I hope everybody is locked and loaded to get… loaded again! It doesn’t matter what new year it is. Every year we should have a goal to make more money, save more cash, and growth our net worth. Only after you’ve achieve financial independence can you take things down.
Let me first discuss five basic and important financial goals everybody should achieve every year.
The Most Important Financial Goals
1) Max out your 401k.
No more excuses. If you make at least $45,000 individually, you should be able to max out your 401k. The dollars come out pre-tax so it’s not as painful as you think. Here’s what you could have in 10, 20, 30 years if you max out your 401k like a person who cares about their retirement future.
2) Start investing pre-tax and after-tax dollars already.
The rich have widened the gap because they are massively invested in assets that have been appreciating. Even during a global pandemic, the S&P 500 went up 16% and the NASDAQ went up 42% in 2020!
Once you’ve accumulated a nice financial nut, the importance of working for a living decreases. The only way the rest of us can catch up is if we see another massive financial crisis. In 2009, we all gained on Warren Buffet by about $9 billion bucks because that’s how much he was down!
3) Pay off all consumer debt.
You know what’s even worse than not investing in a bull market? Being heavily indebted in a bull market. Not only do you miss out on increasing your net worth through asset appreciation, you’re helping credit card companies and other creditors get rich due to your debt.
Consumer debt (credit card debt) and any debt which prevents you from investing in an improving economy is a double slap in your face. Not even Warren Buffet can beat the average credit card interest rate over his illustrious career.
Please read FS-DAIR, my guide to helping you decide how much debt to pay down and how much to invest.
4) Refinance your mortgage and other debt.
If you can’t pay off all your debt, then refinance your debt. Interest rates are at or near all-time lows. This means everything from mortgage debt, credit card debt, student loan debt, and auto loan debt can be refinanced.
I recently got a 7/1 ARM jumbo mortgage for only 2.125% with no fees. Please refinance your debt and take advantage of record-low rates. Check out Credible to get free, no-obligation quotes to refinance any type of debt.
5) Track your finances like you care about your life.
I guarantee you that if you are not tracking your finances, or haven’t done at least a month long deep dive audit, you are screwing yourself because you’re spending way more than you think, and saving much less than you’ve planned. Your five year older self will thank you one day.
Once you’re able to wrap your arms around all our finances, you can then focus your attention on doing more interesting things with much less worry. It’s like writing out a to-do list instead of always being stressed wondering what you’re forgetting by keeping everything in your head.
I’ve personally used Personal Capital since 2012 to track my net worth for free. So far, so great as the bull market continues. Leveraging free technology to manage your money is a no brainer.
6) Invest in yourself.
Your biggest money maker is YOU. I’ve never met a rich person who doesn’t have an insatiable thirst for knowledge. You don’t have to leave your job, lose your main source of income for two years, and get your MBA like I did. You can go to school part-time while working.
There’s nothing wrong with attending some extension classes in your city at nights. How about subscribing to YouTube lessons that teach everything and anything? Subscribe to blogs that are written by people who know what they are talking about.
The people who are getting promoted and paid have desirable skills. You can only fake it for so long. Eventually you will be found out. Develop a set of marketable skills that can be highly monetized!
1) Take 100 hours worth of intense Mandarin classes.
There was a time I used to be fluent in Mandarin. I could read 3,000+ characters, write, and speak business Mandarin. After living in the US for 23 years, I’ve become soft and it’s damn frustrating. It will take me 25 days at four hours a day to achieve my goal. I will achieve this goal by taking a two week study abroad class in Beijing or Taipei, listening to hours of online and podcast lessons, and watching at least one full season of a Mandarin drama. Maybe I’ll even do a 15 minute podcast on FS in Mandarin.
Why is mastering Mandarin a financial goal? Because when you’re able to fluently speak another language, your business world opens up massively with a new demand curve. There are over one billion Mandarin speakers in the world. It’s much easier developing relationships with others who take an interest in their language and culture.
