we’ve managed to save considerably more than we would have imagined four years ago. So with that in mind we are hoping to surprise ourselves.
Major Goals
1) James finish Ph.D.
2) Save for house upgrade (2 bedroom +)
3) Save for kid fund
4) Save for another investment property
5) Reach $1,000,000 net worth by 40
Here are the details for our 5 year timeline:
2009
1) Pay off Miel Student Loans – $39k
2) Max out 401(k) $15,500 – Miel
3) Miel matching retirement – $6,375
4) Max out 2008 & 2009 IRAs – $5k each ($20k)
5) $17k towards investments ($5k stocks, $7k municipal bonds, $5k stocks)
6) $2,500 pay down towards residential
7) $360,000 target net worth end of 2009
2010
1) James Graduate & Get a Job – October 1st 2010
2) Max out 401(k) $15,500 – Miel
3) Miel matching retirement – $6,500
4) Max out 2010 IRAs – $5k each ($10k)
5) Pay off James Student Loans – $10k
6) $20k toward strategic savings – housing upgrade savings
7) $5,000 pay down towards residential
8) $427,000 target net worth end of 2010
2011
1) Max out 401(k) $15,500 – Miel
2) Max out 401(k) $15,500 – James
3) Miel matching retirement – $6,500
4) James matching retirement – $6,000
5) Max out 2010 IRAs – $5k each ($10k)
6) James student loans – $10k
7) $5,500 pay down towards residential
8) $20k toward strategic savings – housing upgrade savings
9) Save James Salary ($75k gross – $25k after 401k & s loans) – housing upgrade savings
10) $540,000 target net worth end of 2011
2012
1) Max out 401(k) $15,500 – Miel
2) Max out 401(k) $15,500 – James
3) Miel matching retirement – $6,500
4) James matching retirement – $6,000
5) Max out 2010 IRAs – $5k each ($10k)
6) $6,500 pay down towards residential
7) $20k toward housing upgrade
8) Save James Salary ($75k gross – $35k after 401k)
a. $20k towards kid fund
b. $15k towards investment property
9) $655,000 target net worth 2012
2013
1) Max out 401(k) $15,500 – Miel
2) Max out 401(k) $15,500 – James
3) Miel matching retirement – $6,500
4) James matching retirement – $6,000
5) Max out 2010 IRAs – $5k each ($10k)
6) $7,500 pay down towards residential
7) $30k towards investment property
8) $746,000 target net worth 2013
2014
1) Max out 401(k) $15,500 – Miel
2) Max out 401(k) $15,500 – James
3) Miel matching retirement – $6,500
4) James matching retirement – $6,000
5) Max out 2010 IRAs – $5k each ($10k)
6) $8,500 pay down towards residential
7) $30k towards strategic goal
8) $838,000 target net worth
2015
1) Max out 401(k) $15,500 – Miel
2) Max out 401(k) $15,500 – James
3) Miel matching retirement – $6,500
4) James matching retirement – $6,000
5) Max out 2010 IRAs – $5k each ($10k)
6) $8,500 pay down towards residential
7) $30k towards strategic goal
8) $930,000 target net worth
2016
1) Max out 401(k) $15,500 – Miel
2) Max out 401(k) $15,500 – James
3) Miel matching retirement – $6,500
4) James matching retirement – $6,000
5) Max out 2010 IRAs – $5k each ($10k)
6) $8,500 pay down towards residential
7) $30k towards strategic goal
8) $1,022,000 target net worth
Timeline
1) James finishes Ph.D. October 1st 2010 (ideally this will be a bit earlier but it gives for wiggle room)
2) 2012 saved for house upgrade and kid fund
3) 2013 move and have kid
4) 2013 saved for and bought investment property
5) 2014 continue to stretch ourselves and reach our goals
6) 2015 continue to stretch ourselves and reach our goals
7) 2016 reach the $1,000,000 net worth mark
Assumption
1) Assumes investment returns to keep up with inflation, but doesn’t calculate potential growth
2) Assumes we’d still be able to save what we are annually now
3) Assumes that we would be able to pocket most of James’ salary for the first two years
4) Assumes that there would be a large drop in savings after an upgrade in housing and having a kid
5) Conservative estimates of James’ salary
6) Doesn’t include salary increases
Given these assumption we think that these estimates are actually quite reasonable and achievable, if not even on the low side. Knowing our past history of wanting to push the envelop in terms of challenging ourselves, we wouldn’t be surprised to surpass these.
