My personal finance goals for this year boil down to one simple target: By December 31, 2015, I want to be worth absolutely nothing.
Getting there is much less simple, but this post lays out the steps it’ll take to make that happen.
Goal #1: Have a 61% savings rate
Last week, I shared a categorical breakdown of all the spending I did in 2014 and found that I sent 60 percent of my take-home pay toward saving for retirement, paying off student loan debt, or traditional savings to be used as an emergency fund.
It certainly wasn’t easy using 40 percent for all of my other expenses.
In 2015, I’d like to improve upon that savings rate by one percent in order to tackle this year’s other ambitious goals.
Goal #2: Contribute $6,000 to retirement savings
Spending just 39 percent of my income will leave me with more than enough to achieve my retirement savings goal for 2015, which is to contribute $6,000 before the end of the year. This is an average of $500 per month, which will be enough to qualify for the full employer contribution to both my 401(k) and my HSA. Of course, this doesn’t mean that I expect my retirement savings to stand still. To the contrary, I expect it to be over $20k bigger by the end of the year, due to the following:
$58k Starting balance $ 6k My contributions $13k Employer contributions and vesting +$4k Gains (at 5%) $81k Targeted end of year retirement savings
Among these, the 5% gain is the most uncertain, but will work for this projection.
Goal #3: Pay $36,000 toward student loans
Spending just 39% of my income on all of my needs and wants, and limiting my own contributions to my retirement to $6,000 will allow me to send $36,000 toward student loan debt. That’s a mind-blowing $3,000 a month! Uf. Still, if I can manage, here’s what could happen during 2015:
$105k Starting balance $-36k Payments $+11k Interest $80k Targeted end of year student loan debt
Making these aggressive payments would knock a big chunk off of my student loan balance, so I’ll give it my best shot!
Goal #4: Get to a net worth of $0
As I mentioned in the 2015 net worth update I posted yesterday, I’m currently at a net worth of -$47,300. It’s ugly, I know, but when I started this blog at the beginning of 2013, I had an even uglier net worth which was worse than -$150,000. If you look at goals #2 and #3, you might notice that my target balances for retirement savings and student loan debt are just about equal.
If I’m able to take the steps that let me accomplish both of those goals, then I’ll reach a point I didn’t think I’d hit for a long while: having retirement assets that cover my student loan liabilities.