Starting fresh: learning to set achievable goals

Someecards Thank you for not laughing at my absurdly unattainable New Year's resolutionsKJ: It’s official, this is our last post of 2013…2014 *ding ding ding* here we come! As is almost always top of mind when heading into a new year, we’re going to talk about those good old New Year’s resolutions. You know, the answers to what are your goals and what do you hope the new year will bring? We all get that feeling of setting high aspirations for the start of the year only to find that a month later we (1) haven’t done anything to get on track, (2) realize the goal wasn’t so attainable, and (3) we may no longer even remember the goals we set. For this post, we hope to help outline some ways to not only set goals, but set BETTER, more attainable goals.

2013 wasn’t much of a different year for us from a goal setting standpoint. We had several goals we were on target for, some we didn’t address at all, and others we wish had been a larger focus. Just like with all aspects of our lives we set goals for where we hoped to take this blog and happily met many of them thanks to our loyal readers. We hope you share our blog with friends of yours that could use financial guidance.

AJ: 2013 was fairly remarkable for me with regards to upholding my New Year’s resolution. I mentioned previously that I gave up shopping and did far better than I think anyone would have guessed was possible. I fell short on some of my other goals, though, which is fueling my 2014 resolution fire fiercely. I love having specific goals, and this time of year always excites me.

AJ & KJ: For the goals we did accomplish, there were some clear distinctions that made them different than the rest:

Set goals that are finite
They didn’t have a day eons into the future or a target with no particular end. I.e. they weren’t simply “increase our net worth” or “read.” Instead, they had specific dollar, date, or resources outlined.

Break the goals into small chunks
While large goals may be harder to accomplish, they can be much more easily accomplished if you set periodic milestones along the way. Using a marker for every couple weeks or every month is often a good way to see that you’re on track. For our goals, we had a simple checklist that I looked over each month to see our progress.

Don’t create goals around something you cannot control
Setting goals for something you have little-to-no control of is futile. Don’t say, we need to increase our net worth by $X and just expect to get there. There could be an economic pullback that thwarts (partially or significantly) your efforts. Instead, set parameters about what you CAN control: your income and your expenses. Set regular monthly goals for each that can help you achieve your net worth goal, but understand there could be outside factors that cause you to achieve that goal quicker (or slower).

Create a mix of goals
Don’t put all of your eggs in one basket, so to speak. It’s helpful to have varied goals that span various disciplines: financial, tasks to learn, projects to complete, personal vs. professional, etc. If your goals are all just about getting healthier, and you set goals for working out, eating better, and changing some of those habits, slipping up on one will often cause a domino effect for your other goals, so tackling things one step at a time with less interrelated goals may help you accomplish them all just a little bit better.

Make a list of HOW you can achieve them
Putting pen to paper and creating a list of not just WHAT you need to do, but HOW you can actually achieve it will dramatically improve the chances of success of your goals. For our savings goals, we have targets for retirement, non-retirement, short-term vs. long-term goals, and we break it up into manageable chunks for each month. Not that every month will be exactly at, above, or below target, but the hope is to keep our eye on the prize and know how it is we can actually get to our goals. This process can also shed light on how realistic your goals are too. If you set a goal and then realize you don’t even know HOW to get there, then maybe it’s time to rethink how realistic or possible the goal is.

Set goals for yours, mine, and ours
Much like our post on his, hers, and ours where we discussed merging or separating finances, it’s important to look at setting both individual goals AND joint goals. Think about what you want to accomplish and how you can accomplish it, but also look at setting goals as a couple that you can work on together. Sometimes the joint goals are a little easier to accomplish since you have two people to help keep an eye on the progress to make sure you don’t slip up.

So, what goals have we set?
We each have set goals for:

  • read at least five books throughout the year (for Angela, it is a specific list of professional books since she reads 2+ relatively mindless books a week) – AJ: Mindless seems a little extreme! :),
  • savings goals month-by-month,
  • workout goals – somehow these always creep up in our effort to be more healthy (but the progress over the years ebbs and flows), and
  • create & maintain a garden in our new backyard (this should help with our related workout goal too!)
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      What are your New Year’s resolutions?
      What is in store for you next year?
      Do you have tips on setting goals for you and your family?

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    A year in review

    AJ: It’s been another incredible year for us. We’ve been abundantly blessed again and continue to be thankful for the lives we have. Here’s our 2013 in review!

    TECHNICALLY we got two kittens (do you remember seeing Swiffer cat?) in 2012, but in 2013 they destroyed a lot of stuff.

