My Personal Finance Journey

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Results of Year 2003 Financial Objectives

Contributed by mm | January 4, 2004 4:21 AM PST

At the start of Year 2003, I wrote down six financial objectives for 2003. To conclude this first full year of my financial journey toward early retirement, here I'm reporting my results vs the objectives.

Here are my top-level financial objectives for Year 2003:

1. NET WORTH

Current (End of 2002) = $78,967
Goal = $110,000
Stretch Goal = $115,000
Result = $132,584

My result greatly stampeded the original goals thanks to a number of favorable developments:

- $7,000 from my wife's part-time work, net of additional income and FICA taxes
- $2,500 more Year 2002 tax return than expected
- $4,000 from Microsoft Stock Option Transfer Program, net income tax
- $2,000 from realtor rebate in my home buying which added to my home equity
- $1,320 from an accounting policy change to accrue annual bonus in my net worth calculation

Without those developments my net worth will be $115,826, still besting the original stretch goal.

2. LIQUIDATION VALUE

Current (End of 2002) = $77,317
Goal = $108,000
Stretch Goal = $112,000
Result = $106,875

The result is a bit lower than the original goal in the face but my original
financial plan does not account for a major financial event of home buying in the year. The action of home buying knocked off $20,000 of the liquidation value (due to transaction cost during reselling). Without it my result will be surely much better than the stretch goal.

3. ABSOLUTE ANNUAL RATE OF RETURN (Absolute ARR)

Goal = 8.0%
Stretch Goal = 10.0%
Result = 21.1%

4. RELATIVE ANNUAL RATE OF RETURN (Relative ARR)

Goal = +3 pts
Stretch Goal = +6 pts
Result = -4.7%

As I discussed in this post, I had a few nice wins, made a few nasty mistakes and learned a few good lessons out of the year. Although I lost to the benchmark, the absolute gain is much better than I originally expected.

5. EXPENSE SAVING %

Goal = 2%
Stretch Goal = 4%
Result = -32%

Yes I missed my expense budget by a lot. I spend $55,682 for the year for all living expenses, much higher than the original budget of $42,142. To account for some items not listed in the original budget:

- $7,500 Closing expenses, prepaid mortgage interest, additional furniture and household items.
- $1,000 My wife's gift to her parents.
- $1,900 Airfare and medical insurance for my parents' visit to US
- $500 Incremental expenses associated with my wife's part time work
- $800 My CFA registration and enrollment fee (professional education)

This will bridge my actual expenses to a restated budget of $53,842. I admit I can control my expenses somewhat better because my actual expenses are still 3.4% higher than the revised budget.

6. EPS SAVING

Goal = $400
Stretch Goal = $600
Result = $752

As I reported in this post, I have a good track record of spending efficacy improvement. Those quick savings contributed to a good Year 2003 summary.

CONCLUSION

I will give myself an B+ for the year in terms of personal financial management. Although I failed the spending and relative ARR goal, the achievement of the Net Worth, Absolute ARR and Saving goal brings a lot of pleasure to me. This is truly a great exercise to set up and manage to the goals; the process brings a good deal of learnings.

In the next week or so I will publish my Year 2004 financial objectives. I will need to change some of the objectives and come up with some new measurements. Of course Net Worth will still be my top goal and the mentality to keep goals and work towards them will be the main theme of this blog for the entire 2004.

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