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.”
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.