Houston, we have a failure.

So once a year I like to open up my Excel spreadsheet and make some assumptions as to how the calendar year will play out for the Ninja household….financially speaking that is. I’ve done this years past, and every single year I seemed to unintentionally underestimate our ability to save. Often meeting our annual goals three to five months earlier than planned. While that is definitely a good problem to have, it’s still a problem. I want my goals to be challenging. Something that would take a full twelve months to reach. Heck, maybe I shouldn’t even be able to reach my goal at all.

Well folks, it looks like my wildest dreams are coming true. We are on course to epically fail at reaching our 2012 personal finance goals. According to our budget, our accounts are supposed to have the following balances by years end:

    • Checking Account: $1,000
    • Savings Account: $100,000
    • Roth IRA: $31,500
    • 401K: $37,500
    • Total Assets: $170,000

We started the year out with $114,622 in assets, meaning we had to move up $55,378 this year to achieve our $170k goal. For those that like things broken down, that would require an increase of $4,614 every month. A quick glance at the handy-dandy savings/net-worth meters on the side of my blog show that our current assets total up to about $135,000. Meaning we are 36% of the way to reaching our goals, but we are 58% of the way through the year.

Frick. 

While I’m extremely tempted to go in to my spreadsheet and make our 2012 goal be a $150,000 net worth, I know that would only cheat myself.

Think about it like this. Would you rather set a goal to run a mile in 6 minutes and run it in 5:45, or set a goal to run a mile in 5 minutes. but run it in 5:15? If you said 5:45, you are a) an idiot, b) lazy, or c) a lazy idiot.

I’m learning it’s not so much the goal that matters, but more so one’s desire to push themselves farther than they ever thought they could. That is what I want to do with our personal finances; Push ourselves to be responsible, to take risks, to have fun, and to be diligent. Ambitious goals promote these types of qualities. Easy goals promote a false sense of accomplishment.

The road to hell is paved with good intentions.

You know that famous saying “the road to hell is paved with good intentions”? Well I’m kinda realizing that the Ninja household is kinda guilty of having a few too many “good intentions.”

Exhibit A: Living off my income. 

The plan when the stork drops a few babies off at our front door (that’s how it works right?) is for Girl Ninja to quit her job and be a full-time stay at home mom. Since we don’t want to be devastated by the loss of her income, which would be about a 30% household pay cut, we’ve decided we should pretend it just doesn’t exist. We live off my income, and bank hers. Great plan right?

Too bad we haven’t actually forced ourselves to really practice what we preach. If we wanted to make this experiment realistic we would have her paycheck auto-deposited in to our savings account, since we never access that account. Instead, her paychecks go in to our regular checking account and at sporadic points throughout the month I’ll transfer money over in to our savings account. Most months, this amount exceeds Girl Ninja’s, but some times it doesn’t. It’s time to get our stuff together and get her check deposited directly in to savings. What you can’t see doesn’t exist right?

Exhibit B: Contributing to my Roth IRA. 

I swear I meant to contribute to my Roth at the beginning of the year. But here I am, over half way through the year, and I haven’t contributed a dime. Retirement doesn’t save for itself. If I want to meet my long-term goals, I have to suck up the $5,000 expense/investment and pull some money out of our savings account. Every time I go to do it, I trick myself in to thinking that it’s not the right time, that we could use the money for something else, blah, blah, blah.

Exhibit C: Not eating until I’m about to throw up. 

I have a serious issue with food intake. I don’t know if my parents starved me as a child, but many meals I eat way more than I probably should. I have this weird complex where I hate throwing food away. This means, even when I’m totally satisfied, I will eat another piece of pizza just so it doesn’t go in the garbage. Fortunately, I am relatively active and my metabolism apparently is too, so I still appear relatively fit. I gotta get over this weird psychological complex that says I must eat even if I’m not necessarily hungry, so that I don’t end up obese and with high blood pressure.

We bloggers typically only talk about the good things we are doing, so it’s refreshing to finally share some of the things I’ve been totally sucking at. What are some of your “good intentions” (financial or otherwise) that you’re not totally executing?

“I’m living the life I wanted 10 years from now.”

One of my buddies, who works in finance for a major bank, told me he recently attended a small group with a few of his good friends from college. During the small group, one of the members began reflecting on his life. He has a good job. He and his wife bought a house in a nice part of Seattle. I think they have a dog. And my understanding is they both have relatively stable employment. They are living the dream. Or as my friend’s friend put it the night of their small group, they are living the life they want to have when they are 35, nearly ten years away.

Can I get an amen?

I know we don’t own a house and I know we don’t have any kids, but gosh darn it, sometimes I don’t want to play grown-up anymore. I only get to be in my twenties for three more years. Mortgages and diapers are not far off. Why then am I not living it up? One word…

Responsibility. 

Retirement isn’t going to pay for itself. My savings account only increases if I keep showing up for work. And Girl Ninja only gets to be a stay-at-home mom if we start planning for that lifestyle change now. The life I want in five, ten, and forty years, prevents me from living the life I want right now.

I don’t know about you, but that depresses me. 

