Wow - what a mixed year it has been!
I am optimistic that the big ugly black cloud hanging over our heads since, September 2012, has moved along. It's only been about 15 months. !!! But anyway, will see... It's only been a couple of weeks of calm and so it's a bit premature to get too excited about it.
Because of this, we did terrible on our financial goals, maybe the worst ever. BUT, all our prior savings worked very hard for us, so it was a banner year for net worth and the big picture. Phew??
Anyway, I wanted to close the books on 2013 because I am SO over it! So, unless something big happens in the next two weeks, this is my final "general" commentary on 2013.
In general, we tend to make our financial goals aggressive and we tend to always meet our goals anyway. This year is a first in I ever remember failing. Spectacularly. The optimist in me is fine with that - if some years we do better than planned then it is expected to do worse in other years - it all evens out.
Cash is up $5,000 by some miracle. We try to increase by $5k every year. Actually, we had decided to hit our goals one at a time this year. It's a mixed bag. We have not particularly put any money into our ROTHs yet (had wanted them funded by 12/31, and expected to do it easy peasy). BUT, if we had, we'd just be really cash poor and stressed right now. So, I think I am happy with this approach. The ROTHs will get funded. I am just considering doing it in April to preserve cash flow and liquidity. (To be clear: We have never in our lives had a crazy expensive year like this one - so it was pretty unusual).
Our goal for 2013 was to save $10,000. We were going to splurge on a trip to Asia. That is completely out the window because we needed *all* of that money for home repairs. Which leaves me ending the year off with some stress since we were supposed to be so ahead of the curve at this point to be able to splurge on a $10k vacation. I share this to illustrate a point. I have friends who will say we never splurge big and do anything fun. BUT, you see what happens when we try. & it's not like I got caught offguard for not planning ahead. !! Instead I am thankful that we had all that cash to cover it and not dip into savings at all. On the flip side, maybe this was just the universe telling us to do something else with that money. IT was kind of an obligatory trip and our relative in Asia doesn't seem to want us to visit her anyway. So... We aren't too broken up about our change in vacation plans. Heck, I am RELIEVED because I Was never very enthused about it. (Note to Universe: Um, you could have left SOME Of that money to do something fun with though???).
We put a whopping $1,500 into our ROTHs this year, and that is all gifts and credit card rewards. I have been saving the money ($900 per month), but just putting it all into cash waiting for the hemorrhage to stop.
This is our primary goal (above basic liquidity and being able to pay cash for all of our needs) and so it will 100% get done. But, I am pushing it off until April. Mostly so I can fund the ROTH without depleting any cash (from current level). Ideally.
I can't boast a $100k balance in our ROTHs until I get them funded for 2013. So, that will have to wait until next year.
The good news is that our retirement funds are up $23,000 even though all we put in was $1,500.
Retirement milestone hit: 2 x income saved
Retirement investments are, on average, returning as much as we put in. I think that is a SWEET milestone. & also means that going forward that our investments are working harder than we are. (Note: This year was not average - obviously we earned far more than we put in).
& all of that makes this year infinitely easier to deal with!
Along the same lines, home value is up 30%. It's been an excellent year for our overall net worth.
Like all our other goals, we failed spectacularly on this one. Only added $950 (snowflakes) to the mortgage payments. Had expected to pay down an extra $4,000. (The rest went to home repairs and other emergencies).
I made the last 2013 mortgage payment in November. Don't need any more tax deductions so will pay the December payment next month (around January 1). So, I was pretty non-motivated on the snowflakes this month. Which is fine, I need to shift focus on the ROTHs. Just waiting to see where the dust settles. (I think I have some snowflakes already applied to the next mortgage payment - probably ones I earned in November since I expected to already pay the mortgage payment, otherwise).
The ending mortgage balance is $190,000-ish. I was going to go for $189,000, as the year progressed, but decided not only did I not need to make another payment this year (Waste of a tax break) but that I really needed to shift focus to ROTHs.
I am not 100% sure what I Will do for 2014. Mortgage has only been a higher priority in past year because of two reasons. 1 - Real estate values were tumbling and we risked having less than 20% equity if things continued. Which is a position I would consider an "emergency". Not an EMERGENCY emergency, but it would be worthy of some drastic measures to correct. 2 - I Thought we were more ahead of the curve and could throw more money at the mortgage.
