Pondering Retirement

Everyone in the PF blogging community thinks about retirement at least some of the time. Heck, I'd even go so far as to say that MOST people think about retirement sometime, even if they don't actually have a plan in place yet on how to get there. Well, for me, retirement planning is different than it is for most people.

For starters, I have a TSP account instead of a 401(k). The TSP has ZERO matching contributions. So basically, all the money that is in there is MY contributions and earnings from those contributions (compound interest). Now, I would bitch about this except for difference number two which is...

I can get a military retirement from the federal government after 20 years of service. Believe me, I think about this A LOT. I mean, how nice would it be to be in your early 40's and be able to retire with a pension check and medical benefits for life? Every year that I spend in the military equals 2.5% that they add to my retirement benefit up to 75% for 30 years of service.

Still, it does make "retirement planning" kind of difficult. Why? Because I don't know if I'll endure the full 20 years in the military for one. Secondly, how much would I have to save up in order to provide for a comfortable retirement from my second career? I mean...I can't touch the money that I've put into the TSP until I'm 60 without paying an early withdrawl penalty...but I'm not sure that I want to work until I'm 60 either. (I'm just going to go out on a limb and assume that Social Security will be a non-factor)

*sigh*

I want to retire NOW! I want to have money NOW! What good is it going to be for me to be "wealthy" when I'm 60? I'll be too old to really enjoy it!

10 years and a million miles away

Well, my last post didn't prompt any responses whatsoever...but since I plan to be at least relatively active in the PF Blogging community, I'd better whip something up for the latest carnival. Truthfully, I don't really know what I'm doing with this whole blogging thing...but maybe I'll pick it up along the way.

So, without further ado...

10 years from now, I will be living in a four bedroom, three bathroom house in Indiana with a large fenced in yard where my dogs and children can run around.

10 years from now, have just sold my current townhouse, after having lived in it for three years and rented it out for another five. After all, the best way to become wealthy is to leverage YOUR money and use SOMEONE ELSE'S to pay for it. ;-)

10 years from now, I will be managing an appartment complex (or tri-plex) that I bought with the profits from the sale of my current home in my spare time.

10 years from now, I will be four years away from collecting a military retirement check for the rest of my life.

10 years from now, I will have approximately $170,000 in my TSP account at the ripe old age of 38.

10 years from now, the Roth IRA I started as an emergency fund and for the sake of tax diversification will be worth about $20,000...or about 6 months worth of paychecks.

10 years from now, I will finally trade in the car I'm driving now for a hybrid replacement vehicle...and I'll buy it cash from my "Car Fund".

10 years from now, my ING Account will be a fully funded emergency fund as well, with a full 6 months of pay socked away.

10 years from now, my children will be age 7 (Rhys - boy) and 6 (Alana - girl).

10 years from now, I will have finished both my Bachelor's and Master's degrees in Business Management...and I will have learned how to play guitar too. ;-)

10 years from now, my children will have college funds in place for when they graduate high school.

10 years from now...I'll be 38. 10 years will pass whether I achieve these goals or not. Nothing can stop the passage of time. No matter whether you strive to fulfill your dreams for 10 years or spend the whole time complaining about how your dreams are impossible to reach, 10 years will pass.

Strive anyway.

Your goals may be big or small, and they may be out of reach today, tomorrow and the next day...but unless you take that first step towards them, they will never get any closer.

Dream anyway.

10 years or 10 days...a journey of a million miles begins with a single step. No matter how long the trip or how many roadblocks are in the way, you can get there.

Begin today.

~A Reading from the Tao of Scott

What I would do if I won the lottery

I was thinking about this today, and I think that this question has less to do with what I would spend the money on and more to do with how I would choose to live my life if money were no object.

I think that after I did all of the obligatory things (pay off debt, max out retirement contributions for the year, go on a spending spree, etc, etc) that I would take a lot of time for myself to enjoy life for awhile by playing video games and traveling...and then I would start teaching.

Not teaching for a paycheck (although that might happen anyway) but teaching for the sake of teaching. I want to educate young people on personal finance matters, and help them prepare for life after they leave the nest and enter the real world. I could be a great teacher, and there is quite simply a TON of things that I could teach young people that would be more useful to them in their everyday lives than say...basic chemistry or calculus.

The other option that I might consider doing is "fee based financial planner". I ENJOY managing money, creating budgets and calculating expected returns. It's fun for me. :-) If I didn't have to spend any time worrying about my own financial situation, then I think I would like to take the time to help other people with theirs.

The only reason that I'm not pursuing either of these careers right now is because being in the military doesn't allow me to change career paths like that, and because I would be very uncomfortable either creating a basic finance class or financial planning business without significant funds to rely on for basic bills. In other words, my financial security has not yet been secured enough to where I would feel comfortable taking that risk.

What about you? What would you do if money were no object? What would you occupy your time with if you didn't HAVE to have a job to pay the bills?

January Networth And Goals for 2007

I am back from my long holiday with family with an update. I know that the two or three of you that occasionally wander through my blog have missed my horribly boring financial posts terribly. ;-) Here is the latest picture of my networth:

As you can see, things are going well. Or at least, well enough. Progress is being made. My networth has actually increased by $8770 since my first post here on Blogger. Most of that is from three simple things.

