Today the Federal Reserve cut the federal funds rate 50 basis points to a new rate of 3%, the lowest since 2005. Personally, I think it is an overreaction, but I do like that the fed has remained proactive under Bernanke.
This doesn’t mean a lot for the average person, though if you are looking for a new mortgage you will likely see better rates soon. It does make holding cash less attractive, but I don’t have any cash ‘investments’ so it doesn’t matter much to me. I would like to look at maybe getting a better mortgage rate, but my credit is pretty weak right now so it may be too soon for that anyway.
In spite of the fear-inspired naysayers, there was no conclusive evidence that we were headed for a recession. However, with these rate cuts and the proposed stimulus package it would be really hard for me to believe that we will see a recession at all. On the other hand, we may already have entered a recession, the data lags behind and can be revised after the fact (FYI- a recession is defined as negative GDP growth for 2 quarters). Yes, that is confusing and a good reason why I don’t concern myself with macro economic factors. I am taking care of my budget, working to eliminate my debt, earn more income, and dealing with things that I can affect rather than becoming fearful of things that are not in my control.
If you are holding cash on the sidelines, this is probably a good time to start moving it into the market. I definitely would if I wasn’t focused on my debt.
I have some big goals and I have some small goals. I write about my big goals on this site all of the time, but I think it would be good to list them here along with some smaller goals for the calendar year so I can look back next year and see how I did in 2008.
Big Goals for 2008:
Pay off all Credit card debt — $18,504.78 as of January 1
Get body fat percentage under 25% — 39% as of January 1
Small Goals for 2008:
Increase our emergency fund to $5,000 — currently about $1,200
Earn $20,000 (gross) from side businesses
Start a Roth IRA with at least $1,000
Buy life insurance
Write a will
How to accomplish these goals
Pay off all credit card debt – If we look at 12 months, we need to average $1,542.06 of principal paid on our credit cards each month. That is just about $100 more than we have averaged since starting our debt reduction plan, however in our first two months of the plan we only paid about $1,000 total. Given our current rate, this should be easily achieved. My dream is to have it done by September.
Body fat percentage under 25% – My current number varies a bit with the scale I am using now. I think the real number is closer to 37%, but whatever the case it is way too high. 25% is on the upper end of the ‘normal’ range for a man, so that is my first goal.
You may wonder why I focus on pounds so much on this blog. I guess I’m not exactly sure myself except that I started out that way and it makes for an easy to track number. I chose body fat percentage for this goal rather than pounds because body fat is a more realistic indication of health and fitness. I can only achieve this by committing to regular exercise and making a complete overhaul of my diet. I need to do this if I want to live a long and healthy life, so there is no excuse for me to fail this year.
Increase our emergency fund to $5,000 – My first thought was to fund an IRA to $5,000, but given the weakness of a $1,000 emergency fund and the fact that I actually want to live without credit cards, this needs to be my top priority. If possible, I will fully fund an IRA as well. If we can pay off the credit cards by September, it will be easy to shift that money to the emergency fund. If not, we are going to need alternative income sources to make this happen.
Earn $20,000 gross from side businesses – I have half of that number expected already through a web maintenance contract in ‘08, although that is not a guaranteed contract so I need to be working on adding other projects anyway. My wife will make a little money doing standardized test grading a couple of times during the year and some occasional tutoring. Since she is a teacher she will have the summer off, but I’m not sure what sort of income opportunities she will be able to pursue then. I hope to make a little money from this blog some day, but until then I will be focused on growing my freelance web development business.
Start a Roth IRA with at least $1,000 – I really want to get started on this ASAP. I know I have neglected it for too long, but I am also in the difficult position of being buried by debt so I have to balance the timing of this. If we have a great year, I will fully fund at least one IRA in 2008.
Buy life insurance – long over due, should have been done ‘yesterday’. I need to set aside a few hundred bucks and get some quotes. Need to get on this ASAP.
Write a will – I don’t think we have to rush out and do this today, but it should definitely get done this year. We have no assets and no children so if both of us die things wouldn’t be too complicated (though I do admit that a will would make life easier on our loved ones who have to deal with the mess). It will get done this year!
That’s it for the plan in 2008. I will be thrilled if I can look back 12 months from now and see all of these things accomplished.
I have to admit that I started this blog with dreams of getting rich and becoming debt free simply by writing a blog about getting out of debt. Seems silly, I know. Well, it turns out that writing this blog has become very valuable to me, but in an unexpected way.
I have learned a lot, I have made some great friends and contacts in the ‘blogosphere’, and I honestly credit this site with keeping me motivated and keeping me on track with my finance and fat goals. Most of that credit goes to you, my readers. The comments, advice, and ideas that have come from many different people are very valuable to me and I appreciate every one. It’s because I value that relationship so much that I want to share with you how I am compensated for my work here.
No one pays me to write any of the content on this site. I do not accept ads from products or companies that I can not personally endorse (why I dropped my ads). I will never write paid posts or be otherwise compensated directly for writing anything on this site (if someone sends me a book or product to review I will state how I received it, give my opinion, and give the item away when I am done).
