Debt-wise, all we have now is our mortgage and the loan on our '06 Honda. My plan is to have the auto loan gone this year, and to do it before the warranty expires (December). As of January's payment, we owe less than $10k on it, and the way my website income's been going (knock on wood), I should be able to have the loan gone by summer or early fall.
To be honest, retiring that loan is more a mental thing than a financial one. I don't feel much different now (with the car payment) than I did back in 2005 (with a paid-for 1995 Honda and no debt other than the mortgage).
Why might this be? I suspect it's a function of now having significant website income. Which, at this point, is all gravy.
It's funny: My associate ExcelGeek (spreadsheet creator extraordinaire) and I occasionally talk about being "exceptions to the rule," and there's some validity to that. Neither of us have any revolving plastic debt. Our Freedom Accounts are doing their thing. We have decent Emergency Funds behind us.
But here's the honesty: For my part, I've allowed my after-tax web income to amble out the door instead of directing it to savings or investments. As I look back, the amount of STUFF we bought last year was nuts.
At the top of the HIGH PRICE TAG list was a new Carrier central heat/air system ($6k out the door), which would've been necessary at some point. But the old system hadn't yet fallen on its face entirely; who knows how much longer it would've sufficed? I don't.
But I know this: To have to buy a new system when your old one completely dies, and outside it's either 10 degrees or 110 degrees ... well, that's not a situation I want any part of. I didn't want it then, and I don't want it now. So I consider this big expense to be a valid one.
However, let's examine the list of other items bought by our web income:
- 42" plasma TV.
- Dyson vacuum.
- Wii game system.
- Honda lawn mower.
- New home-theater speakers ($1k).
- Laptop for my wife (it was coming eventually, regardless) and Office 2007.
- New over-the-range microwave (though the old one was 27 years old and barely functional on its best days).
- Weekend getaway to Dallas (first "vacation" in years).
- LOTS more eating out. (See also #7 above.)
- Bigger Xmas spending than ever before.
- New breaker panel and wiring upgrades to our house.
- Assorted other stuff that doesn't come back to me just now.
Given all that spending, for 2007, our net worth — into which I do not factor STUFF other than cars and house — increased by a mere 13 percent. Big whoop, right?
Sure, I'm throwing 10 percent into my 401k, but you know how much I put in my daughter's 529? A few hundred bucks.
Into mine or my wife's IRAs or Roth IRAs? Zero.
Into our Emergency Fund? Ha. It's about where it was at the start of 2007. Which is NOT at $15k. (That's what I'm aiming for. Pretty sucky "aiming," yes?)
The point is that I flat-out flopped at controlling spending in 2007. When I look back at my total income, and what my bank accounts have to show for it right now, I might as well be Your Average American Consumer.
If it came thru the door, it got spent.
I let the extra money (way more "extra" than what I've ever had before) get the best of me.
I have to reverse that in 2008. I have to get back on track. The car loan has to disappear, for one thing. It's costing me a smidge more than what my savings now earn after taxes, so it becomes Household Enemy #1.
For all that I'd like to believe about being an "exception" to the American Consumer Rule, in reality, I was WAY more Typical Consumer in 2007 than I care to admit.
Did I incur new debt? Nope.
Did savings increase? Yes. But not by much. And really, it increased only because of my automatic 401k contributions.
For all my talk about discipline, I absolutely dropped the ball in 2007.
So You Gonna Do Something About It?
Yes. Early in 2007, I got away from using my monthly Spending Plan. Instead, I simply relied on Quicken to track where my money was going. I have enough money coming in, I thought. Whatever we spend, it'll be covered just fine.
It was covered, all right — by money that I should've directed to other things. Think savings. Think auto loan.
This is why (to borrow a phrase from Total Money Makeover) Spending Plans are so important for dorks like me: Either you tell your money what to do, or it leaves.
So, starting yesterday:
1. Our household monthly Spending Plan is back in force.
And that's not all. There's a new addition to our refrigerator door:
2. Clear. Written. Goals.
I've always kept goals in a Notepad file on my laptop. Well ... no. Really, it's been more like a To-Do List. Time for a change of gameplan, methinks.
Any other thoughts or ideas? I've got the increased income, at least for now.
I just have to get my income to work for me like it did before it went and got bigger.