Debt-free -- and more -- by 2009

We can afford our goals only if we manage the rest of our income better than we do now -- or by lowering the bar. What's really reasonable?

• We're on track to pay off our debt. That's reasonable.

• Because my husband and I are self-employed, we can't afford to forgo the insurance coverage. That's essential.

Should we scale back our savings targets?

Given that we don't quite have $20,000 saved for retirement, it's foolish to save less than 10% of our income at this stage. Dilly-dallying at 5% is just pathetic. (You can see what a difference this makes by running some numbers on MSN Money's Retirement Planner.)

So although it would be terrific to fatten our various other savings accounts, perhaps we have postpone that until our debt is paid off. Our current savings transfers to our blessed ING Direct account are:

• $75 a week to our emergency fund.

• $50 a week to our unexpected-expenses fund.

• $10 a week to our vacation fund.

• $10 a week for miscellaneous.

Total: $580 a month.

Once our debt is paid off, we can add $300 to that $580. Meanwhile, a more reasonable goal is to focus on coming up with $300 more a month to meet our retirement goal and $132.50 a month for our added insurance costs.

Step 5: Find the money

How am I really going to achieve my grand plan for 2008? How are you? How do we all end up together on the cover of Money magazine?

The key to any financial endeavor always boils down to the same issue: Whether you earn it, save it, beg, borrow or refinance it, you have to come up with the money.

Though I highly recommend big raises, offshore investing and trust funds as new sources of income, my husband and I are going to tackle our personal downfall: the eighth deadly sin, carelessness.

If you did your year-end review, you probably noticed where your budget broke down, your resolve failed or when you were taken prisoner by old habits. Those are the places where lost money can be recovered.

Here's our money retrieval strategy:

• With a new home arrive new expenses and the need for a smarter, stronger budget. We are tracking our expenses now to stay in control of our cash flow throughout the coming year. My hope is that with the mortgage increase covered, the rest of our expenses will remain steady. That said, the cost of oil and gas are a bit of a wild card and will require constant discipline.

• We already cut our grocery bill 25%, down to $300 a month from $400. Our goal is to get down to $200 a month.

• Our worst money leak comes from thoughtless spending. In addition to having a smarter spending plan in place, my husband and I have vowed to stop wasting money on stuff that doesn't matter so we can spend it on what does.

In our recent budget conversation, he pointed out that two spontaneous stops at a local diner, over just two days, had cost us $30. Add $9 for the late fee at the video store (grrrr) and we're down about $40 for the week.

Keep that up all year, and it's a good way to kiss nearly $2,000 goodbye -- or a good chunk of our erstwhile savings goal.

• Tell back: What are your financial goals for 2008?

See? It pays to know your financial demons when you're aiming for long-term progress. Rein in those little devils, and nothing will get in the way of you getting where you want to go.

Feel free to play along and put your 2008 goals down in black and white so you and the rest of the Internet can see them on our Women in Red message board.

Published Jan. 23, 2008

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