2020 Review and New Goals for 2021!

2020 was overall a mixed year for me in terms of meeting my goals, as I shall explain.

A summary of all my goals since inception of this blog can be found under my Goals tab.

2020 Goals Revisited
I set 6 goals at the beginning of 2020 to meet by end of the year. The first four are financial and the last two to help me stay current and maintain a sharp mind. All of these goals are specific, measurable, achievable, realistic, and time-based (SMART).

1. Reach a net worth of $2,200,000.
2. Beat the S&P500TR.
3. Achieve total portfolio dividend yield at least 50 basis points below the S&P500.
4. Save 95% of my after-tax income.
5. Read 100 books.
6. Read the bible in one year.

Goal #1:
Reach a net worth of $2,200,000.

Achieved!

Here is the breakdown on the 139 books I read in 2020

 One of my goals for 2020 I set at the start of last year was to read 100 books, which while ambitious is also achievable due to extensive use of audiobooks. 

I am happy to report that I exceeded this goal by 39%!

This feat was mainly accomplished by relying on audiobooks, using the Overdrive app, a good way to listen to many interesting audiobooks from my library for free during my commutes. Audiobooks accounted for 86% of all books read in 2020.

Here is the list of all 139 books I read in 2020:

2019 Review and New Goals for 2020!

2019 was overall a good year for me in terms of meeting the goals under my control, as well as my net worth goal easily in a strong bull market year, but I failed to meet my performance goal relative to the market, as well as my dividend income goal which was actually a blessing in disguise (more on that later).

A summary of all my goals since inception of this blog can be found under my Goals tab.

2019 Goals Revisited
I set 6 goals at the beginning of 2019 to meet by end of the year. The first four are financial and the last two to help me stay current and maintain a sharp mind. All of these goals are specific, measurable, achievable, realistic, and time-based (SMART).

1. Reach a net worth of $1,600,000.
2. Beat the S&P500TR.
3. Receive $19,000 in dividends.
4. Save 95% of my after-tax income.
5. Read 50 books.
6. Read the bible in one year.

Goal #1:
Reach a net worth of $1,600,000.

Achieved!

Here is the breakdown on the 106 books I read in 2019

One of my goals for 2019 I set at the start of last year was to read 50 books. I was pessimistic about meeting this goal and figured only 40% chance of achieving it, based on the assumption that I would try to meet the goal using only print books and not using audiobooks.

Well, I am happy to report that I crushed this goal by a huge margin, exceeding it by a whopping 112%! What changed?

For one, I had more free time than I imagined. Work has slowed down in my job and I found myself with more free time available for reading, though admittedly not all devoted to reading or spent efficiently (darn those addictive games!).

Also, things changed about half way through the year, as I found the Overdrive app a good way to listen to many interesting audiobooks from my library for free during my commutes. Before, I had tried another audiobook app that was cumbersome to use. With the much more user-friendly app, I am routinely listening to audiobooks on my commutes which is about 2 hours each day.

Here is the list of all 106 books I read in 2019:

2019 Mid-Year Review: A Mixed Bag

2019 is half-way through. Here is an update on my progress on the five goals I set at the start of 2019.

1. Reach a net worth of $1,600,000.

Ahead of schedule. My current net worth is $1,592,651.10, which is only $7,348.90, or 0.46% short of target. My annual surplus is roughly $175k, or $87k for half a year. As long as the stock market does not drop more than 5% between now and the end of the year, I should reach this goal. I would give this goal about 90% probability of success.

2. Beat the S&P500TR.

2018 Review and New Goals for 2019!

2018 was overall a good year for me in terms of meeting the goals under my control, but I failed to meet my net worth goal due to the market downturn, and my overweight in foreign stocks and small cap stocks, which did poorly compared to the US stock market, also meant that I failed to beat the S&P500 index.

My total expenses in 2018 decreased significantly compared to 2017, while my savings rate surged well above 90% and dividend income grew modestly. I continued tilting toward lower dividend yield and higher growth to reduce my tax liability given my relatively high income. A summary of all my goals since inception of this blog can be found under my Goals tab.

2018 Goals Revisited
I set 6 goals at the beginning of 2018 to meet by end of the year. The first four are financial and the last two to help me stay current and maintain a sharp mind. All of these goals are specific, measurable, achievable, realistic, and time-based (SMART).