If you’ve been following my blog for a while you know I love my job. That said, it is also the thing that is holding me back the most. If I got fired tomorrow, I wouldn’t go look for a similar position somewhere else. You wanna know what I would do?

I WOULD TAKE THREE MONTHS OFF!!!

Not only would I take three months off. I’d make (or at the very least beg) Girl Ninja to quit her job as well. We would become vagabonds for no less than ninety days. We would be challenged in ways our currently safe, secure, and predictable life can’t. We’d be sporadic. Spontaneous. Scared. And Excited. We’d be living the dream. A 25 year old’s dream.

As with anything, our journey will have to be about balance. We wont be quitting our jobs and sacrificing our long-term goals anytime soon, but I’ll be damned if I catch my 35-year-old self wondering what the hell happened to my twenties. (pardon my french)

I guess this is why phrases like Carpe Diem and YOLO exist. 

When does interest stop being interesting?

You all know I was $28,000 in student loan debt when I graduated. I consolidated my loans with Sallie Mae so I could pay them back over the next twenty years. My monthly minimum obligation was $200. After about three payments, I got sick of making them. I was annoyed by the fact that I owed someone money and had to give them a portion of my hard earned income.

As much as I didn’t like the idea of payments, the thing that really drove me to punch Sallie Mae in the face was the interest rate on my loans. Had I graduated just a few years earlier, the interest on these federal loans would have been about 2%. Unfortunately, I graduated college at the worst  possible time, right when the economy was peaking, meaning the epic crash took place just a few months later. Instead of being able to consolidate my loans at 2% like my sister had, Sallie Mae offered me a whopping 7% interest rate. SEVEN FREAKIN PERCENT!!!!!!

So when my minimum payment was $200 a month, $163 of that was going to interest and only $37/month to lowering the balance. How dumb is that?! Had my interest rate been 2%, $46 would have gone to interest and the rest to lowering my balance. Seven percent interest was absolutely unacceptable to me (and it should be for you as well).

Heck, even when we bought our car last week I entertained the idea of financing part of the cost. I figured with a good credit score I’d be able to get a used car loan around 3% and keep a decent chunk of liquidity on hand. But then I thought, why the heck would I pay any interest when I don’t have to? It’s not like I was planning on investing that money in the stock market and earning greater than 3%. It’s not like it would have depleted my emergency fund and left me cash poor. I just couldn’t bring myself to take on a loan. It would have been stupid.

So we hear people say all the time “you shouldn’t cary high interest debt.” Well friends, today I pose the question, What does high interest mean to you? For me it definitely meant 7% on my student loans, and even 3% on a car loan. I guess the only interest I don’t consider high is a REASONABLE mortgage on a 15 or 30 year loan. Hows about you?

Why?

If you’re like me you have a goal to accumulate some pretty substantial wealth. I had a goal to accumulate $6,000,000 over the course of my lifetime. While that goal is lofty, I don’t think it was completely unreasonable. One thing I never did, however, was ask myself why? Why did I need Six Million Dollars?

Truth is, I didn’t need it. I actually didn’t even plan for it. It just kinda happened. I plugged some numbers in to a Roth IRA and 401K calculator, made some estimations for my investments performance, and BAM there it was, six million. While I don’t know if I will actually reach that number, it’s not unreasonable to predict I will have at least a few million to my name when the Grim Reaper pays me a visit.

It’s one thing to plan on being wealthy, but it’s a whole different ballgame when it comes to figuring out what to do with that wealth.

So I asked myself “What am I getting rich for?” Is it so I can buy a $50,000 car every five years? Or so I can have a second house in the mountains when ski season approaches? Or better yet, maybe it’s so I can afford the $30,000 membership fee at the local country club I’ll never play golf at?

Of course I plan to enjoy my later years. I’ll probably take some pretty SWEET vacations, maybe I’ll buy a few man toys (jet ski, snowmobile, or a pet shark), and I’ll definitely upgrade my closet with all Tommy Bahama gear (side note: I love Tommy Bahama, but feel too young to wear it yet). But let me be clear. These are not the reasons I’m accumulating wealth.

When I die, how many people are going to remember how many jet skis I had? Answer: No one! What they will remember is that I donated $100,000 to a Young Life camp. That I paid for my children’s, grandchildren’s, and great grandchildren’s college tuition. That I pulled a “Bill Gates” and donated a ridiculously sizable portion of my net worth to some noble cause or charity. Those are the things that make being wealthy great!

Just to make sure I’m being completely clear, I really only have two purposes for accumulating wealth and they are…

1) To ensure my family is taken care of

2) To give a crap load of that wealth away

Thornton Wilder said it best…

Money is like manure; it’s not worth a thing unless it’s spread around.

So I ask you, what are you getting rich for? What great (or not so great) things do you want to do with your money?

Christmas + V-day = Broke as a joke.

