Happy New Year everyone! I hope everyone is safe and having a smooth transition into this new start.
It seems this event is always marked with a great deal of optimism because people feel like they have a symbolic marker from which they can wipe the slate clean and start out fresh. It might be eating habits; it might be quitting your bad vices. For me, it always marks a time to re-evaluate our long term financial goals and see if our actions will get us to where we want to be.
Our Long Term Financial Goals – Overview
If you’re unfamiliar with my master plan or my money design as I call it, then check out my latest money design update here in full detail.
Overall, our financial goals for the long term involve building a number of different “buckets” of investments. They are all separated by three different classes depending on when we can legally touch them without tax penalty. If the architecture of my money design is correct, we should be able to make spread out the investments over the course of our lives to create a sustainable stream of income.
The announcement from the IRS that 401k and IRA contribution maximums were increasing was good news for us.
We’ll be bumping the 401k contribution up meet the new $17,500 annual maximum. This puts us well above where I need to be to get my full employer 401k matching.
From our post tax income, we’ll also be bumping up our Roth IRA contributions to the $5500 annual maximum for each of us. That’s a total of $916.66 each month. And while I’m at it, I’ll also be changing my asset allocation. Here are my picks for my next round of Vanguard mutual funds.
One investment fund I won’t be maxing out will be our 403b. Due to no matching, high fees, and low performance, there will be a split between using the money for the 403b and buying more dividend stocks.
In addition to using some of the 403b money for dividend stocks, we’ll also be using some of our profit sharing and blog income to finance this goal too.
First things first, there’s always room to negotiate your monthly bills and get them lowered somehow. In particular, I’m looking at our cable bill. Does anyone have Apple TV or Google TV? I’ve been thinking about looking into that more closely.
In terms of bigger debt, I don’t plan to add any new expenses that would further derail our long term financial goals. We’ll simply maintain the three accounts of low interest debt that we currently are paying on:
1. Our mortgage (3.75% fixed rate)
2. Car payment (2.25% fixed rate)
3. Furniture credit card payment (0% fixed rate until 2015)
You might ask why not pay off all three of these and simply bank the money each month? While eliminating debt is good use of your money, I’m not totally convinced it’s the BEST use for our money. I previously wrote about whether it would be better to pay off my house or invest the money. The exercise taught me that due to arbitrage (the difference between your debt interest rate versus your investment return) using my money for investments was better suited for our long term personal financial goals.
I don’t consider our regular revolving credit cards to be a part of this category since we pay them off in full every month and never incur any interest.
I had considered maybe going for another home refinance, but I’m afraid this isn’t in the cards. Our home value was barely above what we still owe.
More Passive Income:
I have yet to meet one of my long term goal of turning this blog into a source of truly passive income. We’ve only scratched the surface of what this blog can do in terms of generating income. 2012 was a much better year than 2011 in terms of blog income, and I plan to make 2013 no exception. This will involve making the blog more popular, bringing in more concentrated traffic, and writing better content.
2012 was my first encounter with dividend stocks. So what can we try differently in 2013? How about peer to peer (P2P) lending? The idea of this is enticing to me for many reasons: The income is passive. The interest rates are higher. And depending on who you choose to lend the money to, you (should) get your principal back.
What do you think? Who has experience with P2P lending? How about everyone else – How will the New Year affect your long term financial goals? Is anyone starting out with any major investment or passive income targets?
Image courtesy of sheelamohan / FreeDigitalPhotos.net