1) Automatic deductions from my paycheck to go into the TSP (retirement) account.

2) Paying all of my bills on time automatically through online bill-pay and other such forms of money handling.

3) Lastly, through Elissa having a job.


That last one is HUGE, btw. With Elissa working, we have made significant inroads towards paying off her car (currently charged to the MBNA Mastercard) as well as saved a lot of money on the other side of the equation in the form of extra savings accounts scattered over the globe. These savings accounts are earmarked for things like....new computers when our current ones no longer work...car repairs...car upgrades...etc, etc. Basically, all of the things that I have been denying myself for the past few years because of my obsessive desire to get out of debt and live frugally to do so.

On the other hand...if Elissa wasn't part of the equation, it's entirely possible that the liabilities side of the equation wouldn't be quite so out of whack...but I'm trying to think positively here. Plus, she can only do so much damage on that side of the equation, which is more than balanced out if she continues to work past the time when we get all of that crap paid off.

So, that being said...this is as good of a point as any to put down a goal for 2007.

My goal for our family for 2007 is to more than double our current networth from $23,725 to approximately $50,000.

Think that goal is too ambitious? I don't. And here is how I plan to do it.
Note: all amounts rounded to nearest $25

Regular contributions to retirement accounts for 2007 (TSP and Roth) = $4100
Regular bi-weekly payments to mortgage principle + extra payments = $3850
Regular Ford payments to principle, plus extra principle payments = $4000
Regular Prosper Loan payments to principle = $550
Regular Contributions to Emergency fund (minus Prosper payments) = $725
Regular Investment in the Stock Market = $1050
Regular Additions to "Car Fund" = $775
Regular payments to principle on USAA Mastercard balance = $1450

For a grand total increase in Networth of (drum roll please......) =$16500

Now, that's just my portion of the puzzle. Elissa is also kicking in $300 per paycheck to help reduce the balance on the MBNA Mastercard, which, when lumped together with my $225 allotment from my paycheck towards that balance equals an additional $10,500.

So.

If Elissa continues to work, and I continue to put my money where I've been putting it, and Elissa does the same....and if we can somehow avoid the majority of the financial traps that come up in a year, we could theoretically increase our current networth by $27,000, bringing us to a grand total networth of $50,000.

Of course...I'm counting on the stock market to help us offset the depreciation of our vehicles. I'm also assuming that our house will either stay level or increase in price. But, considering that all of the numbers listed above represent just what I currently pay out each month, I don't think that it is unreasonable to think that I could double my networth this year.

The real challenge is going to be trying to double it AGAIN next year! *lol*

I'll keep you posted on how that goes.

~Scott

How to deal with a pay raise

I know I've read an article with the same title of this post on MSN Money, but who cares. I'm going to cover the topic here, because I just found out that I am getting a $136 per month bump in my Basic Allowance for Housing next year! Whoo-hoo!

For those of you unfamiliar with the military, our pay is taxable, but our allowances (BAS and BAH) are not. In other words, this money represents an ACTUAL $136 raise in pay, versus a before tax raise like a COLA (cost of living adjustment) raise.

The reason that BAH went up here at Tyndall AFB is because rents and utility costs increased pretty dramatically in this area last year. As a homeowner, however, I am partially insulated from this phenomenon. My homeowner's exemption kicked in finally, so my monthly required mortgage payment actually WENT DOWN. :-D This had no effect on my monthly budget, other than to increase the amount of additional principle that I am paying towards my mortgage. I am on a bi-weekly payment program that I have set up where I send exactly $450 every two weeks. Since my mortgage required payment actually decreased, the additional amount applied towards principle will increase from $87.78 to $119.97.

With the additional $136 coming in...I've decided that I am going to bump up all of my savings pots, and try to stick to my stated goal of keeping expenses the same.

So, I'll divvy it up like this:
$25 - credit card principle payment increase
$18 - emergency fund
$20 - car principle payment increase
$13 - retirement savings increase
$60 - COLA adjustment.

See, I figure that I have to keep at least SOME of it, in order to offset the rise in prices that neccesitated this increase in the first place...maybe give me a little more elbow room from month to month...but my primary objectives haven't changed. Ridding myself of this debt load and saving money for retirement are my biggest goals...and nothing will give me the peace of mind and "elbow room" that paying off my debts will.

Once the credit cards and the car is paid for, that's going to be roughly $830 per month that is freed up for reallocation towards either spending, savings or going after the mortgage. At that point, I probably won't want to aggressively pursue the mortgage...I expect interest rates for savings accounts like ING will continue to rise and at 5.875%, I'm barely paying anything in the way of interest costs...but at least I'll have the OPTION. It wouldn't make sense to pay extra on towards the house if I can get a better rate of return in my savings account, you know? *sigh* I'm really looking forward to having those kinds of options.

Anyway...long story short...when you get a pay raise...don't just figure out ways to increase your lifestyle...figure out a way to save a portion of it, and with whatever is left over, THEN increase your lifestyle. Always pay yourself first.