    Coffee Pot Broken By Cats

    And moved a lot of stuff (seriously, they have Herculean strength).

    Kitty Litter Box Moved by Cats

    Two of our best friends got engaged!

    Sally and Justin Proposal

    We celebrated our third wedding anniversary.

    Kirby and Angela Wedding Picture with White Wall as Backdrop

    We bought a new house and officially survived the Icepocalypse 2013.

    Kirby and Angela New Home Purchase

    We moved and sold our first home.

    Bella in a Packing Box Ready to Move

    We took the trip of a lifetime part two (see how we planned: Travel: part one, two and three) to Spain and Italy with AJ’s parents.

    Retiro Park Madrid Kirby and Angela Photo

    Kirby and Angela on the Amalfi Coast

    Kirby’s brother got engaged to this beautiful woman!

    Russell and Amie Wedding Proposal

    We went to Napa (boy, did we ever go to Napa)!

    Restaurant Table in Napa With Lots of Wine Glasses

    Kirby and Angela Photo in Napa

    And we had the most celebration-filled year of our lives.

    Angela, Kirby and Family in Fort Worth Sundance Square

    Angela Kirby and Mimi at a Restaurant

    Angela and Kirby and Family in Napa

    Thank you to each of you for adding to our incredible year. This little project of ours continues to enrich our lives and our relationship and we hope we pass some of that onto each of you!

    KJ: And all the while, we never stopped budgeting and planning! See…who said budgeting can’t lead to excess amounts of fun!? So pull out that budgeting software of choice, and get your budgeting engines revved!

      What did your 2013 entail?
      Did you take any trips?
      Share with us how your year was!

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    Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

    Too much or not enough withholding, how to know

    Stick figure yelling "Yeah, taxes!"KJ: So with as complex as the tax code is – kind of like being asked to do differential equations while performing brain surgery on top of a tight rope stretching across the grand canyon – one of the things that impacts you on a regular basis that you don’t necessarily stop to think about is your income tax withholding. And so with that brief introduction, I present to you one great (very quick) resource: the IRS withholding calculator. You enter some basic information about your income, payment frequency, dependents (i.e. any little ones running a muk), etc. and in about 5-10 minutes it provides you with a projection for your taxes owed for the year. While it is just that – a projection – it is a useful tool to see if you’re where you should be as well as start to look at how next year may turn out.

    Given that it’s about time to close out this year and start planning for next year, it would be helpful to see if any withholding adjustments might needed in January with your employer on your W-4 or if a modification to your quarterly tax payments are needed. Waiting until you file your taxes in the spring to realize “uh oh, I need to make a change!” is not really the best solution.

    While this calculator is a good resource, it is not THE calculation with all factors for determining your income tax, so give yourself a little bit of wiggle room just in case. Ideally, you would like to finish your tax return with as close to $0 due or refunded. Huge refunds = giving the government an interest free loan for a year, and huge tax payment = depressing budget fail. If you have a complex tax situation with lots of investments, complex income arrangements, and multiple support obligations, then maybe it’s better to let your CPA do the heavy lifting. In either case, consider a few factors:

    Have you switched jobs?
    Maybe you found a great opportunity or maybe you were needing a change of pace. Either way, having varied income throughout the year can make it a challenge to keep up! Run the numbers and see if your new job is withholding what they need to be, and see if it’s enough for a full year at the new (higher or lower) level.

    Have you been promoted?
    First off, congratulations! With the economy improving these last four years, maybe you were in line for a big promotion? Higher income = higher taxes, so plan ahead and make sure you’re not caught off-guard when the tax man cometh to taketh away.

    Did you or a spouse stop working?
    With one less income (hopefully by choice and not a surprise!), your tax situation may change drastically. Understanding what adjustments can be made is a good start to making sure you stay on track.

    Did you acquire a little one?
    The stork could have brought your family a little one. While certainly not an offset to the additional food/diaper/toys/you-name-it costs you will incur, you get a little bit of a tax benefit to support a dependent (sounds very grown up, doesn’t it?).

    Did you sell a house and are now renting?
    With some of the advantages of home ownership (potential deductibility of mortgage interest, taxes, etc.), you might find that even having a similar outlay for rent each month could end up costing you more in federal income taxes each year. Understanding why and how this may impact you is critical!

    For us, we sold a home and bought a home, so we’ve got to dig a little deeper into next year’s plan to see if any tax implications may change from what we had experienced these last five years. Plus, with housing prices recovering in most areas around the U.S., look to see this reflected on next year’s real estate tax bill – boo for taxes, but yeah for higher prices, why can’t all the increases just come in the year you sell it!?…

    Unfortunately, we didn’t cover any of you that are impacted by a STATE income tax…I’m sure there are calculators out there that can help with those too, so please leave us a comment if you’ve found any tools that help you and your family!

