My Personal Finance Journey

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Year 2004 Financial Objectives

Contributed by mm | January 6, 2004 8:50 PM PST

I'm publishing my year 2004 financial objectives as follows.

Measurement Name/Definition 2003
Baseline
2004
Goal
2004
Stretch Goal
1. Net Worth $132,584 $174,000 $180,000
Combined value of all assets minus all liabilities.       
2. Total Return on Investable Cash (TRIC) 9.27% 10.00% 12.00%
Annualized total return on average balance of saving, brokerage, Roth IRA and 401(k) accounts, minus $5,000 for day-to-day liquidity.      
3. Relative ARR -4.7 pts +3 pts +6 pts
Annualized return on Datek, Ameritrade and Roth IRA accounts minus S&P 500 % change during the same period.      
4. Absolute ARR 21.1% 10.0% 12.0%
Annualized return on Datek, Ameritrade and Roth IRA accounts.      
5. Expense Saving % -3.4% 2.0% 5.0%
Living expenses as % of the budget of $59,000.      
6. CFI Saving $ $752 $800 $1,000
Quantified saving on top of 2003 spending level from cost cutting initiatives.      

This set of objectives is a fine-tuning of my 2003 objectives. Through the analysis of the 2003 execution, I believe most of the 2003 objectives are good indicators of my personal finance progress while I introduced a new metric TRIC to complement the set. Here are some additional comments regarding each of the 2004 objectives:

1. Net Worth

I have finished my 2004 annual budget. (As it includes lots of sensitive information, I don't plan to share it publicly in this blog.) The budget predicts an annual net worth increase of around $41,500 based on some high-level assumptions:

- My wife will spend more time with the family and will not work for the year.
- Reasonable salary increase, bonus, normal ESPP gain, 5% 401(k) gain, 10% investment gain and 1.7% property appreciation.
- Around 5.8% living expense increase to pick up additional housing expenses and enjoy a slightly better lifestyle.
- Normal tax consequences.

I logged $53,618 net worth increase in 2003, and the decelerated net worth growth is mainly attributable to the assumption that my wife will be a full-time homemaker and the effect of certain one-time 2003 income (like SOTP and surprising tax return for year 2002).

My 2004 net worth goal reflects the result of the budget and my stretch goal asks for $6,000 markup.

2. Total Return on Investable Cash (TRIC)

This is the only new objective I introduced this year. As discussed in a prior post, the main reason for setting up this new goal is to get a holistic reading of my capital allocation performance.

3. Relative ARR
4. Absolute ARR

I will continue to use these two metrics to measure my performance in actively managed account. While I will stay defensive for the foreseeable future, my goal for any invested money is still at least 10% annual return. I feel my current portfolio is well positioned to deliver that number.

5. Expense Saving %

My 2004 budget includes an annual living expense of $59,000 and I will measure my expense control based on this number. A 2.0% saving will translate to $1,180 into the bottomline.

6. CFI Saving $

A different flavor of saving measurement, CFI (Continuous Fiscal Improvements) is defined as initiatives to bring down living expenses or bring in more income. After a total saving of $752 in 2003, I target to deliver a slightly better 2004.

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