2015 Financial Goals
- Written by Allison Karrels
I want to share my family’s financial goals and plan to reach them for 2015. To drift is hell, to steer heaven. Which will you do in 2015 money wise?
It is that time of year again, time to look forward and map out where you want to be by the time 2015 comes to a close. Below is my family’s plan for 2015. I hope you find some lessons in my story that you can use to challenge yourself to make 2015 your best year yet.
I have always been a huge goal setter. One of the best things my dad ever did for me was to give me a book called Go For It! when I was around twelve. It talked about how to set goals and how to write them so they are measurable and completed within a clear time frame.
Since then, every year I write down my goals broken down into four areas: financial, physical, work and personal. I keep the goals in a folder in my desk so I can look back at them over the years, but I keep the current year’s goals on our financial spreadsheet where I track our budget, return on investments, Lending Club data and rental property expenses.
I look at our goals each month when I enter in the month’s data to make sure we are on track. I do use Mint and other apps to track our accounts but I find manual entry onto the spreadsheet really helps us stay focused on the goals.
Choosing the right annual goals that are achievable and challenging helps you to reach your longer term goals. A few months ago I read a book, Secrets of the Millionaire Mind by T. Harv Eker, and it really made me think about how I view money and our long term goals.
For as long as I can remember, my biggest financial goal was to have a net worth of one million dollars by age forty. Now at age thirty eight, we are getting very close to meeting that goal.
In the book, Eker refers to your “financial thermostat” and how the setting you choose will dictate your actions and your results. Our thermostat had been set at one million by age 40, so to reach it I increased our workplace retirement contributions each year, invested in the stock market, purchased rental properties and reduced our spending.
But perhaps I didn’t challenge myself enough. What if I had set my financial thermostat to two million by age 40? What would I have done differently? Perhaps your goal is to eliminate your student loan debt or become net worth positive in 2015. What will you do to achieve that?
What changes are you willing to do now to reach your goals and increase your financial thermostat? How high can you set your thermostat and how will that affect your financial position in the long term?
The average American’s long term savings rate is only 8.4% according to the Bureau of Economic Analysis. This raises the obvious question: what are the average American’s long term goals? I do not want to be average and this year I am going to challenge myself, and my family, much more than we have in the past. We have set a savings goal of 50%!
Why save so much? The answer is early retirement. My husband and I both enjoy our jobs but we do not want to work into our 50s or 60s. It took me more than a decade to realize that retiring before your social security checks arrive was an option for a non-ultra rich person!
In order to reach our 50% savings goal we have decided to try something new this year and breakdown our combined income from 2014, $160,000, into three categories and set a goal for each. This let us look at what we did last year and how we can improve each area.
Investments: 50% of income will be saved = Goal $80,000.
2 Roth IRAs (Betterment 90/10 allocation) = $11,000.
2 Workplace 401k (2050 Target funds) = $36,000.
Son’s investment account (Vanguard) -$250/month = $3,000.
Lending Club -$25/week = $1,300.
Saving for the next rental home (Betterment 60/40 allocation) = $28,700. We begin with the basic goals of maxing out our retirement accounts, and then move into more diverse investments like my son’s college account, Lending Club and our rental property savings account.
In 2014 we saved 40% of our income, so we will need to enact a few changes to meet our higher goal. Currently Betterment automatically receives $300 every Monday for the down payment on the next rental property, but that only equals $15,600 —leaving a gap of an additional $13,100 during the year to meet my goal.
That money will have to come from reduced spending or earning more money at work when possible. My husband is salary, but I am hourly and do have the option to pick up extra hours to earn more income.
Debt Reduction: 25% of income will go towards debt with the goal of a $40,000 reduction in mortgage principal. Student loans and car loans were paid off many years ago and all credit card balances are paid in full each month so this section is all related to real estate.
Rental home #1 Refinance – Reduce principal owed by $18,500.
0% Credit Card – Pay remaining $6,500 balance by October when the 0% offer expires.
Rental home #3 – Reduce principal owed by $1,500.
Primary residence – Reduce principal owed by $12,500.
In 2014 we used 30% of our income to pay down mortgages; I am actually going to decrease this area to 25% in 2015 to maximize how our money is allocated. The interest rates on all the mortgages are between 2.875%-4.5% so our money will be better off invested in the stock market, which historically has returned 7%.
Our next rental property purchase is planned for Spring 2016, so we are prioritizing our highest interest rate rental debt for any extra payments we make during the year. Debt is a burden, even debt which, in our case, I consider an investment and one that provides us with good cash flow every month. If you have any credit card debt or other high interest debts, this area has to be your primary focus.
Spend: 25% of all income will go towards living expenses, down from 30% in 2014. This is the “everything else” bucket, utilities, insurance, my son’s school, groceries, dining out, travel, shopping, etc.
This is where you can make the most changes, but can also be the most challenging. Some expenses like electric, water, car expenses are not going to change much. The areas we could improve on are eating out, cable TV and impulse Amazon shopping. In 2015 you can get HBO directly from HBO and I think that will finally let us cut down our cable bill.
As for Amazon, we have started putting things in the shopping cart and only ordering once a week. This short pause has helped us control our impulse shopping and frequently we remove items from the cart deciding we really don’t need to buy them.
Our other big savings will come from my son, mid-2015 he will start elementary school and the days of paying over $1000 a month for preschool will be over!
We are gearing all our savings goals towards the day my military husband is eligible for his pension. We could be spending money each month on car payments, dining out more, giving in to every toy request my five year old has, but we don’t.
We choose to live well within our means. Being military and having to move every 3-4 years also helps keep our belongings in check. You don’t collect much when you are forced to pack it up every few years. This decluttering has also proven to be a surprising source of revenue as we regularly sell excess belongings on eBay and Amazon.
So that is our current plan, which continues to evolve with increased knowledge and experience. My family is committed to our goals and plans and when a family has a joint goal it is easy for everyone to get on board to reduce wasteful spending.
The Florida beaches are calling us, hanging out on a boat fishing all day sounds amazing. We want to be retired in ten years, living off our rental property income and investment dividends. A few more years of saving hard, letting the dollars do their compound interest magic, and then we will have reached the big goal, financial freedom. What will you be doing in 2015 to reach your goals?