2018 Mid-Year Review

2017 is half-way through. Here is an update on my progress on the five goals I set at the start of 2018.

1. Reach a net worth of $1,400,000.

On schedule. My current net worth is $1,307,542.08, which is $92,457.92, or 9.2% short of target. My annual surplus is roughly $130k, or $65k for half a year. I would need a mild boost from the stock market, perhaps another 3% return through the end of the year, to push me to the goal. I would give this goal about 50% probability of success.

2. Beat the S&P500TR.

On schedule. My YTD return is 3.51%, slightly ahead of the S&P500TR of 2.65%. Since my performance and the market performance are volatile, anything can change for the remainder of the year. I would give this goal about 50% probability of success.

3. Receive $18,000 in dividends.

On schedule. My dividends received year-to-date is $9,084.14, which is 50.47%, just slightly over half, the target. Barring something drastic like dividend cuts, I would rate this goal as more like than not to be met, probably 70% probability of success.

4. Save 90% of my after-tax income.

Ahead of schedule. Currently, my after-tax savings rate has been well above 90%, even exceeding 97% since I bought a home with cash. My income is likely to stay the same or increase slightly the remainder of the year, while expenses are expected to remain low. I would give this goal about 95% probability of success.

5. Read 60 books.

Achieved! I have read 68 books so far, and it is only at half time! I have devoted more time for reading this year, and it also helped that nearly two-thirds of the books I have read this year were audiobooks that I listened to on the go. That helps a lot. 100% probability of success here.

6. Read the bible in one year.

On schedule. I am using a daily bible reading app to keep me on pace to read the bible in a year, which is doing a fantastic job. I have no trouble keeping it up only 10-20 minutes a day. I would give this goal about 95% probability of success.

Overall, I have already met 1 and am on pace to meet 5 of my 6 goals. Currently, the probability of reaching all six goals is about 16% (50%*50%*70%*95%*100%*95%). Goals 1 and 2 are the most challenging but also the ones least under my control. Staying diversified and close to 100% stock allocation, buying on dips, and continuing to save diligently should give me a fair shot.

2017 Review and New Goals for 2018!

2017 was another solid year for me in terms of attaining most of my financial goals, helped by a strong stock market performance and a good income. My total expenses in 2017 increased only slightly compared to 2016, while my savings rate remained well above 90% and dividend income grew significantly. I continued tilting toward lower dividend yield and higher growth to reduce my tax liability given my relatively high income. A summary of all my goals since inception of this blog can be found under my Goals tab.

2017 Goals Revisited
I set 5 goals at the beginning of 2017 to meet by end of the year. The first three are financial and the last two to help me stay current and maintain a sharp mind. All of these goals are specific, measurable, achievable, realistic, and time-based (SMART).

My Roadmap to $1 Billion Net Worth

One of my lifetime goals is to reach $1B in net worth. While this may seem far-fetched right now, given that I only have slightly over $1M, there is still a long time left and I should be able to reach it through the magic of compound interest.

For the skeptics, I have projected out my net worth as follows based on several assumptions:

2017 Mid-Year Review

2017 is half-way through. Here is an update on my progress on the five goals I set at the start of 2017.

1. Reach a net worth of $1,000,000.

Ahead of schedule. My current net worth is $999,181.64, which is only $818.36, or 0.08% short of target. I should reach $1M next month. For me to stay above the $1M mark at the end of 2017, I estimate the market can drop no more than 7% from the current level. A fall over more than 7% from the current level is unlikely. I would give this goal about 80% probability of success.

2. Receive $17,000 in dividends.

Behind schedule. My dividends received year-to-date is $7,532.56. That is only 44%, or less than half, the target. To meet the goal, my dividends for the second half of 2017 would have to be $9,467.44, representing 25% increase from the first half. That is a tall order. For comparison, last year the first half of 2016 I received 46% of the dividends for the year, which required about 17% increase from the second half. Though I might still meet this goal, I would rate it as unlikely at this point, probably 30% probability of success.

3. Save 90% of my after-tax income.

Ahead of schedule. Currently, my after-tax savings rate is 91% ytd. My income is likely to increase the remainder of the year, while expenses are expected to remain the same. I would give this goal about 95% probability of success.

