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2017 Savings Goals

January 16, 2017

Our goals this year are really simple – minimize spending, then allocate the savings that results from that!

1.  Retirement accounts maxed for each of us.  I plan to front-load mine to the first half of the year, and T’s will be spread throughout the year evenly.  There isn’t a real reason behind this strategy, but it is what I did last year and I liked it.

2. Mortgage prepayment of ~$30k.  This is a little more than 2016, but it seems to be the right thing to do.  Owning a home in a super expensive market drives this choice.  We have been doing our best to mitigate that now so that we’ll have flexibility to afford kids here in the future. We’ve talked about other options, but it is pretty unlikely we’d leave T’s job.

3.  General increase in cash/liquid reserves of $20k.  Some of this might be allocated to a home maintenance fund (we’ll need an expensive roof at some point in the next decade), the rest will go to general long term savings / cash reserves.  My targeted savings fund for when we may have a kid in the future is already nominally funded to cover unpaid time off, although I should double check my calculations. It also would be a good idea to optimize my strategy for where we hold the cash.

4. Split any remaining savings 50/50 between mortgage and cash savings. The amount in this bucket will depend on what our overall spending turns out to be. I want to set a spending goal of $90k, but our plans (travel, home projects) aren’t firm enough to know if that is achievable. I’m thinking I’ll have another $10k, but it could be more or less.

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8 Comments leave one →
  1. January 16, 2017 2:12 pm

    This plan sounds good! I’m curious though why you don’t plan to put any money into taxable investments and instead keep it all in cash. Do you plan to need a lot of the cash in the next few years?

    • January 16, 2017 5:35 pm

      Not for anything on a specific timeline… we will need a roof in the next 10 years and I’ve heard that will run us something like $20k+. That’s really the only big known thing on the horizon.

      The cash reserves is still at risk-aversion levels and I don’t feel comfortable putting it in stocks right now. There will be some dollar amount where I’ll want to invest. Having lots of cash feels like another hedge against living somewhere expensive and I want our life to be bullet proof in these somewhat uncertain times. I’m not exactly timing the market, but the current politics make me less eager to purchase investments. The other part of this is that if we do have kids in the next handful of years, our ability to build up cash will be slowed way down.

      What is your breaking point for taxable investments vs cash?

      • January 16, 2017 6:56 pm

        My breaking point is anything more than a year’s expenses in cash will be transferred to taxable investments, regardless of the markets. To be fair, that only became my mantra once I realized I’d already paid for my part of the condo. Before that, it was six months in cash and then everything else to the mortgage. My husband used to keep about three months expenses’ in checking and everything extra went to taxable but he’s still figuring out how he feels with the new world order of owning part of the condo now that we are married.

        The great thing about taxable investments is that they work nicely as a secondary emergency fund. You only pay taxes on the gains when you sell, for example, and you can have the money in your checking account within a few days. There’s just the catch that they can go down in value, but if the account is big enough, that isn’t the end of the world.

        • January 16, 2017 7:21 pm

          We were planning on putting anything over a set amount into the market, and then DH’s job got dicey and trump happened and now I feel safer just holding onto excess money in cash for a while. But we do have something like 130k or more in taxable stocks that we could tap as a secondary emergency fund that I’m just keeping invested in the market. I need to feel safe in uncertain times. And I don’t want to cut consumption…

        • January 18, 2017 9:30 am

          So, we don’t quite have a years expenses (i.e. $105k per 2016) in cash. Or maybe we do if I counted all of the moneys, but not much beyond that. And it is possible the next few years will be expensive.

          We may get there this year, but at that point, I’d go back to increasing contributions to tax shelter accounts (via back door roth if needed). If the money is nominally for something in the far future, what is the benefit of leaving out of tax sheltered accounts and in taxable investments (unless early retirement access is the plan)? Especially back door Roth where you could in theory access the principal at any time.

          (I realize you already have filled all of your tax sheltered options, so this is not an issue in your case.)

          • January 20, 2017 6:07 am

            We don’t have a full year of expenses in cash at this time.

          • January 25, 2017 9:46 am

            Oh, I absolutely agree on using retirement accounts vs taxable accounts! That’s part of why my ordering is what it is.

  2. January 19, 2017 5:18 pm

    I had started to move everything over a year of expenses into stocks but stopped when the election happened. Now I’m glad since we’re going to need it for a down payment and I’d be annoyed by taking a cap gains hit.

    I like the simplicity of your plan, though, those are the best.

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