Every new year provides an opportunity for self-renewal. The relatively arbitrary custom of recycling the dates on the calendar is like having a second (or a third, or fourth, etc.) chance to change the world. Although its history is a bit murky, the tradition of new years’ resolutions probably stemmed from this feeling. It took me a while to be comfortable with the ideas of making resolutions. I believed for a long time that it was pointless, since people overall tend to fail to keep their resolutions into the new year. Eventually, scientific studies confirmed what I already believed to be true.
Nevertheless, through Consumerism Commentary, I began to create resolutions and goals at the beginning of each year. The financial goals have proved to be easy; at least, I’ve been able to meet almost all of them for the past few years, possibly indicating I’m being too conservative in my planning.
It has been the non-financial resolutions which have been more difficult to stick with, mirroring the experience of most Americans. For example, while I’ve lost some weight in accordance with part of my resolutions for 2010, I don’t consider myself to be in shape. While I resolved to keep my home in presentable condition at any time, I failed in 2010 to make that a reality. That’s the most common failed resolution, and I don’t like being typical.
I don’t want to feel like a statistic in representation of the “average American male,” so my resolution for 2011 is to go beyond what has been comfortable for me. My non-financial goals will be more specific this year, as specific as I have been with my financial goals.
2011 is when everything changes.
I’ll share my financial goals first, followed by the non-financial goals that pertain mainly to my quality of life and self-improvement. These are all short-term goals that are tied into my life-long personal missions.
My single income goal for 2011 is to replace the income provided by my former employment and benefits. To make this easy to track, I’ll just use the figure of $100,000, which more or less represents the value of my former salary and benefits.
I will consider the year successful if I increase my income from my projects by $100,000. While I haven’t looked at my finalized 2010 income yet, I expect it will be well into six digits. I evaluate my income on a monthly basis, and if the current trend continues, I should reach this goal easily. I am every concerned with the volatile nature of the income, however, so I stay prepared for the worst-case scenario.
2. Net worth
I didn’t set a net worth goal in 2010 because it’s too difficult to predict. With a significant portion of my net worth invested in the stock market, this is a variable that is more or less out of my control. That’s an arguable point; I could keep my money in less risky investments and better predict my end-of-year balances, but that defeats the purpose of investing in the stock market for the long term.
I could set a net worth goal for my cash holdings, but I can affect that easily by moving cash in and out of investments. This is why I believe income goals are more relevant than net worth goals. However, I’d be comfortable setting a net worth goal in the form of a range, with the realization there are no consequences for not meeting this goal if the “failure” is due to the stock market. My goal is to increase my net worth by at least $275,000 in 2011.
Without an active investment in an employer-sponsored 401(k) plan, I need to change my approach to retirement investing. Thankfully, I shouldn’t have to change it by much. I’ve already researched my retirement investing options while self-employed and when the calendar changes I’ll open up some new accounts. I will invest one tenth of my gross income for retirement.
Why such a low percentage? As I’m now working for myself, I’m starting to reconsider the need to abide by the traditional retirement paradigm. If I’m getting paid for activities that I enjoy, I may not want to pick a specific age and stop. I want to be able to spend the time I want now doing a variety of activities that make my life interesting, so locking all of my money away is not my biggest priority. I consider myself lucky to have some flexibility now, and I do want to take advantage of that flexibility.
My other investing plans depend on my savings need, though if I buy a house (to live in, not as an investment) and therefore release myself from holding as much in savings as I am now, I will have a better idea of what I have available to invest with a time horizon of five to ten years.
People often ask me why I’m still renting an apartment. Even with real estate prices down, friends point out to me that I could have purchased something when I left college more than a decade ago and come out ahead. I then remind them that I had no money when I graduated college and had I purchased a house then, at the time I was working for a non-profit organization earning little money, I would have been in debt over my head for most of the last decade. I will buy a house, though, when I’m ready to settle down somewhere for thirty years and start a family.
When I do, assuming I’d be fully responsible for the finances (which I may not be), I want to have a sizable down payment ready to go. I’m not sure paying for a house fully in cash is the best financial move from a leverage standpoint, though it would be great not to have any debt obligations. I may compromise by offering a down payment of 30 to 40 percent. There are many variables at play in this decision beyond the finances, so I must take care of those first before considering buying a house. I will be forever slow to move on the “important” decisions.
I’ve been taking a multi-pronged approach to charity. First, I have a donor-advised charitable fund housed at Fidelity. I now contribute automatically to this account on a monthly basis. With the account, I can recommend grants to charities and non-profit organizations that match my interests. For example, I’ve given to specific programs offered by my undergraduate university as well as to the non-profit organization where I worked after college. For the past couple of years, I’ve offered to match readers’ charitable contribution with my own to a different organization each year. In 2011, I’ll continue the Thanksgiving charity challenge and grant an additional $1,000 through the donor-advised fund to another organization.
Over the past few years, I’ve grown more interested in photography. Now that I’m not spending eight or more hours a day wasting my time in a cubicle, I have more flexibility to explore this and my other interests. I still plan to spend the bulk of my reclaimed time working on Consumerism Commentary and other related projects, I will set aside some time to practice photography as well. I plan to have two photo shoots a month. This could include walking around the local university town for some street or architecture photography, hiking with my camera equipment for some nature shots, or a portrait session.
I’d like to book three or four paying photography sessions in 2011, as well. I don’t plan on advertising my photography services as a business and expect to book these through friends. I don’t yet have a portfolio to share, but perhaps by the end of the year I will be ready for that step. It’s more important for me to learn more about the art and craft of photography first through practice as well as at least one additional class.
7. Personal health
In the past I’ve made vague statements about my desire to improve my health and get in shape. I’m serious about improving my physical appearance, and I am going to make that happen this year. While I’ve already changed some of my dietary habits and have managed to lose some weight, I haven’t achieved a point of physical activity that satisfies me. My plan for this year is to develop a system of rewards that is tied to my physical activity.
By the end of January, I’d like to be in the habit of getting 30 minutes of strenuous physical activity (running, doing push-ups, riding a bicycle, etc.) three days a week, rewarding myself for each successful day. By the end of the next month, I’d like the number of days per week to be extended to five. By the end of 2011, I want to have lost at least 15 pounds through more exercise and better nutrition. Now that I’m making my own schedule, I can set aside time during the day for exercise. With my freedom this year, I can make this happen.
Having seven different goals seems like it could be too much for one person. I don’t believe that I’m biting off more than I can chew. For the most part, since I’ve become somewhat disciplined (but not cheap) with money management, just taking care of my income should be enough for the other financial goals to fall into place. My struggle has been only with the non-financial goals, and I do believe that I have the capacity to focus on and reach these targets if I stay disciplined with them and dedicate myself to them, similar to the way I dedicated myself to getting myself out of a financial mess almost ten years ago.