Appliance and Electronics Repair Rates

Here is a table of repair rates in 3 years for various common household appliances and electronics.

Repair rates for products in first 3 years	%
Desktop PC	37
Laptop PC	33
Refrigerator: side by side (w/icemaker )	28
Washing machine	22
Refrigerator: top / bottom freezer (w/ icemaker)	17
Projection TV	16
Clothes dryer	13
Dishwasher	13
Vacuum cleaner (excluding belt replacement)	13
Microwave oven (over-the-range)	12
Electric range	11
Refrigerator: top / bottom freezer (no  icemaker)	8
Digital camera	8
Camcorder	8
TV: 30- to 36-inch	7
TV: 25- to 27-inch	5

Source : Consumer Reports 2006

Repair rate means that the product needs some sort of repair and does not necessarily mean total failure.  It could be a minor or major repair.

You can tell its a fairly old list because they list 25" TVs and projection TVs but no flat panels.   This is the only such list I could find with the searching I did.   I would assume that the repair rates would be similar 5 years later so I think this list is good enough to give you an idea.

Computers break down a lot apparently.    Thats not too much of a surprise as they are extremely complicated systems.  However what is considered a 'repair' for a computer could be something like a virus infection or an operating system or software problem that requires a technician to resolve.  Thats not the same as a electronic hardware failure.   I'm in the high tech industry personally so this kinda thing matters to me, but to the typical consumer it doesn't matter as long as the thing is broken.

Refrigerators with icemakers break down a lot more frequently.   Presumably that is due to the icemaker itself breaking down but it could also be related to failures that are related to the icemaker in some way. 

How Would You Use the Information?


Lets say that I'm buying a new digital camera and I'm offered an extended warranty.   The camera costs $89 and they offer me a 2 year extended warranty for a mere $12.95.    Generally I know that extended warranties are not a good financial purchase.   But you might be tempted to buy one based on the security that it could bring you.   Is covering the life of a camera for 2 years worth $13?   That really depends on how often such cameras break down or otherwise need replacing.   The repair rate for digital cameras in the first 3 years is just 8%.   That means you only have about 1 in 12 chance of using that extra 2 year warranty.   Since the camera cost $89 to begin with then a 1/12 probability would value the warranty at about $7.42.  

Now consider if you have a few rental properties and you want to plan for and estimate the cost of repairing and replacing the appliances in your units.   You have 8 separate units so you have 8 stoves and 8 refrigerators.    It would be useful to know on an average year the chances of one of those 8 stoves or 8 refrigerators breaking down.   If there is an 11% failure rate for electric ranges in a 3 year period then we could estimate that for a typical 3 year period that you'll have 1 of your ranges need repair.   That assumes you started with all new appliances however.   So it would get more complicated if the stoves are of varying ages.   But this gives us a starting point to help estimate the failure rates.  Best case you can assume you'll need to repair 1 stove in a given year but its likely more than just one. 
-

Backup Emergency Financial Plan 2.0

Over two years ago now I wrote an article Backup Financial plan in Case of a Job Loss in which I discussed my general plan for how to handle our finances in case I lost my job.   Since it has been a while I decided to update the plan a little bit.

My primary focus would be to find another job in my field.   At the same time I would want to make immediate changes in our finances as well as plan for other changes that we may need to take if I'm unable to find work in my field for an extended period of time.

The point of doing this kind of planning is not to be pessimistic or expect to lose a job.   The idea here is that I'll want to be reasonably prepared in case something bad happens.   I don't want to be surprised by a job loss and find myself without any kind of plan then plod along doing the same things.   Of course I could just cross that bridge when I come to it but  another point of doing this kind of plan is to make sure my finances are not setup poorly in the event of a job loss or other financial problem and so that we're prepared to weather any kind of financial emergencies that might arise as best as possible.   For example it might be very beneficial to have better cash flow in case of a a financial emergency and that may be a good reason to refinance some debt now.

