Goal Progress: End of July 2014

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of July, 2014
Current value: $6,690
Change from last month: + $531
Percent of Goal:  6.15%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month: I had a pretty good July. First, I had the second largest monthly payout from my online courses. Second, my work paid out another quarterly bonus. And lastly, I sold another signed Stephen King book on eBay. I put 100% of the monies I received from each of those into my Tesla fund. My total this month would have been more impressive, but I lost about $200 in value during the last two days of the month when Realty Income stock dropped about 1.5 points.

Looking to the future, my free cash flow should take a big jump next month or the month after. I paid off my wife's car loan, freeing up $383 a month. I also started the refinance process on my house, which should drop my payments about $250. More details on that when it has been completed. And once that is completed, it'll be time to take a new look at my budget and set some savings goals!

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Relatively Painless Ways To Start Saving

Since the 1980s, the amount of money people have been saving has been dropping. The savings rate, which is defined as how much money a person saves divided by how much money they earn after taxes, was 3.8% in March, 2014. This means people are basically living paycheck to paycheck and any unexpected event, such as an accident or job loss, could result in major hardships, possibly even bankruptcy.

A common excuse for not saving is people often think they can't save any money. If I can barely make ends meet now, they reason, how can I afford to start saving money? The truth is, you probably are spending way more than you need to and have lots of room to cut back. Do you really need that $5 Starbucks coffee every morning? Do you need to go out to lunch every day? There are dozens of ways you can save a buck or two here and there and it all adds up.

When you want to get serious about saving, you need to do one thing consistently - pay yourself first. That means as soon as you get your paycheck, pay yourself first by transferring some of that money to a savings account. Better yet, set up your direct deposit to put some of your paycheck directly into a savings account. You'll never see it, so you won't spend it.

Building An Emergency Fund

A good starting point is to save 10% of your take home pay each paycheck. That may sound like a lot, but it's really not. Get into the habit of immediately saving 10% of your pay the day you are paid. Do that consistently and pretty soon, you'll find you don't miss that extra money because you will adjust your spending. After a couple of months at 10%, increase that amount. Back when I started this, I went from 10% to 12%. That didn't really cause any hardship to me. A few months later, I upped it to 15%. At that point, I started to notice a bit of pain, so that's where I stopped

This is a good way to build up an emergency fund. Conventional wisdom is you should have savings equivalent to 6 months of expenses, just in case you lose your job or some other financial catastrophe hits. I think that's a tad excessive. I prefer a somewhat lower figure - 6 months of mortgage or rent payments, plus money for groceries. But if you go with this lower figure, do this with the understanding that, if you lost your job, you are going to drastically reduce your expenses by immediately cutting out all your other non-essential purchases - eating out at restaurants, cable TV, etc. Also, if you are part of a two income family, you may be able to get by with less savings due to the fact that it's unlikely both wage earners would get laid off at the same time. (Exception: if you both work for the same company, you both might find yourselves out of a job if the company goes bankrupt or has layoffs.)

Building Retirement Savings

If you are trying to build up a retirement nest egg, there's an even more painless way to save and increase your savings on a regular basis. In fact, if you do this, you won't feel like you are missing any money at all.

First, if your employer offers a 401(k) or 403(b) account, contribute! Furthermore, contribute enough to get the full employer match, if one is offered. The employer match is free money and you should get as much of it as you can. Then, each time you get a raise, increase your contribution. For example, if I get a 3% raise, I increase my 401(k) contribution by 1%, effective the date my raise is effective. By doing this, I still see a 2% increase in my take home pay AND I still increase my retirement savings. It's a win-win!

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The Power Of Goals

Saving for anything can be difficult. It's hard to stay focused when all you can see of the goal is a hazy image months or years in the future that looks unattainable right now.

Enter interim goals. Sure, you have a long term goal, but to stay motivated, you should have many small goals on the way to that larger goal. If your goal is to save up enough money to buy a car in two years, it might be difficult to put away that money each month or each week. The ultimate finish line is so far off, there is a great temptation to cheat and not put away some money right now. But if you make smaller goals, say like saving a certain amount each month, or having a savings balance of x dollars in two months, you'll be more likely to succeed. Those intermediate goals provide you with the frequent sense of accomplishment you need to keep going.

I've got a degree in electrical engineering. I spent five years* being taught to analyze problems in a logical manner and come up with a path to a solution in discrete, small steps. I love checklists. I get a big sense of accomplishment working through a list and knocking out the items one by one.

*I took a tad longer to get my degree than normal - my first years in college were pretty fun.

So it makes sense that I also love goals. I'm finding I really love asset allocation as well.

I also love Fridays. It just so happens that my wife and I get our paychecks on alternate Fridays and because I'm the one that handles the finances in our household, that means every Friday I get to take a fresh batch of money and dole it out amongst our bills, savings, and investment accounts.

Oh, and I also like Fridays because they're the start of the weekend. But mainly that first thing.

I know getting the money for my Tesla is going to take years. I need to stay motivated (or motorvated, if you're into puns or motorin', if you're into Night Ranger). To that end, my computer wallpaper is the first image in the slide show on the home page of this blog. I routinely read websites and stories of Tesla owners to keep the fire burnin'. My monthly goal update posts provide another motivation. But I'm looking for one more motivation. Right now, I'm thinking of that Percent Of Goal number on my goal progress page. A good monthly goal would be to increase that by 1% each month.

I'm not sure about this though. First, that's a tough goal to reach. That would require saving over $1,000 a month, which would impact other things I am saving for. It also provides a quick way to determine how much longer I have to save - one percent equals one month. While this may be good later on, right now, at 95% remaining, it's somewhat depressing. That's almost 8 years. I'd like to reach my goal way before that. (Truthfully, I probably will, thanks to compound interest, but still...)

So I don't know what another good interim goal might be. Any suggestions?

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Elon Musk Donates $1 Million To Build A Tesla Museum

I've written previously about the Oatmeal comic about Tesla. If you visit that page, you'd also find out that the creator of the comic (also a Tesla owner) has been trying to get a Tesla Museum built He raised enough money to buy the land where Nikola Tesla's former laboratory stood. Unfortunately, building an actual museum would cost a lot more than just the land (due to a lot of environmental cleanup work that needs to be done to the property), so he still needed to raise more funds - he estimated about $8 million. Elon Musk, who previously donated money to buy the land, has now donated $1 million to build the museum. He has also pledged to install a Superchager on the site. Awesome!

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