Today we have over 50% equity (our home never dropped below 20% equity) and clearly we are not very ahead of the curve right now. Not where I Want to be. So, I think mortgage is falling off my radar for the moment as far as pressing financial goals.
BUT, I think the mortgage is ideal for snowflakes. So that is the part I am not quite sure on for 2014. It seems useless to put the snowflakes to the ROTHs because I will fund those regardless. & with anything more short-term I don't find it particularly useful or rewarding. I want to tie up those snowflakes for the long haul (retirement or mortgage). So I may just keep throwing snowflakes at the mortgage even if I am not particularly mortgage-paydown motivated otherwise, in the short run.
For 2014 I am going to focus way more on liquidity, which I think is wise given my job situation. I hesitate to say I am actually kicking the mortgage off my list of goals, because any money we save up and don't need for unemployment can eventually get thrown at the mortgage. It's more of a "better keep it just in case but mostly likely will go to the mortgage eventually," plan.
TOTAL NET WORTH:
Our net worth has increased by $125,000 this year. Since our goal is to increase this by $30k per year, we have quadrupled our goal. Wow, what a year!!! (Last year was similar, but we were making up for a lot of really pathetic years with the stock market and real estate market. This year was some serious forward movement). The $30k figure is just 50% of our annual expenses. That is how much we aim to grow our net worth every single year.
So, yeah, how is that for a mixed year? I don't particularly have anything to complain about. It's always disconcerting when things REALLY don't go as planned, but I also know we had a great year financially, in the grand scheme of things.
I hadn't thought about it yet.
I think our goals will have to be:
1 - Fund 2013 ROTHs
2 - Increase cash by $5k
3 - Fund 2014 ROTHs
4 - Snowflakes to the mortgage ($1k is probably doable)
5 - Increase net worth by 40k**
**My "annual net worth increase" goal has been 30k for several years. I wonder if we can bump this up to a full 60k by the time we are age 40? The plan would be that our net worth would eventually increase by our annual spending every single year ($60k). I don't know what age that will be realistic for, but somewhere in our early 40s is what we are aiming for.
A realistic goal for now is 40k:
Mortgage paydown $ 5,000 (includes $1k snowflakes)
ROTH Contributions $11,000
Cash Savings $ 5,000
Overtime Savings $ 5,000 (to 2013 ROTH)
Investment Returns $14,000^^
^^Assuming average 8% return, annually
I did not include real estate because way too crazy volatile, particularly regionally. For that reason, $40k may be a conservative estimate. (I did not include additional sources of income, gifts and so on, either).
It is not surprising that we are able to increase net worth more with time - is starting to compound a bit as we move past the real estate bubble and the last stock market crash.
I don't know what a realistic timeline is to consistently increase net worth by $60k annually. I think it will largely depend on short term market fluctuations.
Most of the $10k bump from $30k to $40k "net worth increase" estimate is due to lower mortgage interest rates (faster payoff) and stock market returns on increased investments. When I first estimated annual $30k net worth goal we were probably only paying mortgage down at a rate of $3k per year and probably had less than $50k in retirement savings. Our income has been pretty stagnant in all that time. But mortgage is being paid down faster (with a smaller payment) and investment returns are 3-4 times what they were in 2007 with investment balances 3-4 times as large. Smaller mortgage payment has also increased our savings ability (more to savings).
Here is my sidebar update (putting it here for the future):
**2013 Financial Goals**
[ ]$11,000 to IRAs 2013 (MAX)
...(6,050 @ 12/31/13)
...Delaying funding to April 2014, to keep cash intact.
[X]$5,000 to savings
...(13,000 @ 12/31/13)
...Had to bump up savings due to lots of emergencies and repairs this year
...All but $5k redirected to expenses
[X]$5,000 saved for Hong Kong
...($5,000 @ 12/31/13)
...redirected to plumbing repairs
[ ]Pay more principal than interest to mortgage (+$4,000) - admittedly a pie in the sky goal
...Redirected the rest to home repairs, medical, vet bills, etc. What a Year!!
Goal savings rate = 30% of gross
(Actual savings rate = 11%? This may be our worst savings rate *ever*?)
[X]To have more cash/mutual funds than debt (mortgage)
...Goal Met as of 3/15/13!
[X]To increase net worth by $30k (or 50% expenses)
...(Up $125,000 at 12/31/13)
Wow - what a mixed year it has been!