Saving for some things---math problem
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Saving for some things---math problem
| Mon, 05-01-2006 - 11:45pm |
Hi, Loca, Aravis, LB, all. Dumb question again. One of my friends (the one who works 3 jobs) says she has specific goals to accomplish--i.e., buying a second-hand car for her kids, assisting with school bills, etc. She says to get an amount of what you are working toward (say, a new garage door, used car, lawn re-do, etc.) and divide by the number of months you are saving for. For example, if the new garage door costs $2500, and you are saving for it in 6 months, divide that amount to put into an envelope, etc. Problem is, I dont see how this can work unless everything is paid off, and even then, it is a stretch. DH wants to get the outside of house painted first, then the garage door, etc. I have a little $$ set aside toward a garage door, but it would take me at least a year. How do you figure the amounts, do you start with one area, or just put so much aside until you reach it? Whiz.

I think in order to do it you have to divert money from your snowball.
I just put aside a set amount every month above and beyond my security savings and when we have enough for something we do it. If you want to do something in a certain amount of time of course you have to divide the total by the number of paychecks in that time frame but if it is something you just "need to do eventuallY" put a set aside amount every month and when you hit a goal do it. Then when hubby is pushing to do it "now" you will be able to tell him that we can't BUT I have already saved X amount towards it.
It will mean diverting from the snowball but in my experience if it is something you really want to do you are eventually going to do it anyway. You may as well save for it now.
I am starting a vacation savings fund because I know we are going to Disney next year. It is non negotiable(just ask the girls;-) I know our trip will cost us @ $1000 so I am going to put aside 100 a month and when the time comes I have it. Yes, it does mean less snowball, but it also means when the vacation comes we won't be adding to debt and that is another one of my goals. But generally I just put aside so much every month that is not security savings and when things come up we have the $$.
Hope that helps....
Hello,
If you have
Sincerely,
Lindsey Schocke
Geeks on Tap: Mission Accomplished
I think that unless the item, such as a new garage door, is really crucial you should focus on the debt first. There is a difference between wanting a new door because the old one looks bad, or doesn't open and close correctly, and the garage door being stuck permanently open and there are a ton of valuable tools inside because that is the only place you have to keep them. Plenty of people don't even have garages and parking in one is not necessary when it comes down to it. On the other hand, I do think things like vacations fall more into a necessity category for a couple of different reasons. Sanity and family time together, for example. There is great value in spending time together while you can. Life is too short and you never know what will happen.
There are a lot of things I would like to do to my house. The siding on the corners of my garage is flipping up at the corners like a bad hairdo. The windows of the house need replacing, which would save on winter heating bills. And I would love to have the house resided because it is that awful asphalt stuff from the 1940's that is supposed to look like brick. Durable, but ugly. But none of those things are going to happen until I get the $30K in debt I have paid off. I just keep telling myself "I can not afford to replace the windows right now", because that is the truth of it. I can't afford it right now. I personally would rather be paying off debt that I am getting charged interest rates on rather than saving that money.
If it is necessary to paint the house or get the garage door sooner rather than later, I would think the best way would be to reduce your debt snowball a bit to save for it. I think you need to figure out how many more months that reduction adds to your overall debt payoff. For example, you need $2500 for a new garage door. You reduce your snowball by $200 per month. You have money for the door in about 1 year. Meanwhile, that is $200 less going to the snowball, so how many months does that add to your overall payoff on the debt? Would you be better applying that $200 per month the the snowball if it will get you out of debt in 8 months? Then you can save what you were paying to all of your debts combined for 4 months and you still end up with the money for the garage door. This is kind of hard to do without knowing your specific situation, but you get the idea.
Heather
Hi Whiz,
I agree that this is really an issue of priorities rather than math. Here's my plan, such as it is:
1. My debt is at a manageable interest rate so while I am invested in getting it paid off this calendar year, I decided I was not willing to abandon all other goals in its pursuit. This means I still tuck a little in my emergency fund, my Christmas Club fund and I am still contributing 10% to my 401k and I just started tucking a token amount away toward a Roth for 2006. I also have scheduled to begin saving for a vacation fund in July. I could reduce/eliminate all of this savings and pay off the debt sooner but decided against that.
2. I have shorter term goals. I am trying to pay off all unsecured debt and my car this year. I will still have a HUGE student loan debt to work on after that but I really am trying to focus on completing the shorter term goal and I'll figure out how to do the next step when I get there. My current thinking is there will be a period of 3-6 mos. between when I meet this goal that I will spend that snowball on deferred expenses (like the kinds of home improvement you've mentioned) and beefing up some savings for a move. Then once I get in my new home and know my new house payment, etc., I will get on track to pay off the student loan (I will be choosing housepayment with the snowball required to pay it off in about 5 years in mind). If I had more or bigger debts, I might set intermittent goals and take these sorts of 'breaks'.
I can't quite tell from your posts how you and DH have chosen to separate financial responsibilities. It seems like maybe you've decided to keep your own debts/income separate but maybe I'm assuming wrong. If that is the case though, my first reaction was if DH wants to do something to the house, he can work it out with his own money and you can keep on your debt reduction plan but maybe I've misunderstood what you guys are doing. If you are doing joint expenses/income, it is the age old challenge of getting on the same page on this stuff. The other thing with house maintenance is making sure that deferring isn't causing more expensive damage. Exterior paint might fall in this category depending on how bad of shape it is in because you might be paying through the nose to scrape if you don't paint before that starts to become necessary.
Peg
Whiz, definitely a priority issue.