My Personal 2013 Goals
I hope that most, if not all of you have set some personal financial goals for 2013. Setting goals is an important part of any financial strategy aimed at financial independence. I learned this the hard way when I first attempted to set a strategy for my self to eliminate my personal debt. Two years went by and although each year saw me marginally better in terms of what I owed than the last there?weren’t?any significant or major dents in my debt. So what went wrong? One of the main things that went wrong was that I?didn’t?set any goals for what I wanted to accomplish that year in terms of retiring debt.
I learned?that lesson?the hard way and in a sense, threw away two years of being able to eliminate my debt. One thing about making mistakes is that you should learn something from them. I did, and I won’t be making that mistake again! As a matter of fact, I’ll go one step further and make my goals a public commitment by putting them on this post. So here are my key financial goals for 2013:
- Eliminate $15,000 in personal debt?You might find the breakdown of this goal interesting, if not somewhat contrary to many popular debt elimination techniques. I’m shooting for $12000 in unsecured debt and $?3,000 in secured debt. You might wonder why I’m even focusing on paying off secured debt rather than focusing entirely on unsecured debt. This is especially true if you follow the ?”Snowball” method of eliminating debt. The reason is simple, it’s a relatively low balance compared to some of my other debt. More importantly, the amount of monthly cash flow it will free up is significantly higher than what would have been freed up by paying off a high interest credit card with the same balance. So by paying off that secured debt I will be able to tackle the unsecured debt much more aggressively.
- Increase my net worth by 10%?I keep track of my net worth?zealously. If your goal is financial independence then understanding your net worth ?is a must in your overall financial strategy. Ten percent may sound like a lot but I have found it to be a manageable and sustainable goal. If you’re on track with eliminating debt, if you’re contributing a significant amount to your 401k & IRA’s and if you are a prudent investor then seeing a 10% increase in your net worth should be within your reach (BTW, I’ve achieved an average of 10% even with market fluctuations n the value of the properties I own).
- Increase my Emergency fund by $2,000?My emergency fund isn’t where it needs to be adding two thousand dollars to it wont take it to three months worth of exppnese (which my target for an emergency fund) but it will get it on track.
I also have?stretch?goals. If you manage to somehow reach your stretch goal nine months into the year you should continue on the same path and shoot for a “stretch” goal. My stretch goals are an additional $5,000 in personal (unsecured 🙂 ) debt and a?fifteen?percent increase in my personal net worth. So now that I’ve set a benchmark for myself and made it public I’ll have to be twice a diligent and?achieve?these goals!
Tips on Setting your Goals
?Here on some tips to help you set your own personal Financial goals in the coming year:
- Understand and Prioritize Your Debt?- If you haven’t already done so now is an excellent time to do this. Understanding what you owe, and what the cost in interest is to you is a?necessity?if you want to?tackle?your debt as one of your goals. By understanding your debt I mean that you should have it categorized. Unsecured debt should take?priority over secured debt, higher interest rate debt should take priority over lower interest debt in terms of what you want to pay off first. There are exceptions to both of these but for the most part these priorities should help guide you in your efforts.
- Evaluate Your Spending?Habits –?Even the most disciplined of us will eventually?drift?off course and acquire spending habits that may not be in our best interest. Take a sound look at how your spending your money to see of this has happened to you. You may be surprised and find that you can free up some money to help tackle some of the goals you’ve set for yourself.
- Set Up and Stick to a Budget?- If you haven’s set up a budget for yourself then what are you waiting for! You need to have a firm grasp and understanding of what you incomes and expenses are to set up realistic financial goals for yourself.
- Think about Savings?-?Abolishing?your debt?isn’t?the only goal you should be thinking about. An emergency fund and retirement accounts need to be fed too. Personally, I contribute as much as I am able too to my 401k and IRA as well, when I can. I don’t quite max out on my 401k but am close. I’m sure there are some that would rather divert this money towards debt and that is a sound strategy. However, I prefer to have a strong growth in my personal net worth, especially when you consider that retirement accounts are “sheltered” for the most part (sheltered from a tax as well as potential liability).
- Set Stretch goals for yourself?- This one is pretty simple. If events in your life change during the course of the year, or if for other reasons you simply are able to meet the goals you set for yourself early in the year, then you should keep on course and have a set of stretch goals to aim for.
- Keep Your Goals Reasonable?and Achievable?- Lets face it, if you earn $30,000 a year and set a goal to save $12,000 and pay off another $12.000 in debt then one or both of your goals are going to meet in failure. Setting up goals that are impossible to reach will only lead to frustration and resignation. Keep it reasonable and celebrate when you hit them, then march on towards your stretch goal!
- Keep the Machine Well Oiled?- Set some aside from yourself. There are a few people out there that are capable of living the most austere lifestyles without a break, a vacation or a hobby. I myself would crack so I set aside some for myself. Set up a goal as to what you want to do for yourself in the coming year whether it be a vacation or funding a hobby. Make sure you account for this in your budget.
One last parting thought. Although New Years Resolutions are rarely kept (Notice i never used the term in this post) you should also set some personal goals for yourself. This really is part of keeping the machine well oiled. Losing weight, going to the gym, quitting something (smoking, drinking,?pick?something) are all things that we should consider doing. Rather than approaching it as a “New Years Resolution”, approach it as a goal. Set a plan for yourself, set some dates with criteria as to what you want to accomplish and follow the plan! Best of luck to you in 2013!
Note:?I posted this a week ago ?but it seems to have?disappeared from my blog so I’m?re-posting?it.
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I was a bit confused reading #1, but I take it that you’re paying off the highest interest rate debt first? I used to stream Dave Ramsey’s radio show on occasion but I couldn’t stand, among other things, when he lied to people about how it’s better to pay off the smallest balance debt first. That’s obviously just not true from an objective perspective.
Joe, I’m with you on that, High interest debt needs to and should be prioritized over everything else. But, as with all “Hard and Fast” rules, at times there are exceptions to that, this would be one of those exceptions. The interest on the “secured” debt that I aim to pay off is middle road in terms of the interest. I certainly have higher interest debt. But, this particular debt sticks out at me every time I do the bills. It’s one I know I shouldn’t have taken on, even with a relatively low balance. So why am I prioritizing it? Here are my reasons: 1) Psychological, It’s going to make me feel a whole lot better to get rid of this one, 2) Free up “debt Paydown” money, that I can then use to hit the high interest rate debt, 3) The lending institution that holds this loan quite frankly sucks. It’s a credit union but one who’s practices should ban them from being in the financial markets. Good enough reasons for me. Everyone’s situation is different and I think that although they should always focus on the high interest rate debt firsdst, there are occasions where it makes sense to tackle other debt first. – Jose