How many of you achieved last year's resolutions? How many of you still remember what last years resolutions were? If you don't write down your goals, you're more than likely to forget.
Here's a quick recap of my official five resolutions:
1) Live Free. Although leaving Corporate America in 2012 allowed me to travel freely, I decided to take a moderate approach instead due to the unknown risk of no longer having a paycheck.
Result: Pass. 2013 was much more of how I thought a free life would be like compared to 2012 because all the building blocks were already set. The longer you go without an income, the more confident you are you don't need a job to survive. 12 weeks of travel and setting my own schedule felt great. Now that I've experienced absolute freedom for over a year, I'm now considering going to work part-time for a start-up or even full-time if there's a great fit.
2) Bring The Family Closer. My immediate family all live 5+ hour flights away. I plan to leverage my finances, the internet, and our shared interest for travel to keep our relationships healthy.
Result: Work in progress. I convinced my sister to invite our parents to go visit her during Thanksgiving last year, a win since they live 11 hours by flight away and her apartment doesn't comfortably accommodate four people. She's got a busy life and my parents don't want to intrude. I'm very grateful to have crashed at my sister's place for 10 days this summer. We had awesome life conversations that haven't been discussed in over 10 years. Finally, several articles on FS helped open up some candid dialogue between my parents and I, which is always one of my intentions.
3) Grow Net Worth Faster Than The S&P 500. It’s one thing to have the stock portion of your net worth outperform the S&P 500, it’s another thing to have your total net worth outperform the index. A 9% net worth increase should be feasible if my stocks and real estate equity grow faster than 11% (70% of net worth) to make up for my CDs and risk free assets which will only grow by about 4% (30% of net worth).
Result: Pass, but disappointed with 32% due to greed since everything went up huge in 2013. I understand why busy people appreciate leaving their money up for others to manage. It feels good knowing someone is looking out for your money manners as you go all out on your entrepreneurial goals. This is my main financial resolution I've had for 10 years.
4) Put My Finances On Autopilot. I’ve been using an Excel spreadsheet with over 50 line items to track all my expenses, assets, and liabilities manually for the past three years. I still enjoy keeping on top of my finances, but I want to spend less time focusing on the nitty gritty since my spending, saving, and investing patterns are pretty set. Instead, I’m leveraging technology to stay on the ball. To care less about your finances, you first have to care a great deal about your finances.
Result: Pass. After deciding on a savings goal, a monthly spending limit, a comfortable net worth allocation, and a travel budget for the year, that was it. I enjoy checking-in on how my boys are doing to make sure they're behaving, but I don't have an obsession anymore that takes away time from doing other enjoyable things thanks to technology.
5) Smile Much More. When I was younger, a friend of mine nicknamed me, “Smiles” because I would always be smiling and not even know it. I’d walk by strangers on the street who would always weirdly smile back. As I entered into the real world of work, bills, graduate school, and financial responsibility, I think my smiles have faded. I’d like to regain this natural disposition and spread some cheer.
Result: Undecided. When I bashed my face that one night from too much partying, I may have thought to myself, there goes my smile due to the huge hole in my lip. But the doctor stitched me up good and supposedly the scar will fade over a year. But this goal really isn't about physical appearance. It's about being so happy you're unaware about positive physical manifestations that occur that brings more joy to those around you.
TOP FINANCIAL RESOLUTIONS FOR THE NEW YEAR
Here's a list of 10 financial resolutions / goals that you may want to consider undertaking to really build your wealth. I encourage you to pick only 3 to increase your chances of success.
1) Stop thinking anybody owes you anything. I firmly believe a proper mindset is the number one key to building wealth over time. As soon as you eradicate entitlement, you stop being bitter about other people's success. You will direct your dissatisfaction towards bettering yourself by working smarter, harder, and more creatively to achieve your goals. It's important not to rely on your parents, a rich aunt, or the government to take care of you because they actually will if you let them! If you do get baseline help, you'll never be able to achieve your full potential. Related: Why Not Just Try Harder To Get Ahead?
2) Increase your savings rate to 50%. If you can live off 50% of your after tax income, then every year you work is one year's worth of savings in the bank. For those who are fortunate enough to be in a committed relationship, try to save the lower income partner's income. For those of you who are single and get paid twice a month, an easy trick is to try saving one entire paycheck. If you happen to get a year end bonus, try and save 50-100% of that sum as well. If you feel you just can't save any more, then gradually inch up your percentage savings rate by 1% or 2% a month until it hurts. If your savings amount doesn't hurt, you are not saving enough. Related: How Much Savings Should I Have Accumulated By Age?
