I know, I know, I’m a little late to the financial blogger New Year’s Resolution party. But, it’s very valuable to set goals and track progress. So here are my top financial goals for 2013:
Save 80% of Net Income
I don’t plan on cutting my spending much below my levels from 2012 so I will seek this to bump this figure from last year’s 76% savings by increasing my earnings at work.
Increase Interest Yield & Earnings from Funds in Savings Account
I have kept a sizable chunk of my net worth in a regular old savings account. Formerly, I would have kept much of this in CD’s back in the heydays when CD yield surpassed 6% around six years ago. However, thanks to Bernake and his cronies, there currently aren’t many attractive and secure means to obtain yield.
I’m currently investigating Lending Club which serves as a Peer to Peer Lending site where investors can provide funds directly to consumers seeking loans. Investors can divvy up their investments between Grades A (safer, less return)- F (risky, more potential return) investments. These loans are sliced and diced into increments as low as $25 to limit risk and Lending Club claims yield averaging between 5-13% depending on the risk assumed.
Max 401K & Roth IRA
I nearly accomplished this last year but fell about $500 short on the 401k mainly just an oversight on not bumping my contribution percentage at the end to hit the $17k max. Also, the limits on these were each raised $500 so I will contribute $5,500 to the Roth and $17,500 to 401k to plunk down an extra grand into these tax efficient vehicles.
Shift Larger % of Net Worth to Index Funds from Stock Picks
Currently, I have a sizable chunk of my net worth invested in stocks that I’ve selected. Due to discouragement from my performance, research about the improbability of sustained market outperformance, and lessened interest in spending the requisite time for “stock picking”; I plan to invest future stock funds into index funds. I have all my retirement funds in index funds, so I’m already pretty heavily staked in them.
However, I will maintain my brokerage account and continue to buy/sell individual stocks from that pool of money without making further deposits to satisfy my desire to dabble as an active investor.
When Stock Market Corrects 10% Downward (To Dow Jones Industrial Average 12,500) Invest $10k in Vanguard Index Admiral Shares & Add Weekly Automated Contribution
Corresponding with the previous goal, I’ve been waiting and expecting a good-sized dip to buy into the Vanguard Total Stock market index VTSAX admiral shares which have an absurdly low expense rate of 0.05% annual fees whipping most index funds and destroying conventional mutual funds by being over 20x lower net expenses than the average “actively managed” mutual fund. Beyond the $10k minimum purchase price, I will look to add an automatic weekly contribution of $150-$250 per week.
Keep Minimum 20% of Net Worth Liquid for “Dry Powder”
I realize doing this takes a hit on investment performance by not having all available funds plowed into investments, however, I like having the funds to deploy into action when the market presents buying opportunities.
My beginning investment experience in 2008 has promoted this as I had just begun work and unfortunately didn’t have much capital to deploy as I watched the markets panic and tank from Dow Jones at 14,000 points down to 6,600 in less than a year. The stocks I was able to purchase during this timeframe performed exceedingly well. I keep this rule so I have the funds to double down on juicy opportunities when others are running scared with the “blood on the streets” of Wall Street.
I may even bump this percentage up in the short term as I believe the market is currently overvalued based on historic earnings measurement and the discontent in Washington.
Encourage Friends, Family, & Readers to Embrace Their Finances
Most people spend 40 hours a week, 2,000 hours a year toiling away at work. If people spent even 1 hour a week focused on their finances, it would maximize the efficiency of all those hours spent at work! I want to encourage and empower friends, family, and readers to embrace their finances to get out of and stay out of debt, gain control of their finances and grow their net worth!