Normally I would set out some very specific goals for the new year; however, this year I want to just line out some targets because I'm still quite unsure of how exactly things will pan out.
As I highlighted in my 2017 recap our budgeting and debt reduction were probably the biggest disappointment for 2017. Much of that was due to lax accounting and being glad to not have to watch every dollar that flowed through our accounts once I returned to work in February of last year. That was laziness on our part, but that means there's plenty of room for improvement.
For 2017 I averaged $5,823 of income each month with $4,014 of expenses each month. Looking at just the last 5 months of 2017, I was re-hired by my previous employer which came with an increase in pay, the average worked out to $6,697 of income each month.
Condensing all of that together gives me a rough guide of $6,697 of income less $4,014 of expenses giving approximately $2,683 of savings each month. That's a very rough guess because it largely depends on how steady work is, but it's good enough to get an idea. Based off the estimates that works out to just over $32k of potential savings without making any spending adjustments.
Obviously increasing our income will go a long way towards helping out the budget, but cutting expenses is the low hanging fruit here. The biggest "discretionary" items that should be able to be reduced is going to be food and our homeowner/car insurance. I say these are "discretionary" because they're all a requirement if we want to continue on with...living.
It's a bit hard to forecast what our income will end up being for the year so I'm being very conservative for now with a target of $5,000 of savings that gets channeled to our investment accounts in 2018.
Unfortunately, all of that savings potential won't be going straight to our savings/investment accounts which brings me to the next target.
Get Rid Of All Non-Mortgage Debt
While the interest rate on this debt isn't killing us there's no reason for us to keep the debt around. As of the end of 2017 our non-mortgage debt is at least $24,600. I say at least because there's still some various medical debts that I'm not entirely sure what the balance is because our medical system here in the United States is all sorts of messed up.
That $24,600 consists of a car from a few years ago as well as the new air conditioner for our house. Combined those two payments alone are just under $875 per month. Ouch! Ball-parking the projected savings less this debt means approximately $7,600 of extra savings. The $5,000 savings goal from above will be very fluid since I'm not 100% sure how much is owed on the other debt that we have which will take priority over investments at this time.
I'm looking forward to finally knocking this debt out and being done with it. Getting rid of the debt will free up a huge chunk of monthly cash flow that can finally start going back towards investing and fueling our journey to financial independence.
Net Worth Target
I won't be setting any specific target for our net worth because we have very little control over the direction it goes. The fact is our net worth is primarily tied to the whims of the markets, so markets up I fully expect our net worth to be up and likewise to the downside.
So the main focus for 2018 is the aforementioned debt reduction or the liabilities side of the net worth equation.
FI Portfolio Dividend Growth Target
Last year saw organic dividend growth of just 4.65% for our FI Portfolio as well as no new capital being invested. Frankly, that 4.65% was a big disappointment compared to where I expected things to be; however, when looking at the bigger picture and accounting for the fact that there were 2 dividend cuts and 4 freezes/continued freezes things weren't quite as bad as they looked on the surface.
That being said I'm hoping to see the weighted average dividend growth rate for our FI Portfolio to increase to at least 6.0%. That might not seem like too much organic dividend growth although I'll be happy if I see at weighted dividend growth rate of 6.0% for 2018.
Part of the reason for the somewhat muted dividend growth expectation is due to the makeup of my FI Portfolio. Many of the companies that I have larger weightings to are also some of the slower dividend growers so they really drag down the weighted dividend growth rate. Also I'm really unsure of what to expect for a boost to dividend growth due to the tax cuts that go into effect for 2018.
So my weighted dividend growth rate target for 2018 is 6.0% which is low, but I think it should be quite achievable.
Forward 12-month dividends
At the end of 2017 the forward 12-month dividends for my FI Portfolio stood at $5,833.07. So with my target of a 6% weighted dividend growth rate for 2018 that puts the forward 12-month dividends at $6,183.05 by the end of 2018 due to organic dividend growth.
As I mentioned above my target is to save and invest at least $5,000 during 2018 into my FI Portfolio. That's a moving target and I currently expect that to be on the low side, but time will tell. If the bull market continues on I think opportunities for 3-3.5% starting yields will be hard to come by therefore I'll assume that $5,000 is invested at an average yield at 2.75%. That would add another $137.50 to the forward 12-month dividends bringing the grand total to $6,320.55.
I think these are fairly achievable, albeit conservative targets for the end of 2018. As the year goes on and there's more clarity as to our savings I'll adjust the target as needed.
Now that I'm back into a semi-routine I want to get back to a regular writing schedule. Thus far my writing time has been focused on writing for my own blog; however, I want to return to writing on Seeking Alpha. Aside from the greater monetary benefit, Seeking Alpha also has a much bigger reach than my own blog which means more opportunities for discussion and to refine my investment/business analysis skills.
I'm setting a target of 12 articles being posted to Seeking Alpha throughout 2018. That's unique articles only which will primarily focus on stock/business/investment analysis. January's already drawing to a close so I'm already behind schedule, but this should be a nice boost for my little space on the internet as well as having being a source of non-day job income.
Passive Income Target
I consider my passive income to be dividends earned in my FI Portfolio, EBIT from my blogging/writing and the interest earned on my savings accounts.
My FI Portfolio dividends will continue to be the largest source of passive income with 2018's total likely coming in around $6,000 before any new capital investments or reinvestment of dividends.
For my blogging/writing I'm not entirely sure what to expect for EBIT in 2018 because Seeking Alpha has changed their payout structure and I've yet to write an exclusive article there under the new schedule. I'm setting a temporary target of $1,200 for 2018 or $100 per month.
That puts the combined passive income target for 2018 at $7,200.
Unfortunately it looks like 2018 will be another year of very little progress towards our goal of financial independence. It's a shame really because the last few years have been a big set back on our plans compared to the pace of progress that we were making from 2011 through 2014. However, this is just a set back, or more of a stall really, rather than a step back.
Since our main goal is to cut expenses in order to boost savings as well as getting rid of our non-mortgage debt that's still progress towards financial independence. Just not the fun kind of progress that researching and investing in companies is, at least for me.
What kind of goals have you set for 2018?