The year is flying by and the sweltering summer sun is upon us. Today marks the first day of the second half of 2013 and provides a good milestone to check back on my progress for my 2013 financial goals (http://www.networthsnowball.com/2013/02/27/2013-financial-goals/)
1) Save 80% of Net Income
I’m accomplishing my goal at the midpoint of the year with a savings rate of 81%! This is a sizable jump from the 75% savings rate I hit last year and was made possible from a small bump in income as well as cutting my spending levels about $90 per month from 2012 levels putting me at a pace for $16,500 spending in 2013.
I will be ecstatic if I can maintain this level of savings throughout the year. As the Mr. Money Mustache Simple Math for Early Retirement post showed, at an 80% savings rate, one achieves financial independence in about 5.5 years http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/.
If I was just starting my savings progress now this savings rate would put me on track for financial independence before age 33! Fortunately I have a five-year jump on my saving journey and my crossover point to FI looks very probable before age 30.
2) Max Contributions for Roth IRA and 401(k)
I am on pace to max the Roth IRA and intend to still max the 401(k). I did however recently dial my 401(k) contribution percentage back as the market soared into the mid 15,000’s. When the market is at a more appetizing level I will ratchet up my contribution percentage to still max out the account.
3) Utilize Index Funds over Stock Picks
At the time I made this goal six months ago my brokerage account stock picks comprised 38% of my net worth and about 47% of my total assets invested in stocks. Now six months later my new stock buys have been index funds in 401(k), Roth, and Vanguard accounts. My stock picks in brokerage accounts now account for 29% of my net worth versus the 38% six months ago and 39% of my stock portfolio vs. 47% six months ago. I still enjoy researching and investing in companies but my current lack of free time and disappointing results of late will have me continue this investment path in the near future with upcoming funds being rolled into index funds.
4) Invest $10,000 into Vanguard Total Stock Market Index Admiral shares when the Dow Jones Industrial Average drops below 12,000 points
Well I was way off the mark with this one as I thought the market was ripely valued at 13,000 points and it proceeded to climb 2500 more points equaling a 20% climb from the time I made this goal. I will still look to do this once the market looks a little more reasonably valued. I was just a little hesitant to plunk $10,000 in one shot at these high market levels. This goes to show you that one cannot easily “time the market”. I probably would be better off just going with the regular Vanguard shares with higher fees requiring $3,000 minimum investment and dollar cost averaging the rest of the $10,000 over the next year and a half.
5) Increased interest from savings
I have achieved this goal. I had $40,000 plus languishing in savings account earning about five dollars interest monthly. I have since invested about $8000 into a lending club account which has been earning around $120 interest monthly thus far. The $8,000 Lending Club investment should provide more interest income in one month than the entire $40,000 savings account provided in a year!
Maintaining around 5% of my net worth in lending club looks like a great option to kick off $2000-$3000 in interest annually to fund upwards of 20% of my total expenses. MMM and Mr. 1500 opened my eyes to the world of Lending Club and it has been a very positive experience thus far.
6) Maintain 20% of net worth as dry powder
I strive to maintain ample “dry powder” or liquid investments that I can deploy into attractive investing opportunities such as large stock market drops, or real estate investing opportunities. I currently am maintaining 21% of my net worth as dry powder for when the ideal opportunity arises. This figure would be even higher near 25% if I hadn’t invested into the P2P Lending recently.
I realize that maintaining this much cash will likely diminish my potential investment returns, but it also helps smooth out volatility. I began seriously investing in late 2008 in the midst of one of the most spectacular market crashes ever. This experience contributes strongly to my goal of maintaining ample cash. I want to be able to capitalize when the next Wall Street panic sends the stock market tumbling or when interest rates climb back to 8% allowing well-capitalized (cash) real-estate investors to scoop up rental properties at 60 cents on the dollar while the highly leveraged buyers can no longer afford the properties.
7) 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 one 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!
This is the single most powerful reason for this blog. It’s awesome sharing my progress to hold myself accountable while getting great feedback from readers. I would like to encourage everyone to embrace their finances to give themselves more freedom to enjoy life by getting out of debt and building net worth to acheive financial independence. I love interacting with fellow financial bloggers and readers, and while my humble blog is small, it still has allowed me to share my message with thousands of readers in less than six months.