The Finance Zombie’s Absolutely Smashing 2016 Goals

After rounding up my 2015 goals, it’s time to set some brand spanking new ones for 2016.  They should be achievable, simple and challenging, or my sporadic mind will begin to wander.

Goal 1 – Savings rate
We have more control over our savings rates than our Networth, try as I might the market won’t listen to my meditation, chanting and sacrificing of animals.  In the early stages of wealth accumulation, your savings rate will have much more impact than your asset allocation or portfolio performance.

Therefore, I want to keep my savings rate consistently nice and high.  Last year my target was 60%, which I narrowly missed, finishing the year with a 59.2% average.  Which was still epically awesome.

I’m going to keep the target the same again this year.

GOAL #1 – Savings rate of 60% average for the year.

*Quite fancy trying to hit a savings rate of 70% one month, which is just about possible.  It would involve some monk like and not realistically be sustainable.  I’m buying a DSLR camera, so a month doing nothing other than learning to use that might do it.  Will be looking towards Ermine and UTMT for advice 😉 *

Goal 2 – NetWorth
Whilst largely driven by savings rates at my early stage in wealth accumulation, tracking your NetWorth in still an incredibly powerful tool.  Tracking it has the added bonus for me of stopping my mind from wandering to other things.  So it’s only right that it gets it’s own goal for the year.

2015’s goal was to increase my NetWorth by 40%, which was achieved as my NetWorth increased by nearly 59%.  It really was as simple as saving and investing each month, something that seems heathen like in the general populace.

The increase was nearly ALL from my contributions, with investments for the year not doing too great.  For example my ISA equity was down 0.21% for the year, so pretty much flat.  Goes to show, even with a flat market you can still make good progress with your savings/investing if you keep your savings rate nice and high.  Really can be that simple.

I’m going to aim for an increase of 45% to my NetWorth in 2016, which by my calculations should be doable with a little bit of help from the market.

For the purpose of this goal I wont’t include my private property equity, similar to 2015.

GOAL #2 – Increase NetWorth by 45%

*As an aside, I do wonder if blindly chucking money into a world equity tracker as is my want each month is still the best thing to do, the Bull Market is slowly running out of puff…perhaps the bear is done shitting in the woods…Outside of my pension I’m only 40% invested in equities, way below my targeted allocation of 75%, guess I will keep on trucking for now.  I certainly won’t be rebalancing into equities.  Any thoughts?*

Goal 3 – Mortgage overpayments
The NetWorth that calculated for the NetWorth goal doesn’t include the equity in my home, some people would have, some people wouldn’t, big whoop, wanna fight about it?

What I found over 2015 is by not including my residence it in my NetWorth, for the goal above, meant the idea of mortgage overpayments went out the window last year.  There are good deals about at the moment and mine allows free overpayments, seems silly not to take advantage.

Diversification is one of the key pillars of investing and personal finance, and it shouldn’t be any different when we deploy our money.  By overpaying the mortgage instead of investing in my ISA or pension I am reducing my exposure to interest rates (or reducing a negative cash / bond holding if you want to look at it that way).

The logical side of me tells me not to worry;

“Chuck it into equity or savings, when interest rates go up we simply take out a chunk and over pay then.  Long term growth rates on equity are in excess of the current rate you pay on your mortgage, you’re onto a winner.”

Two of the Monevator team, TA and TI Have differing thoughts here.

My paranoid side, the side that likes diversification, says;

“But that won’t happen really, you’ll leave it in savings or equity.  Or it would be wasted ISA allowance from a year gone by, a reduction to liquidity or trigger capital gains tax and dealing charges.  Or equity will tank and you’ll be shaking your fist at 2016 goals for not overpaying when you could.  Just over pay while you can.” 

 I’ll side with Mr Paranoia for now.

GOAL #3 – Overpay the mortgage each month.

*No specific amount, just overpay.  I’ll figure out some horribly complicated way to track it in my NetWorth and savings rates 🙂 *

Bring on 2016
And that’s my goals set, only three of them.  Hopefully simple yet effective.

At the same I will try to keep my mileage to a minimum in the car and use the bike for as many trips as possible.  With the gym, commute and food shopping now covered I can see the car barely being used.  Mileage under 1,000 would be nice and smug.  I haven’t set a specific goal for this, but I’m interested to see just how much I can use the bike for.

Hope you all got your financial goals in order for 2016 🙂

Spend Less, Save More & Escape the Horde.

Mr Z

18 thoughts on “The Finance Zombie’s Absolutely Smashing 2016 Goals

  1. weenie

    Another great set of simple yet powerful goals.

    I'm still in the middle of drafting mine, think I've whittled them down to 5 or 6.

    Interesting to see that outside of your pension, you're only 40% invested in equities. You're a young chap with many many years of investing ahead of you – in your shoes, I'd probably up that, say more into ETFs which you seem to favour.

    A Bear Market will mean your net worth will look rubbish but you'll be able to purchase more units, which will put you in good stead for when the Bulls come rushing back!

    Anyway, good luck with your goals!

    (by the way, your blog roll links to my old blogger blog so isn't showing my latest posts, only my last blogger post!)

    Reply
  2. Mr Zombie

    Hi Stephen,

    After tax they are the same, there or thereabouts. Which doesn't help in making one choice more obvious than the other! Otherwise I'd agree, overpayments would make sense 🙂

    MrZ

    Reply
  3. Mr Zombie

    Hi Weenie,

    I am putting most of my money each month into equities. I considered rebalancing towards a 75/25 split but with such a long bull run behind us I'm going for a more gradual approach. It will take a couple of years, but if in the mean time there is a bull run, I can rebalance then. That's the plan anyway!

