I wanted to take a look back at the financial goals that we had set for 2012 and review how each of the areas that I had targeted actually performed. The way I handle our financial spreadsheet, the net worth review that we do toward the beginning of the month is how the year is closed out, so even though there's still some time left in the year, we can give an accurate look at our goals based on how things shaped up with the most recent review.
Here is a summary of each goal as well as how things actually turned out:
- Home value increases by 1% – The housing market had begun to show signs of stability at the beginning of the year, but it now looks like an actual recovery is taking place. The formula which I use to calculate the value of our house takes into account a number of considerations, including Zillow's reported value, comparable houses sold in our neighborhood and surrounding subdivisions, and a couple of other factors. I'm happy to report that, based on these calculations, the value of our home went up by 5.7%. There's still quite a ways to go before we even reach the point of having it worth what we paid for it, but it's still a great step in the right direction. Achieved!
- Auto value decrease of 13% – Auto values had been holding relatively steady over the recent years, mostly as a result of an increased demand for cheaper, reliable used cars. Now that the auto industry is steadily increasing sales and the age of the average car increases, the value of used cars has begun a more rapid decline. Ours actually went down only by about 8% simply because the decline I forecasted didn't really start until about mid-year (at least according to Kelley Blue Book, which is my estimating tool for our two cars). Better than expected!
- A 25-30% growth in our investment account – I have a few stocks which I believed were ripe for big gains. Unfortunately, they didn't do as well as expected and we only realized about a 6% gain here. It's still better than nothing but not what I had hoped for. Fail!
- A 15% increase in our cash holdings – We did OK here, seeing an increase of about 12%. (Our cash holdings allowed us to pay for items and costs that came up, but if cash is not readily available there are options for quick loans that can get you through in a jam) I had hoped our side income would be a little higher with various things that we do to earn money on the side, but while it was good, it was slightly less than expected. Fail!
- A fifteen to twenty percent increase in our retirement balance – This one was right on target and I'm happy to say it was toward the high end, as our retirement account balance increased by 19%. Achieved!
- A five to six percent decrease in our mortgage balance – We did not apply any extra to our mortgage payments this year, but the 15-year 3.375% re-finance we got ourselves into last year helped us pay off 5.3% of the balance. Achieved!
- An eleven to twelve percent decrease in our student loan balance – Again, we made minimum payments (thanks for nothing, employer who still hasn't given out any raises) but this allowed us to pay off 11.3% of the outstanding balance we have for student loans. Achieved!
- An overall net worth increase of 22% – If I were to have hit on all of the targets above, the end number would have resulted in a 22% net worth increase. As it was, we hit on five and missed on two. That's the bad news. The good news is that the ones we hit on had a bigger impact than the ones we missed on, namely hitting the high end of our retirement saving goal, and the value of our home going up by a few more percent than I had estimated. With this we saw a net worth increase of 25%. Achieved!
Am I happy or sad?
Little Boy Beagle is three and a half, so he's learning right from wrong, and as such, he knows if we're ‘happy' or ‘sad' and if he can't read the look on our face, he'll ask “Are you happy?” or “Are you sad?”. My guess is that if he looked at my face, he probably wouldn't be able to read whether I was happy or sad with the numbers.
The bottom line number, overall net worth, is great. Given that we set a pretty high benchmark and we actually exceeded it, I'm very happy about that. In fact, since I started tracking net worth, it's the highest year over year increase since 2003, when I had a 27% increase.
That was the happy part. But, as to the things that made me sad, well first is the obvious fact that we missed on two of the targets. Even though we had a big upward surprise on the value of our house, it still doesn't make up for the fact that we grossly missed on our investment accounts. Now, granted, some of the people that commented on the original goals post indicated that my expectation was pretty lofty, so maybe I shot a little too high.
Or maybe I don't have a great handle on the actual investments.
The good news on that front is that the investment accounts make up a small portion of our net worth total, so a miss there isn't going to have an impact as if we, say, missed on the value of the home. In other words, if we had to miss, I would rather miss on the investment account than the home.
But, in reality, there's a part of me that wishes that wasn't true. See, the investment account won't grow to a comparable level of importance as our home if we don't actually grow the investment account. If it were to grow at 6-7% a year, many would say that isn't bad, but I am hoping for better than that. I want it to grow faster and at some point provide a measurable part of our net worth.
Getting there is the challenge.
Right now, adding a lot to investments isn't really in our cards. Most ‘net new' investment into stocks or mutual funds goes via our retirement accounts. Outside of that, we've been squeezed on several fronts. I will say up front that these are things we have made conscious choices upon.
- We are a single income household – We made the decision even before we got married and were years away from starting a family that we wanted to have Mrs. Beagle stay at home. Her income was in that area where her working wouldn't have resulted in a big net pay increase after you factor in child care, and when you add the fact that our kids are getting great care, I know this is the right choice.
- I haven't gotten a raise in a number of years – Our company was bought out by a venture capital firm several years back. I knew what that meant and expected that raises and such would be impacted, and they were. While the company now makes money (they hadn't before the buyout), apparently it's not enough to allow for raises to be given out. This diminishes our spending power as inflation erodes the paycheck. This is a choice we make for me to stay at the job. The reason I do? Mostly the non-paycheck benefits. I get over five weeks of paid time off. I work five minutes from home. I have managers and team members who support each other. I like the job that I do. At a certain point, these things may not be enough, but at this point, my satisfaction with the job and the complete package is enough (though I do have my moments).
- We re-financed last year – From a net worth perspective, last year's re-finance from a 30-year 5.875% mortgage to a 15-year 3.375% mortgage was awesome. Our payment went up $150 per month, but our contribution toward principle went up $500 per month. That's a pretty good return on investment. Still, from a simple cash flow perspective combined with the fact that I refuse to cut our retirement contribution and my employer refuses to give me any more money, it takes money off the table at the end of the month (though to be fair, there's no way I could get that return in the market).
So, while all of these choices are ones that I have made actively or passively, there's a part of me that is still frustrated by the slow growth in the area of our investments. In the long run, I will have to adjust my expectations and continue to focus on the bigger picture. I know that I am reasonable enough to know that if I were to get a few more years in a row of 25% returns that I would be more than happy.
One can only hope, right?
Readers, how did you do on your 2012 financial goals?