2013 was a year of change and progress for me and my wife. When I sat down to calculate the our net worth, I found that we were short of our ambitious 50% increase YTD goal, but not by much. In fact, when I calculated the change in our net worth from January 2012 – January 2013 and compared it to last year, I found out that we increased our net worth almost the same amount, despite me not making as much money online.
Part of this is due to the increase in the market, but also because I got a better job. Seeing this consistent progress (despite all of the change) showed me that the path to financial success is paved with multiple incomes. Feel free to quote me on that.
I want to keep the momentum going. In order to keep making progress and increasing our net worth, I like to set goals for myself.
This is what works for me. I’m the type of guy that likes to be productive. I can only handle laying around for so long and when I go on vacation, it usually takes me 2-3 days before I can truly relax. This is why my wife and I will take week long vacations – because it allows me to slow down. Because I need to feel productive, establishing financial goals helps me stay focused and prioritize saving over spending.
While it’s not necessary to establish goals at the beginning of each year, it can help to guide your progress. It’s hard to forget about your annual goals when they run January – December because there is so much focus on welcoming in the new year. In other words, it can serve as a nice reminder to kick it into gear.
My Financial Goals for 2014
1. Max Out Roth IRAs
One of the most important things for us to accomplish each year is to save for retirement. Many people put this off and are forced to make drastic changes in their lifestyle later in life. I would much rather save too much at the beginning to make it easier on myself later.
In order to do this, my wife and I prioritize retirement savings. Maxing out our Roth IRAs isn’t easy. We both work for nonprofits and make modest salaries, while living in one of the most expensive areas in the country. But, this is why we need to set it as a priority because it won’t get done without it. Maxing out our Roth IRAs won’t just offer us more retirement money, but greater flexibility for retirement spending because of the tax benefits that the Roth IRA offers.
2. Contribute at least 10% to Mrs. 20s 403(b)
I wasn’t kidding when I said we wanted to prioritize retirement. The second way that we do this is to contribute at least 10% of Mrs. 20s salary to her 403(b). When you add an additional 3% match from her employer, this fund grows pretty fast. The best part is that it seems like free money. Because we never see the money (it gets taken out of her paycheck automatically), it is painless and quite exciting at the same time. It’s borderline magic.
Once we are able to save up enough for a down payment on our future home, I imagine we will do everything we can to max this out as soon as possible. Only time will tell when this will happen.
3. Save 1/3 of a Down Payment
We have already been stashing money away for our future home. Because we are still continuing to put money in our retirement accounts, we not able to save as much as I’d like. We choose to do this so that our retirement money will be able to reap the benefit of compound interest and ultimately work out in our favor.
For 2014, we’d like to add the equivalent of 1/3 of our future down payment. Since we are looking at condo prices of $300,000 in our neighborhood, this fraction equates to about $20,000 (since 20% of $300k is $60k). I think this will be VERY hard to accomplish, but goals are supposed to stretch you. If we fall short by $5,000, I will still consider this a huge success considering this comes after our retirement savings. I’m probably more inclined to postpone buying a home by another year after just moving during a snow storm.
4. Increase Our Net Worth by 30%
Perhaps one of the best indicators of financial success (as I’ve said time and time again) is your net worth. It would therefore be an injustice to not include a goal that incorporates this metric. Considering that my wife and I raised our net worth by just over 40% last year, I think a 30% increase is realistic.
We will need a little bit of help from the stock market to reach this goal, but it’s definitely within reach. Each year that we increase our net worth it becomes even harder to maintain the same percentage growth – but that’s a good problem to have. If you want help tracking your net worth, be sure to read my earlier article on the easiest way to track your net worth.
Those who have been following my series on financial goals will have already noticed that I have simplified our goals from the last time that I updated them. If you don’t recall, that’s okay. I’ve removed several goals from the list. Here are the things I am no longer focusing on:
1 – Paying for Grad School
I am really excited that Mrs. 20s finished her school. Not only because of the future career potential, but also because it means we don’t have to pay for tuition anymore. How exciting! It’s like we just got a raise.
2 – Investing in a Taxable Account
Since we want to buy a home in 2-3 years, we are no longer putting money into a taxable account. I still have some money in this account, but all of it is earmarked for our home purchase. Since the market seems really high, I’m going to hold off putting new money into the market. I know you’re not supposed to time the market, but I think this will work out for us. (and I am still investing, but only for retirement)
3 – Real Estate Investing
We already invested in real estate and while we still have plans to continue to do so, we’re holding off on any new investments until we buy our first home. For now, we will just receive the dividends from our first real estate investment.
When you stop to look at it, not much has changed. We are still focusing on long-term investments while also saving for our first home and trying to increase our net worth. It’s sounds simple, but it’s not as easy as it sounds. In the coming weeks, I will outline how we plan to accomplish these goals as well as update you on our progress throughout the year. I hope you will stick around and join in with your own financial goals for the new year.