My Personal Finance Journey

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Year 2005 Financial Objectives

Contributed by mm | January 26, 2005 1:20 PM PST

Now it is time to reveal my personal finance goals for 2005. Every year, I learn from last year's execution and revise my goals approproately. No exception for this year too; below are my objectives and you can see it is somehow different from my objectives in 2003 and 2004.

  2005
Goal
2005
Stretch Goal
1. Net Worth  $      275,000  $      283,000
2. Total Return on Investable Cash (TRIC) 6% 7.5%
3. Expense Against Budget ($75,000) -2% -4%
4. CFI - Additional Income and Cost Avoidance  $          1,200  $          1,800
.

These goals are pretty straightforward if you follow PFBlog regularly. Nevertheless, let me provide some context to these goals:

First, net worth growth is still the best measure of my progress toward the million-dollar-goal. The goal of reaching $275,000 by 2005 year-end represents approximately $79,500 net worth increase over the FY04 year-end number of $195,522. The planned net worth growth is supported by my annual budget model for 2005 (which I will share later at PFBlog). For stretch goal, I add another 10% growth or about $8,000.

Second, I kept the Total Return on Investable Cash (TRIC) goal but dialed down the target to 6% (and 7.5% for stretch target), which I believe is more realistic. This goal is important as the more I have in my net worth, the more net worth growth is delivered by investment gains vs. earned income and savings. I am unsuccessful in executing this in 2004, but I definitely expect a better result this year.

The third goal is regarding expense control. My budget model indicates realistically, I should spend around $75,000 this year. The number is about 14% higher than the $65,703 I spent last year, but most of the increase is associated with my wife's job (which she started in mid-2004) -- examples includes day care, car and more dining out. Hopefully, I can save 2% or $1,500 against the budget, and if I really manage the cost very tight, I can expect 4% or $3,000 saving compared to budget.

The last goal, Continuous Fiscal Improvement (CFI) appeared in my goal list for both 2003 and 2004. It is a great goal as it pushes you to find creative ways to reduce your cost of living or increase additional income. (See four tests for CFI savings in this post.) In the last two years, I saved a total of $2,297 ($752 in 2003 and $1,545 in 2004). While it becomes harder to find another buck to squeeze out from my cost structure, I still want to sign myself up for the 2005 goal of $1,200 and a stretch goal of $1,800.

Also, starting from this year, I will track my progress against these four goals in every monthly summary. This way, I can measure myself more frequently. Keep visiting PFBlog and share my progress!

This Post Has Received 2 Comments. Share Your Opinions Too.


baselle Commented on February 28, 2005

Hmmm. Are you sure that retirement at 40 with a million's enough? A million's a lot, but finite - it works out to about $40,000/yr with a 4% draw-down. Your spending is at about $60,000/yr. You might want to prove to yourself in the years to come that you can trim your spending to $40,000. It'd be good practice, if nothing else.


mm Commented on February 28, 2005

4% is the most conservative withdrawal rate -- assuming you will never touch your principal. Check out this discussion on whether $1M is enough.

http://www.pfblog.com/archives/124_is_1000000_enough.shtml


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