I always enjoy this time of the year because it gives me an excuse to reflect on the past year and think about how I can improve for the next. Of course, I shouldn’t need to wait till the end of the year to do this, but hey sometimes, life gets in the way. So, since it’s the last day of 2017, for my final post of the year, here are my financial goals for 2018.
1. Max out my 401k
Wait, what?? I know, I’m a little embarrassed to admit I haven’t been doing this, especially since it’s usually one of the first pieces of advice personal finance bloggers give. Even though I’ve always been good at saving, I only realized that maxing out my 401k was the best way to save for retirement earlier this year. I’ve always contributed enough to get the company match (because I can’t say no to free money… or free anything really), but I thought that it’d be better to keep that money for short-term savings instead of putting it away for retirement. However, in not maxing out my 401k, I’ve been missing out on two important things, compounding and less taxes.
Since I wasn’t investing any of the savings I was pocketing, my money wasn’t growing. In fact, because of inflation, it was actually losing value. Plus, I was missing out on the benefits of compounding. Cue the story about Susan, Bill, and Chris.
Susan invests $5000 a year for 10 years from age 25 to 35. Bill invests $5000 a year for 30 years from age 35 to 65. Chris invests $5000 a year for 40 years from age 25 to 65. Who ends up with the most money?
tl;dr Investing earlier really pays off.
If only I had read this post from Millennial Money Diaries and understood the power of compounding! 😫
Since I have a traditional 401k, I am contributing pre-tax money, which means I’m actually lowering my taxable income. Which really means that I pay less taxes for this tax year*. Yay! Additionally, if my 401k contribution lowers my taxable income enough, I could get knocked down to a lower tax bracket! Double yay!
*Of course, since death and taxes are the only two things we can be certain of in life, I’ll have to pay taxes on the money (and the gains) when I take it out of my retirement accounts. But I’ll worry about that later…
On top of those two things, I only recently discovered that I don’t actually get the match until I’ve stayed at the company long enough for it to vest. And so far, I haven’t done that… 🙈 So really, the only retirement savings you can count on is the money you’ve contributed. Since I already save 50% of my take home pay, I can afford to have more money taken out of my paycheck to go towards my retirement.
2. Decrease my living expenses
As I mentioned in this post, I’ve been renting out my parking spot to reduce my rent by $300. However, between staying at my boyfriend’s apartment, traveling, and occasionally visiting my parents, I’ve realized I actually don’t spend that much time at my apartment. At least, not enough to justify what I’m paying in rent… So I’ve started thinking of two options:
Moving in with my boyfriend
Since I already spend most of my time at my boyfriend’s apartment and his place is only a 15 minute walk to my office, I have been considering moving in with him. Plus, his place is a lot closer to most of the places I frequent (such as my aerial yoga studio and Boba Guys 😝). I know this is a big step that will have a serious impact on our relationship. However, by doing this, I would reduce my rent by $600. My boyfriend and I have already started talking about it and he’s definitely open to the idea. We still need to talk more about it, but at least it’s an option that’s on the table.
Moving out of San Francisco
Another option I’ve been considering is moving out of San Francisco. Wait, wasn’t one of my dreams was to live and work in SF? I know, but dreams change. After two years of living in SF, I’m not sure if it’s worth it for me anymore, especially since my rent goes up each year (I sadly do not live in a rent-controlled apartment). There are plenty of places in nearby cities, such as Oakland and Berkeley, that are cheaper than my current apartment and can be only a 15-30 min BART ride away. I used to ignorantly wonder how people could afford to live in San Francisco. I quickly realized that a lot of people who work in SF don’t actually live there and instead, commute from the surrounding cities. For example, one of my coworkers lives in a town 45 miles away and commutes over 3 hours a day when he comes into the office. I probably couldn’t handle that kind of commute, but 30 min on the BART isn’t bad at all. To be honest, that’s how long it takes for me to get to work by bus now… and I only live 2 miles away!
3. Reduce unnecessary spending on food and shopping
Confession time: I’ve been going out and buying my lunch nearly every day for the past two years. 🙈 Even though I have saved money using Mealpal, I know that I could save a lot more money if I started packing my lunches instead. Additionally, you might have noticed that I frequently spend my disposable income on coffee, bubble tea, and baked goods. I purchase them so often that I even made them categories in my monthly budget so I could track my spending. As I mentioned before, these little things bring me joy, so I won’t be cutting them out completely. But I definitely can try harder to reduce the amount I spend on them.
This past year, I finally realized that I have way more stuff than I actually need, clothing in particular. As a response, I purged about 1/3 of my closet and sold most of the items on Poshmark. But getting rid of stuff is only one part of the equation. I have already started to reduce my shopping by avoiding temptation (i.e. going to the mall) and not paying as much attention to fashion bloggers on Instagram (those posts can be pretty dangerous, especially if you have LIKEtoKNOW.it). But I definitely have room for improvement and can shop even less. Instead of buying things that I want, I’m going to try to buy only things that I need. For example, looking back at my latest money diary, I probably didn’t need those skincare products or those clothes from Abercrombie (though, my inner fashionista might argue otherwise 😝).
4. Increase my net worth by 50%
I started tracking my net worth in June with Personal Capital*. In the past 6 months, thanks to finally investing my money (and of course, the great returns of the market this year), I’ve been able to increase my net worth by 40%! For 2018, I plan to continue to save and invest my money (*crossing my fingers the market doesn’t crash*) and hopefully, my net worth will increase even more!
I’m also considering trying to start a side hustle. It was only until this year that I discovered the idea of side hustling. I know what you’re thinking… and yes, I’ve been living under a rock. Growing up, I always thought having a second job was a sign of financial insecurity. So, I thought my goal was to get a job that provided enough income to cover my expenses (I have been very fortunate that I have never needed a side hustle to make ends meet). But I realize now that side hustling or working another job doesn’t necessarily mean you’re struggling financially. So many people have side hustles to supplement the income from their day jobs and to create multiple streams of income. Since I don’t currently have that many obligations or responsibilities, I might as well try to use some of my free time to make some extra cash.
*This is a referral link, which means I would gain a small commission if you sign up. I absolutely love tracking and visualizing my net worth with Personal Capital and highly recommend it! It’s free to sign up and use. However, if they see you have at least $100K in investments, they’ll try to sell your their financial advising product.
Do you have any financial goals for 2018? If so, what are they?