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Financial Goals... "Goals", get it?This past year was an exciting one for us, albeit a little bit of a roller coaster ride.  However, we were able to pick up a new rental property, max out my 401(k) and contribute up to the match in my wife’s account.  We also added to our Roth IRAs and a little bit in my HSA, and continued to save a good deal in our online savings account.

No time to rest on our laurels though – last year’s financial goals are in the past!  We need to keep pushing toward moving our financial freedom and early retirement date up.  So without further ado…

Our 8 Financial Goals for 2016

1) Build back up our online savings

Build back up our online savingsI’ve talked about how I think online savings accounts are a good place for your emergency savings and we had built our account up to a little over $40,000.  Since then, we bought a duplex and pulled out close to $30,000 for the down payment.  My thinking was that we still have some options for emergencies that might come up.  But, I really felt better having that cushion in place, so we need to build that back up.

I was able to recently add another $5,000 to the account so it now has a little over $15,000 in it.  I have some automatic transfers in place to move $500 every pay period over to the account.  So, by the end of this year, we should be back up over $40,000.  The hard part will be not to pull anything from it throughout the year as things come up (and we all know they do!).

2) Invest more in my HSA

Invest more in my HSAI’m seeing the light on the benefits of Health Savings Accounts (HSA), which I hope to write about in the near future.  I’ve always just put a little bit into the account, but over time, it’s grown to over $10,000.  This is an important number because it marks where we are permitted to invest a portion of the money in various investments.  Right now, I earn about a dollar a month in interest, which of course sucks.

This year, I plan to dig into what some of my investment options are for this account and maybe I can grow it a little quicker.  That’s important because the HSA is a great account to have for paying for medical costs – it’s the only account you’re not taxed on at all.

As an added perk, my company adds a little money every year into the accounts of any employees contributing to their HSA accounts.

3) Get both sides of our duplex filled

Get both sides of our duplex filledYes, my little clip art isn’t of a duplex, but it was the best I could find! 🙂

We closed on a duplex last month and, as an added bonus on the purchase, we inherited tenants on one side of it (at least for the next handful of months).  That rental income should help offset a good chunk of our costs – their rent should cover most of the mortgage, taxes, and insurance.

However, that’s not all of our expenses on this property and it’s no time to waste!  We’re already getting the empty side ready to go because we need to get some tenants in there ASAP.

I leave this to the professionals.  Our property management company knows better than I do what to look for in tenants that will stick.  They are going to do a walk-through of the property next week and hopefully start interviewing right after that.

These first handful of months will be the roughest while we get things where they need to be.  But once we can get some stable tenants on both sides and make any repairs that need to be done, we should start seeing a nice stream of income.

This will be important for our next financial goal of the year…

4) Pay down more principal on our home

Pay down more principal on our homeThis financial goal might cause a little bit of discussion because there are two points of view on this.  One opinion is that when you have a cheap loan, you should embrace that leverage and drag it out as long as you can.  In other words, instead of using our cash to pay down a mortgage with a 2.875% mortgage (that’s our fixed rate), we should use it elsewhere where we can make more money, such as the stock market or real estate where we would *hopefully* earn a larger return.

I get it… BUT, I also hate it.  I’m like most people who hate having a mortgage payment hanging over our heads.  And, for my retirement plan to work, I need to pay off our mortgage for our primary residence.  I’m already paying a lot more with each monthly payment and with that extra that I pay, I’m slated to pay the loan off in January 2027 (according to Quicken).  But, I need to get the payoff date to be no later than July 2025 if I’m going to meet my financial freedom goal.  And, more importantly, the sooner I can pay it off, the sooner I can wave goodbye to my current employer.

As a side note, I don’t mind the mortgage on my rental properties.  My tenants are paying that off.  Obviously, it will be great to get them paid off as my cash flow will increase substantially, but that doesn’t keep me up at night.

