2018 New Year's Financial Resolutions

Before you create your 2018 New Year’s Financial Resolution goals, make sure you’ve spent the time to track your monthly or annual expenses so you know your current financial position.  Every December, I create financial goals for the next year.  Additionally, I make stretch goals which require hard work, research, risk, and luck to achieve.  2017 has been the first year I’ve made all my stretch goals.  Here are my 2018 New Year’s Financial Resolution goals.

1. Max out my IRA.  This is the first thing I do every year.  There’s a small debate whether it’s good to save the previous year so you can fund your IRA the first day of the new year or use new year money to fund it.  This is a silly debate to me.  The key is to take advantage of the small pittance of non-employer provided tax sheltering the [oppressive] government allows us to take.  When you do it in the tax year doesn’t really matter—only the investments you make with that money determine your return.
2. Increase emergency savings account/short-term cash savings.  As my net worth increases, so does my desire to have money in a money market or high-yield savings account.  I also save for any short-term goals I have that year requiring access to cash.  I come from a poorer immediate family with little support from extended family.  This requires me to be more conservative with emergency savings accounts.  If you have a stronger support network, you can join the ever-popular movement foregoing emergency savings accounts.
3. Save at least $X from each paycheck.  Most people prefer the “pay yourself first” method where you save money before doing anything else.  To meet my stretch goals, I usually reduce dining out expenses or find other ways to save money like reducing my monthly bills.  Excluding my mortgage payments, my 2017 savings rate was 38%--58% if you include my mortgage.  I plan to increase the savings rate in 2018.
4. Increase passive income from previous year by 25%.  I don’t actively seek to increase the passive income because it depends on how well my long-term mutual funds do and distribute at the end of the year; if my short-term stocks are dividends stocks; and how much I put into savings and bond funds depending on my allocation percentages.  As stocks go up, I put more in bonds and as stocks go down, I sell out of bonds and buy quality stocks at cheaper prices.  I f I have a lot in bonds, I’ll earn more interest.
5. Increase Net Assets to $X.  This is my furthest of a stretch goal.  It requires 12% or greater returns on nearly all my investments.  2017 was the first year I’ve met and exceeded this stretch goal because of good stock returns and the massive increase in my cryptocurrency portfolio.  Bitcoin alone made up nearly 20% of my net asset gain this year.  The only asset that didn’t significantly increase was my home equity.  Despite a year’s worth of mortgage payments, the housing prices barely moved in my location.

What are your financial goals in 2018?  If you need help, leave a comment and we’ll create some together.

What does FIRE mean?

FIRE is a new acronym spreading like fire (pun) throughout the personal finance world.  It stands for Financially Independent and Retired Early.  FIRE is the new personal finance goal replacing “I want to be rich.”  Being rich really means nothing—the same as being wealthy.  FIRE is the new standard because it allows us to define goals and objectives, and more importantly, measure our progress.  Let’s look at each one separately.

Financially Independent – The goal of being financially independent is to create a lifestyle focused on passively earning income while minimizing expenses.  There are many objectives you can use to achieve being financially independent and here are some: 

• Generate passive income – You can do this by investing and earning interest and dividends.  Renting out real-estate properties is a very common method.  You can also do this by having a side job like blogging.  The main objective is to create multiple “streams” of passive income so you minimize risks of losing a stream.
• Minimizing expenses – The most common mistake people make is losing control of their expenses or living beyond their means.  Minimizing expenses allows you to make the most out of your income and to save more.  This means staying away from debt, making smart purchases, and being aware of how much you’re willing to spend on entertainment and services 
• Increase your savings rate – By using your primary income to generate passive income and minimize expenses, you should be able to increase your savings rate.  Unfortunately, many people struggle to save at least 10%, when we should be striving for a 25-50% savings rate (or higher if possible).  In an age of seemingly infinite resources and excessive consumerism, people are struggling to save any money.

Retired Early – Defining “early” is a personal goal.  There is a huge movement to break away from retiring at 60 or later, and having very limited time to enjoy your retirement years.   Retiring early also doesn’t mean a specific retirement savings goal either.  For example, some people just want one million dollars without thinking what the $1M will provide or how long it will last in retirement.  The objective of working towards retiring early involves identifying how much you’ll need to generate by the time you retire.  You calculate how much retiring will cost you annually and then figure out much you’ll need to retire at the specified time you’d like to retire.