FIRST YEAR

Step #1. - Cut back our spending so our short term income will cover it.
 
For the past 12 months we've averaged approximately $4,000 a month in total spending.   That includes our home mortgage, utilities, food, entertainment, travel etc.   I am however excluding  a one time medical expense.

Home phone, cable, netflix, cell phones - All of these have extra charges that we could cut back on. We should be able to trim $100 off these bills pretty easily just by eliminating some of the extras.
Clothing, Travel & Gifts - I previously said we'd cut all these 100%.   I might loosen that some and not cut them 100%.  After all I wouldn't necessarily cancel Christmas and clothing does wear out so we might need to replace a few items.   I'd probably cut travel, clothing & gifts by say 90%.   We could probably cut around $300 off our budget in these areas.
Eating out  and groceries -  We continue to spend alot of money on food.  I'd still cut eating out by 90%.  We'd also want to trim our grocery budget as well.   We should be able to cut $500 in this category.
Entertainment, discretionary, misc - For entertainment and other misc. areas that we fritter away money we could cut 90%.  That would save us $150.

Total of cuts $1,050

Step #2 - Get health insurance

I'd probably sign up COBRA initially.  Our plan isn't super expensive.  Its not cheap but health insurance isn't usually.  I looked up our COBRA premiums and it would be about $770 a month.   However our plan has a high deductible and HSA.  We would also want to make sure we have some money in the HSA and/or bank to cover the deductibles.

We would want to shop around and see if getting our own health insurance would be better for us financially.   I just did a quick search on eHealthInsurance and it looks like we could get a similar high deductible HSA plan for about $200 less per month.   Of course I'd have to read all the fine print to make sure that plan isn't lacking stuff we'd need.   Also COBRA only lasts for 18 months maximum so after that we'd be forced to get our own coverage.


Step #3 - Look for other cuts and find alternative income

Other ways to cut spending:

• We should be able to further cut our cell phone, home phone and cable bills. 
• Sell one of our two cars which would cut our insurance costs and give us some cash. 
• We could shop around and switch insurance companies.  Right now we're with Amica insurance which is a great insurance company.   J.D.Power has rated them #1 for 12 years in a row.
• Trim grocery costs by using coupons more and shopping around better.

Find ways to make money:

• We could have another garage sale to sell off our extra stuff.   That would give us a few bucks but it wouldn't give us any ongoing income.
• I make some money off this blog but not a whole lot.  I haven't put a lot of effort into monetizing the blog.  I could look into ways to make more money here. I might hire Crystal to help.
• My wife and myself could potentially do some work tutoring. 
• I could put up a shingle and do computer work on my own.  

YEAR TWO

Step #4 - Sell or refinance real estate

Right now our cash flow from our rentals is not maximized.  If I were to consolidate and refinance debt I could cut our monthly payment.  I'm not sure if banks will refinance debts when you are unemployed however.   I might be able to get a loan from a relative with the properties as collateral.

Currently we own 3 rentals and our home with combined equity of roughly $450k.   We have mortgages on one rental and our home.   The balances on those mortgages are about $140k right now and our payments are about $2,300 per month with taxes and insurance.  If we refinanced that today then we could cut the monthly payments by $1000 or so.

Or we could sell 2 of the rentals and pay off both of the mortgages.   That would give us about the same cash flow change but without the mortgages.   However you can never tell how easily you can sell a property.   It might work best to refinance first to improve the monthly cash flow and then put the 2 rentals up for sale.  Then if we sell them eventually we could remove the liability of the mortgages.

Step #5 - Career change and/or move

This is the final stage of dealing with a financial emergency. If I'm unable to find a new job in my current field in my area then I'd have to consider either changing careers or moving.   I might want to do both at that point.   Moving back to my home town would definitely worth considering.  Housing is cheaper there and the rental real estate market is better as well.   We could feasibly sell our properties here and buy a house and rentals in my home town and end up with enough rental income to support ourselves.   However selling properties is easier said than done and it could take several months to sell.