This would particularly happen if James’ salary was higher than anticipated or if there were any real growth in our portfolio. Either way we should be able to make the million dollar mark before Miel reaches 40, and with any luck, before James is 40 as well. As long as we concentrate on building our wealth, we should be fine.
We’ll continue to assess this and mark down as we’ve managed to achieve various indicators in our goals.
Happy Savings,
Miel&James
Hi there:
I’ve been reading your blog and it is sooooooooooooo helpful! I have read a tonne of your posts and have sent them to my husband as well.
I am looking for a little bit of help here. Our current situation is like this. we live in Canada and it is much more expensive here than the U.S. However, currently we both make average wages (I make $43000/year and my husband makes $50000). We both just didn’t get the high paying jobs that a lot of our friends/family got (even though I got a business degree it just didn’t happen for me). Our take home pay is just over $5400. However, my husband has a son from a previous relationship and we pay $411 in child support monthly. We have a TONNE of expenses and got ourselves into debt trouble more often than not since we’ve been together. We are both now totally focused on getting ahead as I am now 31 and he is 38. We are not planning on having kids. We just do not think with all of our expenses that we can afford to. We have a mortgage payment of $1800/month, child support of $411/month, personal loan with payments of $248 bi-weekly, car loan of 263 biweekly and cell phones, and other utility bills, etc. After all is said and done we do not have much money to sock away into savings (nor do we have any savings at the moment).
We have sat down and decided to pay down our personal loan of $26000. I wnat to pay it off as fast as possible however, I realize that with our current bills that we just do not have the means to do it fast. Afterall we didn’t get into debt over night. I guess I’m looking for tips or any help you can provide.
I’m also wondering on how much money is good to spend on entertainment/fun money a month? We currently give ourselves an allowance of $50 each per month. Is that too little? Too Much? Also, I have money of $50/month budgeted for clothing. Should we be taking out the entertainment and clothing allowance until the loan is paid off?
I just want to get it paid off as fast as possible so that we can pay out our VERY expensive car loan of $41000. As you can see we were VERY bad with our money the last while and have gotten ourselvesd into way too much debt. We now want to pay the piper and get out but just not sure what the best way to do it is.
Thank you for reading my comment and I hope you can assist us in some way or another.
It sounds like what you need to do before anything else is budget.
Although you guys have ‘average’ income individually, together, you make almost $100k/year, which puts you in the top 5% of households easily.
You have the means. You just need to find a path to getting your debt under control.
This will come from being aware, in clear terms, of what your expenses really are, and what it will take to overcome them.
There’s always something that can be cut. It’s scary, at first, but once you accept that you will have to make budget gets to get your finances under control, it becomes MUCH easier. Maybe you have an expensive cable package that you can abandon and get your entertainment off of the internet and Netflix instead. This can some people as much as $100/month, although most people will get something in the mid double digits out of that. Another area that’s can be easy fodder to cut back on is food — eat in more, eat out less, and be more careful about prices.
In your case, you might merge your entertainment and clothing budgets into one $50 budget, for starters. It’s important to keep yourself happy, and new clothing can be a part of that. But by saving that $50/month, you’re saving a total of 1% of your income. That may not sound like much, but if you can find a few other places to save $50, then you can have as much as 5% of your income saved every month, which is the difference between a path to debt and a path to wealth.
Note: I am not the James & Miel James. Just thought I’d make that clear.