• Identify WHEN and HOW you’d like to retire – A common retirement goal for military members is to retire from the military at ~45 within the same lifestyle they were living.  When military members retire after 20 years of service, we receive 50% of our basic pay plus an additional 2.5% for each year after that.  In the beginning of 2018, the retirement system will change significantly.  The main problem with that goal is that BAH (Housing Allowance) is not part of our retirement, so military members actually only retire with 35% of their paycheck.  They’d need to generate an additional 65% of that income through investing and passive-income strategies in only about 20 years—a difficult task.  A generic FIRE goal is to retire at 55 with a lifestyle slightly less than having full-time jobs.  It’s recommended that your expenses (living, traveling, hobbies) only make up 80% or less of pre-retirement expenses.
• Your savings rate is within your control – The easiest ways to retire early are to have a high savings rate and live a retired lifestyle within your means.  It would be difficult to retire early saving only 10% of your income.  Conversely, one could retire early within an aggressive savings rate of 50% or more.  Additionally, you could also live a life in retirement which requires very little income.  I know one military family that will only need $25K a year for their retirement plans.  The military member’s retirement income will fully cover the cost of their simple retirement.

The people most interested in FIRE tend to be minimalists.  They have no interest in excessive consumerism or working until they’re old.  They want to enjoy life earlier and without the distractions of excessive TV consumption, celebrity worship, and the exhaustion of a hectic life.  Is this something that interests you?

2014 Year in Review and 2015 New Year's Resolutions

Every year I create financial goals to help guide me through the year. I first read this quote when I started my fitness journey regarding meal preparing, "If you fail to prepare, then you are prepared to fail." (Unknown). I think this is relevant in any goal management, but especially with financial goals. Here's a sneak peek at how I managed my finances in 2014.

• Max out Individual Retirement Account (IRA) - In 2014, the limit was $5,500. This is always my first goal and I've been maxing it out every year for almost a decade. This is my first goal in 2015 as well. I use Fidelity to manage my IRA; if you're interested in starting a Fidelity account please let me know so I can refer you. In 2014, I met this goal.
• Put $XXK into my "high-yield" savings account - This is my emergency savings account. I'm expanding it beyond the 6 months of bills (the typical advice) to add 12 months of bills for my new house. My goal is to have the ability to absorb a whole year of not having a renter when we PCS and have to rent this house out. Some of the increase will also be for a new car in 1 1/2 years. I use CapitalOne 360 (the bank that bought ING Direct) for my "high-yield" savings account; if you're interested in starting a CapitalOne 360 account please let me know so I can refer you and we both get money. In 2014, I met this goal.
• Save at least $XK from each paycheck - Ever since I was an E-4 I've been creating this goal. No matter how hard you plan, you'll always have unexpected costs throughout the year. For this goal, I'm focused on the end goal so if I can't save the goal from one paycheck, I'll make sure I save a little more from a future paycheck. But this gives me an average savings goal from each paycheck and allows me to see if I'm exceeding my goal or not meeting it. In 2014, I met this goal.
• Increase dividend income by X% to $XK - One of my retirement goals is to supplement the amount I lose by retiring with dividend and interest income by the time I retire from the Air Force. This is a lofty goal and I may need several years after Air Force retirement to achieve it. Nonetheless, I try finding better return rates on my investments to achieve this goal. One of my new investments this year was Lending Club. They offer loans ($35K or less) to people and investors can contribute $25 increments to their loan so it spreads the risk while offering a better yield. By playing it safe, I earned a 9%+ return on investment this year. If you're interested in starting a Lending Club account please let me know so I can refer you and we both get money. In 2014, I DID NOT meet this goal. I was very close but missed the goal by less than $200. I'm not too worried, but next year I would like to say I exceeded the new goal I set.
• Net Assets of $XXXK by the end of the year - This is just an overall goal. I don't focus on how much I have saved total. I focus on what the money is doing and what return on investment I'm getting. People focus on a round number like $1M without figuring out what their going to do with it once they get there. Most rich people don't even care how much total they are worth, they only care how much money it's earning so they can use it. Either way, it helps me focus and ensure I'm earning a decent of return on investment. In 2014, I DID NOT meet this goal. I tried to do some ultra-risky investments to help my wife pay off her school loans and they all back fired on me. I lost a lot of money this year on those investments and it stings pretty badly. My house equity didn't rise at all either like I had expected. In fact, I manage my Dad's IRA and it's pretty conservative and safe and he crushed my returns this year.

These goals are specific to me. If I had debt-management goals, then those would be near the top. If I didn't have an emergency savings account, then that would've been my first goal. What are your goals for this year? If you need help or are interested in being referred so we both get money please leave me a comment or e-mail me at bjone6 @ gmail . com (spaced out to prevent spam bots).

How to Make a New Year's Resolution

Have you tried to make New Year's Resolutions in the past?  Is the resolution a financial one or a health one?  Does the resolution only last 3 days, 3 weeks or only 3 months?  Don't worry if this happens to you because it happens to a lot of people.  The secrets to making a New Year's Resolution a success are to make more than a one-sentence resolution and keep yourself accountable.  These steps are similar to my How to Set and Complete Financial Goals blog post.  Here's an example of a proper way to execute a financial New Year's Resolution.