Step #6 - Selling assets to feed ourselves

Selling properties off over the years may allow us to keep ourselves afloat for a long time.   If we start with a pile of cash, refinance our mortgages and limit our expenses then we can afford to live for around 10 years.   Then after 10 years we could sell our rental here to get some cash out of the equity.  Then we could sell our home and move to my home town giving us some more cash.   Finally we could sell off all our out of town rentals to get cash as well.   Of course selling the rentals would reduce our monthly income but it would give us a pile of cash to live off of for a while.   You don't want your financial plan to consist of selling off all your assets one by one until you're finally left with nothing as that won't make a good retirement.   However if worse came to worse we could feed ourselves for a while by selling off assets one by one.   Meanwhile our retirement accounts would all be untouched and growing in value over the years.  I could feasibly not work for the next 20 years and then retire following this method.   It would be a low income subsistence level lifestyle however.

But Bill Gates and Warren Buffet Did It!

Is going to Harvard a good idea?   Of course it is.  A Harvard degree is almost a free ticket to a good job that pays well.   Is going to Harvard a good investment?  Definitely. 

Not a typical drop out

It seems that when you have this discussion that eventually some wise guy asks "What about Bill Gates?   He didn't finish college.  He dropped out of Harvard and look at him, now he's a mega billionaire!"   I'm paraphrasing there but something to that effect is the usual argument.   The idea here seems to be that going to college like Harvard isn't necessarily a good idea cause someone like Bill Gates became a wealthy billionaire without a college degree.   If Bill Gates can be so successful without college then why do other people need to go to college?


Point: College is useful.
Response: Bill Gates doesn't have a degree.

Can you make 20% or more a year every year over the long term on your stock investments?   No you can't expect to do that.   Individuals shouldn't expect to get stock returns that are significantly different than the overall market performance over the long term.   Of course theres variations you may be a bit lucky or unlucky and do better or worse. 

Not a typical investor

Point: Don't count on higher than average investment returns.
Response: Warren Buffet gets higher than average returns.

Compare the Bill Gates versus college and Warren Buffet versus investing discussions with the following :

Point: Making a 3 point basket from across half court with 0.5 seconds on the shot clock is very hard.  Don't expect to be able to do it.
Response: LeBron James could do it!  

So?   Who cares if LeBron James can make a half court shot.   He's a basketball super star.  Just because a star athlete can do something doesn't mean that a normal person like you or me can do it.

Not typical at all.

Just because Bill Gates or Warren Buffet achieve unparalleled financial success doesn't mean that anyone else should plan their lives or make decisions using them as an example.    Just because one guy can drop out of Harvard and become a billionaire doesn't mean everyone can.  Other Harvard Dropouts  like the ones in this article "Dropouts" from Harvard Magazine are just as likely to have ended up becoming homeless hippies for a decade and eventually settle into 'normal' jobs with 'normal' levels of success.    For every Warren Buffet there are about 307,006,549 million Americans (and counting) who have had less success with their investments.

For every LeBron James in the world theres millions of normal people like myself who are not particularly good at basketball.
 
There are exceptions the norm in everything.   Rare extremely talented or gifted individuals can do that which most of us can only dream.    These peoples individual experiences should not be considered relevant to our own individual financial planning.

Gates photo by Domain Barnyard, Buffett photo by Medill DC , James photo by Keith Allison

Six Stages of Financial Freedom

A while back I reviewed a book called The Complete Idiots Guide to Getting Rich   One of the ideas in the book that I really liked was what they called the 5 stages of wealth.   (see my review for details on their 5 stages)    Their idea got me thinking about the different stages of financial freedom.    Wealth and financial freedom are pretty similar but I have a little different take on the idea of financial freedom and I think theres some different milestones.   So I decided to start with their idea and give it my own twist and interpretation to create 6 stages of financial freedom.

