When I posted my 2013 goals last week, I got a comment on them from one of my all-time favorite personal finance bloggers, Frugal Zeitgeist. I started reading her blog five years ago and I can honestly say it changed my financial life. Her commitment to frugality was one of the major sources of inspiration I needed to start working on my own finances and begin writing my own blog. So, just knowing that she read my blog was an amazing feeling. But what she actually said in the comment really got my wheels turning. Her comment was long and thoughtful, so I won’t re-post the whole thing here. Here’s a snippet, though:
“Your goals sound great, but I’m curious about one thing: Why divert money to taxable investment accounts before fully funding your Roth? The reason I’m asking is that your gains on the Roth are tax-free, which reduces your future tax burden (a huge plus, especially given that you have a long time horizon until retirement), but those on your taxable investment accounts aren’t.”
Good. Fucking. Point. I was silly not to notice this myself, and I’m glad someone else did.
So that should be an easy change to my 2013 goals, right? Just switch a few figures around, diverting more funds to my Roth and slightly less to a brokerage account. Not too drastic a change.
But something was wrong. Something was nagging at the back of my mind all week. Why did I overlook that very obvious flaw in my financial plan? Why did I want to create an investment account outside of my Roth so badly? Why was I having trouble letting go of funding a brokerage account when it’s very clearly not the most tax-efficient thing to do?
Eventually, when I was able to be really honest with myself (which is another 2013 goal!) I realized why the brokerage account was so important: somewhere, deep down, I was hoping to use those investments to buy a house. Not today. Not even in a year or two. But sometime in the next five years, I want to become a homeowner, and investing in ETFs was how I was hoping to do it. So when I really boiled down the motivation behind setting the goal of opening a brokerage account, homeownership was at the core.
For some reason, admitting this is scary for me. Buying a house is such a big goal. And especially in the part of the country that I live, it’s a very expensive undertaking. What if I fail? What if I can’t ever find a house I can afford? What if I chicken out? And I think that’s why I was “masking” my desire to be a homeowner behind the different, less scary goal of creating an investment portfolio. I’m totally freaked out by the idea of announcing to the world that I want to save up for a house because there are so many reasons I might not be able to make it happen.
But I need to put those fears aside and go after this. Again, I’m definitely not ready to buy a house now or even in the near future; however, I need to start planning now to make this happen.
So in the spirit of planning, and going after big dreams, this is my 2013 financial goals do-over:
- Maintain $5,000 emergency fund
- Max out my Roth IRA
- Save $5,000 towards the purchase of a home
If you compare my original goals and my revised goals, you’ll notice that both international travel and the brokerage account have dropped of the list entirely. While investing and traveling are both important, I’ve decided that they’re just not priorities for 2013. I think it will be good for me financially and emotionally to work on pursuing a big, scary dream – homeownership.
How are your 2013 goals going? Any you’d already like to revise? Please tell me I’m not the only one!