At the beginning of each year I like to do some planning and set some goals. In the past my goals have always been informal and private. I’d have a few ideas of big things I’d like to accomplish but I wouldn’t write them down and I wouldn’t really track them. That’s all changing.
One of the reasons I wanted to create my blog was to track my financial decisions and keep my self accountable. By looking back at my decisions and the rationale for I’ll hopefully be able to learn from any mistakes I make. My hope is that listing my goals here and then showing periodic updates on my progress towards them I’ll have extra incentive to stay on track.
I’m trying to make all of my goals easy to track and monitor. Setting a goal of “make more money” isn’t easy to track and can’t be broken down into smaller goals. Setting a goal of “make $100,000” is a better target.
My plan is to provide quarterly updates on my progress towards these goals.
Financial goals
Goal 1 – Increase net worth to $4M
At the end of 2016 our net worth was $3.36M. For 2017 I’m setting the aggressive goal of a $4M net worth (that’s a 19% increase). Increasing our net worth by $640k in one year would obviously be a big jump. Why do I think this is achievable? Well, for the last 4 years I’ve been working on a big deal at work. If I can close this deal I should get a commission check in the mid 6 figures, with the possibility of even more depending on how the deal is structured.
My estimate is the commission check should be worth around $500k after taxes. That would put us at $3.86M. This means we’d only need growth $140k (or 3.6%) to hit the $4M number. I think that’s definitely achievable.
Goal 2 – Pay off 2nd mortgage
Our second mortgage currently sits at $188k and is at a 5% interest rate. Given how overvalued the stock market is I think that paying off the second mortgage will give us a better return on our money than investing in the market (which could very well be negative). We’ve been paying an extra ~$1,200/month on this second mortgage, which puts our total payment at $2,000/month. Getting rid of that second mortgage will free up that $2,000 in cash flow to be used for other purposes.
The great thing about this goal is that it dovetails nicely with Goal 1. If we pay off $188k of debt we’ll increase our net worth by $188k plus save the interest payments.
Goal 3 – Generate passive income of $60k
Total passive income for 2016 was $46,890. I have calculated that we’ll need about $120,000/year in passive income to be able to retire. That number assumes that our mortgages aren’t paid off. If we pay down our mortgages then we’d obviously need less income to retire. Regardless, the current plan is to shoot for $120,000/year which at a 3% dividend yield would require $4M of invested assets (non-income producing assets like our primary residence obviously wouldn’t count towards the $4M number).
Going from $46,890k to $60k is obviously a substantial jump (a 28% increase to be exact). However I think it’s possible through a combination of factors.
Dividend raises from existing investments should get us to around $50k (that’s a 6.6% increase). That means additional investments need to make up the remaining $10k increase. If we assume our new investments will pay a 3% yield then we’ll need to make new investments of $334k. Assuming my commission check is $500k and we pay off the $188k second mortgage we’ll have $312k in additional money for investment. This means we’ll only need to come up with $22k in additional investments over the course of 2017 to hit our goal. I think that’s very achievable.
Of course, the reality is that we’d need to have the entire $334k invested on January 1, 2017 to benefit from the full 3% yield over the course of the year. My hope is that our rental properties will perform a bit better this year and that will cover the difference. Last year we had thousands of dollars in expenses for both vacancies and repairs. If we were just able to eliminate the repair costs in 2017 we’d see about $5k in additional cash flow.
Goal 4 – Research another real estate investment
We currently have a total of 10 mortgages (8 rental properties and a first and second mortgage on our primary residence). This is the maximum number of conforming mortgages for conventional loans. If we want to purchase an additional rental property we’d need to either:
- Pay cash for the property
- Get a non-conventional loan (which implies much higher interest rates, shorter loan periods, and more money up front)
- Crowdfunding
My current thinking is to explore some of the crowdfunding options for real estate. These work a lot like LendingClub or Prosper, except instead of providing money for unsecured personal loans you’re buying a fractional ownership of a real-estate project. The sites claim that all projects listed on their website have been vetted. The sites collect the money and distribute to the investors (taking a small cut, of course). Minimum investment amounts are anywhere from $5k to $25k – this makes it easy to diversify your real estate investment money across multiple projects. My concern is that these companies haven’t been proven to be durable across the full business cycle. Will their business model still be successful during the next downturn? Do the developers have adequate reserves to handle vacancies or potentially reduced rents?
I intend to do some research over the next few months so I’m prepared to jump on one of these projects if/when the next downturn occurs.
This is the only goal that’s not specific and measurable. It’s not really clear what level of effort would qualify as success for this, but I think it’s one of those things where I’ll know it when I see it.
Related posts:
Trump is telling you to pay off your mortgage today
Physical goals
Goal 5 – Deadlift 400 lbs
I’ve pulled together a pretty great garage gym. This allows me to regularly workout and still be connected to the family. My 3 year old daughter will sometimes join me in the gym to “get sweaty” and to do “up-downs” (which is apparently the proper description for every exercise I do).
For some reason I’ve almost always favored the squat over the deadlift, even though it’s pretty clear my body type would be better suited for the deadlift. For the second half of 2016 I started hitting the deadlift on a regular basis and I was able to max out at 375. I think that with some dedication I can get up to 400 lbs in 2017.
