Financial goals and status

I've been doing a lot of thinking about my financial goals lately.

Originally, the goal was to be debt-free, except for a mortgage, by the time I was 30. I came to the realization recently that probably wasn't going to happen. Now, I'm thinking, do I really want that to happen?

Dave Ramsey outlines 3 baby steps to achieving financial peace. (Please note: these are from the reading that I've done on his website's forums, not from the book, The Total Money Makeover. I am hoping to get to the library soon to read this book, though.)

1. Save $1000 in a emergency fund.
2. Pay off all non-mortgage debt.
3. Save 3-6 months expenses for a full emergency fund.
4. Contribute 15% of paycheck to retirement savings.
5. Save for kids college fund.
6. Pay off house early.
7. Give and build wealth.

Here's where I stand with each of these.

Baby Step 1 - $1000 Emergency Fund: I have very little in savings at this point. I opened an ING account, and got $25 to do so. And I started a Freedom Account for Savings, and have been transferring money this month, until I have the $300 I need to open a free savings account at my bank. I'll have this by mid-February. After I have the first $500 there, I'll save the rest at ING. That should keep enough easy to get to. My yearly bonus, when it comes, should be a nice boost, as well as any tax refund.

Baby Step 2 - Debt Repayment: I have two personal loans to repay, and these will be repaid in the next couple months. Other than that, I have a home equity line of credit, and given that I can't possible repay that in the next couple years, Dave recommends moving it to Step 6 (mortgage repayment).

Baby Step 3 - 3-6 Months Expenses in Emergency Fund: I'm not even sure what 3-6 months expenses would total right now, and would rather live on my budget for at least another month before determing that amount. Given that I'm single with no kids, I can probably focus on a smaller amount.

Baby Step 4 - 15% to Retirement: I'm currently deducting 5% to my 401(k). And I think there really is enough wiggle room in my budget to increase this to 15%, especially after I change my W-4 to withhold less taxes (waiting until I finish my taxes to do this).

Baby Step 5 - College Fund: No kids (yet).

Baby Step 6 - Pay Off Mortgage Early: And in my case, the HELOC first, then the mortgage.

Baby Step 7 - Give and build wealth: Not even close right now.

So, depsite that fact that I was disappointed that I couldn't pay off the HELOC before I was 30, I really am in a good financial position. That was an impractical goal; now I just need to make realistic ones.

Here's a start:

By January 2006, I will have an emergency fund with 3-6 months of expenses, and be contributing 15% to my retirement.