5) Change our 401(k) investments

Change our 401(k) investmentsI hate the stock market.  I feel like it’s just one big Ponzi scheme – if people stop contributing, the whole thing falls apart.  But what can you do?  It’s hard to pass up things like the match I get on my 401(k).  In my Roth IRA, at least I can pick up dividend stocks that pay me every quarter instead of the old buy-and-hope-for-appreciation technique.

Another thing that keeps me on edge is Rich Dad’s Prophecy.  In it, Kiyosaki predicts that the market will crumble worse than ever in 2016.  Sure it’s just an educated prediction, but you never know!

Regardless, what I’ve decided to do as one of our financial goals is to move all our investments in my 401(k) to a domestic index fund and a global index fund.  This should dramatically bring down all those fees for us.  Then we’ll probably do the same with my wife’s 401(k) investments.  I hope to do this in the next couple of weeks.

6) Open up a HELOC

Open up a HELOCWhen we purchased our duplex last month, we decided to use a chunk of our savings for the down payment instead of opening up and using a Home Equity Line of Credit (HELOC) or a home equity loan.  My thinking was that the cost of interest on a HELOC would be more than we were getting on our savings so we might as well put our savings to use.  Then we could open up a HELOC later (with no annual fee) and have that on-hand if needed.

Well, that time is now.  I’ll be opening up a HELOC here in the next couple of weeks.  The good news is that I found out that our credit union offers a HELOC with no annual fee.  I really hate the big banks so this is a real find!  I’ll keep you in the loop on this.

7) Optimize our taxes

Optimize our taxesI’m still learning a lot of the ins and the outs of this, but there are so many ways to optimize what we pay in taxes.  Deductions and credits are only part of this – we need to learn to do smarter things like push everything we can toward avenues that really help on our taxes to reduce our adjusted gross income.  This can be things like contributing more to our HSA or 401(k) plan (we already max out my 401).  It can also be selling some stocks that we have that just suck and take a loss on them.  Or buying things for our rentals like A/C units to make sure we don’t show a profit on them.

All of these are things I don’t know a lot about and need to learn.  I’ll probably be working more with our new accountant to gain a better understanding and help put us on the right path for our future.

8) Further our daughter’s education and financial education

Further our daughter's education and financial educationThe last of our financial goals is to focus on our daughter’s education – both financially and her financial education.  The somewhat easy part is to push whatever leftover funds we have into our daughter’s 529 plan.  I don’t focus as much on her account because she can always get loans for school – we can’t get a loan for retirement.  Right now, I contribute $125 every month with an occasional additional contribution every now and then.  We’ve built it up to over $7,000, which should pay for almost one of her books when she gets to college. 😉

Ok, we probably need to up that a little, and hopefully we can once we have a little extra income coming in from the duplex.

More importantly though, I need to continue to grow her financial education.  I’ve been teaching her little bits here and there (she’s only five after all).  This is a tough balance as I don’t want her to be like I was (learning the path to financial freedom late in the game), but on the other hand, no kid wants to hear dear old dad drone on and on about finances.

I’ve been pretty lucky though, because she continues to ask questions and I give her just enough to keep her interested.  In fact, she just asked me today why I keep writing all these articles and that turned into a good 5-minute discussion in which she seemed pretty intrigued.  Hopefully that will continue on throughout the years.


So there you have it – our financial goals for 2016, which I’m sure will be adjusted as the year progresses.

What kind of financial goals have you set for yourself for the year?

Thanks for reading!!

