You can’t get anywhere without deciding where to go.

As it’s a New Year now, it’s time to re-examine the past year’s goals and see where we are. It’s also time to set new goals for the coming year.

Setting goals is a basic task for making your life and situation better. If you sit around and just ‘wish’ things would get better, or try to make things better without some kind of plan on where you want to end up, odds are things are not going to happen like you hope.

Creating a S.M.A.R.T. set of goals helps you define where the path lies, and the ultimate point you want to reach. It also keeps ‘pie-in-the-sky’ ideas from overtaking all your efforts. Dream big, but realize you have to take a lot of prep-steps to the BIG dream. S.M.A.R.T. goals help you make those steps.

• Specific – Make a goal that has a very defined outcome and keep the overall goal simple and definable
• Measurable – The goal needs to be something that can be defined as either complete or not. Being rich is not really a definable goal. Making 1 million dollars is a definable goal.
• Achievable – The goal needs to be reasonably achievable. Set the bar high, but not too high on a particular goal. If you achieve the goal, you just make another one with higher achievement standards. Don’t bite off more than you know you can chew.
• Realistic – Keep it real people. Wanting to fly is fine, as long as it’s in an airplane. Growing wings and flapping around the flagpole probably isn’t going to happen.
• Timely – Don’t plan for 20 years in the future with these goals, plan for short-term timeframes. Long-term goals are desirable, but they change with time as well. These goals should be things you can achieve within a year or so.

Looking Back at 2008

I had a number of goals defined for last year that didn’t get completed

The Blog

• Increase subscribed readers to 1000 – Nope, only around 300 this year. Going to continue this one
• Consistently post at least 5 entries a week, moving to 10 entries a week (average 2/day) by third-quarter of the year. – Also nope. I was consistent for most of the year, but this last couple of months have been sporadic. Gotta re-concentrate ont his one
• Contribute to at least 1 blog carnival a week, and HOST 1 carnival a month, starting 3rd  quarter of the year. – Also nope. I’m kind of torn about the usefulness of carnivals any more. They’re fun to do, but a lot of effort, for not a lot of readership. Might drop this one for the coming year.
• Officially join the M-Network and continue to network with existing and new PF Bloggers. – Yeah, didn’t happen. Not expecting it to either. That’s OK. I do this for fun, while for most of the other M-Network folks, this is either a significant part of their income, or their full-time job.
• Get a guest post published on The Simple Dollar, No Credit Needed, and Blueprint for Financial Prosperity. (More wish than goal) – Same as Blog Carnivals, I’m not sure how useful this is anymore. I like getting more people to read the blog, but the traffic I’ve seen doesn’t justify the time and effort involved. Dropping this one.
• Get enough advertisers to break-even on the expenses for the blog – Amazingly enough, this one hasn’t been that difficult to accomplish. I’ve broken even and made money with the blog. I won’t be quitting the day job anytime soon, but it’s enough to justify continuing.

Personal Goals

• Fully fund my 401k – Ended up cutting back on this because of the market. Concentrated on paying off bills and saving up an emergency fund.
• Fully fund my wife’s and my Roth IRA – Same as 401k above.
• Start a 529 fund for both children – Ditto here too
• Pay off all credit cards – I haven’t paid off ALL the cards, but anything over an 8% interest rate is gone. That leaves only a handful of cards that I’m not in that much of a hurry to pay off quite yet.
• Increase our emergency fund to 6 months of money. – Woohoo! I have increased the emergency fund to 9 months (or maybe a year if I’m REALLY careful). This is just in case things go south at my job, not that I’m expecting that. With the economy the way it is,
• Replace paying my mortgage ~$1500/month from the primary salary and start paying it from secondary income sources (blog revenue, side consulting, delivering pizzas, etc) – Achieved this one, just not in the way I expected. I now commute more than 1 1/2 hrs a day, but I get per-diem mileage. That comes out to a little over $2000/month above and beyond salary. I was starting to see some side consulting money early in the year, but that dried up. Blog revenue isn’t bad (around $2000 this year) but that’s not enough to put me over the point. Since per-diem isn’t ‘exactly’ primary salary, I’m giving this one a pass.

Looking Ahead to 2009

The Blog

• Break 1000 Subscribers – Come on everyone, tell your friends, family, random strangers on the street, etc.!
• Consistently post at least 3 times a week – There’s a lot of blogs on finance out there (wonder why?!??) and a lot of them just regurgitate the daily news or basic financial information. While I’m guilty of this too, I’m trying to put out articles that make people think about why people and the financial markets act the way they do. This isn’t an every-day kind of thing, so I’m dedicating to a Mon-Wed-Fri (and sometimes Sat roundup) schedule.