      What do your results show?
      Do you need to make any changes for next year?
      Share with us what you do to try and stay on top of this each year.

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    What is the value of insurance?

    AJ: For most of us, insurance is a sometimes-legally-required, income sucking vortex that you rarely actually tap into for your benefit. HOWEVER, it only takes one too-close-to-home story to force your eyes open to the benefits of insurance, and as is true with all financial decisions, pre-planning is key to ensuring you have the power of research and time on your side when selecting the right insurance for you and your family.

    KJ: Insurance is a tool to help cover catastrophes that may occur – plain and simple. It’s not to get a sudden windfall or profit in the event of a disaster. In fact, it’s basically a zero sum game (technically negative sum game if you subtract out the profits that the insurance companies make). So, why purchase insurance?

    I buy insurance for the same reason I buy lottery tickets: "what if"

    It helps cover you in the event of a disaster
    Whether you get in a car accident, have a damaging windstorm pass through, or have a fire, chances are you won’t be able to rebuild to new on your own. That’s where the insurance policy comes into play. It helps make you whole (or close to it depending on what types of policies you have) to get you back on your feet since it would likely be difficult (to impossible) to do so on your own.

    Insurance is not for minor emergencies or slip-ups
    Insurance is not used to repair that broken window, fix the siding that’s peeling on your house, or any other “routine maintenance” that crops up. Those are up to the homeowner to periodically take care of on their own. Don’t expect anything minor to be covered by insurance as you’re deductible is designed to push some of those costs on to you. Otherwise, we would get the insurance company involved for EVERY little thing and thus drive up costs for all.

    It’s designed to be a cost sharing mechanism
    Your regular premium payments essentially begin to “front load” the payout you may get at some unknown date in the future. In fact, a lot of smaller insurance payouts are simply giving you your money back after years of paying in! Furthermore, most insurance policies have you pay for a certain amount of the costs out of pocket (known commonly as a deductibles, copays, coinsurance, etc.), and you may even share in a portion of the costs above a certain limit. If you’re fortunate enough to not have to file a claim with your insurance company, your premiums are essentially going to pay for the payouts for those less fortunate – you generous gifter, you!

    Bad luck might be following you
    Unless you can predict the future and know exactly when something may happen to you (please call me, as that would be quite handy in my profession), then it’s important to plan for the unexpected. You could run into a string of unfortunate events (natural disasters – not all are covered under your policies though), and it could be just what you need to help get you back on your feet, so you’re not derailed permanently. Whether it’s a car accident, storm that rolls through and damages your home, or sudden disability derails your plans, you never know when life will happen and what it may bring, so do your research on the coverage you and your family needs.

    It can give you much needed peace-of-mind
    Knowing that certain catastrophes are covered by your insurance policy may help you sleep a little better at night and worry a little less about something unknown derailing you and your family’s goals. It could cause you to side-step a little bit (as you have a deductible to pay afterall), but it helps with the peace-of-mind to know that you won’t lose it all.

    So, where do you go from here?

      Find a deductible that’s right for you
      First and foremost, make sure you build $1,000 in your emergency fund (once that’s reached, look to build 3-6 months of living expenses in a highly liquid savings and/or investment account). Then, based on your situation with how many cars you have, whether you own or rent, etc. you should look to have a deductible that’s reasonble, but not too low. I’m not a fan of having a deductible for cars or homes any less than $500 (much higher threshold for medical expenses) as you’re just throwing money away each month if your deductible is too low. Do a quick analysis on the premium savings you could see by raising your deductible to the next threshold. If it costs you an extra $150 per year to have a $500 versus $1,000 deductible, what are the odds you’ll have a real worthwhile claim within the next three years? If the answer is ‘slim’ then raise that deductible and keep the premium savings to yourself. Use the extra savings to build up your emergency fund and be able to put you on even better footing in the long-run, so you’ll be even more equipped to deal with the unexpected.

      What coverage types do I need?
      At a minimum you should have auto insurance (most states legally mandate a minimum amount of coverage), homeowner’s (or renter’s) insurance, and health insurance (soon to be mandatory thanks to the Affordable Care Act), but you should also look to have some other core insurance policies: life insurance, disability insurance, and long-term care insurance (particularly as you get older and are approaching retirement) – of course the coverage amounts and types of policies may be different from situation to situation. So, if you don’t have any of the coverages listed above, now is the time to speak with an insurance agent to start getting coverage. Be sure to shop around too as not all policies or companies are created equal!

