In December 2007, I set a number of financial goals or targets to be accomplished by the end of this year. In some cases I was successful while in others I fell short. It’s important to keep things in perspective; when I set these goals, the economy was in a significantly different state. The goals reflected a positive economic outlook but a cautious approach to my income. Here is how I measure up.
Goals for 2008
Income:I don’t see much growth ahead in my salary, but I would say that if I continue to work hard on my side projects, one of which is this blog, $100,000 in additional income is not out of the question. The industry could change drastically, so one year from now, I could be looking back at these goals and laughing at the ridiculousness of that number. I’ll call $125,000 my stretch goal. If I am able to earn that much next year, it may be time to leave my day job and devote myself to my projects full-time.
Result: success. I’m on target for earning about $117,000 in additional income this year, between advertising, affiliates (percentage of product sales driven by my websites), and freelance writing. I feel like I don’t have much to show for it, however, and I am concerned about my upcoming tax bill.
Investing: I plan on contributing the full $15,5000 to 401(k) accounts. I also plan on contributing as much as possible to my 2008 SEP IRA account, but the amount I can invest depends on how much income I make from my side business.
Result: not success. According to my final pay statement of 2008, I contributed $14,142 to my 401(k), split between before-tax and Roth 401(k) after-tax contributions. I missed the target by not carefully planning the contributions. In February, I increased my 401(k) contribution rate from 25% to 33% of my salary. Later in the year, I bumped up my contributions again to 50% of my salary, the maximum allowed, to try to reach the $15,500 goal by the end of the year. It was too late, however, and I fell short.
I won’t fund my SEP IRA for 2008 until I file my tax return because the deductions I take will determine how much I am allowed to contribute.
Debt: I have about $13,000 left in student loans at an interest rate above 4%. This is the only debt I currently carry. It is reasonable for me to completely eliminate this debt by the end of the the year. I have the cash to do so now… Stretch goal: eliminate the $13,000 debt by the end of June 2008.
Result: success. Earlier this month, I sent the final check to my student loan servicing company and am now completely debt-free. It was an anticlimactic experience for me; I’ve had cash available to pay off the student loan for a long time, but I wanted to keep cash on my balance sheet for as long as possible. Still, by the end of the year, I was paying over $1,000 per month to eliminate the debt. It will be nice not to send those payments out the door.
Saving: My primary saving goal is for future real estate, so I want to have $40,000 earmarked for a down payment (plus closing costs) either by the end of the year or by the time I sign on the dotted line. I may not use all of that cash depending on how it would affect my liquidity at the time. I’d also like to double my emergency fund so I could last four months without significantly reducing my expenses and without tapping credit. Stretch goal: accomplish these goals by the end of June 2008.
Result: not success. According to a preview of my year-end balance sheet, I have over $70,000 in savings accounts spread across a number of banks, plus about $10,000 in money market mutual funds at Vanguard. I need to consolidate these accounts and properly organize the funds. I should be able to find $40,000 to earmark for a down payment. My emergency fund, or the cash I have in an ING Direct account labeled “Emergency Fund,” has increased this year from about $8,000 to about $13,000. Like the down payment earmark, it’s a question of moving money from one account to another, but the cash is there.
Charity: Last month, I established a charitable gift fund in my name. In lieu of creating my own foundation, an expensive and overly administrative process, this is going to allow me to direct my contributions to non-profit organizations at any time easily. My goals for this year are to choose two or three organizations to support, grant at least $5,000 to the organizations, and contribute an additional $10,000 over the course of the year to the fund.
Result: not success. With the stock market experiencing a major dip this past year, I was reluctant to distribute funds from the charitable gift fund. I added to the fund this year, and rather than investing it all, I left half in a money market fund and invested the rest in a stock market index fund. With this strategy, I can grant half of my contribution in 2009 and allow the remainder to grow. The goal is to grow the fund to a level at which the grants can come from the interest and gains alone, with the principal left to sustain giving every year. In 2008, my charitable giving was funded outside of the charitable giving account.
Net worth: I am ending the year with a modified net worth of about $120,000. I’ll have a more concrete total when I post my full financial reports in the next few days. This number will likely be about twice the amount of my net worth at the end of 2006. I’d like to continue this trend by doubling my net worth by the end of 2008, but that may not be realistic. Let’s call this goal $210,000 by December 31, and the stretch goal will be $240,000.
Result: not success. I did end 2007 with a modified net worth of $123,000, a little less than twice my net worth at the end of 2006 ($69,000). Doubling my net worth would be a great trend, but the stock market ensured that this would not be a possibility in 2008. Despite investing throughout 2008, my investments have only increased $5,000, including my contributions. That’s a negative rate of return. My modified net worth at the end of 2008 is heading towards $180,000, significantly short of my goal. I would likely have exceeded the goal if the stock market increased at a rate closer to average.
Some of the goals could have been reached by rearranging or reorganizing my accounts. I should have considered the effect that a down stock market could have on my finances when I initially determined my goals of 2008. In the next few days, I’ll set my goals for 2009, a year that will present a lot of questions for me.