Goal 6 – Get body fat down to 10%
When I was young I was skinny. Really, really skinny. When I was a freshman in high school I decided to join the wrestling team because I wanted to do something non-academic. I was 6’2″ and I wrestled at 119 lbs. Yes, you read that right. It was ridiculous. I was about a foot taller than everybody I was matched up against. Unfortunately, I was also about 1/2 as strong, which resulted in loss after loss.
When I went off to college I was 6’4″ and 140 lbs. I gained about 10 lbs from the start of my freshman year to the end of my sophomore year and I was still really skinny. As a result I decided to seriously gain weight during the summer after my sophomore year. For the entire summer I ate all day long and lifted hard and heavy for at least an hour a day. It’s amazing what squats and milk can do, and by the end of the summer I was up to 180 lbs. Since then I’ve continued to consciously eat lots (past the point where I’m not hungry any more) and lift weight regularly with the goal of continuing to add weight. As a result, I’m now up to 200 lbs. It’s pretty much impossible to gain muscle and not gain some fat at the same time and I’m now a bit softer than I’d like. In 2017 I plan to address that issue.
The plan is to spend the first 3-6 months of the year eating a bit less with the goal of losing .5 lbs/week. 12-24 weeks of that would result in losing 6-12 lbs, and if most of that is fat I should be down to around 10% body fat (I’m currently around 14% body fat). Once I hit 10% body fat I’ll hold it for a month or two then increase my food intake enough to support my progress towards Goal 5 (deadlift 400 lbs).
Personal
Goal 7 – Take and pass the Certified Financial Planner (CFP) exam
I started taking the required classes for the CFP at the end of 2014. I’m now taking the ninth and final class in the series, with the goal of taking the test in July, 2017. The test is supposed to be pretty tough, so my plan is to spend the 3 months after the end of my last class studying for the exam. It has a 68% pass rate for first time takers, which is roughly on par with the California Bar exam (62% for first time test takers).
Goal 8 – Close largest deal in company history
As I mentioned in the writeup for Goal 1, I’ve been working on a large deal at work for about 5 years. It’s been a LOT of work and there have been a lot of ups and downs during that time period. However, the result has been that I’m in the position to potentially close the largest (and hopefully most lucrative) deal in company history. This deal will need to be done by March 31 of this year, which means I have about 10 weeks to find a way to get this deal done. Closing this deal will affect most of our other financial goals, so this is a pretty important one.
Conclusion
There you have it – 7 specific and measurable goals and one that’s a bit nebulous (goal 4). I plan to post quarterly updates on my progress. The fun thing will be that one of these goals will have to be completed by the end of Q1 (goal 8) and one will need to be completed in Q3 (goal 7). Goal 6 will probably need to be done in the first half of the year. The other goals are ones that I’ll be able to track progress towards and I’ll either pass or fail at the end of the year.
Questions for you
What goals and resolutions have you made for 2017? Do you make financial resolutions? Personal? Is there a category or type of resolution that I haven’t thought of?
Those are some fantastic and big goals.
I hope you are able to hit your goal of closing that HUGE deal at work. It sounds like there is a lot in it for you and for the company.
On the body fat goal, how are measuring it?
Also, just to let you know, it looks like there is an option to subscribe to the comments, but the “Submit Comment” button sits on top of it (at least from the Chrome Browser), so I won’t be able to know if/when you respond.
Cheers,
Dom
Thanks for the kind words. It’s always a balancing act to make your goals big enough to be interesting but not so big that they are impossible to achieve.
The big deal at work is looking good. It’s a weird experience to work on something for 5 years with the hope that one day there will be a payoff for you.
Good question on the body fat. I have a body fat measuring scale. These things are notoriously inaccurate, but I’ve found that mine is at least pretty precise. That is, it gives an answer within a relatively narrow range throughout the day, but that range might be 2% higher or 3% lower than the real answer. My goal should really be to reduce my bodyfat by 4 percentage points as measured by the scale. That would likely put me in the 8-12% body fat range.
Those are incredible goals and with your determination you will achieve them. Great read and good luck on your test to become a Certified Financial Planner. Who knows, I could become a client. Sometimes you just have to take the jump and create something great. I enjoyed meeting with you! Let me know the next time you’re in Atlanta!
-Alex
Congratulations on all of the work that you did in 2016. It’s the determination that will help you achieve all of these goals. Goal number 1 will be a challenge, but as long as you are able to complete that deal at work, you will be able to meet your goal.
I enjoyed meeting you while you were in Atlanta! I look forward to reading your posts in 2017 and good luck on finishing your Certified Financial Planner course.
-Alex
It was great to meet you too. It’s always amazing when I meet people who are on the right track at such an early age. If I’d developed an interest in finances when I was 20 I can only imagine how much further along I’d be on my path towards retirement.
Good luck finishing your degree and enjoy your senior year.
Great to see financial and fitness goals. It’s no sense having a high net worth if you can’t live to enjoy it!
Couldn’t agree more. Finances are just one part of a well rounded happy life. There’s no use putting all of your time and effort into improving your financial situation if you’re not healthy and surrounded by friends and family so you can enjoy it!