Retire Before Dad 2014 Financial Goals

Beach

Photo Credit: RBD and the surprising beauty of southern New Jersey.

Happy New Year everybody!  2013 was quite a year for the Retire Before Dad family as we welcomed our second child into the world. She is an angel.  Meeting her and watching my now almost two-year-old son grow up have not only been the highlight of this year, but of my entire life.  When young kids are in your life, everything else can seem unimportant. Being the best husband and Dad will always be my number one goal.

Just a few weeks before my daughter was born in September, I started this blog which has helped me to focus more intently on my investment decisions; all while sharing insight with my readers and hopefully inspiring others. By writing about my retirement strategy, I think much harder about what I am doing and why. The blog, I believe, has so far made me a better investor. Also, being part of the financial blogging community, I read a lot more about investing than I would otherwise which deepens my knowledge and helps me to refine my retirement plan.

For the first time, I am setting financial goals to guide my investment strategy even further. In previous years I have never made specific one-year goals. The overriding goal of my financial life (and blog namesake), to retire at age 55, one year before my Dad retired, has been in place for some time. But I have never written down shorter-term goals until now. Shorter-term goal setting will hopefully accelerate the implementation of my retirement strategy, pushing harder on the longer-term goal.

With that, I give you my 2014 Financial Goals:

  1. Increase Number of Dividend Stock Holdings to 20 from 13
  2. Increase my Forward 12-Month Investment Income (F12MII) to $5000
  3. Considerable Consolidation of Financial Accounts and Simplification
  4. Continue Lending Club at $200 Per Month and a New Filter
  5. Deposit Money to Roth IRA on a Monthly Basis
  6. Transition Out of High-Fee Mutual Funds Into ETFs
  7. General Spending Reductions

#1 Increase Number of Dividend Stock Holdings to 20 from 13
I learned during the financial crisis of 2008-2009 that I was not diversified enough in my taxable accounts. This mistake cost me significantly and landed the top two spots on my Top 10 investment blunders list. Over the next few years, I would like the total number of holdings in my taxable account to be stable somewhere around 30 stocks. For 2014, I think seven new positions is a reasonable goal.

This goal is 100% under my control, so I should be able to easily achieve it. However, I don’t want to go out there and just buy seven more stocks. I want to make sure I am buying great companies at a good price. The market will fluctuate. A big dip and many companies may become undervalued. Maybe the market will keep going up and I won’t see a lot of good value. It’s hard to tell at this point. My goal is that I can initiate positions in seven solid companies at an average amount of $1200 per holding, spread throughout the year. Both of those numbers could be higher depending on what I see out there and how much money becomes available, but hopefully not lower.

#2 Increase Forward 12-Month Investment Income (F12MII) to $5000
F12MII represents the amount of money I would make on a yearly basis through investment income if I stopped working today. My 2013 year-end F12MII is $3788.  This number has gone down since December 15th because I put $5500 into my Roth IRA this month, bringing down the amount of interest I earn on cash savings.  The Roth IRA move was a no-brainer, however, and I have some purchases to make in that account in the New Year. $3788 of F12MII is up from $3082 at the end of 2012, a 23% increase.  If I go from $3788 to $5000 in 2014, it would be a $1212 increase or 32% increase year over year.

I came the $5000 F12MII goal through a few estimations.

Source

+Δ  F12MII

Dividend Increases

$183

Stock Purchases

$336

Lending Club

$288

Cash

$150

Unknown

$255

Total

$1212

First, I assumed my current stock positions would on average increase dividends by 10% and companies would not decrease or eliminate them. This is a high number, but throughout this process I want to make this goal difficult to achieve. At this rate, dividend increases would add about $183 to my F12MII.  This may actually be a bit conservative if Bank of America (BAC) finally increases its dividend this year, but I’m not holding my breath.

Second, I take my goal of buying positions in seven new dividend paying companies, at an average amount of $1200 per holding. That equals $8400. At an average yield of 4%, this would add another $336 of F12MII. Again, I used an aggressive metric on the yield.

Third, $200 per month going to Lending Club would total $2400 over 12 months, at an average rate of 12% (below my current NAV rate), would add another $288 of F12MII.