2) Grow net worth by $1 million.
I’m focused on increasing income, but I’m more focused on growing net worth. Every $1 million in net worth growth is roughly $30,000 in relatively risk-free interest income. Although I mentioned the first $1 million might be the easiest in a previous post, once you get to a very significant figure like $10 million, it only takes a 10% increase to build another million.
How the hell do I plan to achieve this goal? Mainly through things I think I can control e.g. my business. For example, if I can grow recurring revenue by $333,000 in 2015, I’ll achieve the $1 million goal if current valuations call for a 3X revenue multiple on online media companies.
It will be nice if my investments and real estate grow by 10%, but I’m not holding my breath as the effort (asset allocation, investment selection, purchases) have already been made and there’s not much more I can do. Stay tuned for an upcoming post about my goal to become a millionaire again.
3) Make more passive income.
I plan to invest $250,000 into venture debt and $250,000 into real estate crowdfunding. By investing $500,000, I hope to generate at least $20,000 more in passive income to achieve my $300,000 goal.
4) Build up a steady $100,000 liquid cash pile.
I thought having just $25,000 in liquidity would feel OK, but with the addition of another mortgage and venture debt investment, my desire for more cash on hand has gone up. During the three month break when I was no longer spending any money on remodeling, it felt absolutely wonderful rebuilding my cash stash.
I often forget that I DON’T have a steady job any more as a business owner and consultant. I’ve gotten comfortable with my financial achievements, and that is a dangerous mindset to be in.
Who knows if several business verticals go bust. I’ve got property taxes and freelance income taxes to pay, not to mention expensive health care premiums for the first time ever.
5) Pay down my vacation property mortgage.
I’ve got $150,000 in vacation property mortgage to pay at 4.25%. The rate is relatively high, but the debt is not high enough to refinance due to the costs.
This vacation property mortgage has got to go!
More Goals To Have
1) Win at least one official 5.0 USTA match (tournament or league). Chances are slim that I’ll be able to win a 5.0 match given the 5.0 level is filled with ex-Division I college players who are still in their 20s and early 30s, but I’m sure as hell going to try. Age is almost always the enemy of an athlete. In order to achieve this goal I will practice for at least 1.5 hours at least twice a week. I’ll also do at least one session of stretching/yoga a week to improve my flexibility. I’m also going to upgrade my diet by reducing dairy intake by at least 50% in order to lean down to 157-160 lbs from my current 165-166 lbs. Getting fit is a pretty useless thing to do if there isn’t an objective. I have no desire to go through this year with a 0-X record. To put things in perspective, winning a 5.0 match for me would be like hitting a single off SF Giants pitcher Madison Bumgarner. I could never hit another ball or win another 5.0 match again and I would die happy!
2) Feel hungry after at least one meal every day. Portion sizes are massive in America compared to everywhere else in the world. To save money and help stay in shape, I plan to eat up to 75% full every lunch or dinner every single weekday and save the rest for leftovers. If I eat up to 75% full for lunch, I’m not going to make up for the hunger during dinner by eating 125%. I’ll keep dinner at 90%-100% instead. The other reason to feel hungry after at least one meal every day is to be more appreciative of what I have. It’s too easy taking life for granted in the United States. When I lived in Kuala Lumpur, Malaysia as a middle school student, many of my Muslim friends would practice Ramadan. They’d fast from dawn until sunset, refraining from consuming food and drinking liquids. Their commitment to being mindful and more spiritual for 29-30 days until the crescent moon appeared always inspired me.
3) Do one live interview or presentation. I don’t think I’ll have a problem talking in front of a live audience as I’ve done it before. I just haven’t done so in a long while. Maybe I can be a guest lecturer at a school, or maybe I’ll give a presentation at a conference or speak to someone on TV. One of my main goals for starting a podcast is to practice my speaking skills. The other goal is to just connect with readers in a different way.
