I would like to say that I have always been a goal oriented person, but that would not be the truth. Although I have been AMBITIOUS for as long as I can remember, I haven’t always given myself a clear path to success. It wasn’t until I read the Slight Edge for the first time in 2011, that I became OBSESSED with SETTING GOALS and ACHIEVING them. It’s pretty amazing what you can accomplish when you actually set SPECIFIC and MEASURABLE goals.
As humans, we tend to overestimate what we can do in a day or a week. But we also tend to under estimate what can be accomplished in a month, quarter, or year.
Writing (or typing) out your goals and then reviewing them on a regular basis, keeps them top of mind. It is not just the mere action of writing them down that makes setting goals so powerful. It is the daily review that keeps you in achievement mode. This daily practice is the first step in success. You start to visualize yourself accomplishing your goals, and your subconscious continues to work around the clock to find a way to ensure success with enough repetitions. Some people call this the law of attraction…and if that is a little to hoke for you, I tell people that your FOCUS goes where your energy flows.
The things we think about the most, tend to become self-fulfilling prophecies. The mind is one of the most powerful assets we have, and if fully leveraged can find a way to get just about anything we desire. This is not meant to offend anyone, but I don’t believe that any of our fulfilled desires are a result of any magical force or god. None of us are so special that we get special treatment…that is just ridiculous. We are in control of our own destiny.
We are the most intelligent being on earth. Most of us take that intelligence for granted, while others go on to change the world and live the life they first dreamed and then designed. Think about the world we live in for a moment. 99% of the things in our daily lives did not exist a mere 100 years ago. Everything we see was based on someone’s idea. At some point ideas are transformed into goals, which are then transformed into reality.
How powerful are we?
We have been blessed with a gift to turn ideas into reality. We are only limited by our own limiting beliefs.
“Most people fail in life not because they aim too high and miss, but because they aim too low and hit.” – Les Brown
Let’s break through the glass ceiling we have placed on our potential and start setting goals that get us out of our comfort zone. When you set your goals, make yourself uncomfortable, by setting goals that will stretch you to grow. Goals that you’re not sure exactly how your going to accomplish based on the person you are today. Jim Rohn use to say “if you want more, you must become more.” The most powerful thing about setting goals and accomplishing them, isn’t the end result of the goal, but who you have become in the process.
You begin to realize that the mind can ACHIEVE anything YOU can BELIEVE.
Our 2016 Financial Goals (1st pass)
I have always been a little obsessed with numbers and tracking, but I will admit that I have taken that obsession to a whole new level since starting this blog. This past year, I have gotten more granular than ever before.
It’s important to track where you have been so you can figure out how you are going to get to where you want to go. Personal Capital is my tool of choice for automated tracking. It’s a FREE tool that aggregates all your accounts into one place and provides you with summaries (and detailed transaction) of all your financial data.
I have recently been using this aggregated data to set up my financial plan (cough…budget) for 2016. My idea of a budget is not like that of most. I don’t set a budget to live and die by, rather to set targets and goals to aim for. It’s my best guess and a bit of a stretch for me to accomplish.
Some of you may be thinking that 2015 isn’t even over yet, how can you already be focused on 2016. Maybe I have been in Corporate Finance for too long, because we always start planning for the next year about 3 months before the current year is over. We also need to realize that 2016 will be here faster than we realize.
Here is what I have come up with so far:
In order to complete the year over year analysis, I also had to go through the exercise of forecasting how we plan to finish 2015. Something else I should point out, is that this is draft number 1. Meaning I have started with what I consider to be the base case for 2016 based on the information I currently have and with no layered in initiatives or goals if you will. This should on auto pilot.
The Big 6 Highlights:
- Gross Income is on track to go up by 6.4% in 2016. This is largely due to the mid-year raise I received that we will get to experience the full benefit of next year. In this first pass we have no assumptions for any raises and we have pushed my wife’s income down by $30K going into 2016, as a large part of here monthly income is commission based. We think the market will stay strong going into an election year, but are putting a bit of conservatism in the first pass (or base case). We want to see what we know we can do, and then use that as the launching pad for setting our stretch goals.
- Taxes are projected to go up 27.3%. This is due to several things. First our taxable income is going up by 13.3% due to the increase in income. Additionally, we are losing some of the deductions and a one-time tax credit we have for installing Solar. Before the end of the year I plan to run my numbers through a mock tax return using my tax software, and will compare that to what I calculated recently, which as come down a bit since my “Oh Shit” moment.
- Our Take home pay is actually going down by 2.8%. A big piece of this is the fact that we will be contributing to my wife’s new 401K in 2016 which will allow us to put $18,000 away vs. the $5,500 we were putting away in the IRA. The timing could not have been better, as we are getting dangerously close to being phased out by the IRS income limits for deductible contributions. The other piece is the increase in taxes.
- We are actually forecasting a 20.1% reduction in expenses. The savings is coming from 5 major categories (highlighted in bright green): home & mortgage, home improvement, food & dining, auto & transportation, and personal development. Our two big home improvement projects in 2016 will be to install new flooring on the bottom floor of our house, and to refinish the cabinets. Believe it or not, work we plan to do ourselves. Even in the face of my lack for skills and ineptness when it comes to DIY home improvement. You may also recall from my August Financial report that we were going to be making a shift in our strategy to pay off the mortgage early (more details to come in early 2016).
- We are forecasting a 9.6% increase in our savings rate (up 21.8%). It looks like we are going to be just short of our goal to save 50% of our income in 2015 (we set the goal mid-year). 2016 is looking like it will come in right at 54% in this first pass.
- Net Worth is forecasted to finish up $109K or 35.8% (to $414K). In the plan I outlined to hit $10M in a 20 year period (2015 was year 1), we have miles stones of $301K (2015) and $428K (2016). This is short by $14K of the 2016 milestone, but does not include any market appreciation or depreciation (assumptions are currently 0%).
This post was really intended to push you into planning mode for 2016. When you fail to plan, you plan to fail. The reason we start thinking about this stuff so early, is so that we have plenty of time to put the systems in place to accomplish these goals. And so that we have enough time to think through all the details and the different initiatives that we need to layer in, to achieve the next milestone in our longer term plan.
In my next iteration I will be layering in assumptions for the following:
- A pay raise for me, even though I just got one in July.
- Stock options in the company of my day job.
- An additional Rental property in 2016.
- Higher income for my wife.
- My initiatives for producing side hustle income in 2016.
- Overall plans for creating more passive income in 2016 (i.e. cash flow real estate).
- Life Insurance (this should make for a controversial, but interesting post series)
- Family Trust & Will
- An expense line for Charitable Causes.
During the remainder of the year, I will also be taking time to think about other non-financial goals that I want to accomplish in 2016. It’s not all about the money, right?
What kinds of goals are you planning for 2016? Who is ready to make 2016 an EPIC year with me? When will you start and finish your planning?
-Gen Y Finance Guy
p.s Did you notice the NEW “Start Here” page? It’s a curated journey through this blog and it’s content. Check it out!
Personal Capital allows you to aggregate your entire financial life into one account. All you need to do to see all your accounts in one place is log in to Personal Capital and voila! But it doesn’t stop there. They even automatically classify all your income and expenses for you. You get a FREE and fully AUTOMATED tracking system!