July 8, 2011

Looking Into My Crystal Ball

The countdown has begun on how much longer our credit card debt will be around. It has been served it's eviction papers, but like most unruly tenants it is taking it's own sweet ass time packing up it's stuff and moving out. That doesn't keep me from wondering what we will do with all this "extra" money once the debt is gone. As I have played this debt game for awhile now (and had been losing terribly) the normal thing for us to do after we paid off some debt was to go "buy" some more debt. Not this time. I am older and wiser and sick of losing. I am fiercely competitive and ready to win. There is a future plan set now, even if it takes us a few more months to actually start implementing it.

The plan....
We will have $1000 to spare a month. Here is the breakdown...

Car Loan 
This needs to be paid off in full, but unlike some, I am not going to go all gazelle on it. I would liken my approach to be more dik-dik in nature. It is still an antelope just smaller and not as fast. Double payments will be made on the car loan, that should pay it off in one more year after the debt is gone. We plan to continuously add to this after the loan is paid off, to fund any car we may need in the future.
We will add an extra $380 to payment making a total of $800 a month.

Emergency Fund
This will be a nine month emergency fund and this is going to take some time. That is okay, we are in it for the long haul. Once the car loan is paid this will build up in no time, well some time, but not too bad. This is not an emergency fund that will go unused. I foresee this being important, because the sailor retires from the Navy in about seven years, when he is 38. Now of course he plans on getting another job and he will be getting a retirement check, but there is always the possibility that he may not find work for awhile.
We will start with $300 a month, to be increased with car being paid off.

Roth IRAs
Plural. One for the sailor and one for me. Most one income families only do one IRA for the wage earner, if they even contribute. This limits the amount you can contribute each year and doesn't protect the non-working spouse. This was discussed and we thought it was a good idea to fund two. We plan to set these up once the debt is paid. We definitely won't be able to max out our contributions right away, but we will work up to that point.
After reading a lot about Roth and Traditional IRAs, the Roth just seems to make more sense for us at this point in time.
We will begin with $110 each a month totaling $220 a month, this will also be increased when the car is paid off and then again once our emergency fund is settled.

529 Plans
Each of our children already have savings accounts, but now we will be setting up automatic payments for a 529 account. We will begin with $33.33 directly deposited to each of their accounts. Equaling $99.99 a month. Again, this will increase with the finishing of the car loan and emergency fund.

That leaves us with one cent left over each month, maybe we can save it for a rainy day.