Speaking my financial goals into existence

Eight areas aimed at fixing my foundation in 2023.

By now, I don’t have to tell you I’m a changed man.

The financial setback and subsequent sea of uncertainty I faced when my transmission unexpectedly gave out is a feeling I never want to feel again. But from that ordeal, I grew resolve.

I didn’t simply seek new ways to earn. I also became intentional with how I spent and more informed about ways to save and invest. I made it my mission to be prepared when the next emergency expense arrived.

Research shows the majority of Americans can’t cover a $1,000 emergency expense with money from savings. And last fall, I was among them — my assets limited, my cash reserves virtually non-existent.

I decided I needed to start there. I committed to building my emergency fund, tucking away money each month just in case something happens. Not long ago, the act of saving sounded repugnant to me. Now, doing it brings comfort. I’m only a few months in, but watching my emergency fund grow already has reduced my concern about the next unexpected bill. When it comes, I’ll be ready.

Feelings of security have accompanied my growing understanding of — and control over — money in ways I never imagined.

The more I began educating myself on money, the more I wanted to fix my financial picture. And I knew the faster I made changes, the sooner I’d see life-changing results. I quickly expanded my focus beyond my emergency fund to more adequately manage as many of my financial affairs as possible.

I don’t have all the answers, but I’m starting and that’s what matters most. I’m sure I’ll become savvier as I go. For now, I’m OK taking a simpler, slower and steadier approach. My foundation needs fixing, and I can’t afford to wait any longer.

Here is how I’m planning to get there. Here are my eight primary financial goals for 2023.

1. Tithe: The first 10 percent of my income will go back to the church (which I’ll write more about this week). I believe it’s important to be charitable. It’s one of the lessons passed down to me. As a Christian, giving back to God’s kingdom has been a tried-and-true practice in my life. But I stopped tithing for a long time. I’m happy to say I started back this year.

2. Build a $5,000 emergency fund: To do this, I have automated $334 each month into a savings account with a 3.75 APY (annual percentage yield). Most of the approximately $1,000 shortfall sits in a separate, lower-yielding savings account I previously used as my emergency fund. I will add any additional income to this account throughout the year. My $5,000 target is well below the suggested amount given my age. But it’s a start. It’s better than $0. And it’ll grow.

3. Max out 401K contribution: My company recently added a 401K employer match to its benefits, which I’m grateful for. It’s free money toward my retirement! Even better, I already was contributing more than the max the employer will match. So I don’t need to change a thing. As I learn more about how to use my 401K as a wealth-builder, I might look to increase my contributions in the future. For now, I believe I’m adequately funding this account.

4. Max out Roth IRA: I was ignorant and late to the party on this tax-advantaged vehicle. I will dedicate more to it specifically soon. I opened a Roth IRA account and began contributing only in recent months. My goal is to max out the allotted contributions each year. For 2022, that was $6,000, which I have until April 18 to meet. I’m $3,000 away. For 2023, the amount increased to $6,500. As soon as I reach the 2022 max, I’ll continue my contributions for 2023.

5. Invest $4,040 for Parker: There’s a story behind that dollar amount that I’ll share at a later date. But it fits in my budget and ensures I’m tucking away something regularly for Parker. To do this, I am investing $336 each month into the stock market, specifically the Vanguard High-Dividend Yield ETF (exchange-traded fund).
   
   Doing this each year for the next 10 years assures Parker of $40,000 in an appreciable asset by the time she graduates high school. I anticipate its value will be significantly higher than the principal a decade from now given expected appreciation, dividends and other, non-scheduled contributions.

6. Pay off remaining divorce debt: I’m in the final phase of reimbursing my mother for attorney fees. I’ve been paying this debt since November 2020. My final payment is scheduled for September. It will put several hundred bucks a month back into my pocket.

7. Transition primary savings to the stock market: I’ve mentioned more effective ways for me to save. A method I’m exploring is using a stock market index fund as my primary savings account. I’ve selected the Vanguard S&P 500 Index Fund, a low-cost ETF that tracks the performance of the 500 leading publicly traded companies in the U.S.
   
   The average annualized return of the S&P 500 since 1957 is 10.15%. That beats any bank I have access to. Because the cash is long-term savings I have no plans to use soon, it matters little to me when the market is down. By getting in at a good price, riding the stock up over time and collecting quarterly dividends along the way, I’m comfortable allowing this vehicle to operate as a far better performing savings.

8. Start investing in whole life insurance: I’m in the beginning stages of learning about this form of life insurance and plan to share more as I learn. But it has piqued my interest as a powerful path to accumulating and maintaining wealth. Before I can commit to a dollar amount to contribute to this position, I need more clarity about its capabilities and complexities. From there, I must figure out how much I can fund annually.

   
   Whether I jump in this calendar year or not, the set-up has my attention. The idea of someday becoming my own bank and never having to take out a loan or get approved for financing sounds like true financial independence to me.

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   Disclaimer: The information contained on Money Talks is not intended as, and should not be understood or construed as, financial advice. I am not an attorney, accountant or financial advisor. These are my personal experiences, and neither this website, newsletter nor podcast is a substitute for advice from a qualified professional.

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