2009 Financial Goals

One of the positive things which I took from 2008 was that it is now possible to acquire assets that offer considerably better yields than could be obtained 12 months earlier. Even if a fall in distributions (rent, dividends) of around 20% is assumed, the current yields on both real estate and equities remain attractive.

Given my retirement model and the current market conditions, would it make sense to acquire assets and minimise the holding of cash? To a certain extent, I have been doing this already (I purchased some ETFs in November and December) and my cash position has been reduced to about 2 years worth of living expenses (with no attempt to economise) or 3 years (if we cut back in certain areas). I also have a high degree of confidence in my ability to generate income from employment which gives me confidence that I do not need a wasteful emergency fund.

Accordingly, my financial goals for 2009 are:

1. maintain my employment position and the high income and high savings rates it allows me to generate. Due to some changes in what I do and the way I am remunerated my income in 2009 (and after) is likely to be much more erratic than in previous years (although overall at least as good). Accordingly, if this objective is met then I should be able to retire at around 50 years old even if the markets perform badly for a few more years. That said, I am still hoping for a 2012/2013 retirement date. Target savings rate is 55% of pre-tax income;

2. maintain a low cash position by investing most of my cash flow into the equity markets. Yields are the cornerstone of my retirement plan. I cannot afford to pass up opportunities to invest at prices which generate yields higher than are required for my retirement objective. Unless I am saving for a property purchase (see #3 below), cash should seldom be more than 3 years of budgeted living costs + accrued tax reserve;

3. at some point, I would like to acquire another property in 2009. I like cash flow. The issue will be obtaining mortgage finance from the banks which have shown themselves to be increasingly reluctant to lend (and, when they do, they require higher deposits and charge higher interest rates). While I am sure that I will get the finance, the terms are unlikely to be as favourable as my current mortgages;

4. I will continue to do some active trading - but only with small sums of money. I more or less broke even on active trading in 2008 and have no illusions about day trading for a living. Trading is fun but should be nothing more than a minor diversion.

Simple isn't it? It's the execution that will require effort. I'll do a separate post on

I have also set myself a number of non-financial objectives for 2009. Some of these will get more attention than in previous years (where financial consideration have dominated).