Resolution:  I want to become debt free in 2014.  This is where people usually stop.  They may cut some spending the first couple of weeks but then they lose motivation and the New Year's Resolution disappears.  You have to create some short-term goals and a timeline like the one below:

• Goal 1 - Identify which debt sources should be paid off first.  Always start with the smallest balance and then work your way up, using the free balance from the first source to go after the next, bigger source.  If balances are the same, then go after the one with the highest interest rate.
• Goal 2 - Divide the total, or the amount of debt you want to reduce by, 12 months.  If you owe $12K, or want to reduce your debt by $12K, then you should shoot for $1K a month.
• Goal 3 - Get your calendar out and mark each quarter and write it down.  Every two weeks, or every paycheck, remind yourself about the Resolution consistently.
• Goal 4 - Make yourself accountable.
• I always recommend using Facebook, Twitter and/or Instagram.  On January 1st, download little images you can post each month or each milestone so you always see what you were supposed to do when you look in your Pictures or Documents folder.  Post it on Facebook and ask your close friends to keep you accountable.  If it's a health goal than you should post progress pics as positive attention is addicting.
• Make sure your spouse, if applicable, is on board and talk about it frequently with others.  Then when they see you next, they will ask you about how you are doing on it.
• On a notepad or a Word document, write your January 1, 2015 Facebook post telling everyone that you stuck to your 2014 New Year's Resolution.  Read it frequently.

You can start out by leaving your New Year's Resolution on this blog so we can keep it together.

How to Set and Complete Financial Goals: Work in Reverse

A lot of people have difficulties setting goals and then completing them.  I read a lot of biographies and self-improvement books as well as practice this theory myself and I think one of the best ways to set and complete goals is to work in reverse.  Think about 60 years from now or think about your obituary (seems a little morbid right?) and then set goals of what and where, financially or otherwise, you want to be at that point.  Once you’ve done that, then work in reverse on what you need to do to get to that point and then start completing each task in order to get to your goals.  Instead of just preaching about, I will let you know mine goals; letting people know about my personal life is something I rarely do.  My goal at 60 or when I pass away is to build a multi-headed Empire.  I want to own everything.  So here is each task, how I plan to get there and where I’m at now.  The goals are incredibly high, so if I miss a mark I still hope to achieve major success.

· Hedge Fund Manager – I would like to retire as a hedge fund manager.  I want to own so many investments, including all possible types of assets, that I can affect political policy, change corporate strategies.  I want to own stocks, bonds, gold, art, real estate, land, etc.  To get to that point I have to have displayed success with my own portfolio, once I retire from the Air Force, I will have to work up the corporate ladder and then sell myself to potential investors.  I’m currently an Air Force Finance Officer and plan to get my CPA, Accounting Certification, or the required mutual fund/stockbroker licenses.

· Real Estate Empire – I want to own several properties and land in several cities in several states.  My goal is to be a major player in America’s real estate future.  At 31, I’m starting late in the game, but my wife and I plan to purchase our first house when we PCS to Barksdale AFB, Louisiana.  I will have to keep purchasing homes at the right time, taking advantage of the greed-to-fear cycles American continuously has.  To have a real estate empire, I’m going to have to learn a lot about multi-property management and ensure I balance the risk-to-reward ration that I’ve been comfortable with.

· Media Empire – A person’s relevancy is increasingly becoming more dependent on his or her success on social media.  I DO NOT want to be famous at all.  I would like a large following of people who share my values and/or want to learn from my mistakes and successes.  I want to educate people on what I believe (some may call it brainwashing) through normal media, social media and fictional novels.  Frequency and persistence is the key to success in forming a solid following.  Currently, I have this blog, Military Finance Report, that I try to spread around.  I’m frequently offer financial advice and discuss politics on my personal Facebook page.  Lastly, I self-published my own fictional novel called Blood Flows Like Wine, that I’m currently re-writing.  I hope to make a series out of it called, The Vampire Wealth Chronicles, and is a covert and overt attempt at pushing my ideological beliefs through fictional Vampire novel.  Check out the books Facebook page at www.facebook.com/vampirewealthchronicles and the Twitter page @vwcbooks.  You can purchase it on Amazon here: http://www.amazon.com/dp/ASIN/B00AEFFHRW or on Smashwords here: https://www.smashwords.com/books/view/300393.

This is just a small sampling of what my future goals are.  As you can see, I set the main goal in the future, then I identify all the milestones needed to execute each one and then I start completing each milestone.  I continuously review them and check my progress and adjust as needed.  Your goals can have shorter time horizons or not be as grandiose.