New Year, Fresh Start

Goal
Originally uploaded by Obi-Akpere

I am not one to make New Year's Resolutions; it just isn't my thing. When I resolve to do something, I tend to start it right away, and picking an arbitrary date to make a resolution just seems...contrived. This year, however, this worst - of - all - married - financial - years, I was really happy to see the turn of the year. I thought, early morning on January 1st (after all, I went to bed at 9 o'clock on New Year's Eve with a terrible case of the flu), here's my chance to change the numbers. New year, new taxes, new choices. There are a few switches to what I've posted in the past, and I'll explain why.

This year, I want to get rid of two student loans. Most finance experts don't encourage paying off student loans before consumer debt, but we're going to ignore this advice for a few reasons:

1. Right now we have our consumer debt on very low interest rates -- 4.99 and 5.99% for the life of the debt. This means we don't have to move the debt over to new cards every 6 months, and we don't have to worry about it.
   
2. I'm having a surprising amount of difficulty tracking one student loan, which is currently at 5% interest. It should be down below $5,000 by now, but the school has made some kind of mistake and has very little paperwork to show where the money went. I was paying via ACH transactions and did not realize I had no receipts with this kind of payment! There's not much I can do about this, except absorb the $300 the school insists I did not pay.
   
3. The second student loan is at a whopping 7.5% interest. If I took 10 years to pay that, I would pay triple the balance! We are much, much better at paying off consumer debt, and I will probably save money by focusing on the student loan first.
4. Last but not least, we are following some financial advice, and that is this: pay off the debt that bothers you the most first. I am definitely bothered by the slow pace of paying off our student loans, and I am tired of the junk mail I get about refinancing! I am ready to get rid of some of the smaller loans. Incidentally, although our consumer debt is slightly less than my two smaller student loans, the interest rates -- and the psychological benefits -- win out. Read about how blogger Get Rich Slowly used the debt snowball to pay off $35,000 in debt in just 3 years!
   

Next, I have decided I don't want to save a $10,000 emergency fund. That should be my goal for 2009. We have been very successful at saving small amounts of money twice a month, and I think I want to take the snail's approach on this. We should be focusing on paying off debt, and just keep $1,000 in savings for emergencies.

While I want to shrink our emergency fund and focus on debt, I also want to add more to my IRA retirement account this year. This requires a small restructuring of my account, but since one investment has gone up 78% since I bought into it, I think it is worth doing some cost averaging and investing further. This is one goal that really frightens me, as it carries risk, but I think it's time we considered it.

Lastly, I want to find alternative sources of income this year. My husband's GI bill will end in May, and with me unemployed, I have to look at ways to add to our finances. Here's a few possibilities:

1. A raise for my husband. This may be possible, but since he got a large raise (20%) last year, I doubt a raise will be forthcoming. We can keep an ear out, however.
2. An at-home job for me. I really don't want to work an outside job right now; my daughter has health issues, and keeping her out of daycare is definitely helping. Some possibilities would be restructuring advertising on my blogs, filling out surveys, mailing letters, and renting out our guesthouse by the week.
   
3. Either my husband or myself joining the National Guard. I hate the idea of doing this; I could be required to serve far from my children, negating any benefit we would get for my doing this. My husband is a former Marine and definitely does not want to re-enlist. I put it here because it is a last-ditch resort for us, and if all went well, I would only have to give one weekend a month, and wouldn't need childcare for my children.

I think 2008 is filled with some hard choices for us, but I am tired of living paycheck to paycheck, and watching our debt grow slowly over time. This year I am ready to fix things, and reduce our debt as much as humanly possible.