I don’t want to ask for anyone’s money, but if you find yourself in an excellent financial position and would like to donate, of course I would greatly appreciate your generosity. However, please do not send me a donation if you are in debt. That being said, don’t forget about me when you become debt free thanks to the great content on this site.
There are a couple of other ways you can help support this site. If you visit regularly but have not subscribed to my RSS feed yet, please do so. RSS subscribers are very valuable when it comes to selling ads (I do intend to sell a few ads some day, but only for products I believe in). You can also help me if you shop at Amazon.com. Just follow this link and I will earn a commission based on what you buy (no personal information is sent to me).
The other Amazon.com links you will find on this site are ‘affiliate links’ meaning I will earn a commission if you click the link from the site and buy the item. However, you will not find me promoting these products in order to earn money. I am simply sharing information about products that I have tried or recommend. If you feel uncomfortable using affiliate links, simply type the item names into a search engine and find information about them on your own.
Thanks for taking the time to visit my site. Blogging doesn’t pay much, but that won’t stop me from putting in the time to write content and do my best to help others who are struggling with the same things I am.
I received a lot of great comments in response to my post, What I Have Learned Since Starting My ‘Finance and Fat’ Turnaround. Here is a compilation, in the order they were posted, with links to the bloggers who shared their wisdom. Enjoy these tips and be sure to visit these sites as well. I read them all regularly and highly recommend them. Single Guy Money – I’ve learned that I in order for my financial position to improve, I must get rid of DEBT!
Mrs. Micah – I’ve learned a lot, including that I’m going to be in debt for years (but I can influence how many) and it’s hard to attack debt when you’re in an flexible income situation.
Making Money Journal – If you are part of a couple, both have to be on board the get our of debt bandwagon, otherwise the climb will be nearly impossible.
Quest For Four Pillars – What have I learned? Maybe not to over-analyze too much. Most bloggers do this (that’s why we are bloggers) but it doesn’t necessarily help us in our decision making.
Dawn @ Iowahippiechick – I think what I’ve learned the most since starting financial blogging, is to make every dollar count. Making that a mantra of some sorts, helps me think a little, before spending it frivolously.
Also, as savingdiva does, putting the bits of money that I may earn on the side towards a specific goal.
In other words—making every dollar count
I think there is a lot of financial power to that frame of thought!
Debt Diet – I’ve learned that I’m not the only one in this situation, and that I have what I need to be able to change it.
It’s not too late to share what you have learned on your journey- whether that be with a financial or ‘fat’ turnaround or any other tips for breaking bad habits and starting good ones. Thanks to all who have participated!
Mark Cuban, the owner of the Dallas Mavericks, happens to be a billionaire and a blogger. His public persona comes across as a bit wild at times, but I think he has some very solid wisdom behind that. His blog is worth reading (usually) and he wrote a really interesting article yesterday, Warren Buffett, Taxes and the Presidency.
Warren Buffett has been all over the business press recently suggesting that the very rich, those on the Forbes 400 list, are taxed advantageously to the rest of the workforce. That it makes no sense that his tax bill as a percentage of income is lower than that of his secretary or housekeeper.
He is absolutely right.
Is this a fair system? I don’t know if that is the right question, but I think it would be hard to make a case for the above scenario being the right way to do things.
Its also wrong that those who must live paycheck to paycheck find themselves paying the same amount of taxes on consumables as the super rich. That 8pct sales tax on life’s basic necessities is real time cash out of pocket, a far greater percentage of income and much more expensive money than the federal taxes we pay the following April 15th.
This is a brilliant point. 8% on every purchase for people making under $30,000 a year is going to hurt the wallet quite a bit more than it does for the person making $300,000. A consumption tax is often touted as the most fair tax system, but I think it clearly is not (at least not a flat consumption tax without considerations for income).
Right now I hate paying taxes because I feel like I’m giving money to a known crack addict. However much you give, its not enough. They will buy their crack, get a short term high and soon be back asking for more.
The federal government , whether in Republican or Democratic hands is the same way. No matter how much you give, they are always asking for more, more, more. Always spending on the ridiculous, without remorse and without the ability to restrain itself. Just like a drug addict.
If you are going to raise my taxes, I want somethings in return.
Raise my taxes by 1 pct, by every 1 pct you cut federal spending. Your choice of raising taxes on luxury items, or on annual income of 10mm dollars per year or more. Cutting spending means the government needs to raise less which allows you to raise the income threshold on which you charge this “Forbes 400 surcharge”
This is really the problem. Our government is simply out of control with spending money and nothing can change for the better until that problem is solved.
I also have one more tax suggestion that I think will create so many jobs in this country that it really wont matter what else our politicians do.
If we really want to stimulate job creation in this country, take the same approach to small business with fewer than 25 employees that we take to Internet taxes. Outlaw them.
No taxes of any kind on small businesses with fewer than 25 employees. No employer payroll tax. No state or local taxes. No taxes on earnings. Nada. The business owners will pay income taxes on their personal income they pay themselves, but not corporate earnings
Wow! I really like that idea. Mark Cuban for President anyone?
There is a lot more in the article worth reading and I recommend you check it out. How often can you get the opinion of the super-rich on taxes and things that could actually affect their bank accounts in a big way? Kudos to Cuban for taking the time to write this.
(no personal information is sent to me).
