Do you have a plan for your financial goals?

I used to play this game with myself and think “Where do I want to be in 5 years?” Once I thought about that for a while and figured out what I wanted…it could have been

• 1) Pay off my credit card.
• 2) Pay off my car.
• 3) Spend two weeks on vacation.
• 4) Buy a new house.
• 5) Renovate my house

1.        A) Put on a new roof
2.             B) Landscape the front yard
3.                C) Paint and put in laminate flooring

Then I would put these in priority order, because my house has to stay in good condition. Putting on a new roof was top priority. I had to find out how much it would cost. Get estimated and get referrals. Then I know how much I would have to save in order to be able to put a new roof on the house.

Credit Card and Car Debt

I then looked at the list and thought I need to pay off or pay down the credit card debt. The interest rates on credit cards are the highest of any revolving debit. I had to figure out how much extra I could pay into the credit card debt. I also had to vow that I would only use the card in case of an emergency. I would sometimes put a percentage on the extra amount I would pay. My goal would be 30% extra every month. If I could not pay the extra 30% I would pay at least 10% extra and no less than 10% but 30% would be my goal. Believe it or not an extra 23% will only pay the interest rate on the amount due. It would be wise to look at the interest rate you are paying on your credit card. Look at your December statement and see what the accumulative interest you paid for the year. You could be surprised by the amount you paid in interest.

Go through the same exercise on the car debit. I would work hard at paying down that revolving debit as soon as possible. Unfortunately, as soon as you pay off the car in 5 years, the car has lost a lot of value. There is no equity in a vehicle. We just need them to live and get around. You might as well pay off the debit as soon as you can, because you are paying interest on the loan.

Buying A House

If you want to buy a house, paying off debt is the best way to get ready. The most important thing to do is pay the revolving debt on time. This is critical. If the debit is not paid on time it can take an extra 24 months to prepare for the purchase. I know that late pays are the hardest to get off the credit report. It takes 24 months and a lot of work. Once again you might want to look at your pay check and see if you can save 10 or 15% to purchase. I counsel my clients and advise that you will need at least $10,000 in Southern California in order to purchase. This would be your down payment. Even with a first time home buyer program you still need some cash to purchase.

Well so much for a vacation this year! I think the roof took that. But for next year I could save at least $100. a month for a vacation next year. It would definitely be on my goals list for next year.

Have fun looking at your financial goals. Remember this is a 5 year plan. The other thing to remember is that this is not set in stone. It can change as you go through the year. But keep your eye on the goal and shoot for the moon, because if you miss you will land on a star.