It’s a new year! Time to think about goals, resolutions and bucket lists. I’m not big on New Year’s resolutions because it’s too cliche for me but I do believe in setting realistic goals that our family can focus on and meet in a practical amount of time.
Since we’re a frugal blog let’s talk about setting goals for your budget this year (or even the next 3 months) and how to put them into action. Then I’ll share with you what goals my husband and I have for our family this year.
First, start with these two steps:
:: Create a budget. You can’t achieve any financial goals if you don’t know where your money is going. Sit down. Get honest with what you spend and figure out if where your money is going is the best for you or your family. It can be on a cute budget worksheet, on the computer or a scratch piece of paper. It doesn’t matter. Just write them down.
:: Start spending cash only. It’s much harder to hand over three $20 bills than it is a slim little debit card. Yes, I agree that debit is cash, but it’s not ACTUAL cash. For those worried about carrying around cash in your wallet, I can only say that I’ve never worried about losing my wallet or having it stolen. It’s usually within 2 inches of me at all times. Not because I’m paranoid but because it’s located next to the necessary diapers I am required to carry at all times.
When you put these two steps into action it makes setting goals much simpler because you know what is happening with your money.
Now the goals. Here are the goals my husband and I have set for our family. These are very similar to Dave Ramsey and his method of Financial Peace.
:: Create a $1000 Emergency Fund (Done)
:: Pay off all debt (completed last January!)
:: Create a living expenses fund (to be fully funded by April)
:: Begin working with our investment adviser (in June) on intentional planning for retirement (we already do this but after creating our living expense fund we plan to put more money towards our retirement)
:: Save for 30% (or 40%!) down on a bigger house (hopefully moving in 3-4 years)
Having these above goals in mind for our family makes big and small financial decision making much easier. When it comes to a windfall (taxes or work bonus) we know where the money is going. When it’s deciding between overspending on our clothing budget we can ask ourselves, “Do you want the shirt now or the bigger house later?” It’s not always the house but when you have a family of 5 with one bathroom the bigger house sounds more appealing. Or at least one with 2 bathrooms.
Did you make financial goals for yourself or your family this year? How do you plan to stick with them?
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We have one last student loan to payoff , then its on to saving for an emergency fund. We hope to have the loan paid off by April, so that we can also be funding our retirement and start saving for our boys’ college funds. I worked really hard last year to figure out the best ways to save money and make the most of what we have, so I am super excited to put all that work to the max this year to reach our goals!
I thought we were debt free but found a random $3400 bill I knew nothing about. I am researching it and if it is legit I will be paying it off by June then saving for living expenses. Nothing extra gets taken care of before we reestablish our emergency fund. Last year was the first year we have ever ended the year with money in savings. Super excited about the direction we are trending.
Can someone explain to me what a living expense fund is?? Thank you:)
It’s a fund that you have just in case the primary breadwinner in your home loses their job. We estimated 6 months worth of income we would need in case of that emergency. And it’s the bare bones living, no clothing or extras included.
Thank you Kate.
My dad calls it the “Oh shit account” haha. Just learning about budgeting and such as a 20 year old just finishing college. I can’t wait to start saving for a house!
What a great post to start the new year! I’ve shared this like crazy, and I’m sure it is going to be so helpful to a lot of people!
Thank you!
Great order. I made the mistake of working on my retirement and bigger house before emergency fund, living expense fund and debt reduction. Wish I had done it the other way. The living expense fund especially reduced my stress by an incredible amount!
We created a budget this year and have figured out what things are paid for in cash or via debit card, how much we will save each month and from what pay check each payment, budget item, will come from. We set a goal of how much we would like in savings by the end of the year, and we would like to be debt free (we have one small school loan to pay off) (minus house payment) by the end of the year. So we can do the dance! 🙂 This year we are trying to be much more intentional with our money and the things we do!
We did a Dave Ramsey class last year and were able to cut our debt from 23k down to 12k by the end of 2011. Our 2012 goal is to pay the 12k off and pay cash for a Disneyland Vacation!