This is something that I recommend to everybody trying to do better financially regardless of where you are at in your financial journey.
Every year I make sure that I take the time to set up financial goals; realistic ones! Based on what I know, meaning my incipient financial literacy, and what I have experienced in terms of my investments’ performance I start each year setting some new expectations for the new year.
Last year, just like the previous years, I surpassed my goals, which is totally fine and it actually boosted my confidence. With that said, I still keep myself grounded and continue to base my expectations on my real numbers.
Last year was truly exceptional with a 67% net worth increase. Part of that increase was a 50K legal settlement, but even without that windfall the increase would have been 48%, which is still amazing. Especially for a household of 2 adults and 4 kids living on one teacher’s income.
For this year this is how I see things going down…
First, I start with a very broad and general appreciation of 3% of the total amount of our real estate assets, including the home we live in. That’s the first big number at $39,300.
Next is our tax return that usually comes at around 10K. I get a lot of deductions because of the 4 kids, and all the morgage interest we pay. I am starting to think about changing my witholdings so that I can invest the money right away instead of loaning it to Uncle Sam for free.
Then, there is the break-down of the rental income. We have two rental properties, and we just bought a vacation rental in Michigan. We are in the process of figuring out how much we could rent it for. It seems like, according to market prices, we could rent it somewhere between $1,800 to $2,300 per week. So, I calculculated the rental income of this properrty at $1,850. We get about 10 weeeks out of the whole summer season and we are planning on using it for 2 weeks. 8 weeks will pay for the mortgage, and even at the lowest rate we should be left with about $900; maybe for unexpected expenses.
Finally from my teacher salary I manage to save $716, which was originally our student loan payment and after paying it off we repurposed the payment into our savings pot/bank. That amounts to $8,592 yearly.
Investments: I haven’t really put much effort into my 403B plan(Same as a 401K) because we have focused more in real estate investing. Why? Because I like the idea of building more cash flow and the leverage you get with real estate investing. My current balance is $74,441 in FSKAX(Fidelity Total Market), VTASX( Vanguard Total Market), FXAIX ( Fidelity SP500), and very little FXNAX(Fidelity Index Bonds). However, I think I am getting to my limit of how much property managing I want to do. From now on, I will use the cash-flow from our rentals to fuel my 403B plan. Once I hit 100K, I will move on to build up a 457 fund, in case I retire early, quit my job and want to access some of the money earlier than 59 1/2.
All this income comes to a total of $84,911, or 20%. This is how much I am hoping to increase my net worth in 2022. I will be more than thrilled if I shattered my goal/prediction like I have done in the last 3 years. We’ll see!
I just realize I have a disparity between my Mint and Personal Capital net worth. Mint shows $412K and Personal Capital $437K. I am not that concern about it. Mint lately has given me a lot of issues synching with Zillow, so I may consider going by my Personal Capital net worth of 437K instead.
If you read this, I hope this gets you excited about the power of getting a hold of your finances. The hardest thing is getting to the point of starting, committing and wanting to do it. Once you start everything falls into place.
If you have any question or I can be of any help I will be more than happy to share ideas with you for free. Just drop a comment below.
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