4. Read 50 books.

Behind schedule. Excluding the Bible, I have read only 20 books so far, leaving 30 more to go. I was unsure how to account for reading the bible (i.e. count it as one, 66, or six??). At this pace, I would have to count the bible as 66 books to meet my goal for the year. Or I can start picking up the reading pace! My estimated probability of success (assuming conservative accounting of the bible as only 1 book) would be 20%.

5. Read the bible in one year.

On schedule. The app I am using to keep me on pace to read the bible in a year is doing a fantastic job. I have no trouble keeping it up only 10 minutes a day. I would give this goal about 95% probability of success.

Overall, I am on pace to meet 3 of my 5 goals. Currently, the probability of reaching all five goals is only a tad better than 4% (80%*30%*95%*20%*95%). To help reach all five goals, I need to spend extra effort on #4, which is mostly under my control. There is little I can do to help with goal #2. I can only invest however much I have and I would rather not assume greater risk by investing in high yield stocks. 

2016 Goals Review and New Goals for 2017!

2016 was a pretty good year for me in terms of attaining most of my financial goals, helped by a strong stock market performance and a good income. My total expenses in 2016 stayed about the same compared to 2015, while income and savings were moderately higher. I also began to shift my investment strategy toward lower dividend yield and higher growth.

2016 Goals Revisited
I set 5 goals for 2016 to meet by end of the year. The first four are financial and the last is to help me stay current and maintain a sharp mind. All of these goals are specific, measurable, achievable, realistic, and time-based (SMART).

1. Reach a net worth of $800,000.
2. Reach total portfolio value of $600,000.
3. Receive $16,000 in dividends.
4. Save 90% of my after tax income.

5. Read 50 books.

Goal #1:
Reach a net worth of $800,000.

Achieved!

I set this goal based on $643,161.31 net worth at end of 2015 and target of 5% organic growth (I expected an anemic stock market performance) and about $125,000 savings (roughly in line with surplus in 2015), which would get me to $809,576. I rounded it down to $800,000 for a nice round number.

Actual net worth achieved at end of 2016 was $883,575.44. I ended up surpassing my set goal by more than 10%, due to favorable variances in both of my targets.

First, the stock market performed much stronger than I anticipated. My portfolio ended up gaining 15%, which even outperformed the S&P 500 TR of 12%. I attribute most of my outperformance to a value tilt in my portfolio, which returned to favor in 2016 after several years of underperformance.

Second, higher than expected income combined with stable expenses increased my savings to $144k.

Goal #2:
Reach total portfolio value of $600,000. 

Achieved!

I set this goal based on $457,571.38 portfolio value at the end of 2015 and target of 5% organic growth (I expected an anemic stock market performance) and about $125,000 savings (roughly in line with surplus in 2015), which would get me to $599,150. I rounded it up to $600,000 for a nice round number.

Actual total portfolio value attained at end of 2016 was $691,077.87, excluding cash held in brokerage accounts, illiquid bonds, and assets in my tax-deferred retirement account. This far exceeded my goal, by about 15%, due to stronger stock market performance and higher savings than expected.

Goal #3:
Receive $16,000 in dividends. 

Failed!

I set this goal based on $457,571.38 portfolio value at the end of 2015 and target of 3.5% dividend yield, in line with my portfolio dividend yield at that time.

Actual dividend received in 2016 was $13,391.84. This was about 84% of my goal.

My average dividend yield was $13,391.41/average portfolio value = $13,391.84/(($457,571.38+$703,820.00)/2) = 2.3%.

I am not too disappointed to fail this goal, actually. The current amount of dividends I get is more than enough to meet my living expenses in 2016, with a dividend to expense coverage ratio of 1.4. Also, I still have a job and expect to keep it for at least another six years, thus higher dividend now will serve to increase my tax liability and reduce my net worth.

The main reason I failed this goal was that I began a transition to lower yield or even zero yield stocks with higher growth, in an attempt to reduce my tax liabilities from excess dividends. I now favor no dividend stocks like BRK.B, AZO, FISV, FOSL, DLTR, HSIC, AN, SRCL and low dividend stocks like AAN, DHR, UHS. I will still buy higher yielding stocks if the price is right for diversification.

Goal #4:
Save 90% of my after-tax income.

Achieved!