Lastly, I intend to continue to save a good amount of cash over the year, hopefully close to about $20,000. This money will be used to potentially purchase an investment property, or could go to eventually upgrading our current home or buying a car in the future. The cash savings has an unknown use at this stage, but my wife and I are keeping our options open with cash on hand. $20,000 at my 0.75% current savings rate is another $150 in F12MII.

If you are keeping track, my estimates total $957 in increased F12MII for 2014. Add that to $3788, and it would come to $4745.  I could just round that up to $4800 which would be a nice round monthly income number to shoot for, $400.  But I want to be aggressive here, so I’m rounding the number up to $5000. To cover the gap, I’ll need to buy more than seven new stocks, reinvest dividends, increase money in existing positions, add more to Lending Club, or simply make more money from my job or other sources. Or, perhaps, purchasing a rental property may take me over the top.  I don’t know, but I think the $5000 number is ambitious, and I am excited to shoot for it. This is my first time doing this, so we’ll see how things change over the year.

#3 Considerable Simplification of Financial Accounts and Consolidation
This is a big one for me this year. Now that I have two kids, my time is precious and that became very obvious this holiday season. Between my wife and me, we have a few too many retirement accounts scattered around due to job changes over the years. I’ve attempted to consolidate in the past but never completed the task. These retirement accounts need to be in one brokerage, and the holdings need to be reevaluated.

I also have three bank accounts at a bank that I like. However, the branches are no longer near enough to my home.  I have decided to open new bank accounts with the bank that already holds my two mortgages and has multiple branches nearby, giving me one less online website to log into.  I can also eliminate a savings account that holds my tenant’s security deposit because the State of Virginia does not require a separate account for landlords with less than five properties. I’ll just move the money to the property checking account.

I’m sure if I keep this goal at the forefront of my thinking, more opportunities to simplify my financial life will surface.

#4 Continue Lending Club $200 per Month and New Filter
I have been depositing money into my Lending Club account since May of 2013.  This goal is to maintain a steady deposit stream into my account, lending money at an average rate of 12%. If I can achieve this, I’ll increase my F12MII by about $288, plus compounding 2013′s Lending Club activities. I also want to spend more time developing strong filters, and when I get around to it, I’ll be sharing them with my readers. I expect to start seeing some defaults this year, so I may also open a trading account to offload loans that are not current.

#5 Deposit Roth IRA Money on Monthly basis
Since my wife stopped working completely to raise our children, my eligibility to contribute to a Roth IRA has opened up again. She had income in 2012 that took us over some income thresholds. 2013 was the first year I was able to deposit money into the Roth since our marriage. In 2014 I want to deposit money into my Roth IRA on a monthly basis and be more active in using it to create more growth and income through ETF investing. To reach $5500 for the year, I’ll need to deposit about $450 a month… a tall order. I’ll need to spend a significant amount of time on this, but it will be fun. Thus far, this blog has focused mostly on my taxable accounts, VA 529, and real estate, but I may throw in some analysis on ETF investing in my Roth once I put in the due diligence. I may also buy some dividend stocks in my Roth.

#6 Transition Out of High-Fee Mutual Funds Into ETFs
This goal applies mostly to the various retirement accounts that I will be consolidating and adding money to this year, including IRA, 401k, and Roth IRA between my wife and me. My 401k is through a company that only offers high-fee American Funds, but I may have the opportunity to move it to another provider this coming year. So I expect 2014 to be a big year of reallocating retirement assets into low-fee ETFs and index funds where possible.

#7 General Spending Reduction
I think this goal is on everyone’s list.  During a few long car rides this Christmas, Mrs. RBD and I discussed ways that we could simplify our lives and cut spending even further. Some ideas included buying baby supplies online (freeing up time and often spending less), and getting rid of cable in favor of Netflix and/or Hulu. We don’t overpay for cable, but at the end of the day we are tired and tend to watch whatever is on instead of getting stuff done around the house. By eliminating cable, we’ll save money and be more deliberate with any TV watching we do. Plus, Netflix has many movies and shows that neither of us has watched, so it will be a nice change for 2014. In addition to those spending reductions, she’ll be working to plan better meals, and we’ll be looking at ways to reduce our paper waste and utility usage. We have never been a big spending family, but everyone can find some corners to cut. I’m sure as the year goes on, more ideas will come to fruition on this front.

