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2006 Financial New Year Resolutions

10 01 06 18 28

-------- Simple Goals

Everyone does resolutions, why can't I? I do want to make them reasonable, howerver. I want them to be goals for the year.

The difference between a dream and a goal is that a goal has a realistic plan on how to achieve it.

I will share SOME of them:

Increase Dividend/Interest Income

Yearly Income at End of 2006: $6,000.
Inflation Adjusted Yearly Increase: $2,000.

Capital Gains are important, they increase your capacity to generate even more money. But given the fact that I am young, I should not allow myself the luxury of tapping into my capital. If I am suddenly without a job, I may have to do so -- and I do not want to. Wouldn't it be nice if I could assure myself a modest stipend that covers mortgage, food, health insurance, and necessities?

2006 goal would not allow for that, but if I continuously increase it, I may be able to achieve it soon, while keeping or even paying off my house (alternate unvoluntary retirement plans include selling home and converting it into income securities so that I could survive a long time).

To make it happen I will have to fund my investment accounts even more. It will have to be the taxable accounts, as any dividend income earned in retirement accounts can't be readily used in the event of a job loss (or at least, I do not want to). I will also have to take care of investing in dividend producing companies. This will require discipline, and more cash inflows into my investment account. Nobody said it would be easy. My ESPP proceeds will have to go there!

Consolidate Retirement Accounts

I want a 401k, a Traditional IRA, a Roth, and a non-tax-deductible funded Traditional IRA (just to keep accounting straight). Sounds like a lot of accounts, but it isn't when you consider I hold two 401k's, two Traditional IRAs, one Roth, and chances are I will end up with the spillover from excess 401k contributions into even another IRA. I just want to have everything in an easy to administer situation.

Two things will happen:

1. I will consolidate my previous company 401k and the small Traditional IRA I have in a brokerage house. Where? Most probably in the brokerage house. I will most probably buy a bunch of SPY, QQQQ, DIA, and other Electronically Traded index Funds, and leave them there for a really long time.
2. I will probably have to roll over the non-tax-deductible portion of my new company 401k (if any), together with my current non-tax-deductible IRA. If I had a choice I would place it on the Vanguard 500 fund it is now, but I will have to assess what kind of movement would be easier. Both will eventually reside on the same place.

Will / Living Will

As financially conscious as I am, I do not have either. I am intestate and unprotected from society. Fortunately I do not have dependents. My wife is more than capable of taking care of herself if I am missing, and my parents have their retirement taken care of. Furthermore, I do not have any plans on dying - EVER! (that is why I need my dividend/interest income to increase). However, life plays tricks on you, and just in case, I must prepare these documents. I must make it easier for those surviving to take care of any final matters that may arise from my unexpected departure.

Will I use a lawyer for this? I should! Should I store them in a bank's safe deposit box? I should! But knowing myself, I will probably get some software and prepare some test ones and have them notarized. Keep them for a while as a valid draft and then have them revised/redone by a lawyer in a year or so after I have given even more thought about the inplications of such documents. (But I still insist that the right way is to have them done by a lawyer).

Car

My Car is slowly dying. I will attempt to get it back to working order as soon as I get back home. If I can't do so for less than a $1,000, I will be forced to buy another car.

Do I want to replace the car? No. I love the car, and I love the fact that I have no monthly payments on it. But no car lasts forever, at least no commuter's car.

First thing to do is to try to repair it. If I succeed, I want to end the year with a car buying fund of $2,000 USD. That amount would serve as a basic down payment for a car. If it can't be repaired, I will have to buy a car with a $1,000 down payment -- something I will avoid as much as possible.

There goes a least one of my four quarterly bonuses.

Emergency Fund

Goal: 1/2 of 3 months: $3,750 ~ $4,000.

Shamefully, my emergency fund is empty. $0. Zip. Nada! Everything I had there resides on my stock brokerage account. Why? Read the Deposit at the Bank or Invest on the Bank article.

Nonetheless I want to have 3 months of expenses covered. That is ( $3,000 * 3 months ) - Dividends ( ~$500/mo * 3 months ) = $7,500 USD.

That is another advantage of dividends; they reduce the need for emergency funds. Not that you want to be left out without any cash in any situation, but it greatly eases it.

How to accomplish it? Simple, stash cash in a money market account. Two more of the quarterly bonuses gone.

Other posts on New Year Financial Resolutions:

• All Things Financial
• Five Cent Nickel
• Canadian Capitalist
• My Money Blog
• Our Money
  
• Yours Can be here (if you send a comment with a link).

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