I noted recently that most people fail at financial new year’s resolutions. That may because of the tradition that the typical “resolution” is a light-hearted attempt at improving one’s self, many times uttered in a drunken state, without much of a plan for attainment. If you want to succeed, set a real, solid goal, devise a plan for getting there, and check your progress.
After reviewing my progress over the last year, I am in a better position to set some specific, measurable, attainable, relevant, and timely (SMART) goals for the coming year. Keep reading Consumerism Commentary throughout the year, and subscribe to the RSS feed (more options and info here) to check in on my progress and give me a hard time if I start to slip.
Continue reading for my goals and resolutions.
Goals for 2008
Income: Last year my goal was to earn $40,000 from my side business in addition to my day-job salary. I almost doubled that amount. 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.
Investing: I have several goals for investing this coming year. Roth IRAs may be out of the question, so I believe I will focus on maximizing my contribution to my 401(k). This will be split between a Traditional 401(k) and a Roth 401(k), for which there are no income limits. 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.
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, but I haven’t yet made any decisions about my living situation. How fast I pay off this debt depends on whether I will be buying a house this year. I’d like to have an excessive amount of cash ready for a down payment to minimize leverage and interest payments on a mortgage. Stretch goal: eliminate the $13,000 debt by the end of June 2008.
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.
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.
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.
I have my work cut out for me in 2008. There are other things I’d like to accomplish, only marginally related to personal finance. You’ll notice that these resolutions are not all as specific as the goals stated above. They are similar to my resolutions from last year. I will need to focus on creating a plan for achieving these so they don’t go unnoticed twelve months later.
* Find a new day job or move ahead in my current job with an eye towards more responsibility.
* Exercise three times a week and ride my bicycle more frequently.
* Improve the organization and management of my time.
* Eat healthier food and less in general.
I plan on focusing on the above goals and resolutions throughout the year. The first check-up will be at the end of the month. As many people fail to uphold their resolutions after just one month, I hope that I find myself above average.