Financial Goals for 2017
I'm a type that doesn't like to arbitrarily assign specific dates or thresholds to any goal or activity. That being said, a calendar year is a simple and well understood duration of time that everyone can relate to, and it is also enough time to make solid progress on something that takes a long time.
Here are my financial goals for 2017:
1.) Stay debt free.
I went on quite a few adventures relating to my career in 2015, and was ill-prepared for the bill I got from Uncle Sam when my taxes were finally calculated. It left me hurting in debt for the better part of all of 2016. I am older and wiser, and I have established an LLC for my consulting business which will contribute to the overall cost-offsetting nature of working as a sole proprietor. Having finally become free of debt, I intend to continue this lifestyle in 2017 and as long as I keep breathing. I am not counting my home mortgage as debt, but more as an expense of living, such as a cell phone payment or food. So it isn't entirely accurate to say I'm debt free if that is the case, but that's how I'm choosing to look at it.
2.) Build a 6 month buffer fund - $7,200
If the shit hits the fan and I am forced to cover my entire mortgage (if I suddenly lose all contributing roommates, for example) my highest monthly burn rate would be around $2000. The likelihood of that happening in 2017 is near nil, so I've reduced that number to $1200 since I can count on rental income for at least this year. That being said, I intend to build a 6 month buffer fund with that in mind. In total the buffer fund will come to $7,200. In the event that the loss of rental income becomes more likely, I will bump that savings to a safer $12,000.
3.) Keep it to 3 cars or less
It's easy for me to get carried away with different projects, and I have finally come to a point where they're stressing me out because I can't seem to focus on one at a time and finish it before something else comes up. Knowing this about myself, I have been systematically purging my home's inventory of vehicles. I currently have 4, and intend to sell my 2006 Acura RSX in Q1 of 2017 after I get my 1986 Corvette running (both of which you will be able to see and read about in the Flipping Chronicles when the time comes - look for the corvette article the last week of December 2016). I'm also helping a good friend fix and sell two of his cars at my house. A reduction in vehicles sitting on my property by three is going to be a hugely welcome change.
4.) Pay down principal on home loan enough to eliminate PMI
This one is a little tricky. I've got to have 20% of the loan amount paid off in order to eliminate the extra 1% in interest that I am paying on the loan every month for mortgage insurance. With the current amount contributing to the principal, it is going to take another 5 years making the minimum payment in order to get rid of that pesky 1%. My home has appreciated significantly since I purchased it in August of 2015, and as a result could be reappraised for 15-20% more than I originally paid for it (based on Zillow home estimate the exact appreciation number is 21.2%, but this information would need to be verified by a licensed home appraiser). As a result, it may be possible to reassess the value of the property, and drop the PMI without paying any additional money (other than the cost of the appraisal). If the home is actually worth what Zillow has shown me, then I would be able to reappraise today and drop the PMI completely. Since I have my doubts about the actual increase in value, I intend to contribute another $5000 to $10000 toward the principal before Q3 of 2017, to be certain that I'll be within the new 80% appraised value threshold. The elimination of PMI will pump approximately $120 a month into principal that was previously going to interest. Over 5 years, that would amount to over $5,000! Not bad for some simple due diligence!
5.) Increase gross income by 35%
My plan to achieve this lies in a combination of diverse income sources between my salaried position, consulting part time with my business, creating quality content on this website, and of course, flipping cars. I currently have a plan slated to come close to this number that only requires me to profit about $5000 from flipping cars in order to achieve this. Also, notice the use of the word "gross" above - achieving this much income is going to mean I have to make a few large expenses in order to grow my business and diversify my skills. I expect to net around 60-70% of that number after taxes and business expenses. Not ideal, but you have to spend money to make money. Also, apparently you have to pay the government to make money.
6.) Start contributing more to retirements and investments
I've been thinking a lot recently about what I want my nest egg to be, and I have a heavy bias towards real estate. I like it because even if its value drops significantly, you still have something real that you can go live in and eat dog food from a can in if the world ends. Although you might have to protect it with some firepower if that's the case, it's still yours. I will fully assess the feasibility of purchasing a rental property in 2017. There is a good chance I won't actually make rental income on it for a while, but it will be a great deference of taxable income that I intend to take full advantage of.
Until next week!