**I am pretty sure I’m drunk on DQ Blizzards after an epic buy one get one for $0.99 deal I took advantage of last night. I’m gonna post about this tomorrow (don’t worry it is completely related to PF), but today I got a great guest post for ya today from my girl Jenna at Adaptu. I know when guest posts go up you think “Meh, not reading stupid paid post.” I was not compensated for this and it doesn’t suck. I’ve met Jenna in real life and she’s super chill. She asked if she could put something up on PDITF and it was the least I could do after she’s been a loyal reader/commenter for like two years. Don’t be a hater.**

The last remaining Valentine’s chocolate was probably polished off by now and the roses are most likely wilting in their vase. Sounds depressing, but there’s good news: unless St. Paddy’s Day puts you in the giving mood, the “spendy holidays” are over for a few months. So what does this mean for you besides a lack of last-minute trips to the flower shop or candy store? One thing: it’s time to get back on track when it comes to paying off your debt.

So how do we go about this? Like most things in life, it’s easiest to break it up into different steps.

Tally it all up.

Tally up your debt and know where you stand. Just how much damage have you done in the past three months? Were you already in debt prior to the first of the year? Take a good look at your assets and liabilities.  Use Adaptu to aggregate all of your financial accounts and get the real number. It’s never easy to look at that final number, but it’s time to come face to face with reality.

Make a reasonable goal.

How long will it take you to pay off the excess debt from the holidays? Can you have this paid off by June? By next Christmas? It’s important to be realistic with your goal. What can you achieve while still giving enough attention to your other financial milestones (i.e.  retirement savings, building up your emergency fund, etc.)?

Map it out.

You know where you financially want to be. Now it’s time to map it out. What will it take to get there? If you’re cutting back on spending to pay off debt, update your budget so you know what you can still spend. Determine how much you can put towards debt every month without forgetting your other obligations (and making sure you are still enjoying life).

Stick to your plan.  

So now that you’ve mapped out a plan, you know how you’re going to pay off your excess debt. But nothing will happen unless you hold yourself accountable. When you reach a new milestone- say every $1,000 paid off, treat yourself to a small treat − a babysitter so you can enjoy a movie night, a manicure, etc. Something that will motivate you to keep up the good work.

Learn.

This is arguably the most important step.

1. Did you meet your goals? Why did it work this time? Did you make them more realistic than you have in the past? Were you rewarding yourself when you met milestones? If you find yourself in a similar situation – will you know your way out of it? Take note of what made you so successful.

2. Didn’t meet your goals? What went wrong? Unexpected events? Couldn’t stick to your budget?  Take some time to figure out a new reasonable goal based on your experience and start the process over. It’s rare to get it right the first time.

History doesn’t have to repeat itself.

Now that you’ve met your debt relief goals, it’s important to remember this feeling of accomplishment to ensure you’ll never be in debt again. Keep the momentum going for the rest of the year− and don’t let yourself fall into the same trap next winter. You made it through the storm; just keep the smooth sailing going and you’ll be set for the rest of 2012.

**Ninja’s comments: Do the Xmas/V-day expenses throw a wrench in your PF tires? Why do all these points seem so simple, yet are often terribly difficult to actually act on? Why does debt suck so freakin’ bad?!??!**

Your credit score doesn’t make you cool

I want to both cringe and laugh uncontrollably when I hear someone tell me how “high” their credit score is. I put the word high in quotes because it is a completely subjective term. Most people start getting pretty proud around the 700 mark, and once they breach 800 it seems they want to shout their score from the roof tops. Sorry to burst your bubble peeps, but your credit score doesn’t make you cool.

I honestly have no idea what my credit score is. I’ve never checked it. I use to have student loans and a car payment, and I currently have recurring credit card accounts. I have a pretty good track record of making my payments on time so I’m gonna take a shot in the dark and assume I have a pretty okay score. You can get a free credit report score by doing a quick google search.

Do you know what the primary purpose is of your credit score? It tells lenders how likely you are to make your payments on time and pay back all that you borrowed. The higher your score, the better rates you get. Pretty straightforward stuff.

But what if you don’t like borrowing money? What if you are going to pay cash for your next car? What if you don’t care what the interest rate is on your Credit Card because you pay the bill in full each month? Hmmmm, suddenly your credit score becomes exponentially less important.

Instead of thinking you are super cool for having a high credit score, maybe you should be asking yourself why you even care? Are you really that excited about being deemed “qualified” to take on more debt?

Don’t get me wrong. I know the difference between a 6% interest rate and a 4% interest rate on a mortgage will save you tens of thousands of dollars over the life of the loan. I’m not at all trying to say people shouldn’t care about paying their bills on time, of course everyone should do their best to be fiscally responsible. But instead of manipulating my spending habits in hopes of them having a positive impact on my credit score (by doing things like taking on a car loan), I’d much rather pay cash and not even have to worry about it.

Long story short: I will NEVER, EVER, EVER put myself in further debt just for the sake of improving my score. And personally, I don’t think you should either.

We’ve allowed the credit score to become far too important in the way we evaluate one’s character (people can actually get denied employment because of a poor score). So today I take a stand and say “Bite me FICO score!” I’m not changing a darn thing.

Are you with me!?  Do you know people who appear to be pretty proud of themselves for having “great” credit? Do those people make you want to cry inside? Do you care about your credit score?