My version- financial plan. What's yours?

[bethasaver]

I listen to lots of personal finance podcasts, and books on tape. The usual experts: Orman, Ramsey and some of the more popular podcasts.

Here's what my financial plan looks like- it's sort of a variation of the baby steps but is what makes the most sense to ME long-term and taking into account our specifics. I know that the baby steps get you to be debt free faster but it isn't always the best answer financially. If you can stay motivated and make smarter, calculated moves sometimes that's better. So, what do you think? What are your "steps" and why?

1) One month’s expenses in emergency savings account DONE

2) Contribute to max matching in company’s retirement (hubby and wife combined is 12%) DONE

3) Pay off all debts in order from highest to lowest interest rate excluding mortgage and car with interest rate that is lower than mortgage DOING

4) Build 3 month’s expenses in emergency savings account

5) Savings for home expenses, vacations etc. AND Roth IRAs

6) College funding for kids

7) Pay off home early OR save 20% down payment for another house

[disneysteve]

2) Contribute to max matching in company’s retirement (hubby and wife combined is 12%)

Looks like a solid plan.

Just to clarify, you are putting 12% of your gross household income into the retirement plans not including the company match. Is that correct?

[bethasaver]

Looks like a solid plan.

Just to clarify, you are putting 12% of your gross household income into the retirement plans not including the company match. Is that correct?

Correct disneysteve. We each have 6% taken out pre-tax, not all of that is matched 100% but I wanted to max out any match, even if 50%. So 12% from our checks plus what our companies contribute.

It is nice to get some validation here! When I try to collaborate with my husband he basically just stares at me blankly and says "ok" even when I had asked him his opinion. ha ha. Oh well, I like doing personal finance stuff- it feels good, especially if I know I'm on the best right track.

1 question I have is: I have this "goal" set up through mint.com where I can guesstimate how much I'll need for retirment. This thing says I'm 5.5 years ahead of schedule using the figures I plugged in, which is surprising because my husband and I didn't contribute much to retirement until our late 20's and we're 32 now. At what point does it NOT make sense to fully fund a Roth, and/or to put the order of priority to after saving for kid's college?

[WDELTA]

That actually means you're contributing 6% of your gross before match.

[bethasaver]

That actually means you're contributing 6% of your gross before match.

My 6% + hubby's 6%= 12%

[snafu]

I chose percentages to work out how much was reasonable to spend in the different categories. For example, 30% for housing including utilities and maintenance. We wouldn't consider buying a house that costs more than 2.5 times our annual income [higher interest rates back then]. Food including restaurant was set at 17%, transportation 15%, clothes 4% and so on. I challenged myself to stay in the guidelines or 'borrow' from another category which reduced spending elsewhere. We were on defined pensions so we did 10% pay-yourself-first as our savings/investment plan.

Just a different way to do the same thing, and how my mind evaluates what's important and what's not.

[WDELTA]

Say you both make $100,000/yr. 6% each would be $6,000, for a total of $12,000.

But it's only $12,000 combined out of $200,000 combined income which is 6%.

[disneysteve]

My 6% + hubby's 6%= 12%

Sorry but it doesn't work that way. You need to look at the total gross household income. Let's say you earn 50K and he earns 50K. If you each put 6% into your plans, you would each contribute 3K for a total contribution of 6K on a total income of 100K, thus 6%. In order to contribute 12%, you'd need to be putting in 12% each, not 12% total.

[BMEPhDinCO]

Sorry but it doesn't work that way. You need to look at the total gross household income. Let's say you earn 50K and he earns 50K. If you each put 6% into your plans, you would each contribute 3K for a total contribution of 6K on a total income of 100K, thus 6%. In order to contribute 12%, you'd need to be putting in 12% each, not 12% total.

See this is my question all the time - when "people" recommend saving 15% or whatever for retirement, is that per couple or per person? In on case, the OP is doing pretty well, in the other case, it's very low.

I would bump it up to 15% per couple, if that's the recommendation, even if you are "ahead", things can slow down quickly.

[Petunia 100]

My 6% + hubby's 6%= 12%

This is faulty math.

Here is the problem: you are contributing 6% of your income, but your income is not 100% of yours and hubby's joint income. If you and hubby earn the same amount, then you are contributing 6% of 50% (or 3%) and hubby is also contributing 6% of 50% (or 3%), for a total of 6%.

[Petunia 100]

To answer your actual question, my financial plan is to arrive at age 65 with 600k in tax-deferred, 150k in my Roth, and hopefully some home equity. I don't know if I will make it or not, but I do have a good chance.

[Petunia 100]

Correct disneysteve. We each have 6% taken out pre-tax, not all of that is matched 100% but I wanted to max out any match, even if 50%. So 12% from our checks plus what our companies contribute.

It is nice to get some validation here! When I try to collaborate with my husband he basically just stares at me blankly and says "ok" even when I had asked him his opinion. ha ha. Oh well, I like doing personal finance stuff- it feels good, especially if I know I'm on the best right track.

1 question I have is: I have this "goal" set up through mint.com where I can guesstimate how much I'll need for retirment. This thing says I'm 5.5 years ahead of schedule using the figures I plugged in, which is surprising because my husband and I didn't contribute much to retirement until our late 20's and we're 32 now. At what point does it NOT make sense to fully fund a Roth, and/or to put the order of priority to after saving for kid's college?

Have you tried some other calculators? The thing is, the built-in assumptions in this type of tool vary greatly. Some calculators tell me I will make my goals, no problem. Others tell me I won't so I need to save more. Don't rely too much on just one, get second and third opinions.

And remember, you can withdraw your Roth contributions (not earnings) at any time for any reason, with no penalty. So you can tap your Roths for a kid's college if you so choose.

[bethasaver]

This is faulty math.

Here is the problem: you are contributing 6% of your income, but your income is not 100% of yours and hubby's joint income. If you and hubby earn the same amount, then you are contributing 6% of 50% (or 3%) and hubby is also contributing 6% of 50% (or 3%), for a total of 6%.

Thanks for pointing this out. I ran the numbers, and for household contributions it's closer to about 8% total.

[bethasaver]

See this is my question all the time - when "people" recommend saving 15% or whatever for retirement, is that per couple or per person? In on case, the OP is doing pretty well, in the other case, it's very low.

I would bump it up to 15% per couple, if that's the recommendation, even if you are "ahead", things can slow down quickly.

Eventually. After debt is paid off and emergency fund is built. Also, as Petunia mentioned I can use ROTH as part of my EF.

[Diavel_guy]

I'm a single guy, so mine will be short and sweet (no wife or kids).

1) I contribute the full $17k per year allowed to my 401k

2) I contribute the full $5k per year allowed to my IRA

3) I have a one year emergency expense fund in place

4) I have zero debt of any kind (0 credit card debt, vehicle is paid off, 2 motorcycles paid for)

5) I have no desire for a home as of now because I'm not 100% certain where I live now is long term

6) I continue to save on average $4k a month to my savings account because I honestly have little desire to purchase much beyond what I already own. That being said I enjoy life and spend when I want something. I guess I'm lucky that I don't need a lot to be happy.

Yes, I feel blessed (and I'm not a particularly religious man!).

: )