    Thanks Weenie, you too!

    MrZ

    [Hmmmmm – will have a quick look into that now!]

    Reply
  4. SB

    Mortgage overpayments are a good way to get a guaranteed tax free return, and if you really do think that the bear is going to be coming out of the woods in 2016 that might be such a bad return after all. They are also a sort of an emergency buffer – most mortgage deals that allow overpayments also allow underpayments to the extent of what you had previously overpaid. I view this as an extension of my emergency fund.
    In my view the main uncertainty in 2016 is what George is going to do with pensions… it's looking as if with auto-enrolment there's going to be less of a need for a carrot to get people to save for their retirement, and the treasury has been circling around pension pots of higher earners for a year now.
    Good luck with your goals.

    Reply
  5. Mr Zombie

    Hi Stephen, Thanks for your comments,

    Couldn't agree more 🙂

    My thinking was that an equity retreat might be just around the corner, so to rebalance into stocks from cash now *could* be a mistake. My monthly savings will slowly up my equity proportion towards my desired split, although it will take a year or so to correct. If we were in a slump it would be different. Perhaps I'm over-complicating things, but it's my plan for now.

    MrZ

    Reply
  6. Mr Zombie

    Hi SB,

    Thanks, I'll have a look into that. See if I could use my mortgage as some kind of revolving loan, should it be needed. That potential feature had completely passed me by!

    It does feel as if they are circling like vultures for some tax scraps. If they do go after higher earner pension pots it will feel like a big step backwards. With the initial announcement of the pensions freedom I smelt a glimmer of hope somewhere, that is slowly retreating. Diversification might be best, Pension, ISA & taxable in equal measure…

    Thank you, and you too.

    MrZ

    Reply
  7. London Rob

    Hi Mr. Z

    Sounds like a really good set of goals there to keep you busy in 2016!

    On the ISA vs. Mortgage Overpayment, I dont think there really is any right answer – its what works for you. For me, I am concentrating on filling up my and my other half's ISA allowance first, and then overpaying the mortgage. The sooner I can get the mortgage down the more I can save, but its going to be a long road, so I want to get as much as possible into tax shelters!
    Cheers,

    Reply
  8. David

    I don't include the value of my home in my net worth but I do deduct the value of my mortgage. That way both overpayments to the mortgage and savings have the same impact initially. Debt is debt and it has to be paid off, whether or not its secured against your property. If you buy a more expensive home with a larger mortgage then your current tracking system isn't going to recognise the implications of that.

    Reply
  9. Huw Davies

    Nice round up Mr Z! I wish all the very best for 2016!

    Excellent saving rate, and so close it doesn't even matter…well done.

    I would also throw side income's into the ring for making a higher saving rate. In 2015, I found a FAR greater return from focusing on earning more than I did in 2014 from saving more. The ceiling to earning more is limitless, whilst saving more gets increasingly difficult. Really, it's great to do both!

    I would support Rob's point above with regards to overpayments and investing. There is no 1 x right answer as no-one knows what's going to happen to the stock market or house prices. It's impossible to know the future. Whatever gives you the peace of mind you desire is the right move, and once again, if people are unsure it's worth doing both. Moderation is beautiful, much overlooked, successful strategy.

    Good luck my friend!

    Huw

    Reply
  10. theFIREstarter.co.uk

    Nice set of goals. Good luck although not sure you really need it.

    You did mention about the wedding though which can get out of hand, hopefully you and the future wife have had a decent chat about keeping things sensible. I found the FI stuff just a little too late to do much about our wedding cost, a lot had already been baked in before, but it was still relatively sensible compared to many recent weddings we've been to. Also worth saying that I don't regret spending a single penny on it. A great day and the honeymoon was amazeballs!

    Regarding net worth and house equity, yea I do wanna fight about it!! 🙂
    (My all time fave Family Guy character!)

    Reply
  11. Mr Zombie

    Thanks Rob

    Numbers in the long run suggest that saving is better than paying off the mortgage. But that completely removes human emotion from the equation! I'm not quite that emotionless and so overpaying the mortgage (even on slightly) feels like additional diversification and a positive move.

    Good plan LR!

    Reply
  12. Mr Zombie

    Ouch! A prudent way to do it.

    I do include both the value of my property and the liability of the mortgage separately. Looking at my NW in total, overpayments won't change it (just a movement from cash to paying down the mortgage say).

    But I do (sadly) split my NetWorth into assets and liabilities, like a company balance sheet, so I can see the split of my networth. And by tracking expenses I am very aware of the outgoing mortgage payments.

    I agree, debt is debt, and up-sizing your house might just hide additional debt in your NW if you're not careful.

    I'll probably include overpayments in my SR% so that they count towards one of my goals (and keep me motivated). 🙂

    Thanks

    MrZ

    Reply
  13. Mr Zombie

    Thanks Huw

    Once exams are truly finished (waiting on one result) and the wedding has faded into memory, then having a look at income is the plan 🙂 (Which it kind of has been for the last few years, as the studying with work was supported and payrises linked to exam success).

    Completely agree on the moderation point.

    HNY

    MrZ

    Reply
  14. Mr Zombie

    Hey TFS,

    Thanks! And I will need it with the wedding! (I expect to really have to fight this year to meet the goals)

    Sensible-ish! We are doing as much as we can ourselves to keep costs down. Mrs Z had her eye on a location for years, that's cost a bit(!). But we've been paying off as much as we can as we go. There will no doubt be a chunk of NW 'lost' as the time approaches, but it will be worth it!

    Thanks

    MrZ

    Reply
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