As I mentioned in my earlier post, I wanted to see where my financial situation was at the end of December 2007 before considering what I should do for 2008. I first calculated my net worth (including home and car) in mid October 2007. Therefore, my 2007 numbers do not include a year's worth of financial data. To calculate my debt, I also created a simple mortgage calculator to keep track of how each payment decreases what I owe.
In 2007, assets increased 1.16% , debts decreased 0.44% and my net worth increased 3.34% to $85,360. I have enough liquid assets to cover 5.5 months worth of expenses. My debt-to-income ratio is 23% of my gross monthly income (below the 30% or less target), and I save 28.5% of my gross income (covers liquid and retirement savings).
My 2008 financial goals (to be fulfilled by December 31, 2008):
1. To reach a net worth of six figures ($100,000).
I will have to work hard on this one. I do not think it is out of my reach on my current income but I will need to keep assessing where I am. My monthly calculation of net worth will help me keep on track for this target and allow me to adjust my savings to reach this goal.
2. To have $15,000 in liquid savings for emergency expenses.
My liquid savings includes what I am saving for a car, a small amount for fun items which I am discontinuing and my "found money" account. Excluding these and my planned window replacement expenses means this is a challenging goal for me. I have just over $9,000 now and my current savings rate should get me to this number. However, being an emergency expense fund, I cannot count on current numbers getting me to this point.
3. To have $500 in my "found money" account.
This account is funded by rebates, bonuses, gifts or other irregular and unexpected amounts of money. I do not put all of a bonus in this account, just the odd dollar amount (e.g., $8.37 from $38.37). I currently have $81 in this account and my final goal is $3,000 to open a Vanguard account. It is difficult to predict how much I can put in there in one year as I have only started it in October 2007.
4. To increase my contributions to my Roth IRA to $3,000.
I opened a Roth IRA in 2001, contributed twice, watched my money lose half its value and promptly ignored it. In 2007, I rolled it into a T Rowe Price index fund, contributed monthly and threw my state income tax refund at it. My contributions fell just short of $2,000. In 2008, I will be contributing for the entire year and adding my state income tax refund. I anticipate I should be able to get to this amount.
5. To generate $2,000 from an alternative income source.
This goal is more nebulous because while I know I want to make money other than through my job, I have yet to figure out what my alternative income source will be. My track record finding a retail job speaks for itself (they do not even call me back), and I am not sure what skill to use on behalf of others. This will be a challenging goal for me for these reasons but I want to limit my dependence on a single job and income. I believe in having back ups and I need to have another income source.
I expect that my percent saved (28.5%) will fall a bit but not below 27%. This will change depending on my raise and alternative income stream. I am looking forward to learning if I can meet these goals. To exceed them would be fantastic. What are your goals?