I thought long and hard about what I want my finances to look like at the end of 2013. That was definitely an easier way of phrasing this.
1) another $20k-ish in my 401(k). I say ish because maxing it out means putting $17,500 in, plus the match from my employer and dividends on all of the index funds. The dividends are the best part – in 2013, the dividends might even outpace my employer match!
ON TRACK! This is on track. I’ve been averaging this out each month.
2) to have a full 12 months of expenses in an account that is accessible within 3-5 days, at the prior year’s spending level. Until I closed on the condo in mid-2012, about 70% of my assets were in cash and I had over two years of living expenses in cash. I’m now down to 9.5 months, with about 13% of my assets in liquid cash and 6% in taxable investments. 30% of my assets are in tax-advantaged retirement accounts that can’t be withdrawn except with huge penalties. 47% of my assets are tied up in my condo value and while I don’t like the size of my mortgage, I want to have a bit more money in cash. (The other 4% is my checking accounts.) It’s less about the percentage of my assets that are in cash and more about the number of months I could live off of my easily accessible funds.
DONE! I did this with my January bonus.
3) to put the maximum I can into the Roth IRA through the front door. I need to do some more research before putting any more money in the back door. My deadline for this research is April 1st for the 2012 tax year’s contribution. This research will be important since I’m pretty confident I will be over the income limit to put any money in through the front door in 2013.
PROGRESS! I maxed out my 2012 Roth IRA in January. I plan on doing the same for 2013 in November.
4) to put every purchase on a credit card. This may result in me moving my primary checking account (since it’s currently a dividend rewards account and only by making enough debit purchases do I get free ATM transactions). It will result in higher credit card limits since my current limits are essentially unusable. The first step is to ask my primary credit card credit union to increase my limit to $10,000. The second step is to ask my other credit card company to increase my limit to $10,000. It doesn’t hurt to ask, right? And they can always come back with less than that, but at least I tried.
DONE! As of July, my credit limits are now high enough that I can use credit cards for all of my spending.
5) to pay down the mortgage. I would like to get it under $200,000 if possible. A stretch would be paying it down to 50% loan-to-value (LTV) or to my 2013 gross income including RSUs.
PROGRESS! I am definitely on track with this considering that I am already ahead of the five year payoff end of the year goal as of July.
6) to save 50% of my net income each month, ignoring RSUs. That seems like more than a reasonable spending level, so I’m going to try to stick to that.
ON TRACK! Through July, I’ve averaged about 63% of my regular net pay saved and that will increase over the remainder of the year since I no longer have to pay Social Security tax.
7) to save 100% of my RSUs. Why? I don’t want to rely on these. 2013 could be an anomaly income year and I want to take advantage of that to increase my net worth by leaps and bounds. I think that I could increase my net worth by $100,000 without a lot of effort this year and I would love to do that!
ON TRACK! I’ve saved 100% of the first 3 of my 4 RSU vests for the year. I think I’ll increase my net worth by closer to $125,000 this year.
8) to close the gap between debt and assets. There is a gap of ~$150,000 between my mortgage and my non-property assets (checking, savings, CDs, stock and bond investments). That is a huge gap. I don’t think that I can eliminate it entirely in 2013 (perhaps in 2014!), but I would like to narrow it pretty significantly. I think that I can get it down to ~$50,000 by the end of 2013, which is much more manageable and making it possible to reverse the gap (assets > debt) in 2014.
So my ideal financial structure would look like this at the end of 2013:
- $100,000 in investments (2 years of expenses) $125,000 [estimate as of August; passed original estimate in April]
- $48,000 in cash savings/taxable investments (12 months of expenses) yep! Should have in August.
- $200,000 in mortgage debt $185,000 in mortgage debt [estimate as of August; should pass original estimate around October/November]
- $50,000 less in assets than debts $20,000 [estimate as of August]
This may or may not be ambitious, only time will tell.
ON TRACK! I’m now forecasting to get this down to around $20,000 by the end of the year, so I should hit positive ground sometime in early 2014.