2012 Financial Goals

2012 is here and it’s time to look at our financial goals for the year.

In order of how I have things tracked on our balance sheet:

  1. A modest increase in our home value – I would be happy if our home value increased by 1% over the current value.  Last year was the first year in many that we actually had an uptick in the noted value, so it would be nice to see that continue.
  2. A modest decrease in the value of our automobiles – I’ve budgeted a 13% decrease in the value of our automobiles (and RV)  We have a 2007 Buick Rainier, a 2006 Pontiac G6 and a 2004 Jayco Feather camper.  I use Kelley Blue Book for the car values and I’ve decided to do a straight-line depreciation for the camper.
  3. A 25-30% growth in our investment account – I am bullish on some of the stocks I own.  If even one or two can break out, this could lead to out performance of the market, which would be nice since our holdings under performed the market in 2011.
  4. A 15% increase in our cash holdings – We took a hit in our cash savings when we bought the camper.  This increase would bring us back to where we were, and increase our earmarked allocation for some of the savings goals we have (like a new roof in 2013-14)
  5. A 15-20% increase in our retirement balance – Regular contributions plus a nonimal gain the stock market would allow us to reach this goal.  If the market has a down or flat year, we could potentially miss this goal.
  6. A 5-6% decrease in our mortgage balance.  Regular payments would allow us to make this goal.  Now that we have re-financed into a 3.375% 15-year loan, we are comfortable with making the minimum payments for now, choosing to put extra into cash, investment, or retirement funding.
  7. A 11-12% decrease in our student loan balance – Again, minimum payments will allow us to meet this goal.  With a locked in rate of under 2.5%, and a monthly payment under $100, we are OK with not paying extra on this for now.
  8. An overall net worth increase of 22%.  All of these things together would add up to a 22% increase in net worth value for the year.  We only achieved 10% in 2011, which is pretty good, but below the growth I want to see.

Hopefully market, job, and other conditions go our way to allow us to reach our goals in 2012.  Exceeding them would be even better!

What are your goals for the new year financially?

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How Book Endings Are Like Personal Finance Goals

I read a lot of books.  Reading fiction has always been one of my favorite pastimes, both as a kid and now as an adult.  Few things are more relaxing than settling into a good book.

But, as I’ve read more and more books, I’ve realized something.  When I start reading a book, I can usually judge partway through whether it’s good, great, or not worth continuing.  Out of all the books I start reading, very few fall into the ‘Great’ category.  I don’t keep statistics, but say 5%.

That judgment, as I said before, is usually made about halfway through.  But, by the end of the book, that percentage is usually much lower.  By the time I’m done with book, most fall back into the ‘Good’ category.  What knocks them down?

The endings.

For some reason, authors have the hardest time finishing the books.  I was reading a book recently, The Homecoming of Samuel Lake, and I was so engrossed during the first and second half that I was ready to proclaim it one of the best books I’d ever read.  But, alas, by the time I was done, it had fallen off.  I certainly enjoyed it and I would recommend it to anybody, but the ending for me kind of fell apart.

As it often does.

I asked myself why?  I think it’s because, just like when we establish a personal finance goal, we concentrate on the parts leading up to the ending.  An author that comes up with a story can come up with the characters and the problems that make the story interesting.  A lot of thought and effort comes into developing those things, and many halfway great books show the diligence that the author put into them.  But, actually solving the problem is another issue.  I think many times the author has a general idea of how they expect to get the characters stories wrapped up, but forget to put as much time into that part of the story, so many endings feel forced.

In the case of the book above, things seemed rushed.  Several characters did things in the ending that did not match anything they had done in the book.  It just didn’t match.  It was still enjoyable, but not up to the same level as the earlier parts of the book.

I think many of us often fall into the same trap when it comes to personal finance goals.  We set goals to change a behavior.  Either to get out of a bad behavior (e.g. continuing to accumulate debt) or to encourage good behavior (e.g. saving for a house).

Relating that to the book analogy, we are the characters and we identify the situation that we want solved.  But, we don’t spend enough time on the ending.

We say, “I want to get out of debt.”  But, what’s the ending?  Even if we get out of debt, what happens next?  Do we do that so that we can get back into debt again?  So we can retire?  The good goal-setter will say they want to get out of debt and will tell you how they plan on doing so.  The great goal-setter will spend as much time developing what they do after the goal is set as they do on the goal itself.

What’s your personal finance ‘story’?  Are you writing a great one that will fade to good at some point or are you going to  make sure that it’s great, cover to cover?

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