This is what I came up with:

6 Stages of Financial Freedom

Stage 1 : Spend less than you earn.
Stage 2 : Pay off consumer debts
Stage 3 : Build a solid cash reserve
Stage 4 : Assets generate income to pay basic living expenses
Stage 5 : Assets generate income for comfortable living standard
Stage 6 : Assets generate income for comfortable living plus luxuries and some left over


Stage 1 : Spend less than you earn.   

This is the first step towards achieving any kind of financial success.  If you're spending more than you earn then you'll just be digging your debt hole deeper and you'll never get financial freedom.   Once your spending is under control you've got the ship pointed in the right direction.

Stage 2 : Paying off consumer debts

Paying off your credit cards and other consumer debts is a good step towards financial freedom.   Freeing yourself from credit card debt is a major milestone in financial freedom.   Lacking obligations to debts is part of being financially free.   You could include your student loan debts in this step as well especially if the debt is at a higher % rate.  I do not include mortgages in this stage since they are based on the homes equity.

Stage 3 : Build a solid cash reserve

A solid cash reserve will give you financial freedom so that you can get through a short term economic hardship such as job loss or unexpected major expenses.  Having a large pile of cash gives you a lot of financial freedom.  If you don't have cash on hand then you may feel tied to a job you hate or stuck in a situation that is not a positive one.   A decent amount of cash will give you the money to do things that you wouldn't have the option to do otherwise.    Your emergency fund can be some of your cash reserve but this stage is more than having a basic emergency fund.


Stage 4 : Generate income to pay basic living expenses

The next step is to build assets or investments that will start to generate income for you.   The style of investment is up to you.  You might have dividend paying stocks, rental properties that generate rent or simply bonds that pay a yield.    Your goal for stage 4 is to get enough investments so that they can generate enough cash flow to pay your basic living expenses.    By 'basic living expenses' I mean your utilities, food, clothing and some minimal amount of discretionary income.   This is a lower standard of living than most of us would choose for ourselves but enough money to live off of if you had to do so.   Once you've accomplished this stage your financial freedom will increase because you won't be solely dependant on working for an employer or the state of the economy around you.   If you get laid off abruptly then you can fall back on the cash flow generated by your assets.  Your own assets will give you a safe financial base you can fall back on if you ever need to or want to.


Stage 5 : Generate income for comfortable living standard

The next stage of financial freedom is where your assets are generating enough money that you could comfortably live off the cash flow.  At this stage you have a reasonably comfortable standard of living which goes past the basic 'pay the bills' level of stage 4.   The comfortable living standard pays the basic bills like stage 4 but also gives you extra money for some entertainment, travel, gifts  and a bit of a margin for safety.   At stage 5 your assets generate enough that you can safely quit working your 'day job' if you choose to do so.  This is the stage that I consider to be real 'financial freedom'.  Your assets now generate enough money that you are really financially free from work.  

Stage 6 : Generate income for comfortable living plus luxuries and some left over

The final stage of financial freedom is where you have more than enough money to live off of.   This means you have the income for the comfortable living standard of stage 5 plus more money on top of that.   Basically you have more money coming in than you spend by a decent margin.  You can spend all the money you want to (within reason) and still have money left over.    While its certainly nice to have the financial freedom of stage 5 its even nicer to have the amount of money at stage 6.   Stage 6 financial freedom really gives you true freedom from financial worries.

You need to decide on the dollar amounts

You'll notice that I don't cite specific dollar amounts for stages 3 to 6.   The exact amount will depend on your situation, your spending habits and the cost of living in your area.   You should figure out your expenses and then decide the amounts for yourself.   Maybe you'll be able to cover your basic expenses for stage 4 with $10,000 a year or maybe you'll need $25,000.   The amount you'll be satisfied with for stage 5 and 6 really depends on your own goals.  

Should you pay off mortgage?