That’s it for the blog. I’m not getting too ambitious this year.

Personal Goals

• Fully Fund the 401k – Up my percentage to max out this year.
• Pay off Credit Cards – Finish off the last of my credit cards this year
• Fully fund my wife’s and my Roth IRA – Same as 401k above.
• Start a 529 fund for both children – Start and fund SOMETHING this year
• Purchase a Rental Property – This is the big S.M.A.R.T. goal for this year. With things looking good job-wise, and the elimination of a lot of debt. I’m going to start seriously looking around for a rental property in my area. Prices have been dropping like a rock, and there are some relatively good deals to be had if you can come up with the credit and down payment. I’m thinking the bottom of the housing drop is coming somewhere in the third-fourth quarters of the year, and by that time I’ll have all the credit card debt gone, and enough saved for a significant down on a property. We’ll see how it goes

So, what are your goals for 2009?

It was the Reagan era. The time when everything seemed to be ‘going right,… finally’. Pres. Jimmy Carter had been defeated, and the country was coming out of some heavy doldrums that included $1.75/gallon gasoline (oh no!), stagflation, high unemployment rates, and mortgages with interest rates hovering around 14%.

Fast forward a few decades, and we find ourselves in a strangely similar situation. Pres. Elect Barack Obama is set to take office, bringing with him, if not solutions, at least a feeling of anticipation and hope. Sen. Obama is facing a presidency with two on-going wars, an economy in the throes of an economic disaster, and following a president with some of the lowest approval ratings ever recorded. That’s no easy position to be put in, no matter what political affiliation you have.

Seems Eerily Familiar

Our similar situation here, with high gas prices, high unemployment, and a floundering economy, has caused another fashion trend to take root. The Frugality Trend.

Where it was once ok to go out and buy whatever you wanted, today there is a growing sense of peer pressure to not buy anything. In many cases, this is simply due to necessity. With hundreds of thousands of people out of work and businesses either declaring bankruptcy or shutting down entirely, budgets have to be cut and spending naturally goes down.

But for those with steady jobs and disposable incomes, there is an increasing trend NOT to spend money. People are saving their money at rates that haven’t been seen in decades. The U.S. could possibly reverse the recent trend in personal savings (we currently save a ‘negative’ amount, meaning on average, we spend more than we make).

In the short-term, this lack of spending is actually causing more economic problems, as the flow of money out of the system makes it harder for goods and services to be produced. No buyers of goods, people get laid off, businesses go out of business. It’s a self-perpetuating cycle. This re-adjustment in lifestyles is causing a larger re-adjustment in the financial sectors, as businesses deal with consumers that have all but stopped consuming. Not a pretty picture.

Moving into Mainstream

The public relations firms and much of the media are already picking up on this Frugal Trend. Frugal living blogs, like my friend Lynnae over at Being Frugal.net are seeing speedily increasing readership, as people adopt the low-cost lifestyle. Coupon clipping and bargain shopping are moving back into mainstream, with lots of success stories starting to appear on major media outlets.

This New Frugality is long in coming. The United States has been a country of consumers, many living well beyond their means, for years. The mortgage bubble, and the economic crisis we’re now in are due primarily to a combination of people ‘living large’ and financial institutions willing to help them to do so. Our ‘fast food’ mentality means that we’ve turned into a nation of impatient people. We want it our way, and we want it now!

The New Frugality

So how does this New Frugality affect us? People are beginning to scale back their lives. To take control of their finances and their lifestyles. The vacation in Maui is turning into the vacation down at the lake. The Godiva chocolates are becoming the Hershey chocolate bars. Everyone is taking a hard look at what they ‘thought’ was import to them, and re-thinking their value.

Could this lead to families actually doing things together again? A large-scale adjustment of our value system might be a good thing. Spending time with family and friends isn’t expensive, and is much healthier for you than doing a little ’shopping therapy’ by yourself. Reconnecting with people instead of things could be one of the greatest benefits of this new fashion phase.

One final thought. With all the economic problems we’ve been having, I personally think that it has focused everyone on a common problem. Working as a team, trying to solve a common dilemma, and coming together, can’t all be a bad thing. As bad as things are now, I think we’re going to come out of this much stronger as a people, after stripping away some of the rampant materialism that has been distracting us from the truly important things in life.

What do you think about this new trend towards frugality? Is it a flash-in-the-pan, or a worthy movement? Are you joining in? Leave us a comment and let us know.

I normally do a little credit card arbitrage, to get the lowest rates possible. So when one of the credit card rates was set to increase, I did my normal little trick of moving it to one of the empty ones to maintain a low interest rate. I know this isn’t necessarily the smartest move for household money, but it’s an effective way to maintain a balance and still get a low interest rate. All told, doing this has kept me from paying more than 7% interest on any of my cards for years.