    Now it’s YOUR turn to reflect:

      What role does insurance play in your life?
      What are your views of insurance?
      What policies have been critical in your family’s life?

    What is the value of insurance? is copyrighted by TheSimpleMoneyBlog.com without consent to republish. Card courtesy of www.someecards.com.

    Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

    Defining differences in IRAs: choosing what is right for you

    KJ: An IRA stands for “Individual Retirement Arrangement” (you thought I was going to say account, didn’t you?). It’s a way to help you save for your retirement in a tax-advantaged way. Sounds simple, right? While you could walk into a bank or brokerage/investment company to open an IRA in a matter of minutes, it’s best to know the different types and uses of each kind. So, we’ll break it down for the IRA basics on what you need to know. A professional financial advisor or CPA can help you navigate which may be best for your situation.

    With the compounding effect of your money over time, you’re just throwing money away each year if you don’t take advantage of these accounts as a twentysomething (or thiry- or forty-something)! We were fortunate enough (my background and studies) that we opened our first IRAs in our teens. It now doesn’t seem like a whole lot, but at the time, it was a lot of money! And, it was less about the actual contribution itself than it was about the act of saving and thinking about future savings that has helped us today to create, set, and accomplish our goals.

    There are all kinds of IRAs (Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs to name a few), and understanding the differences is important, so we prepared a handy-dandy chart for you to reference. Enjoy!


    Traditional IRA Roth IRA SEP-IRA (Simplified Employee Pension) SIMPLE IRA
    Current Taxation Deduct current year contributions on your tax return (as able) No tax deduction Deduct current year contributions on your tax return Deduct current year contributions on your tax return
    Ongoing Taxation Interest and gains are tax-deferred Interest and gains are tax-deferred Interest and gains are tax-deferred Interest and gains are tax-deferred
    Future Taxation Distributions are taxable as ordinary income Distributions are NOT taxable Distributions are taxable as ordinary income Distributions are taxable as ordinary income
    Contribution Limits for 2013 $5,500 $5,500 The smaller of 25% of income (20% for self-employed) or $51,000. Employee contributions cannot exceed $12,000.
    Contribution Limits for 2014 $5,500 $5,500 The smaller of 25% of income (20% for self-employed) or $52,000 Employee contributions cannot exceed $12,000
    Catch-Up Contributions for Over Age 50 $1,000 $1,000 N/A $2,500 (as allowed by the plan)
    Contribution Deadline April tax filing deadline of each year April tax filing deadline of each year Personal return tax filing due date of each year (including extensions) Business return tax filing due date of each year (including extensions)
    Required Minimum Distributions (RMD) at Age 70 ½ Yes No Yes Yes
    Phase-Out for Contributions Varies depending on whether you are covered by an employer’s retirement plan. See IRS website for more details.(1) $178,000 – $188,000 for Married Filing Jointly for 2013 N/A N/A
    Withdrawals Before age 59 1/2 Earnings and deductible contributions subject to income taxes AND a 10% penalty. Withdrawals are proportional to all lifetime deductible/non-deductible contributions. Earnings are subject to income tax and a 10% penalty. Generally, withdrawals are treated as your contributions being withdrawn first (which are not subject to tax or the 10% penalty). Subject to income taxes AND a 10% penalty. Subject to income taxes AND a 10% penalty.
    Notes: Great if you think you will be in a lower tax bracket in retirement. Great if you think you will be in a higher tax bracket in retirement. Also, these assets are good for “generational” monies to pass to heirs/children. Cheaper, easier alternative to a 401(k) or other expensive employer retirement plan. Cheaper, easier alternative to a 401(k) or other expensive employer retirement plan.

    Note that with a traditional IRA, you could have deductible and/or non-deductible contributions to the account. However, with a Roth IRA, once your income gets above the phase-out, you are no longer able to contribute to the account. See also the IRS website on IRAs for more information.

    (1) Read more: IRA deduction limits.
    Since Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees (SIMPLE) aren’t common, see also the IRS website for more information: SEP IRAs and SIMPLE IRA. Note that if you participate in an employer plan (401(k), 403(b), etc.), your SIMPLE contributions apply to the $17,500 annual contribution limit for 2013 and 2014.

      Tell us about your retirement plans.
      Do you have an IRA?
      What types of IRAs do you use?
      What is preventing you from using an IRA?

    Defining differences in IRAs: choosing what is right for you is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

    Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.