You might be wondering why I don't have paying off your mortgage as one of the steps.  I do think that for many people that owning their home free and clear is a major stage of financial freedom.   It is the next goal that my wife and I have.   However paying of a mortgage may or may not make sense for you and I don't think its necessarily a universal goal.   If you want, you can add it as a step in the system around stage 4.

Deciding When To Exercise Stock Options

I work at a high tech company and like many tech companies my employer has granted me stock options over the years.   With the stock market crashing in 2008 many of my options have been worthless for some time.  But now that the market has recovered significantly I find my options are "above water" again.

One of the toughest things about stock options for myself and many others is deciding when to exercise them.  In the past I've simply held on to the options until they expired and then I would exercise them shortly before that or let them expire if they were worthless.   This hasn't been a very good strategy for me thus far.

Right now my options are worth about $12,000.   If I had cashed in my options several years ago I would have pocketed about $20,000 more than they are worth today.   But I got greedy or simply timed it poorly and I hung on to the options and rode the tide of the stock market until it crashed again.   Hindsight is 20/20 and I don't expect to sell at the exact perfect moment to maximize my profit.

I need to have a plan to exercise the options once the price hits certain levels and try and ensure a certain amount of gain.   If I don't have a plan to exercise then I may miss peaks in the stock value or I may be tempted to wait too long for the stock to go up in value. 

Figure out realistic expectations for what the stock value may be over time. 

If the stock is trading at $10 today then it is probably not very realistic to think it will be $20 in a year.  But its relatively realistic to think it will hit $10.50 or $11.00 within 12 months.   I shouldn't sit around waiting for the stock value to double but should instead set a target price that is more realistic and settle for that profit level.   One simple way to estimate future value is to project a 10% annual growth.  With a $10 price today that would look like this:

2010 = $10.00
2011 = $11.00
2012 = $12.10
2013 = $13.31

If you have 1000 options that are at a grant price of $9 and they expire in 2012 then its not unrealistic for the stock to hit $12 before the options expire.   The options would be worth $1,000 if you exercised them today and if the stock did hit $12 then you could cash in for $3,000.   Based on this kind of expectation of the future stock value I could set an order to exercise the options at $12 and settle for that.   If the stock hits $12 before they expire in 2012 then I'll profit $3000.  If the stock never hits $12 then I can always sell them for market value shortly before they expire.

Cash in Higher value options sooner

I've got some options at a higher price and some at a lower price.   Using the example of the stock value at $10, say you've got some shares at $8 and another option at $9.   If the stock goes up to $12 then your shares at $8 are worth $4 each and the shares at $9 are worth $3 each.   You might be inclined to cash in the $8 shares first since they are worth more.  Instead I would prefer to hang on to the $8 shares since they are going to be "above water" longer in case the stock value happens to go down again.  If you're at $12 then the stock can either go up or down or stay the same.   If the stock goes up then both your $8 and $9 shares are going to go up equally.  If the stock stays at $12 then theres no difference..   But if the stock goes down then you could potentially hit the point that the stock goes to $9 and the $9 shares are effectively worthless, however your $8 shares would still be worth $1 each.

Exercise shares that expire soonest first

I've got shares that expire in 2012 and some others that expire in 2013.  It makes sense generally to exercise the older shares that expire in 2012 first.   If I exercise the 2013 shares first then that leaves me with the 2012 shares and only 2 years timeframe for the stock to potentially go up.   If you instead exercise the 2012 shares first then you're left with the 2013 shares that will last 3 years.   Thats another year of potential growth of the stock that you could stand to profit from.

Bottom line:   The key strategy that I think I'll use for deciding when to exercise my stock options is to set a target price based on a reasonable expectation of the stock price and then exercise once I hit that price.

Backup Financial plan in Case of a Job Loss

Right now I have a pretty good paying job but my employer has had several rounds of layoffs over the past 10 years. Thinks are looking OK right now but I don't know if we'll get through the current recession without some job cuts. I'm fairly confident I will not be laid off any time soon, but you never know. Its best to plan for the worst and hope for the best.