3) Review your finances like the CIA. It's hard to devise a plan if you don't fully map out your current financial situation. Figure out whether you are happy with your stock and bond portfolio allocation. Assess your overall net worth allocation and see where you'd like to reallocate based on your risk tolerance. I don't care if you use an Excel spreadsheet, Personal Capital, or hire a financial professional to sit down with you, make sure to spend a good day going over your finances in order to understand what went well and what didn't go so well over the last 1, 3, 5, and 10 years. The better grasp you have on your finances, the better decisions you will make. If you have a partner, please have an open dialogue with him or her. You know you're on top of your finances when you've memorized the balances for every single account you have!
4) Work on your X Factor. You are more than just your job. Remember when you were growing up how creative and active you were? Try to go back to the days where life wasn't just about making money from a day job you don't love. X Factors comes in all shapes and sizes. You'll never know what will hit. I was reading a profile about how a bakery chef ran out of pastry for her cream stuffing so she decided to stuff empty cannoli shells laying around. Now she and her husband have their own business in NYC called Stuffed Artisan Cannolis! Spend 10 minutes a day dreaming about wild and crazy things. Then narrow down your focus and give your X Factor a go!
5) Review your will. You do have a will in case something happens to you right? I bet for those of you who do have wills, it's been a long while since you reviewed what was written. Perhaps little Johnny is no longer your favorite grandson because he never comes to visit anymore. Perhaps your assets have grown over the $5 million mark for tax free inheritance and you've got to accelerate your gifts while you are still alive. Maybe you've got a new granddaughter and you'd like to ensure she has enough money for college in 20 years. Keep your will up to date. Related: Average Inheritance Amounts By Country
6) Get started on passive income creation. The best time to create passive income is yesterday. Meaningful passive income takes an extraordinary amount of time to create. This is why it's best to start as young as possible so that by the time you burn out from work, you'll have enough passive income to hold you over until you find something better to do. I was originally going to put a good 18 years of work until 40 and ride off into the sunset with my passive income. I could only last 13 years in finance, but fortunately had enough passive income to survive and an X Factor to work on. But I started my passive income creation in 1999. There comes an inflection point where your accumulated assets will start returning more than your annual income. Work towards this achievement. Related: Passive Income For Financial Freedom
7) Create a Punt Portfolio. One of the biggest risks in growing your wealth is complacency. When you're satisfied with what you have and living a life of leisure, you're definitely not looking for the next home run investment. I encourage everyone to create a Punt Portfolio equal to at least 5% of your net worth. Your Punt Portfolio's main purpose is to invest in higher risk, higher reward ideas. Everybody should be able to survive a 5-10% hit to their net worth. With a Punt Portfolio you'll be able to satisfy your crazy beliefs and limit the amount of “should of, could of, would of” thoughts in your life when it comes to investing.
8) Create a Blackout Fund. After you've calculated your net worth, set aside a Punt Portfolio and figured out your budget, it's time to set aside money for a Blackout Fund. Your Blackout Fund is the money used to have such a fantastic time you blackout! Saving more cash makes us feel happier, but it's more than likely you will die with too much money if you're this serious about building wealth. Set aside money every year for guilt-free spending. By blowing some money every year you'll prevent a massive spending orgy that could one day really cripple your finances. I've set aside a $25,000 blackout fund for travel, conferences, and some new electronics.
9) Make a career move. Day job income is by far the largest source of income for the majority of people. Given this fact, it is perplexing why more people don't get in first, leave last, work weekends, and be great team players with terrific attitudes at work. Even if you dislike your colleagues and think your boss is a bigot, grit your teeth and do good work. If you can't stand your job, then you've got to make a move. Complaining is for losers and you're not a loser! Doing one thing like coming in first over an entire year will do wonders for your career. Another favorite recommendation is to take one senior person out for lunch once a month. If you just implement one new habit in your career, you will get paid and promoted faster than if you did not change. When was the last time you pulled an all-nighter anyway? If it's been a while, you're falling behind the person who wants it more. Related: Never Quit, Get Laid!
10) Work on your communications skills. It doesn't matter how smart you are if you communicate like Golem from Lord Of The Rings. The people who get the farthest are those who are able to make people feel at ease. Part of making people feel at ease is having a knowledge bank so deep that you are able to relate to anything the other party is talking about. Develop your understanding of politics, sports, finance, and trash magazine issues. Learn to speak another language well and travel abroad to understand new cultures. Be a voracious reader. Join ToastMasters. Get into the habit of writing proposals every day. Having good written and oral communication skills will get you farther than any genius brain will.
TO A BETTER TOMORROW
Having a proper financial mindset is everything to building wealth over the long run. It's very easy to get off track the more money you accumulate because you face more temptation. Once you combine good financial habits and self-belief, there's very little that will stop you from achieving your financial goals.
Next up will be a discussion on net worth growth targets you don't want to miss!
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. You can use Personal Capital to help monitor illegal use of your credit cards and other accounts with their tracking software. 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 2019 and beyond.