I’ve been overzealous in my desire to save and invest more this year!

My plan was to max out my both my 401k and my Roth IRA, but with a twist.  The idea was to use my employer’s ESPP to save for my Roth IRA (and this has been successfully done), but also to take more out of my paycheck for my 401k contribution, the thought being that I would max my 401k contributions so that we could breeze though Christmas since my 401k contributions would be finished in November.  Unfortunately, that’s not going to happen, and that is all part of financial planning.  I underestimated my expenses and overestimated my income (slightly) and now it’s time to make some end of year cash flow changes.  Luckily, I control the dials on my financial engines, and all I have to do is make a few small adjustments to put myself back on a track that is realistic.  Below are those changes!

Cash Flow Changes

1. I now plan on back off the amount I’m saving for my 401k Contributions by 1 or 2 percent.  This alone will make an instant and dramatic impact.  Since I was shooting to get my 401k maximum paid off in November, this really won’t affect me other than make Christmas a bit tighter.
2. I already kicked up my withholdings for taxes at the beginning of the year.  This is an easy dial to adjust, I reduced the amount by $25 and that move freed up an addition $50 a month.  Not a huge number, but it counts.
3. The most important one is my ESPP.  I’ve saved enough from it to cover my Roth IRA, so now I’ll be able to transfer the amount from my ESPP saving into my checking account to cover the rest of the year, and the bills next year in January for Christmas 2013.  Originally, I had hoped to use this money for investments, but it obvious that the original path is not going to happen now.

Cash Flow Thoughts For Next Year

My basic plan is that I’m going to throttle my 401k contribution percentage down by 3% to 5% less than what I’m currently saving.  This will make a big difference I believe.  Then midyear next year, I’ll reevaluate how I’m doing and then maybe adjust the amount up if all is going better than I believed or do whatever is needed to make life for my family good.

On the ESPP front, I will continue to use it as a forced savings account for both my Roth IRA, and then later for investments or more than likely for basic living expenses since this is what I have to do this year.

I think the above cash flow changes should put me back on track to free up the flow of money for the rest of the year.  If it doesn’t, then I’ll adjust my budget again next month.

Bests,

Don