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Allocating Our Income

February 2, 2012

Well Heeled’s post about having enough income needed to hit her long term goals really got me thinking about long term goals and how we’ll be able to afford them.

almost never feel like we need more income to meet our goals.  I’m generally optimistic that when we are ready for the big next steps in life, the income will be there to help support them.  Maybe this is a bit naive.  Maybe I just don’t spend enough time clearly defining the long term goals.  Maybe I just will move the big goals until we do have the money for them.  My approach to meeting my long term goals is to save as much as possible now, so we’ll have more freedom to choose later.

We have 1-2 fairly major expenses coming up in the next 2 years ( post coming soon!).  My strategy is to save whatever cash is left towards the furthest priority –  a down payment on a home.

Year after year, we make the best decisions we can with our savings and spending. Just because I say that I want a house in 3 years doesn’t mean we’ll actually be able to allocate any more money to housing without sacrificing things that I think are important enough not to sacrifice.    Also, I don’t want a house until it is clear it makes the most financial sense for us.

I prioritize travel at this point in my life, because it is a passion of ours and we don’t have kids.  This is one place we could make major impacts on our savings, to the tune of $5-$10k a year (for the past 2 years).  I prioritize retirement because I have no kids and I have a good salary, and it just seems like the right time to be saving for the super long term.   I have not (in the past) prioritized saving for cash for a home.  We don’t know where we will be living in the long term (though most likely, a high cost of living area), and we don’t know what our salaries will be.  But I think we’ll be able to pull it off, when the time comes.  I don’t want to change any of my current priorities, so there seems to be no sense worrying about the future.

It was weird for me to realize how few plans I have for a home and kids and anything 10 years down the road.  I am a planner, after all!  But I trust in myself and my husband, and therefore, I trust in our  future.  We’ll make the best choices we have and deal with whatever surprises life throws at us.

5 Comments leave one →
  1. February 2, 2012 11:04 am

    Being optimistic is good! I’m kind of the same way, but I also tend to think a lot about how much money I’ll need in the future to have the things that I need/want. I prioritize travel also.

  2. richiechivz permalink
    February 2, 2012 2:38 pm

    Funny I should stumble across your blog and this post in particular! Prioritizing savings for both short and long term goals is something I’m struggling over deciding up right now. I’ve budgeted for some key long term goals such as emergency funds, debt elimination and even a vehicle fund for ongoing yearly costs such as insurance and repairs. Now I’m trying to work out how I budget for the shorter term stuff like holidays, home improvements and Christmas! The journey continues… 🙂

  3. February 2, 2012 4:17 pm

    Just came across your blog today and thought I would say how much I am enjoying reading your posts!

  4. February 5, 2012 10:03 pm

    I am having a hard time deciding how to allocate my discretionary savings after I close on my condo. What I ended up deciding was to split the funds three ways equally between: 1) pre-paying the mortgage, 2) taxable investments for retirement, and 3) saving towards a down payment on a house in case I don’t have much equity in my condo when I want to buy a house.

    I’m putting aside $250/month for vacations right now. I may up that as my income goes up – we’ll see how that goes along with my plan.

    I have no plans for children either, but I also have no boyfriend or dating prospects. I think that you’ll do just fine whenever you do end up planning to have children 🙂

  5. kim permalink
    February 19, 2012 1:01 pm

    Well think about what you’re trying to quantify – it’s hard to plan for children because the costs aren’t quite as transparent as the line-by-line details in a mortgage. Every health insurance plan is different when it comes to 9 months of OB visits, tests, and delivery. Then what if there are complications? Child care varies, but that’s a little more quantifiable by asking around. You can only kind of estimate diapers, because like womens’ jeans, each brand fits each kid differently (i.e. rashes and blowouts). Clothes – again hard to estimate because children don’t grow at a steady rate. Most try public school, but some kids have special needs, or need more attention in a private school. There are just so many variables that “planning” for a child isn’t cut & dried. I’m pregnant, and our plan was just to have a good chunk in savings (tens of thousands). It’s more important to have cash in the bank and be in a job that respects maternity rights than have an involved plan.

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