Nov 10 2008

Looking toward the future

Karen at Living Well on Less has a great post about planning ahead for your finances/life.

When you’re working that debt snowball or building your emergency fund, you have a pretty clear focus on where your “extra” money is going. It can take awhile to complete those things. A long while.

When we get that inevitable “Oh, let’s just forget about our debt snowball and do something fun” it’s probably a great time to remind ourselves why we’re doing what we’re doing.

Look ahead to the future and picture your debt-free life. By that point, your money will be able to do more things you want it to do. Imagine some things you’d like to do for yourself and your family at that point.

For Karen, she hopes to someday upgrade her furniture and save for a house. When she and her hubby have their debts paid, they’ll have the funds to do those things.

Thinking about the future can help us stay focused on our present tasks. We might be more motivated to keep our spending low and our debt snowball high, knowing that we won’t always have to deal with debt.

It’s important to stay positive about what the future will bring, and not get upset on your current situation. Sure, it’s not as fun to pay money to loans when you’d rather use your money somewhere else. But be patient — the debts will be paid, if you stay the course.

As for my husband and I, we’ve talked a little bit about what we want to do with our “extra” money.

To remind ya, we’re working on paying off our car early, with the hopes of it being paid off by the end of 2009 at the latest.

But, we have other goals we want to work toward as well. We haven’t decided if we’ll do a snowball approach and throw every extra cent at the car loan, or if we’ll just make double payments and put leftover funds toward other things, including increasing our retirement contributions, saving 20% to put down on a house, starting a college savings account for our son, better furniture, and travel.

So many fun things to think about! I just need to remind myself how far we’ve come in the last year, and that makes me realize that hey, we can achieve all of these goals, too.

When I think of it in terms of “Oh my goodness, how can we ever save $25,000 to put toward a house?” I need to remember a few things. Yes, that’s a lot of money for us. Yes, it will take us awhile. BUT. When we’re finally debt-free, we’ll have more money each month that we can put toward savings.

Just think about how much you’re sending toward your debts each month. Add up minimum payments, and for good measure, throw in how much extra you’re usually able to send to debt repayment. Now, think about how far that same amount will go if you just use it for savings (or whatever your goals are). Wow.

That $25k suddenly seems more doable to me.

What about you? What do you want to do once you’re out of debt and have your emergency fund in place? Or, if you’re already past those steps, what are you doing? Any words of wisdom to share?



8 Responses to “Looking toward the future”

  1. For me it helps to think of things in terms of time. When I was trying to decide how much of our income to put toward debt and savings, I looked at the debt and set a goal for when I’d like to have it paid off. I also figured out how much we needed to save for moving in 2 years. I found a balance between the two that allowed me to come as close to reaching both of those goals as possible.

    Doing it that way has made it easier for me to allocate funds when I value two things equally. That might be a good way for you to figure out how much should go toward your car payment. Just figure out how much you need to pay every month to have it paid off by the end of 2009 (or sooner if you want). Then you can divvy up the rest of your discretionary income based on your priorities. If there’s nothing left over, then you can decide if paying off your car that soon is really your top priority or if you’d be ok with extending the time period.

    Karen’s last blog post..Planning ahead for the big stuff

  2. The good news is if we simply make double payments (and make sure our last payment is six months’ worth of car payments from the E-fund), then we’ll have it paid off by the end of 09.

    The big question is whether to get rid of it even sooner. We’ll save more in interest that way, but might have to sacrifice some savings in other areas.

  3. Hello,

    What a commendable goal to have the car paid off so quickly!

    My husband and I are out of debt except for our mortage so I’ll share about that. It took quite awhile for us to get to the point of having a great down payment for a house.

    First let me say it took a looonnnggg time. (10 years before I saved up the 10% down for my first house). It wasn’t always fun, but it was SO worth it!!

    It was a full 17 years after I first started saving for that 1st down payment before we bought the home we live in now. Thankfully because of all those years of saving and hard work we were able to put down a very generous down payment. We will have our home paid off in a few years.

    Our standard mortage payment (without paying extra) is very low. Some days I’m overcome with thankfullness for having such a modest mortgage payment. Debt really is bondgage and I applaude the efforts of you and your husband to recognize this and make the sacrifices to get out of it.

    It is such a liberty to not be tied down to a large mortage payment! No matter what happens to us financially we always know there will some way we can scrape together such a small amount of money each month. Plus we think ahead to the day when we won’t have a payment at all — freedom!!!!

    Blessings,

    Trixie

  4. My husband and I are also working hard at paying off our car loan within the next year. We also have an installment loan to pay off. It’s hard to always stay motivated on that end goal! When both of those debts are paid off I would like to travel more. :)

  5. Kacie, can I just say I love your blog? I was just thinking similar thoughts earlier today! How in the world will we pay off, in our case, our student loans? We’ll never be able to buy a house! It’s hard when so many of our friends are choosing to go into massive debt instead and are buying houses right now. We went and watched Dave Ramsey Live 2 weeks ago, and felt like the babysteps were the way to go. I agree with you; sticking with debt payoff will have a better return! Good luck!

    -Rachel

    Rachel’s last blog post..Making My Home A Haven…

  6. Being debt free is very freeing, and you end up being able to make a lot more choices about how you save, give and spend your money.

    We have been debt free for a while now, and that has allowed us to save up for the things we want/need, and not go into debt. For example, we just saved for and paid cash for my new car. If we hadn’t been debt free and able to save up, that would never have been a reality.

    So pay off that debt and be free!

    Peter’s last blog post..Money Matters

  7. I really enjoyed that post- thanks for the link! I have the same future goals in my mind, and it is definitely motivation to continue to work toward the seemingly “boring” intermediary goals. We just sat down last weekend to do a “budget check-up” to see that the long-term goals are still on track. So far, so good!

    As you and other commenters said, being debt-free frees up a LOT of money each month, and saving for seemingly big amounts goes much faster. We’re working toward saving for a 6-month emergency fund, a trip to Hawaii, and maxing out contributions to a Roth IRA. All are totally doable when we live frugally and are debt-free!

    joanna’s last blog post..Birthdays galore

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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