Done To Zen

Something I noticed over the past couple of months is that I’m getting more and more frustrated with my financial life despite the fact that I’m improving my net worth every month. Maybe I just remember bad feelings more easily than good feelings. At any rate, the lack of concrete goals left me with no clear understanding of how a month went. Net worth went up, but was it above or below expectations?

So, from this month on, I plan on creating goals at the start of each month, so I know at any point in time how I’m doing.

The goals for September:

In other areas in my life, I try to give myself 1 really hard, 1 medium, and 2 easy goals, so I’m going to go with that here, too. Can you guess which of the stated goals are going to be hard for me?

1. No purchasing anything other than fixed expenses. The reason for this is very simple. About a week ago, I once again upped my 401K contribution. This resulted in an extremely tight budget with maybe $10 left for whatever spending. Of course, I would rather that I put the $10 towards a better use. There really is no reason why I should be eating out every day or buying books for the heck of it.

2. Meet emergency fund goals. I have a fixed savings amount that goes to my emergency fund every month. I want to meet it despite increasing 401K goals. Note: if this proves to be impossible, then I’m going to lower my 401K contribution to the previous levels. It’s good to have retirement savings, but not at the expense of liquidity and financial security, IMHO.

3. Purchase bonds. I finally turned in the confirmation application for my TreasuryDirect account, so I should be able to start buying Is it a better idea to save the (insignificant) amount into emergency fund? Maybe, but I want to commemorate my successful battle against procrastination by actually buying something.

4. Maintain my 401K contribution limit for at least 4 pay periods. From past experience, I know that I often think that it’s absolutely impossible until I stick with it for 2 months, at which point it becomes habitual. So I’m going to wait at least until October 31 to make any changes. We’ll see whether I’m right: maybe I just got use to wasting money and require time to adjust.

Stretch Goals for September:

1. Earn income from freelancing: any amount I earn is obviously going to be a plus, but I have a specific dollar amount in mind. To encourage myself to meet the goal, I’m going to give myself 10% of the money to spend as I see wish (the rest is going to go to savings, naturally).

Difficulty Ratings

Ratings are from 1 to 10, with 1 being super-easy and 10 being super-hard.

Note: a stretch goal isn’t automatically a 11 and normal goals can sometimes be 11s.

Stretch Goal #1: freelancing: 11

Goal #1: No unexpected purchases: 10
Goal #4: 401K: 5
Goal #2: Emergency fund: 4
Goal #3: Bonds: 1

There are no 4.5ers this time, but that’s OK. I feel that my hall of famer will more than make up for the loss.

Final Notes

1. I finally have enough in my emergency fund that I’m making more than just cents over the course of the month in interest. What to do with this??? Should I include it in the budget or simply let it accumulate in the e-fund? At this point, the money is small enough that it doesn’t make any sense to expend the effort, I think, so I’ll leave it to accumulate for now.

2. My AC appears to be broken. Though I know nothing about it, it looks like the engine is running fine, but no air is coming out. My home is a fairly new construction, so I can’t imagine that the AC broke down, but I’m wondering whether maybe it did. I’ll have to deal with that, but a broken AC obivously throws a monkeywrench into financial plans.

3. I’m expecting a small payment (around $100) but I don’t know whether I’ll get it in a lumpsum later on or broken up into pieces throughout the rest of the year. Anyway, what should I do with this money? Put it in e-fund or buy bonds or pre-pay mortgage?

Mrs. Micah challenged everyone to find a single step to better personal finance:

Find one step you can take to make your financial system better or more organized.

Like mbhunter at Mighty Bargain, I have about a hundred steps I can take to make my personal finance better or more organized, but since we’re restricted to picking only one of them, I’ll go with:

Make savings automatic.

I do this already with 401K and for a weekly transfer of $30, but for the bigger amounts, I still do it automatically. For example, my emergency fund is still being built up manually. The reason I do it this way is that I have variable expenses that, well, vary widely from month to month. I’m worried that I’ll need my entire paycheck for something or another one month, but as the emergency fund amount is transferred automatically, I won’t have enough funds available for something — whether be it the transfer to the emergency fund or the bill-pay.

But if I really think about this, this is not a likely case and I’m only using it as an excuse to psyche myself out. With my variable expenses, I typically don’t pay them on my credit card around the end of the month, which means that I usually have a month and a half to pay them off. If it is the case that I need the extra money to pay these expenses off, then I have more than enough time to transfer money out of my emergency fund to make the payments, though I don’t anticipate this to ever happen.

Steps to take

1. Set up an automatic transfer of half the amount I want to save from each paycheck.

I’ve been procrastinating a great deal for a plan so simple…