Conclusion
Tomorrow I’ll be looking at my end of year final numbers to see how I fared with saving and investing. With the markets up so much this year, it should be fun, unlike some other years in the past. I’ll hopefully be able to work this into a 2013 recap blog post.

As for the blog itself, I have a few goals I have also set for myself including a web site upgrade, possible monetization, and possibly writing for other web sites. Last week my article 10 Year Anniversary of Buying and Holding Verizon was the first to be picked up on Seeking Alpha, so that is another avenue I hope to explore in this coming year.

As always, thanks for reading, commenting and sharing.  Best of luck in the New Year!

-RBD

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20 Responses to Retire Before Dad 2014 Financial Goals

  1. Martin December 31, 2013 at 2:21 pm #

    I like your goals. Some of them are quite impressive.
    As far as diversification it also depends on your account value. Unlike with motif investing for example on a regular brokerage account it would be difficult to diversify with little money, you do not want to be spending 200 – 300 dollars to buy each stock and pay large fees. they would eat up your gains. So depends on your account size it is OK to be under-diversified at the beginning and slowly move towards the goal diversification.
    I wish you success in 2014!

    • retirebeforedad December 31, 2013 at 2:33 pm #

      Thanks Martin, Best of luck in 2014 to you as well. I’ll be dripping into some holdings, starting some new drips, and adding to and opening new positions in my normal brokerage. All depending on plans and fees. Hopefully all this activity will lead to the big $5000! We shall see. Happy New Year!
      -RBD

  2. JC @ Passive-Income-Pursuit December 31, 2013 at 4:39 pm #

    One of my big goals for 2014 is to pick up at least one investment property. I’ve got a few in mind right now that can generate 8-12% cash on cash returns and give $200+ per month in cash flow. So they look pretty good to me. Luckily my older retirement accounts aren’t spread across too many different brokerages so I don’t have to worry about that yet. Just two different investment accounts for me. I like your goals and congrats on getting an article published on SA. I’m guessing you won’t be earning any income from it since it’s also posted here, but that’s one area that I’m looking at also expanding my blog/writing into. Sounds like it’ll be a stretch for you to hit $5k in forward investment income, but I think it’s important to set far reaching goals. If your goals are too conservative then you’ll either lose focus or relax on them since you know you can hit them. Best of luck in 2014 and congrats again on baby #2!

    • retirebeforedad December 31, 2013 at 9:02 pm #

      PIP,

      I didn’t put a new property on my list but I may pursue that. Not a ton of good deals around me, and we are keeping cash on hand to have options. The SA story was just a pick up from my RSS, but I like the idea of writing extra good content for them that fills a story not covered yet. We’ll see. Have a great 2014. And thanks for all the support this year. It’s been a big help getting this blog off the ground.
      -RBD

  3. SavvyJames January 1, 2014 at 7:47 am #

    Some good goals there, particularly the last three. I have always believed that articulating goals – which are quantifiable, particularly with regards to financial goals – is key. Good stuff, RBD.

    • retirebeforedad January 1, 2014 at 12:55 pm #

      Savvy James,
      This is my first time, I hope the goals keep me on track. Happy New Year to you!
      -RBD

      • SavvyJames January 1, 2014 at 1:02 pm #

        Thanks, my friend. And here is to hoping that you and your family enjoy great love, laughter, and health in the new year.

  4. Roadmap2Retire January 1, 2014 at 11:11 am #

    Congrats on all the progress in 2013 and wish you the best for 2014. Those are some good goals and hope you get to achieve them.

    Best wishes
    R2R

    • retirebeforedad January 1, 2014 at 12:55 pm #

      R2R,
      Thanks and good luck to you and your goals this year. Happy New Year!
      -RBD

  5. plantingourpennies January 1, 2014 at 1:20 pm #

    Consolidating all those accounts is a great goal – and should not only make checking in on your progress much easier, but you may even be able to get much lower fees if the combined balances are big enough to get you into a lower fee asset class.

    Best of luck with 2014.

