Financial Goals: 2015 Review and 2016

Well, another year is in the books, and it’s time to look at our financial goals, specifically to see how we did, and how we’d like to see the year play out ahead.

Overall, we saw our net worth increase, but it was a disappointment in the fact that we fell short in a few categories.  This means that we had a gain.  It just wasn’t as big as I’d hoped.  In fact, it was our smallest gain (percentage wise) in over six years.  I guess it could be worse.  It could be back like in the recession when our net worth fell.

I track our finances by breaking it down into several categories, first on the asset side and then on the liability side.  I will do the breakdowns by percentage, rather than list actual amounts.

Here is the breakdown for each major area:

Asset – Real Estate

We only have one asset here, our home.

2015 Goal: +3.8%
2015 Actual: +4.0%
2016 Goal: +2.9%

The value of our home, which I estimate by a combination of Zillow, actual sales in the neighborhood, and estimates from the city, was about on par.  Things seem to be slowing down a bit now that prices have largely recovered from the crash, so I’m lowering the pace a bit, though still projecting an increase.

Asset – Autos / RV

2015 Goal: -11.6%
2015 Actual: -23.6%
2016 Goal: -17.4%

We have two older cars (2007 Buick Rainier and 2006 Pontiac G6) as well as an older RV.  For the cars, I largely use the Kelley Blue Book Private value.  For the RV, I have a straight depreciation method.  I had thought that by nowmb-201403stacks the decline in value year over year would decline.  But, it looks like older cars lose a lot of their remaining value around this age. Bummer!  I’m basing our projections on keeping our current ‘fleet’ and projecting somewhere in the middle of last years values for the estimates.

Asset – Liquid Assets

2015 Goal: +14.2%
2015 Actual: -1.5%
2016 Goal: +33.0%

These are things that can be converted to cash easily.  These include bank accounts, non-retirement brokerage accounts, CDs, and the like.  I’d projected a modest increase, but we ended up with a small decrease.  This was largely because I’ve ‘written off’ a bit of the amount in anticipation of replacing our HVAC system, which we’ll have to do in the next couple of years, and also had to do with the volatility of the stock market. I’m being optimistic for 2016 in that I think we can add to our savings more aggressively and hoping for some improvement in our portfolio.

Assets – Retirement Accounts

2015 Goal: +12.0%
2015 Actual: +4.2%
2016 Goal: +12.9%

We cut back on our contributions a bit to avoid a potential IRS penalty depending on our tax situation this year.  That’s since been covered so we’ll be making up the difference.  This means that our contribution level will be a lot higher.  Plus I’m hoping that performance is a bit better.  Our investments are more aggressive since we’re still 20+ years away from retirement, so our investments here under performed the market.  Hoping for a turnaround.

Liabilities – Mortgage

2015 Goal: -7.0%
2015 Actual: -7.0%
2016 Goal: -7.6%

We’re not paying extra so as long as we make our regular payments, the projections here are pretty easy.  We were right on track!  Since the balance is declining and the amount to principle expands every month, the impact will be better for 2016.  That helps our net worth!

Liabilities – Student Loan

2015 Goal: -18.4%
2015 Actual: -18.7%
2016 Goal: -23.8%

We only have one small student loan that doesn’t have much time left.  With a fixed rate around 2%, we are currently making the minimum payments.  We’ve got just around 4 years left.  I’d love to go ahead and pay it off sooner, but the low rate keeps this a low priority.

Total – Net Worth

2015 Goal: +15.9%
2015 Actual: +8.3%
2016 Goal: +17.7%

I was disappointed that we didn’t at least hit double digits, but it simply wasn’t meant to be.  Maybe I’m setting us up for even more disappointment by being even more aggressive.  I guess I don’t see it that way.  I want to make up the difference and a good year will help us do just that.  I’m going to put it out there and shoot for the stars.

Readers, how did your 2015 go and what are you setting as goals for 2016?

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Declining Net Worth: A Personal Mini-Recession

I think the economy is fine, even though many Wall Street followers will try to lead you to believe otherwise.  But, unfortunately, we’re in a bit of a rut with our personal finances.

I just completed our net worth analysis, and for the fourth month in a row, our net worth has fallen.

Yikes!

Luckily, the amounts every month a pretty small, and even with four months of losses, the overall loss isn’t much.  It could be made back up with one good month, so here’s to hoping.

Still, I thought it would be worth looking at why..

Our Personal Mini-Recession

  • We paid our Disney trip. Trips to Disney World aren’t cheap.  We decided to splurge given that it was a trip we’ve been saving for awhile and won’t repeat immediately.  The payment for that came due.  We had money set aside, but it took cash off the books.
  • That darn stock market.  Even though I think we’re fine, the market has been a bit spastic.  Hopefully that changes for the positive. mb-201102piggybank
  • Summer spending. When temps rise, so does spending, it seems.  We haven’t made any major purchases, but it’s been more the little things adding up.  My wife and I have talked and will be consciously reigning in our spending to get back to where we’re more comfortable.
  • Side income was down. When we camp, my wife’s side hustle gets shut down.  Mine have been in a bit of a lull.  Again, hoping that these both normalize.