For the past half your our spending has been about $4,250 a month. That is a lot of money for sure. But our monthly take home income is over $6,600. So while we spend a good amount, our income is pretty high so overall we're saving a lot as well. But if I lost my job we'd lose most of our income and our spending would have to change.

FIRST YEAR

Step #1. - Cut back our spending so our short term income will cover it.

One mistake I have seen from some people in todays economy is that they do not immediately and drastically cut their spending when they first lose their job. If I lost my job then we'd make immediate cuts to our discretionary / 'wants' spending.

We would cut our spending to something under $2800 a month. With severance, unemployment, our rental income and my wife's home business we should be able to cover that level of monthly expenses for maybe a year or so.

These are the areas that we'd cut back:

Eating out. Cut back about 90%. We'd probably still treat ourselves to an occasional, maybe monthly dinner out.
Travel. We'd cut any unnecessary travel. Most of our travel spending is on vacations and that could be cut significantly. Vacations are a luxury you can't afford if money is tight.
Entertainment - Cut back about 90-100%. We don't spend a huge amount of entertainment but we'd stop almost all of it.
Clothing - We can make due with the clothing we have. Cut 100%.
Cable TV / Netflix - Drop HBO immediately. We'd probably keep Netflix and cable at least in the short term. Cable is our primary form of entertainment and reasonably good value.
Gifts - Gift giving would have to take a back seat temporarily. Cut 100%.
Discretionary spending money - This category is misc. spending on stuff like an occasional latte or personal purchases of movies, games, books or whatever other miscellaneous spending. I'd cut this back 90-100%

Total cuts = over $1450 / month

Secondly I'd look for other areas to save money. I could probably cut some off the following expense categories:

Home Maintenance & Auto maintenance - These are two areas that I could cut costs significantly by either delaying repairs or doing the work myself.
Grocery / Drug store / home goods.I'm sure this category could be cut back a ways. we've been spending quite a bit on household goods and we could cut back further on our grocery bill with a bit of effort. ON the other hand our grocery costs would go up a little bit since we'd be eating out a lot less.
Gasoline - I'm not sure if we'd be able to cut gasoline spending. I'd not have to drive to work so that would cut it some but I might be doing other travel while job hunting.

Savings = unsure

Our mortgage, Garbage & water bills are fixed and not something we can cut back on.


Step #2 - Get health insurance, look for life insurance.

I would not want to go without health insurance. We'd probably take COBRA coverage short term and look for a high deductible plan with health savings account (HSA) after that. We have funds in our HSA that would cover COBRA for a while. Longer term we'd want to get our own plan since it would be a cheaper option. I'd also want to look for life insurance since my current coverage is through my employer.

Step #3 - Look for other cuts & find alternate income.

Longer term if I was unemployed for a while than we'd have to look at making deeper cuts.

Electricity - We're fairly frugal with our electricity use. I don't see any easy or cheap ways to cut back. We could cut the heat down and save that way but this is not a first step for us.
Insurance - We might be able to shop around and get a better rate. But we're very happy with our current provider. Cutting insurance cost would not be a first step.
Cell phones - We could probably cut our cell phones down a lot if not get rid of them entirely. That would be something we'd have to think about.
Phone and Internet - We could cut our phone and internet. Lower internet would mean a slower service. Not something we'd like at all given my wife has a home business and uses the net a lot.

I could probably cut $100-200 off our bills with a bit of effort

That would bring our spending down to $2600 to $2700 level.

I'd also look for other income sources. I'd probably try working on the side doing computer service work. Or I might spend effort helping my wife with her home business. We'd do whatever would net us the most income. Hopefully that would be enough to add some to our monthly income.

