Financial Goals for 2010

Now is the time to outline your financial goals for 2010. In case you haven’t already done this, I’ve put together some ideas to get you started. While I’ve loosely prioritized the main themes, you’ll want to tailor things according to your individual situation.

Reduce your debt

Debt reduction should, in my opinion, always be numero uno. This is especially true if you’re dealing with high interest consumer debt. But even if your debt has a low interest rate, you might still want to make debt reduction a high priority. Whether or not you should pay off your mortgage early is a hotly debated topic, but even that is worth considering.

Build your savings

Your first line of defense when it comes to your finances is your emergency fund. Open a high yield savings account and work to build it up as a hedge against job loss or other unexpected curveballs that you might come your way.

A lot of people say to maintain a minimal emergency fund until you are out of debt, but I disagree. I think you should always pay yourself at least a small amount. That’s why I stick to a 75/25 savings plan.

There are, of course, other savings priorities that you might need to consider. For example, if you have a high-deductible health plan, you should be funding a Health Savings Account (HSA) so you can pay for health expenses with pre-tax dollars. Unlike a Flexible Spending Account (FSA), you can modify your HSA contribution levels throughout the year.

Fund your retirement

When it comes to funding your retirement, you have several options.

Individual Retirements Accounts – These come in two main flavors: Roth and Traditional. I personally prefer Roth IRAs over Traditional IRAs, but your needs may be different. Regardless of the type you choose, funding your retirement is an important priority. If you are under 50 years old, the 2010 IRA contribution limits are $5, 000 or 100% of your taxable compensation, whichever is less.

If you are 50 or older and have sufficient taxable compensation, you can contribute $6, 000 in 2010. The extra $1000 is referred to as a “catchup” contribution. Either way, getting started in January is your best bet for fully funding your IRAs. In fact, you still have time to make your 2009 contributions if you haven’t done so yet — the deadline is April 15, 2010.

Employer plans – Depending on where you work, you might have access to a 401(k), 403(b), and/or 457(b) retirement plan. We’ve previously outlined the contribution limits for these plans. In short, you can make elective deferrals of $16, 500 to these plans in 2010 with an additional $5500 in “catchup” contributions if you’re 50 or older. If your employer matches your contributions, you should at least take advantage of the match so you’re not leaving money on the table.

Taxable investments – If you’re doing all of the above and still have money to spare, you should consider investing in a taxable account. You can do this either through a major mutual fund family, or through a discount broker. Either way, you’ll want to pay attention to tax efficiency when deciding what to hold where.

Save for college

Once you have everything else under control, you might be interested in funding your child’s education. Here are some of the best ways to do so…

529 Plans – When it comes to 529 plans, you have your choice between prepaid tuition plans and college savings plans. The former is a hedge against tuition inflation, while the latter depends on the performance of the underlying funds.

Regardless of which route you choose, make sure you do your homework. The good news is that qualified distributions are state an federal tax free (at least for now), and you might also get a state income tax deduction on your contributions.

Education Savings Accounts – The “Education Savings Account” (ESA) is a less-utilized college savings vehicle that has undergone some attractive changes since its inception as the “Education IRA.” Like a 529 plan, qualified distributions from an ESA are tax free.

ESAs can be used not only for qualified college expenses, but for certain K-12 expenses, as well. The contribution limits were raised from $500 to $2, 000 in 2002 and remain there today. If you’re in a position to fund your child’s education accounts, make sure you look into this as an option.

What are your financial goals for 2010?

As I noted above, everyone’s financial priorities are likely to differ at least a little bit. While the above outline is a good place to start, you’ll want to tailor things for your own needs. You might even have things on your radar that I haven’t touched on.

What are your financial goals for the coming year?

15 Responses to “Financial Goals for 2010”

  1. Anonymous

    I’d like to pay off the remaining $3000 on our car and finish off the the school loans that feel like they’ve been hanging around forever. To do this, my husband and I need to reexamine the budget for the year. Thankfully we’ve learned to be fairly frugal so we’re not in any “danger”.

    What I really want is to feel more free to give generously and with purpose. We give some, but there is so much need. I haven’t given anything for Haiti yet. My tendency is to hoard, which shows my fear of the future and the unknown. I want to be able to trust that God will provide for my real needs, and to joyfully give as He leads. Use money as a tool, and not be a slave to it.

    Thanks all the great thoughts/advice/inspiration.

  2. Anonymous

    1: Pay down mortgage to 80% to eliminate PMI.
    2: Eliminate CCs one by one. $9550 on 4 cards to go. My goal is to have all gone in 12 months.
    3: Increase my emergency fund. No specific number established here. Currently about $800, which is enough for a 1 major pickup repair or 1 medium house repair.
    4: Invest lightly in Lending Club. Maybe average $20-30/month.
    5: Maintain company matches on 401(k)
    6: If everything else works out and I am in 15% bracket, invest in a Roth IRA account.

  3. Anonymous

    I just cut up all of my credit cards – every single one, the week of Christmas. My husband and I are going to dig ourselves out of a GIGANTIC financial hole. I am so excited about this!!

  4. Anonymous

    Increase EF from 6K to 12K
    Increase personal slush fund from $500 to 1K
    Try to stop smoking, which would free up $350 per month (in addition to the obvious health benefits)!
    Put a new roof on house without using any debt/financing
    Pay an extra 3K on HE loan (this is our only debt, primary mortgage is paid off, and we want this GONE!)

  5. Anonymous

    Financial goals for this year include:

    Fully funded 401K and IRAs (no problem)
    Another 3,000 to taxable investment account (no problem)
    6 extra mortgage payments (a stretch!)
    Double my hobby income (?)
    Convince my wife to give up cable (dream goal!)

    What are your goals nickel?

  6. Anonymous

    With no debt except for mortgage, an ample emergency fund in place, and plans to continue maxing out retirement accounts…our goal will be to continue cutting expenses. We are a family of 5 living (basically) on one income. Last year, I got serious about couponing and halved (yes halved) our grocery bills. Satisfied with the grocery bills now, we plan to continue with reducing energy consumption. NOT to reduce our carbon footprint (Al Gore and the other tree huggers are morons!), but for the sole purpose of lowering our utility bill – which is pretty high considering we run a daycare out of our home. Last year we reduced our utility bills by 25-30% when we got a new roof with better ventilation, and built an addition – yeah, add more space and the utility bill goes down, go figger! ha! Actually, it’s b/c the windows on our house are crap. We had the adddition built with very efficient windows (replacing some of the crap windows). So this year, we will start with replacing the remaining (30 year old) windows in our house. We are also scheduled to have a new energy star refrigerator delivered in two weeks…I wonder how much our utilities will drop when we replace the 20 year old fridge?? I can’t wait to see!

  7. Anonymous

    My goals for 2010

    Payoff the remaining 4000 on my cc

    Build up the savings a bit more

    Keep paying the minimum on my student loans until I can apply for the Education reduction when I hit the 5 years of teaching mark as I worked in a school in need.(they will payoff up to 17,500)

  8. Anonymous

    Having been there and done all that, my goal is never to have to go back to work again. The day job is now history!


    Happy New Year, and a long and happy life of financial independence to one and all.

  9. Anonymous

    I’m taking a cue from you and I’m consolidating my loans to get a lower rate. The interest rate for consolidating student loans is really low and I want to take advantage of that.

  10. Anonymous

    The new year is also a great time to start a new budget or fine-tune an existing one. Our budget needs some adjustment in a couple of key areas – namely groceries and entertainment expenses. Getting our grocery expenses under control will also help with another goal for 2010 which is to stop eating like a pig.

Leave a Reply