4) Live more vicariously. The one thing that bummed me out in 2014 was that I didn’t do anything risky or go on any adventures. I guess after one leaves a job of 13 years and goes traveling around the world for 10 weeks a year, it’s hard to one-up such an adventure. A large part of me felt like I was getting sucked back into quicksand, working for money instead of working for the love of learning and networking. As soon as I stop learning new things or taking on new challenges, I have this immense desire to move on, partly because I can. This is one of the reasons why I’m proud of myself for sticking things out in my consulting job for one full year. The adventures I seek almost always have to do with exploring new countries and meeting new people. I will be traveling for at least six weeks once again in 2015.
5) Generate recurring charitable income through a new low-cost book. Two years ago, I wrote a book that helps people learn how to negotiate a severance package in order to provide a long enough financial runway to do something more meaningful with their lives. The book has led to personal finance consulting clients, more FS brand awareness, and the ability to speak with media outlets as an authority on career exit strategies. I’ve developed an intimate understanding of how to self-publish a piece of work on my own platform. Now I plan to put together a new book that will leverage the Amazon platform and my own platform with a price point under $10. The book’s target audience is anybody who wants to achieve financial freedom sooner, rather than later. I hope that many existing readers will buy the book and gift it to friends and relatives. A portion of the proceeds will be donated to a charity that focuses on helping our youth. It takes an elephant-sized effort to put a book together, but I plan to get it done by the first half of the year.
6) Increase output on Financial Samurai by 28.5%. I’ve been averaging about 3.5 posts a week for the past 5.5 years. I’ve seen a lot of bloggers decrease their output because their readership has grown. No longer do they need to write as much to reach a certain target figure. Instead of fading, I want to raise output to 4-5 posts a week (4.5) from now on by introducing new writers and new styles of writing. I love reading guest posts from the community and being an interactive commenter on my own platform. Building a large site is about long-term consistency. My most popular posts average 2.3 years in age. Like planting a sapling today, it might one day grow into a great big fruit-bearing tree. I plan to get to 4.5 posts a week on average through hard work, guest posts from readers, and a new staff writer.
7) Stop working for money. Through my year-long consulting experience, I’ve discovered that I really dislike working for money if I’ve stopped learning anything new. Learning something new and feeling the excitement of progress is what it’s all about. It is unrealistic to always feel excitement at work, but I say that one has to feel it at least 70% of the time or else they need to find a new occupation or gig. When I worked in Equities, I had to cover even different Asian markets with seven different political regimes, economies, languages, and all the various publicly listed companies, of course. There was alway something new going on every day and that was exciting. But even with so much going on, thing start getting boring after a while. I’ll always commit to anything for at least a year, but if things start getting dull, I will move on and not worry about the money I’m giving up because money is not the primary objective.
8) Visit my parents four times, and my sister and nephew two times. A couple years ago, I almost sold my house to move back to Oahu and be closer with my parents. I didn’t pull the trigger because it felt too early to leave booming San Francisco. Hence, the solution is to just travel to see my parents more often. There were years where I’d only see them once a year. With my added freedom, I expect to see them at least four times a year for a week at a time. I’ve got my house ready to go for my parents and for my sister and nephew to come visit for as long as they want.
Think Big, It Helps!
The first step to building great wealth over the long term is to keep track of your finances in one place. By knowing where all your money is going, you’re better able to optimize your wealth by reducing expenses and making better investments. Once you’ve got a handle on your money, have stretch goals. Even if you fail, you’ll end up going much farther than if you had no goals, or rather common goals.
Finally, make sure you’ve got a solid fall back strategy. We’re now in a rising interest rate environment in 2016 and beyond. It’s going to be tougher to make money and get ahead as a result of this self-imposed headwind to keep inflation in check. Focus on increasing your savings rate, adjusting your risk tolerance, and finding new side hustles to keep the income stream flowing!
Recommendation To Build Wealth
Manage Your Money In One Place: Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing. I’ve been using Personal Capital since 2012 and have seen my net worth skyrocket during this time thanks to better money management.
Updated for 2021 and beyond.