I set this goal based on my past savings pattern which has exceeded 90% savings rate. Maintaining a 90% savings rate would allow me to become financially independent (FI) in less than 3 years! Technically, I am already FI and could afford to live on my dividend income alone, but I plan to keep working a bit longer to help build a bigger asset base for a greater margin of safety against higher than expected expenses and discretionary spending.

Actual savings rate: 93.74% (improved over 93.05% in 2015)

A high savings rate is the key to financial independence/ early retirement. See the graph below from networthify.com.

The table below shows the number of years it takes to be able to retire as a function of savings rate.

Savings Rate (Percent)	Working Years Until Retirement
0	infinite
5	66
10	51
15	43
20	37
25	32
30	28
35	25
40	22
45	19
50	17
55	14
60	12
65	11
70	9
75	7
80	6
85	4
90	under 3
95	under 2
100	zero

If one saves only 10%, one would not become FI for 51 years, essentially having to work until social security or pension kicks in. Saving half of one's income would allow one to retire after working for 17 years. Saving 90% could drastically cut the number of working years to under 3!

The graph below shows my trailing twelve month dividend income versus expenses.

The dividend line crossed the expenses line sometime in July 2015. Now I am working on building the buffer. It is comforting to know that I do not have to rely on income from my job to cover my living expenses.

Goal #5:
Read 50 books. 

Failed!

I set this goal based on my love for learning and desire to stay current and keep my mind sharp.

50 books in a year is about one book a week, which seemed reasonable to me.

Actual number of books read was 39, about 78% of goal.

About half of the books I read were related to investing and finance, my main interest. Other books were in fiction, philosophy, economics, statistics, health, and self-help.

I failed this goal because I did not spend enough time reading.

In summary, I managed to achieve 3 of 5 goals I set for 2016, for an overall success rate of 60%. While this may not seem too impressive, it is actually the best result I have attained so far. In 2015, I only achieved 1/6 goals, for a 17% success rate. In 2014, I achieved 2/5 goals, for a 40% success rate. So 2016 was a good year for me.

New Goals for 2017:
1. Reach a net worth of $1,000,000.
2. Receive $17,000 in dividends.
3. Save 90% of my after-tax income.
4. Read 50 books.

5. Read the bible in one year.

The first one will set a significant milestone for me. One million dollars net worth is finally within reach now, from zero net worth about 7 years ago. I expect to add $130,000 savings to my current net worth of $883,575.44, which would become $1.01 million, allowing me to reach this goal if the stock market would at least break even in 2017. Given that the current bull market has been running for almost 8 years, the currently sky-high valuations withal, I expect the bear is just around the corner. I figure a 40% chance year 2017 will turn out to be a losing year for stocks, potentially even downright -20% bear market territory. In that case, I will fail to meet my goal, but will be better positioned to meet or exceed it the year after that. That leaves 60% chance the stock market will continue higher or at least break even, allowing me to reach the $1 million mark in 2017. Either way, I win.

I don't have a goal for portfolio value for 2017, because it is highly correlated with net worth, and net worth is a better gauge of my financial status.

The second goal sets a less aggressive target for dividend income. My current portfolio is $691,077.87 with a yield of 2.3%. If I add $130,000 savings throughout 2017 at a similar 2.3% yield, I shall collect $17,390 dividend income in 2017. I target a bit less in favor of lower yielding stocks for my new cash flows, so rounding my goal down to an even $17,000. This would be feasible and achievable.

The third goal is a maintenance of my 90%+ saving rate, which is the key to financial independence.

The fourth goal is another attempt after failing to reach it for the past two years. My goal is to read a book a week. I will target books about 100-300 pages each.

The fifth goal is new. It has been about 10 years since I read the bible. I need to refresh my memory and read it again. To help me stay on track, I download an app to read the bible in a year. You can download this free app here. It will take 10 to 25 minutes a day, which is realistic.

I can think of three ways I can count this last goal for my fourth goal. To be conservative, I would count the bible as only one book, which means I would have to read 49 other books in 2017 to reach goal #4. To be liberal, I would count the bible as 66 books contained therein in the Old and New Testament combined. That way I would exceed my goal #4 if I meet goal #5. Finally, there is the compromise of considering 200 pages as a "book", in which case the bible being slightly over 1200 pages is equivalent to 6 books, which leaves 44 more books to read to reach goal #4. I have not yet decided which approach to take. I'll keep you in suspense.

That's all for 2016. Happy 2017!