Anyway, I received a nice little balance transfer offer from Chase recently (3% up front, .99% for 6 months after that) and I had a balance on a card that had just moved to 18%, I decided to make the move. I calculated out how much I could move, including the up-front costs, and went online and moved the balances. No problem.

End of story.

Or so I thought. A few days later, I get a letter from HSBC, saying they’d lowered my (empty) credit card from a credit limit of $7000 to $305. And where did the $305 come from?!??

The letter had the standard blah blah about usage, credit record, and such. The one that caught my attention was the reason specified ‘The ratio of available credit to utilized credit is too high’.

Now, that’s true, on the one card I transferred the amount to. The OVERALL amount of available credit to utilized credit didn’t change at all. In fact, utilized credit has been going down steadily, as I’ve been in debt-killer mode these last couple of months.

It’s a Bad Bad Market Out There

Now I’m not particularly mad at HSBC. I haven’t used their card in the better part of a year, and I originally got the card because of the low intro rate for their balance transfers. It just goes to show that there are still more than a few banks out there that are scared of how things are going. Pulling in, and eliminating large available credit balances for customers is a way for them to keep themselves safe. Assuming they thought I was suddenly going to run up a huge amount of debt, then stiff them for the payments.

Ain’t gonna happen.

I’ve never (knowingly) missed a payment to any bill in almost 12 years. My credit rating should show that, and the banks and credit card companies should know that as well. It’s the banks that depend on a computerized algorithm to tell them whether someone is about to go belly up or not, that triggers these kind of cuts.

The one thing that does bug me about this is that I’m going to take a hit on the FICO score, because it will show a decrease in available credit vs. utilized credit. This doesn’t mean anything to me right now, but because getting new credit is becoming more difficult, this might cause me issues if I need to finance something relatively soon.

I’ve got paid off cars, a house within my means, and not that many bills left, so the odds aren’t too high. It’s just having the option to do something would be nice.

Have you had your credit limits reduced recently? We’d like to hear your stories and see if there’s a common thread or cause. Leave us a comment and tell us your story!

Son: “Daddy, are we poor?”

Me: “No, of course not. Why do you ask?”

Son: “Because we don’t do anything fun anymore. We don’t go to the movies, or to McDonalds at all!”

Me <taken aback> : “We’re just paying off our bills. That’s why we don’t have any money right now.”

Son: “I hope we pay off the bills so we don’t have to be poor anymore.”

The conversation continued on as I tried to explain what we were doing, why we were sacrificing now and how it would be better in the long run. It didn’t sink in, and he moped around the house the rest of the day. He even went to his room and closed the door. There wasn’t a sound coming from the room for over an hour.

To see my youngest son in such a state was a life-changing event for me. I hadn’t realized how much he had heard of our discussions on paying off bills, or that he connected not having money to being poor.

Days later, I learned that even the kids at school had an inadvertent hand in his mood. While they gleefully talked about going to movies or to Burger King, or doing other fun things, my son was left out, since he hadn’t done any of those things in, well, like forever!

The whole family went out that evening to a movie, and dinner. The next day, I re-worked our (now obviously) too rigorous debt payoff schedule to something that allowed more ‘fun money’ and swore never to see that look on his face again.

The Hard Times are Back

Fast forward a year, and we find ourselves in a huge financial crisis. The jobless rate is increasing, as is the price of food, health care, utilities, and many other day-to-day costs. I’m hearing more stories similar to the one I experienced, but this time there’s no happy ending of just re-budgeting and making everything better.

Times are tight, and people are doing what they have to in order to get by. A lot of times that means cutting everything as much as possible. As an adult, we know that it’s the necessary thing to do, but children don’t really understand why their lives change so radically, and so quickly.

Explaining to your child that they can’t get toys like they used to, or go to fun places like in the past, isn’t easy. It’s hard for them to understand. And even when they do understand, the best (and worst) thing they can do is to sympathize with you and be ’stoic’. In some ways, that’s worse than a crying fit.

So what can you do when times are tough and things have got to change?

Tell Them – Little ears are actually very big. They pick up on a lot of conversations and body language that you don’t think would get through to them. Tell them up front, in simple terms what’s going on (Daddy/Mommy lost their job, and we have to save our money.)

Warn Them – Especially with the Christmas season coming up. If you know that Christmas is going to be radically different than years past because of financial problems, start prepping them now. Set their expectations so they aren’t horribly disappointed come Christmas day.

