This is a bit of an odd time for a saving goals post for the year, especially as we’re over half way through. I’m a little late to the game.
A lot has changed since I first wrote my savings post, actually that’s a total understatement: everything has changed! Now we’re planning to live overseas for a good few years, want to become permanent residents of Panama and pay no taxes. Things are really different, so my goals have to adjust.
Before we decided to go overseas I had planned to pay my student loan off as slowly as possible. This is mostly because there’s no interest on student loans when you’re living in New Zealand. However now that we will be overseas, I’d rather avoid paying tax on it – so it’s gotta go. Here are my savings goals for 2014:
How to Plan Savings When You’re Self Employed:
This is very tricky as my income is always fluctuating based on the time of year, how much work I’m doing, the moods my clients are in and if I’ve released any new projects. It seems to be pretty unpredictable. Last month I pulled in $21,000 this month I think I’m going to come in just over half of that (I think) so how can I plan?
I am going to plan my savings for this year around my average.
I think around $15,000 a month is probably realistic – so how would I divide that when I’m not paying taxes?
Life Costs: Now, I’ve said a few times that traveling is generally going to be cheaper than living in New Zealand – and I can’t wait to share that with you. However, I pay myself a weekly wage of $750 and I’m not going to change that despite being overseas and probably spending less money. Why? Because that’s an amount of money I feel happy to play with and I will save some of that money, if appropriate, for my own personal things such as new clothes, flights, and fun activities I might want to do like diving, paddle boarding or treks that can be quite expensive.
One thing that I’m really firm about is living below my means. Out of a monthly wage of $15,000 I could easily pay myself $3k a week and live the high life, but, honestly, I don’t want to. I’m young, have no children and no mortgage so $750 a week play money is a fair amount of money. One thing I’ve had a problem with in the past when I paid myself less was that I would constantly dip my hands into my savings/business account for bigger purchases and ignore how much I was spending. Even though I can afford to buy most things I want with cash, I want to “save” for them with my weekly wage.
I believe that delaying purchases, even when you can afford to buy them, is a great way to really appreciate them and to avoid financial hangovers.
No Tax: Hopefully from the 30th of July I will be paying no more tax, but I have to apply to be a non-tax resident and I have to be grated non-tax residency status, which they could easily turn around and say nah! If they refuse me, about 1/3 of my income will go towards tax each month.
Emergency Fund: At the moment I have $3,000 sitting in one bank account that is my emergency fund. In my business bank account I have a lot of tax money and also about $15,000 that is mine (hard to tell exactly and I always leave a buffer of money in my business account for business expenses). However, I am pretty keen to pay off my student loan as quickly as possible and its sitting pretty at $31,000 so pretty hefty. Today I’m going to transfer $2,000 into my emergency fund and I’m going to add in $2,000 every month until my student loan is paid off and then I will up the savings. My first goal is a $15,000 emergency fund which will take another 5 months at this rate. However, once my student loan is paid off I will contribute more aggressively.
Once this goal is reached I would like a $30,000 emergency fund. The reason I would like this amount is I believe that it is about 1 year of my own living expenses if I needed to return to NZ or had some kind of injury and couldn’t work. Likewise it is about 6 months emergency expenses for my partner and I (if necessary, however I hope he’ll create his own emergency fund too). This is an amount I feel comfortable with. It is also about 2 years worth of living expenses if I was based in Asia 😉
Business Expenses: My business expenses vary from about $500 a month, to a few thousand if I buy some new things or spend a lot of time outsourcing projects. It does really fluctuate. I think $1,500 a month is a pretty fair estimate as an average price. My business expenses include: my VA, my researcher VA, my 2 content writers and my third “on call” writer, as well as hosting, new blog themes, and any domains or sites I purchase.
I want to be as aggressive as possible with my student loan payments. I want to pay it back as quickly as possible.
These are my totals in summary:
$3,000 a month in wages
$2,000 a month in emergency fund
$1,500 a month on business expenses
So a total of $6,500. If I’m earning a rough estimation of $15,000 a month and not paying taxes that leaves me $8,500 a month to put on my student loan. Taking into consideration the extra money I have in my business account, I should be able to pay my student loan off in 3-4 months. Isn’t that crazy? Paying a $31,000 student loan off in four months!
If I am paying tax it will probably take me 7 or 8 months to pay off my student loan, depending on how aggressive I am – so being tax free will make a huge difference to finally becoming debt free.
I am setting myself a goal for the end of October of being DEBT FREE and having at least $12,000 in my emergency fund.