8 Ways to Cut My Net Worth in Half in 2008

I am determined to cut my net worth in half by 2009. Since my net worth is negative, this is actually a good thing! Sounds absurd to aim for a net worth of -$30k, but that's my goal and I'm sticking to it.

I've updated my Net Worth IQ for December 2007 and I'm very happy with my progress. I found myself thinking I sure can't wait until that number is postive! Then I thought Gee, I wonder when that will be...

After careful consideration I have tentatively scheduled it for 2010.

If I can manage to get half way there with every force of reverse compound interest working against me this year, then it will be cake to get to $0 and beyond in the years to come. This is the most ambitious financial goal I have ever set for myself and here is how I'm going to do it. I tried to put these goals in realistic, measurable numbers that are consistent with my planned budget and tracked (and declining) spending habits. See my "SMART" goals in italics. I'll be keeping track of my progress here for accountability. Without further ado...

8 Ways to Cut My Net Worth Debt in Half in 2008

1. Credit Card Debt
   I am going to pay off my $14,939 credit card debt by putting $1400 per month towards it. First and foremost, I have to eliminate high interest credit card debt. The sooner, the better. In my original Financial Resolution for 2008 post I described made my plan. Since then my $17k goal has been reduced to $15k but my plan remains the same. My budget has been cut down to bare essentials. I'm going to start making more time to tutor and keep selling my stuff for extra income.
   
   
2. 401(k)
   I am going to increase my 401(k) investments by at least $4000 by contributing a minimum of 5% of my gross income. My employer match will kick in about half way through the year to help me out here. This is the easy part. Additionally I plan on increasing my contribution to 6% next time I get a raise.
   
   
3. HSA
   I aim to save $2000 in my health savings account by having $30 deducted from each paycheck. Combine that with my employer's contribution and I will have over $2200 deposited into my HSA in 2008. So the real goal is to accumulate less than $200 in medical expenses. I've already stocked up on prescriptions for the year and I plan to be very careful with my medical expenses. This is not a hard goal. I'm not going to skip any necessary medical care to save money. However, I am a young and healthy woman so I shouldn't need more than $200 worth of care. I'll go into how I plan on reducing medical costs in a future post.
   
   
4. Hospital Bill
   I will reduce my hospital bill by about $2450 by paying $205 per month. These bills go back from when I didn't have insurance in college. I called the hospital and they agreed to lower my monthly payments to $205 and thats as low as they'll go. This won't be paid off next year but it will be reduced quite a bit.
   
   
5. Emergency Fund
   I will have over $1000 in my emergency fund by contributing $30 per paycheck. My initial goal was to have at least $1000 before fully focusing on debt. By that time I have that much my outstanding liabilities will all be relatively low interest. Not to mention $30 per paycheck won't be terribly missed in my budget. My long term emergency fund goal is to have 6 months net income on hand.
   
   
6. Auto Loan
   I will pay the $2500 balance on my car loan with my income tax return followed by consistent payments of $125 per month. In reality I'm hoping that a friend that owes me money for my last car will come through and take care of this one. If not I'm prepared to take care of it myself.
   
   
7. Student Loans
   I will reduce my student loan balance by about $1200 by paying $300 a month. Most of my payments go to interest these days, but my rates are nothing compared to rest of my debt. When my credit cards are paid off next year I'll be able to drastically accelerate student loan reduction.
   
   
8. Roth IRA
   As if all of this wasn't enough, I plan on opening a Roth IRA for 2008 with at least $2000 from additional income sources and next year's Christmas Bonus and Tax Returns. This is the least "SMART" part of my plan. I'm not exactly sure how I'm going to manage to come up with this extra money but I know I will find a way. I don't want to count on a bonus next year and I don't want to loan my tax dollars to Uncle Sam. These are just things that may help contribute. I'm also hoping that a new position at Tutor.com will help me earn enough extra income to stretch my dollars enough to reach this goal. I'll be posting about this soon.
   

And there it is. The ultimate guide to cutting your net worth in half! I'm nervous and excited about this post. I know I can do it, but it's going to be tough. One year of living way below my means and far beyond my typical income levels could set me on the path to financial freedom. Wish me luck!

Best wishes to my readers in for the New Year! I hope that we all reach our goals :)