Reassure Them – Make sure they hear it from you, your spouse, and any other older person in the household. “This isn’t a big deal. Things will get better eventually.” It’s good for them to hear this repeatedly, and it’s also good for you to say it, as it’s true, and a pick-me-up for you as well. Bad financial situations come and go. You need to make sure they don’t think that this temporary state of affairs is permanent.

Love Them – Pure and simple. Spend time with them, and show them you love them. That’s better than all the money in the world anyway, and it’ll do all of you good. Children, particularly little children, crave attention and love from their parents. If they’re getting that, lots of other things seem trivial and less important.

Getting through these hard times is easier as a family. Taking care of yours doesn’t always cost money. Sometimes, in rare occasions, the best things in life are free.

My wife hadn’t been particularly close to her over the years, but just the sheer number of years that they had known each other (more than 30) put her in a very small group of people. I can count on one hand, the number of people I’ve known for 30 or more years, and most people I know that are around my age are the same. Long-term friends are getting rare. My wife has been on the phone with her brother on a regular basis during the last couple of weeks and has had long talks with him, trying to help him deal with the situation.

One of the conversations I overheard was the discussion about paying bills and how things were not getting paid correctly. If you listen to Dave Ramsey very much, you’ll hear a recurring theme about how marriages are usually based on one person being a ‘geek’ (or the person that does the numbers) and the other being the ‘free spirit’ (or the one that isn’t as interested in the details). My brother-in-law was definitely in the latter category.

It’s not that he didn’t know about the finances and bills, but he wasn’t familiar with his wife’s bill-paying routine. Because of that, he sent two payments to his (their) truck, when he should have only sent one. He is going to have to call the credit company and see if they will cancel the second inadvertent payment.

That triggered a conversation between myself and my wife.

What if Aliens Abducted You?

Of course the ‘Alien Abduction’ is a euphemism. One that I heard from a friend of mine, Lynne over at BeingFrugal, some months ago. It really just covers any contingency when the ‘geek’ in the family disappears for some reason. The ‘free spirit’ will need to know a lot of details about the family and finances, that they might previously have not been interested in. I thought it was a cute statement, and filed it away for a Joe Sixpack writing when I got a chance.

Then circumstances brought back the whole issue in a way that highlighted the importance of getting this in place. After discussing finances with her brother, my wife was in a near panic thinking about worst-case-scenarios concerning her if I were to ever be ‘abducted’.

I can’t say that I’ve actually prepared anything formal so that she knows what to do if I were to disappear. I’m also not so sure what I would do if she were to disappear either. That, in particular, was what hit me. I hadn’t even considered about what to do in the opposite situation.

So, as a cautionary tale, I’m going to document what I’m planning on doing for my ‘kit’. It won’t be complete, so I’ll revisit it as I cover different areas other than just financial.

The Financial Kit

The first part I’m going to work on is the low-hanging fruit of finances. They’re an immediate concern should I disappear, and are one of the things my wife isn’t completely comfortable with.

I have all my bills paid automatically, as I’ve written before so the paying of the bills should continue whether or not I’m around. However, because of the way the automatic payments are made, there are some bills that need to have larger-than-minimum payments on them, or some of the other payments will overdraw the accounts. It’s a somewhat complex setup, but has worked flawlessly for me for years. Having my wife pick it up and understand what’s going on is another matter.

Step 1 – I’m going to update and move my spreadsheet-o’-bills that I use to track things, to a common area on our computer where she knows where it’s at. Since it’s also password protected, I’m going to make sure she knows the password. (She should already, it’s our family password, one that everyone in the family knows, but I’m just being super cautious).

Step 2 – I’m going to enforce (on a monthly basis) that we sit down and go over the bills, our investments, and debts, so she has an idea about where we stand and what would be necessary for her to do if I were suddenly to disappear.

Step 3 – I’m going to verify (or at least re-verify) that all our insurance accounts, retirement accounts, and other assets are either in both of our names, or that she is the beneficiary if I’m the only one on the account/investment (and vice versa for her as well).

Step 4 – This is the hard one. I’m going to write up a will. I haven’t until now because thinking about death is very depressing for me. I realize now that it’s vitally important for those left behind to get this straightened out. Leaving the family high and dry legally, isn’t something that I want to be remembered for.

First Steps, More Steps

There’s lots of things to do if you’re really going to prepare for the inevitable. This is just some of the first steps. It’s something that should have some thought put into it. Things you forget to add until after you’re gone, won’t help your family. Don’t forget anything!

In coming articles, I’m going to think and write about some other topics concerning what to do when planning for the worst.

If any of my readers have ideas, suggestions, or additions, I’d appreciate leaving a note with the info. I’ll add as much as possible to put together a complete ‘Alien Abduction Plan’ in coming weeks.