I hope that everyone had a great holiday! I enjoyed the break from blogging, though I was still reading blogs somewhat and will catch up on some commenting. It’s so wonderful to be back home in my condo! I really want to put some more home-y touches around the place in the next month or so. The second bedroom especially needs some work. I found some $2 picture frames at Target that should be great for trying out a gallery wall of my travel photos!
Last year, I made 11 goals. This year, there are a lot fewer, or there were when I first started the list, oops. I thought these were all set at the beginning of December, but I’ve been putting a lot of thought into these. I’ve debated purchasing i-bonds, maxing out my Roth IRA for 2012 and 2013, paying down the mortgage, increasing my emergency fund, and purchasing index funds in my regular account. I even opened a Treasury Direct account! To be honest, I’m still debating what I’ll end up doing for the year as I publish this post. What I do know is this: savings is a huge priority, the traditional 401(k) will get maxed out, and it’s just a matter of how to allocate all of the funds other than that…
To help with the problem, I thought long and hard about what I want my finances to look like at the end of 2013. That was definitely an easier way of phrasing this.
1) another $20k-ish in my 401(k). I say ish because maxing it out means putting $17,500 in, plus the match from my employer and dividends on all of the index funds. The dividends are the best part – in 2013, the dividends might even outpace my employer match!
2) to have a full 12 months of expenses in an account that is accessible within 3-5 days, at the prior year’s spending level. Until I closed on the condo in mid-2012, about 70% of my assets were in cash and I had over two years of living expenses in cash. I’m now down to 9.5 months, with about 13% of my assets in liquid cash and 6% in taxable investments. 30% of my assets are in tax-advantaged retirement accounts that can’t be withdrawn except with huge penalties. 47% of my assets are tied up in my condo value and while I don’t like the size of my mortgage, I want to have a bit more money in cash. (The other 4% is my checking accounts.) It’s less about the percentage of my assets that are in cash and more about the number of months I could live off of my easily accessible funds.
3) to put the maximum I can into the Roth IRA through the front door. I need to do some more research before putting any more money in the back door. My deadline for this research is April 1st for the 2012 tax year’s contribution. This research will be important since I’m pretty confident I will be over the income limit to put any money in through the front door in 2013.
4) to put every purchase on a credit card. This may result in me moving my primary checking account (since it’s currently a dividend rewards account and only by making enough debit purchases do I get free ATM transactions). It will result in higher credit card limits since my current limits are essentially unusable. The first step is to ask my primary credit card credit union to increase my limit to $10,000. The second step is to ask my other credit card company to increase my limit to $10,000. It doesn’t hurt to ask, right? And they can always come back with less than that, but at least I tried.
5) to pay down the mortgage. I would like to get it under $200,000 if possible. A stretch would be paying it down to 50% loan-to-value (LTV) or to my 2013 gross income including RSUs.
6) to save 50% of my net income each month, ignoring RSUs. That seems like more than a reasonable spending level, so I’m going to try to stick to that.
7) to save 100% of my RSUs. Why? I don’t want to rely on these. 2013 could be an anomaly income year and I want to take advantage of that to increase my net worth by leaps and bounds. I think that I could increase my net worth by $100,000 without a lot of effort this year and I would love to do that!
8) to close the gap between debt and assets. There is a gap of ~$150,000 between my mortgage and my non-property assets (checking, savings, CDs, stock and bond investments). That is a huge gap. I don’t think that I can eliminate it entirely in 2013 (perhaps in 2014!), but I would like to narrow it pretty significantly. I think that I can get it down to ~$50,000 by the end of 2013, which is much more manageable and making it possible to reverse the gap (assets > debt) in 2014.
So my ideal financial structure would look like this at the end of 2013:
- $100,000 in investments (2 years of expenses)
- $48,000 in cash savings/taxable investments (12 months of expenses)
- $200,000 in mortgage debt
- $50,000 less in assets than debts
This may or may not be ambitious, only time will tell.
Readers, what does 2013 look like for you?