    • retirebeforedad January 1, 2014 at 1:46 pm #

      POP,

      I hadn’t thought of getting into another asset class. I use Fidelity for retirement because my 401k was started there. I am happy with them, but I’ve learned I need to be more skeptical about fees. That’s why I’m looking into more ETFs. My wife has a 401k and IRA in Fidelity, and a Gov TSP I need to move (which has been a pain so far). I hope to combine them all into one. Then my 401k I’d like to also bring into my IRA or move to another if I switch jobs. Lots to think about.
      Thanks for stopping by, commenting, and Happy New Year!
      -RBD

  6. thefirestartercouk January 1, 2014 at 6:33 pm #

    Good luck for 2014 RBD!

  7. I cannot see the ugly house finished January 1, 2014 at 10:19 pm #

    These are very worthy goals RBD! I share #6 with you. We have some old 401k accounts that have incredibly high fees. We’ll be moving them over to Vanguard soon. Will you be going with Vanguard as well?

    • retirebeforedad January 1, 2014 at 10:29 pm #

      1500,
      I am very likely to go with mostly Vanguard Index and income ETFs when I shuffle the holdings. But the money will stay with Fidelity for now. On first look, the fees in my funds with them aren’t too bad, but I need to look closer. But if I want to buy Vanguard funds in Fidelity it would be very expensive. So the ETFs I think should be a workaround at $7.95 a trade without the hassle of completely switching. I’ve been mostly happy with Fidelity, and upon looking at my IRA’s and my wife’s 401k and IRA with them, they beat the markets (after fees I believe). I need to join Personal Capital to see how bad the fees really are though. Didn’t you write about that helping you a while back? My wife also has a TSP I need to move.
      -RBD

  8. Michael Bedtelyon January 2, 2014 at 10:33 am #

    I like your enthusiasm for the upcoming year. 2013 was a great start to my investing career, Set up some Heavy Hitters for the future, and will continue to reinvest dividends. 2014 should be even better, as far as pursuit for an ever increasing dividend portfolio. If I am lucky, I will be finishing payments on my house around March!!! So, maybe some extra cash flow to invest elsewhere. Thanks for writing, Happy New Year, and Best of Luck for 2014 and on.

    • retirebeforedad January 2, 2014 at 11:00 am #

      Michael,
      Thanks, best of luck to you in the New Year is well. Paying off your house in March, that is major! Congrats on that. Should make it much easier to build your dividend paying portfolio.
      -RBD

  9. Leigh January 28, 2014 at 11:10 am #

    Good idea on consoliating financial accounts! I’ve been trying to do that a bit lately as well. I have a ridiculous number of accounts for a single person! It’s a slow process though, but every few months, I make a list of accounts I could cull that I haven’t used in a while. I’ve also been closing out some credit cards that don’t gain me anything, e.g. one I got at Home Depot to save some money when I was buying a bunch of stuff, another store one, and my first one since it had a weird points system that was impossible to ever redeem.

    Have you heard of a Spousal IRA? You can still contribute to your wife’s IRA, based on the family income. You should check it out. I think it’s a pretty sweet benefit of being married when one person doesn’t work.

    On Fidelity, have you looked into their Spartan index funds? They’re pretty low cost. There’s a great wiki on them on the Bogleheads site: http://www.bogleheads.org/wiki/Fidelity That’s what I would use if I was investing at Fidelity myself. I have everything at Vanguard since that’s where my 401(k) is.

    My main goal for 2014 is enjoying my life with my boyfriend and getting the mortgage on my condo under $100,000.

    • retirebeforedad January 28, 2014 at 11:19 am #

      Leigh,
      Thanks for stopping by. I’ve been closing and consolidating accounts in the new year. Namely I moved my wife’s 401k over to her Fidelity IRA and I am in the process of positioning some money there. Also closed her Banana Republic cc that is never used. More work to do. That Boglehead resource is REALLY helpful. Thanks for pointing me to that. I had never heard of it. I knew of the Spartan Funds, but frankly hadn’t researched them enough. This makes it very helpful. I’ve been looking at the Vanguard ETFs and made a small purchase already, but I might take a closer look at the Spartan funds. I like your goal of paying down your mortgage this year. It feels great to lower the balance. I’ve never regretted paying a debt.
      -RBD

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