Monday, January 4, 2016

2016 Net Worth Goal

It's hard to believe that in 2015, our net worth increased by over $64k. Reaching $500,000 in net worth was a bit anti-climactic, since it doesn't really change the way we live. In that regard, I don't expect 2016 to be any different. In fact, I don't expect our lifestyle to really change until we have a net worth over $1.5M, at which point I may begin to consider partial retirement.

All that aside, for 2016 our goal is to reach a net worth of $600,000. This represents an increase of $90,000. In one year. Wow. A year ago, I wouldn't have believed we had reached a point yet where this pace of wealth accumulation were possible, but seeing what we accomplished in 2015 even with several large and unexpected expenses, $90,000 in a year seems possible.

Here is an estimate of how I think this will be broken out.

  • 401k contributions (including employer match): $21,500

  • Mortgage reduction (regular and extra payments): $11,300

  • Beefing up our Emergency Fund: $6,000

  • IRA and non-retirement investment contributions: $25,000

You will notice that these contributions don't fully add up to $90k on their own. I will need to rely on stock market returns to get me the rest of the way to $600,000. If our investments earn 8% this year, I'll hit the goal. Lower stock market returns would be needed if my home appreciates in value, but for now we'll assume the value of the home is constant.

Some risks to this goal in 2016 include:

  • Going over budget on some home renovations and upgrades we are considering

  • Potentially needing to replace a car or some expensive car repairs (I just hit 180,000 miles on my car. No signs of dying yet, but the potential is there)

  • Possibility of a work relocation and risk of maintaining two households until our home sells (including the possibility of not being able to sell in a timely manner or for the desired amount)

  • In 2012 we earmarked some money for charitable donations to our alma mater that would cover donations through 2015. In order to maintain our annual giving, we'll have some expenses in 2016 that we didn't have in 2015.

Some advantages we anticipate in 2016 vs 2015:

  • We don't have another European trip planned, which was a large expense in 2015

  • My 2016 income and bonus is expected to be about $25,000 more (gross) than last year, most of of which will be saved (included in above estimates)

  • Our portfolio is more heavily weighted to stocks than it was last year as we have sold off most of our bond holdings

I can't control what the market does, but I can control how I react to the market. If I reach all of the contributions outlined above that I do have control over, and the market doesn't cooperate, I'll still consider that a win so long as I stay invested and continue investing for the long-term.


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