SECOND YEAR

Step #4 - Sell real estate

If I'm unemployed for longer than a year we'd start dipping into savings. Thankfully we have a very healthy cash reserve and our savings would last us a while. But at this point I think it would be smart for us to consider selling either our home or a rental.

We have a rental with enough equity to pay off our home mortgage. If we sold that rental then we'd be able to pay off our mortgage and knock over $1000 off our monthly expenses.

This would bring our monthly expenses down to less than $1700.

OVER TWO YEARS

Step #5 - Career change and/or move

If things didn't look up for a couple years then we'd most likely consider a major change in our life. I might make a total career change. That could include going back to school for training in a different field. We might also consider moving somewhere with lower cost of living.


While I hope I am not laid off any time soon, I think it is important to have a plan just in case.

Health Savings Account plan for 2009

The other day I listed my financial goals for 2009. One of the goals was to maximize our Health Savings Account (HSA) contribution for 2009. The maximum contribution that you can make to an HSA in 2009 is $5,950 for a family or $3,000 for a single person.

About my HSA account in general
I have an higher deductible medical insurance plan with an Health Savings Account at work. I chose this plan because my monthly premiums are $0 excluding the HSA contribution. By comparison the standard health insurance would be $3,500 a year or an HMO would run $2,200 a year. The HSA plan I'm on has a $2,400 deductible and $4,200 maximum out of pocket. Since the HSA funds are BEFORE TAX its a great savings. First of all I could fun the plan at $4,200 before tax for an out of pocket cost of about $3,150. This is a few hundred less than the standard health plan. But I only use that money if we max out the medical expenses. If our expenses are low then we save more.


Why maximize the contribution?

First reason to pay into the HSA is to cover any medical costs we have for the year. Our maximum out of pocket costs are $4,200. By maximizing our HSA account for the year we will make sure we have all our medical bills covered 100%.

The contributions to the HSA are pre-tax. Generally my tax rate is around 25% off the top of my income. So for every dollar I put into the HSA thats 25¢ which I avoid in taxes. By investing in the HSA we avoid taxes. Plus this money can grow tax free while its in the savings account.

We are likely to have medical expenses in the future. So we should be able to use this money to cover normal medical costs in future years. As long as we're using the money for a qualified medical expense it can be used completely tax free.

Ultimately even if we never use the money then we could withdraw it after age 65 and only pay income tax on it. In this way it would have the same tax deferred savings benefit of an IRA.



For more on Health Savings Accounts:
Wikipedia page on HSAs.
Dept. of Treasury HSA page.

Financial goals for 2009

Here are my primary financial goals for 2009:

Control our spending.
Maximize contributions to Roth IRAs : $5,000 x 2
Maximize Health Savings Account : $5,900
Pay down the home mortgage. : $20,000

All together this amounts to over $30,000 in savings and retirement investments. Keep in mind that this is a goal and I may fall short or if all goes well I might exceed it.

Looking at each item a little more specifically:

Control our spending - Without controlling our expenses we won't have money left to spend. So savings starts with keeping our spending down. I like to continuously look for ways to save money and reduce costs. Controlling our spending will be an ongoing effort throughout 2009 and after.

Maximize Roth IRA's - My wife and I will both put the maximum amount into our Roth IRA accounts. This is one of our basic retirement investments along with our investment real estate. With both accounts maximized at $5,000 that would be a total of $10,000.

Maximize HSA - I've decided to maximize our HSA contribution in order to save this money for future medical expenses and cut our current tax liability. For a married couple the maximum you can put in is $5,900 for 2009. We've decided to cap that contribution.

Pay Down the Home Mortgage - Our final major financial goal for the year is to pay down our home mortgage. We'll do this in two ways. First I have an additional payment made towards our principal with each monthly mortgage payment. This is about half of the extra amount that we plan to pay towards our mortgage. Above the extra principal payments we will also have a one time bulk payment which I'll likely make in the Spring. I hope to have about $20,000 extra payments towards our home mortgage in 2009.