Friday, February 7, 2014

Financial Update: Positive Net Worth

It's that time of year again - tax refund time!

YNAB is rubbing off on me in good ways. Instead of spending 1/3 of the $$ on shiny new things, I put 2/3 towards Rainy Day Funds, and the rest was split between credit card debt and fun $$. Instead of new toys, I'm saving most of the fun money to buy Newsies tickets when it comes to town.

I have met my first three savings goals: living on last month's income, $2k in my Car Maintenance RD fund, and insurance. I now have a positive net worth that has a fighting chance of staying in the black.

Next up: pay off the credit card debt (approx. $7,100 - below the national average, but still way too high, of course). It is conceivable to have it paid off in 3 years.

The YNAB blog encouraged us to answer some questions about our financial future. He uses 40 as the goal, but I'll have to answer for where I want to be when I'm 50:

Make a Wish List

Debt-free (obviously), including student loan debt (I've still a long way to go there, but in almost 10 years from now, I'd like for that to be gone, too).  I don't want a mortgage, either, but that would be the only acceptable debt.

Fully-stocked Emergency Fund - It's still at the "baby" level. I'd like to have at least 6 months' worth of living expenses saved, preferably 8.

Imagine Failure

It may sound negative, but as a believer in the Power of Negative Thinking myself, I get it. It would feel pretty awful if I still had consumer debt 10 years from now. It's not that I'm a big spender, so I think if it happened, I'd most likely have bigger problems. I can, however, spend money mindlessly and a little bit here and there can add up quickly.

The only other reason I would have debt is if I went back to school - which isn't entirely out of the question. So if that were the case, it would only be acceptable if I had a solid plan in place to pay it off. And, of course, no consumer debt.

If I still didn't have at least 6 months' emergency savings, then that would tell me I'd taken on too many monthly/annual expenses. It would be time to make some serious cut-backs again.

Dig Into Why Failure Would Hurt So Much

This one's totally easy for me. I spent quite a few days feeling pretty crappy in Dec of 2012 when my high-interest credit card went from a zero balance to carrying a balance again. I could not believe I'd done that again.

Yet, when I started digging into it, I was able to start making changes for the better. Feeling that crappy was the impetus for the turn-around. But I'm getting far too old to go through that again. If it happened again in the next 10 years, I would be extremely disappointed in myself and wouldn't have much confidence in my ability to dig my way out. Again.

It was only weeks ago that the Car Maintenance fund was down to about $10. Now it's fully funded. It was only weeks ago that my credit card debt looked like it was there to stay for around 10 years. Now, unless there's a financial disaster, I have a plan to pay it off in 3 years. It was only days ago that my net worth was negative. Now, I have a viable plan to keep it that way.

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