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.
Investments Goals:
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.
Debt Goals:
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?
Related Posts:
1) My Cash Flow Plan – September 2012 Update
2) Budgeting Advice to Help Keep You Motivated
3) Building a Special Gift for Your Young Adult Children
Image courtesy of sheelamohan / FreeDigitalPhotos.net
I plan on adding P2P lending into my investment strategy over the coming weeks. I’ll have to let you know how I go.
Awesome! I plan to do the same with some of my blog income. If enough of us get going on this, we can pool our knowledge and really figure out the best strategies for getting the best return.
I’ve never really looked into P2P lending and probably won’t. Our big goal this year to start working on a SEP IRA for our business. We’ve finally gotten our business to a point where it’s bringing in good income month over month and can now re-focus on retirement investing. SEP limits can be considerably higher so hopefully we can make some decent headway.
John, that’s great to hear that you guys are doing well enough to make this consideration. I don’t know much about the SEP IRA, but I do know that the contributions are higher. Take as much advantage of it as you can!
Right now my goals are a little more simple, like paying off the rest of my debt and building my emergency fund. I can’t ignore investments forever since I’m 42 and nowhere near where I should be, but first things first. Yes, I hope to build up some kind of passive income this year. My first step is a collaborative ebook.
All races start with the first step. Those are perfectly fine and suitable goals for you at this point. If you do ever need any investment advice, I’m here to help. I will be interested to hear how your efforts with the eBook go!
I am definitely going to look into peer to peer lending after my girlfriend’s student loans are paid off which hopefully will happen this year!
That’s quite an aggressive pay-off schedule you guys have pushed to get those loans paid off. Good job! Hopefully by the time you look at P2P, I’ll have a few posts about the mistakes or successes I’ve had that will be of value to you.
I just put 5K of “fun money” into Lending Club. I’ll be updating on how it goes!
I’ll definitely be interested to hear how that goes for you.
Happy New Year MMD! I haven’t tried P2P lending but interested to see how you choose who to lend to and how it goes. good luck with your goals!
Happy New Year to you too Pauline! I’ve got some reading up to do on P2P before anything can happen. I know one of the pitfalls is choosing prospects with high interest rates but risky credit ratings. I’ll have to see how others found their happy medium.
I definitely have the goal of getting more passive income. The dream is to be able to live off it as my main source of income, but we’ll see what happens 🙂
You just need to act on your “mo houses” mantra. 🙂 A lot of people have gotten very rich by buying several houses or an apartment where they can spread out risk over having multiple tenants. There is a good book called “The Wealthy Code” that dives pretty deep into how to pull this off.
I have no experience with P2P lending, but have heard it mentioned a lot lately in the pf blogosphere and am intersted in learning more about it. This year we’re planning to increase our savings and hopefully pay a little extra on the mortgage. I also need to contribute more to my retirement and we’d like to start researching buying a rental property.
KK, welcome to the site! Those are all excellent financial moves. Keep in mind that you don’t need to take on too many things at once. That rental property idea sounds good, but be prepared to devote a lot of time to it in the beginning.
I haven’t specifically set goals in terms of income with my site, but I believe the other goals I’ve established for it coincide with increasing how much I’m making from that.
The majority of our other goals revolve around eliminating some of our student loans. I’d love to hop on board with the P2P lending…although I’ll be starting in small increments.
Jason – I totally believe five figures is a great goal for income on your site. You’re already very optimized for it with the credit card page, other ads, and the high traffic goals you’ve set!
Barbara Friedberg and Jeff Ross have dabbled in Peer to Peer Lending. Both have expressed that it has worked for them. I think most people feel that investing is only about retirement accounts, but it should include a taxable investment account. An investment account you would have access to instead of 59 1/2 years of age like retirement accounts. It’s a good idea to explore the possibility of having a different investment accounts.
Ornella, its like you read my mind (or my last Money Design post).
https://www.mymoneydesign.com/personal-finance-2/retirement/money-design-achieving-financial-freedom-nov-12/
One of the big shifts in my retirement strategy has been to balance out the focus on pre and post retirement accounts. the pre retirement accounts are of course the taxable accounts that I can access without penalty. If I can architect this whole thing correctly, I’d be looking having income throughout my whole life as opposed to just after age 59-1/2.
Thanks for the tips on Barbara and Jeff. I’ll look there to see if they have any posts with tips on the subject.
It is good idea to set long term financial goals but if we prepare a monthly financial plan as shared here https://www.boomerandecho.com/monthly-financial-planning-checklist/ and set monthly goal then long term goals easily can be achieved.
That’s a good point. Long term goals are good for perspective. But when it gets down to actual nuts and bolts, you’ll need to have some good short term goals so that you can make progress.
I haven’t done the P2P lending because my state won’t let me originate loans and I don’t want to deal with their secondary market. I also prefer to invest in stocks and get better tax treatment or I would look to municipal bond funds for a safer tax free return, but that’s just me.
I am interested to see how your P2P experience goes. Most people it seems to be pretty positive and I hope it is for you too!
Thanks Brian. Those are good points about the tax treatment. As we all know, taxes can eat into anything you pursue, so it would be wise to consider how that plays into the overall gain. I don’t plan to start with very much in P2P – just enough to get a handle on things and see if its worth getting into deeper. Thanks for the positive wishes and I hope I don’t make too many blunders.
I agree about debt….while it’s always good to have it gone, there’s some that just doesn’t make mathematical sense to eliminate. Cheering you on for blogging income 2013!
Thanks FF! Not a lot of people understand how arbitrage allows them the potential to make more money by investing as opposed to paying down low interest debt. Although both are good moves, one is certainly more lucrative than the other.
Hoping that you see some good blog income in 2013 yourself! Let’s all go for five figures!
I think you are on the right path by focusing on building passive income from your blog. This is a goal that will take some time to achieve but if you create quality content it will pay off!
Agreed! Quality content is No. 1. But I have been spending a lot more time with keyword selection, SEO, and other tricks to make my site more appealing. If I have any substantial gains in traffic and conversions, then I guess it wasn’t all just an exercise in futility! 🙂
Im on the same boat as you, I want to increase my blog income and dividend income. I struggle to fully max out my 401K but I increase it 1% every year.
Great minds think alike! Hope your efforts with the blog and dividend stocks pay off well. If you keep increasing your 401k every year, then you’ll get to the max eventually. I got there by splitting my raise each year between my 401k and my take home.
I am certainly interested in P2P lending. In a way, I’m already doing that with seller financing a portion of my business sale, but I am also interested in online as well.
I’ve been reading a few articles on it now and it seems a lot like bond investing. Look for good rates of return, but don’t get so caught up that you end up lending money to people who have no chance of ever paying you back. We’ll probably start with $1K or so and see what happens!