I have saved the remaining $2,000 for my Roth IRA contribution and I'm anxiously awaiting the September 1st withdrawal so my IRA investments for 2011 will be officially done. I also have saved enough for the carpet cleaning bill that we put on our credit card. So now I think I'm finally ready to save money again. The only problem is I don't know what to save for first. I have so many things I want to save for, but my income is not big enough to do them all, or at least do them all as fast as I would like. I'm a little stuck on which one to do first. In Dave Ramsey's baby steps, he says to go smallest to largest, but when saving, it's tougher to decide which thing to save for first since some are more important than others or we may need the money sooner. Here are the things I want to save for and how much each would cost:
New carpet for our basement: $3,000
It makes me so mad that we just replaced this carpet less than a year ago, and now we have to do it again. It's livable with the carpet and pad removed in part of the basement, but it would really be nice to not be embarrassed about our ugly basement.
New used vehicle or 2: $16,000 to $32,000
We have 2 vehicles with over 100,000 miles on them, so unfortunately we'll need to be replacing one or both of them some time in the next few years. I hope it's not next year, but am determined not to go into debt to get a new car, so I want to have enough money to pay for it in cash. Unfortunately one of them could die suddenly and we'll need to replace it fast, so the sooner I have the money for a replacement, the better. I came up with a replacement cost of $16,000 each because that's what a two year old version of the same make and model as we have now would cost. This is just a number I picked, so we could maybe get a slightly older car that is not as expensive.
2012 IRA Contribution: $5,000
I'm not even officially done with this year's yet but, since I am behind on my retirement savings for my age, I need to make this a non-negotiable investment next year.
Trip to Japan: $10,000
I know it's extravagant, but it's still on the wish list. We had the money set aside this year and reservations booked. But, after the earthquake there this spring, we cancelled the trip and I ended up putting that money towards paying off our second mortgage.
One disappointing thing is only the IRA contribution will really contribute positively towards our net worth. I guess technically a new vehicle is an asset, but in 6 or 7 years it'll be worth no more than the cars we currently have. We are currently about $2,000 under water on our house too, so I'm tempted to put some extra money toward the mortgage to improve our overall net worth. Another thing I should mention is I was thinking we'd need to increase our emergency fund. We currently have 1 months of expenses plus a $1,000 rainy day account for smaller "emergencies" such as a car repair etc. Because I plan on saving the cash before we actually purchase the items listed above, the cash I'm saving could double as more emergency funds if there was a true emergency. So, for right now I plan on just keeping the EF at $1,000 plus one month's expenses.
What do you think? What would you save for first if you were in my situation?