— Jim

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Our 8 Financial Goals for 2016
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8 thoughts on “Our 8 Financial Goals for 2016

  • January 4, 2016 at 1:32 pm
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    Happy new year, Jim! This is a great list of goals for the year. On the emergency fund, you said you’re often tempted to touch that cash — have you considered opening a separate “life happens” account? (This is a Suze Orman idea.) We have an e-fund at an inconvenient bank (Ally) and a life happens fund at USAA, where we do our regular banking. Since splitting funds over the two, we haven’t once touched the e-fund, though we’ve needed to dip into the life happens fund quite a few times. Just a thought! We’re also with you in hating the mortgage, so are working hard to pay ours off quickly (though we leave the mortgage on the rental alone, for the same reasons you have). On the HELOC, is that something you guys really need? There were so many horror stories during the recession of people losing homes over HELOCs, plus, as you said, you hate having debt, and a HELOC is debt. Just curious. 🙂

    Reply
    • January 4, 2016 at 3:44 pm
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      Happy New Year!! We keep our stash at the same inconvenient bank (Ally!). We do have a joint savings at our credit union where we keep a couple grand – this is the account linked to Ally. I like the idea of splitting the funds up (and I do love Suze!), but on the other hand, I hate not seeing any return on our funds (at least Ally gives you 1% at the moment). I may have to look into leaving a little more in this account though to help ensure the Ally funds stay that much more out of reach.

      Love that you’re on the same page with the mortgage – I know it’s the wrong thing to do mathematically, but I think the peace of mind wins out!

      We don’t really need the HELOC, but my thoughts are that the only time you can get the HELOC is when you don’t need it. I just learned today that my credit union offers them with a low variable rate, no annual fee, a 5-year draw period and up to 10 additional years to pay it off. Believe me, I don’t want to incur any new debt – I learned my lesson years ago with credit cards a long time ago. This wouldn’t be something I would probably ever use and it would be a line of credit, so it wouldn’t really be debt unless we used it. I only want to have it there as a temporary account while we rebuild our emergency savings just in case something catastrophic happens.

      Love hearing from you guys!

      — Jim

      Reply
  • January 9, 2016 at 1:54 pm
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    Happy New Year. I was in the same boat thought-wise regarding our mortgage. I retired the first time with a $100K low interest rate mortgage and low payment after years of added payments for earlier payoff. I started an encore career and decided all of that income to just go to paying that off and it was the best decision I have ever made. Especially when you watch market volatility like there is now. Now retired again I take comfort in knowing that I don’t have that cost anymore. So stick to your thinking because although the 2.875% interest savings isn’t much it sure beats what any guaranteed and insured investment is paying and mortgage payoff is just that, guaranteed savings. If inflation and savings interests takes off you can always adjust your thinking then.

    Reply
    • January 10, 2016 at 8:51 am
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      Thanks Tommy – I appreciate the support!! And congrats on getting your own house paid off!

      — Jim

      Reply
  • January 10, 2016 at 7:36 am
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    I can understand hating the stock market. I mean it seems like a casino. And I do think we will have a bear market in 2016. But my reaction is whoopie. I mean it can’t be all that bad when the market is made up of real stalwart companies. I guess that is why I consider myself to be an investor and not a trader.

    I love the plan though. Looking forward to seeing your goals in 2016.

    Reply
    • January 10, 2016 at 9:02 am
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      Thanks, Jason – I think calling it a casino really helps sum up my feelings. That’s a big reason why I’ve been starting to put more into real estate investing so I don’t have all my eggs in that big stock market basket… though the passive income doesn’t hurt either!

      — Jim

      Reply
  • March 26, 2016 at 11:01 am
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    Sure, the interest rate is low but it is also a “guaranteed” return. Plus, it’s not just “saving” 2.875% – depending on how many years you have left, extra payments can save you thousands in interest over the lifetime of your remaining mortgage. I still have over 20 years left so an extra payment would be worth a lot! We’re still paying off our HELOC (which we accrued a balance on after I quit work for 1.5 yrs to finish up a degree) but when that’s done, I’d like to max our our retirement savings. I’m still uncertain as to whether we should pay down our (massive) mortgage as we have a rental and the interest is tax deductible.

    Reply
    • March 26, 2016 at 8:34 pm
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      Hi Ulyana – that extra payment a year is huge when paying down a mortgage. I would run the numbers if I were you to see if it makes on paying down your mortgage versus utilizing the money elsewhere.

      Good luck on getting your HELOC paid off!

      — Jim

      Reply

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