Friday, December 21, 2007

Our 2008 Goals

Well I guess it is really more of a 2021 goal.

S and I have been talking a lot about money. He likes to make fun of my obsession with personal finance blogs and how I talk about what everyone did this week and how that has inspired me to do things in my own life. We have been working on starting out savings and preparing for the onslaught of school loan repayments to start early in 2009. It also looks like we are going to need probably buy a new car for me around the same time. My Rodeo is not doing well and we don’t thing it will last another year.

I have been trying to spur on motivation for savings and future planning and thing I have finally done it. I pulled out the magic word- “Millionaire”! Why this word sparks a light in everyone I am not sure, but it did work well for me! I figure that if I get us to start early enough we will be able to prepare for many things that catch others off guard in life (babies, medical bills, college expenses, etc.).

So I pulled out the GMAC calculator and started paling with numbers. S is 26 years old this year. I thought that I might motivate him by trying and finding an age for us to shoot for. Well, we started with him being 40- that’s 14 years away (In 2021). Sometime last month we started calculating our estimated expenses for after we graduate (may) and move (hopefully to Denver) sometime next summer. We came up with a base of $2,500. I am sure that we could make that number much smaller- but that is what we are thinking based on what we spend now, and the things we don’t pay for now, such as rent.

I started with a conservative 4.50% high yield interest rate started working the numbers to make it hit as close to $1,000,000. I hit the number of $4,266 a month (starting with $1,000 initial investment). Well, added together that is about $6,766 a month. Multiplied by 12 months that becomes over $81,000 a year combined income for S and I. A little ambitious I would say for starting out, but maybe realistic in 10 years of so.

Then I started playing more with the numbers and started using a very generous 10% annual rate of return. Using the calculator I figured that we need to save $2,735 a month, compounded quarterly (starting with $1,000). That is a little more comfortable. That makes monthly income requirement $5,235, and annual combined income of around $62,000. That is more like a stretch goal for two just out of college kids.

I am very excited to start 2008 and continue with my newly started $500 a month savings goal (account already set up) for our move and expenses starting this summer!

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