That’s really about it.

Am I concerned?  Not really.  While it would be nice to have our net worth go up month after month, the fact is that it doesn’t.  I actually track how often it does, and it’s around 70% of the time for us where it goes up, meaning that 30% of the time it doesn’t.  Over time, it will average out and that’s what I’m targeting.

Readers, have the warm months been kind to your finances or do you have some ground you’d like to make up?

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Wealth Grows Like A Tree

I live in a neighborhood with a lot of old trees.  We have trees on our property that are at least thirty feet tall, and there are others throughout the neighborhood that are even taller than that.

These trees have been here for a while, well before the neighborhood was built in the 1990’s.

As I looked through the trees the other day, thinking about raking once all the leaves started falling, it occurred to me that people simply don’t plant trees that large.  It just doesn’t happen.  If I want a tree in my backyard, I’m going to get one that’s anywhere from a few feet tall to maybe ten or fifteen feet at the most.

A fully mature tree with roots that stretch far into the ground that’s been around for many a decade?  One of those isn’t making it’s way into my yard, and probably yours, anytime soon.

Your Tree Of Wealth

I started thinking about it and realized that trees are a lot like wealth.  You look around and you see people that have built wealth.  Whether it’s a famous person like Warren Buffet who defines wealth to someone who lives comfortably in retirement because of modest wealth, chances are they did not simply get their wealth planted as it stands today.

Instead, they started off small.  They planted their tree of wealth.

They took care of it.

They watered it, so to speak.

They allowed the roots to grow and spread.

They watched it slowly grow taller.  Maybe so slow that they didn’t even realize it was growing, but when they took a step back and looked at it compared to a few years ago, the difference was noticeable.

One day, they looked at their tree of wealth and realized that it had grown to a significant level and it was all because they gave it care, time, and patience.

Reasonable Expectations

In thinking about how trees grow, the same needs to be said for wealth.  It doesn’t grow quickly overnight.  Patience is key.  For those who are looking to build to a certain level of wealth, expectations must be set.  Time must be allocated.  Care must be given.  Progress has to be measured.

It all fits together.

Readers, if you envision your wealth, does it help if you think of it as growing like a tree? Both up in the sky and through the roots that strengthen it below.  How do you apply the principles of growing a tall tree to growing your wealth?

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It’s Been Two Years Since Our Refinance

Two years ago we completed the re-finance of our house.  I thought I would go through some of the numbers and things that have happened.

Original Loan: 30 year mortgage, 5.875%, closed July 2007
New Loan: 15 year mortgage, 3.375%, closed November 2011

Increase in monthly payment: $157.69

Reduction in total term: 10 years, 8 months

Principal paid on new loan in the first 24 payments: 10.67%
Principal paid on old loan in prior 24 payments: 4.97%

Amount ‘extra’ paid on new loan over last 24 months: $0Amount ‘extra’ paid on old loan over the prior 24 payments: $4,144

Number of months before euphoria of making double the impact wore off: 2

Number of times I’ve regretted not taking a longer term re-finance so that I could have extra cash each month: ~5Average amount of time (in seconds) for me to completely dismiss that idea as ‘the crazy talking’: 4

Happiness on a scale of 1 to 10 when my tax preparer followed up to make sure that the reduced interest amount for 2012 was correct: 10

My calculated age at end of original 30 year term: 62My calculated age at end of new 15 year term: 52

My kids ages at end of original 30 year term: 28 and 26My kids ages at end of new 15 year term: 17 and 15

So, some things to take away from the above numbers:

  • mb-201311contractIf we stay in our home and don’t make any adjustments to the mortgage, we will have it completely paid off prior to the kids starting college, which has always been a goal of mine.
  • We would also have at least 10 years of being mortgage free while still being in the workforce.  This would definitely help set the table for a more successful retirement.
  • When I was still paying on the old mortgage but working through the details of the re-fi, the numbers were incredible to me.  By paying essentially what I was paying anyways every month, I’d be making almost double the impact.  That was awesome for the first couple of months.  Luckily, I anticipated this.
  • Paying the mortgage off early is not a priority right now.  Any extra money goes toward savings goals such as saving for a new car, home improvements, travel, or retirement.
  • If I were to pay the mortgage early, I would likely do so when I could pay off the entire balance at once.  So, if I made a boatload in the stock market and my trading account balance (after taxes) exceeded my mortgage balance, it would be then that I might consider a payoff.
  • We are nowhere near that possibility in our current state.
  • But I’m OK with that.
  • I think we chose the perfect term length.  It doesn’t crimp our lifestyle and keeps us honest to our savings goals.  The truth is that extra cash flow would be nice, but wouldn’t be worth it at all.

 I know many of you must have taken advantage of the low rates back around the time they hit thier low point.  I’d love to hear from those who have had their re-fi’s and how you’ve fared, emotionally and financially, in the subsequent months.

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