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Financial Plan Writing Contest Winner & My Plan

25 March 2010 6 Comments

Thanks for everyone who took the time to write out a financial plan for the writing contest.  The winner of the contest was Jim!  His financial plan was very thorough and got some good attention.  Congrats Jim on winning the $250 Amex gift card.

I decided, for kicks, to write out my ten year financial plan as well and post it to the blog.

My 10 Year Financial Plan

I think I can sum up my financial plan for the next ten years with the following components:

  1. Sustaining and growing my income – I’m young with energy and need to maximize my earning potential now and in the future.
  2. Getting into a rhythm of frugal living and minimizing our expenses
  3. Saving and investing while anticipating potential economic trouble ahead.

Sustaining and Growing Income

In order to sustain my income, first, I need to keep my job.  I’m in a position that is fairly safe within my company… as long as my company is making money.  We’re a very small company and my performance is a part of the overall performance of the company.  I won’t be subject to layoffs like many people in larger companies, but at the same time, I have to help the company survive and even grow hopefully.  My income growth with my job is tied to the growth of the company.

Outside my main job, I’m working hard to produce additional income streams.  As readers of this blog are aware, this blog is a major component of my online income.  After almost two years of hard, semi-consistent work, the blog is generating between $300-400 each month on average.  Not too bad.  With some work, I think the $1,000 / month milestone is very possible in a year or so.  Honestly, I believe that in 5-6 years, I could get to a place where I’m generating anywhere from $4,000 to $8,000 every month in online income.   If there’s one thing I’ve learned, it’s that online income is very possible, but it’s very slow to develop and requires consistency and a ton of hard work.  It’s definitely not for everyone.

Frugal Living

Over the last year, I’ve made significant strides in cutting down my family’s day-to-day expenses.  Going from two incomes to one (due to having children) has been tough and it definitely took a while to get to where we need to be.  And, to be honest, we’re still not there yet.  Dropping your standard of living and embracing a more frugal lifestyle is not easy to do overnight; instead, we’ve made a series of small steps over time.  Over the next couple years, we will need to continue to make several more of these steps.  While our family grows, it is my intention to have our expenses decrease even more.  This won’t be easy and will require sacrifice, but I believe we will be able to adjust what we’re used to and get into the rhythm of a more frugal lifestyle.  I won’t go into details about what areas, because honestly, it’s every area.  Small adjustments to every area of life will add up to a large impact.  I discuss specific ways we’re doing this on regular posts on this blog.

Saving & Investing

I’m doing my best to save every penny possible as a young person.  I fully realize the impact of saving when young due to compounding interest.  It can’t be overstated.  As such, a boost in income and a frugal lifestyle should allow me to grow my savings rate over time as well as the size of my savings and investments.

I’m more focused on capital preservation that speculation at this point due to my economic views which are well documented.  I don’t trust the stock market as much as I used to, or maybe I just don’t trust the current valuations.  As such, I’m willing to have a higher allocation of cash as I wait for better opportunities.  If I have to wait a couple years, I’m willing to.

I am still adding to my Roth IRA every year, maxing it out.  While there is definitely cash sitting there, I am slowly building dividend yielding positions.  If I’m going to be owning stocks right now, I better be earning a dividend.  I will add the maximum contribution to this Roth every year moving forward.  At this point, we haven’t opening a Roth for my wife, but this might happen soon.

2010 will likely have significantly less transactions as I cut down on my trading activity.  I’m growing in my investment strategy, and am learning to be more patient.  I do all my own investing/trading.

Some Specifics

  • At this point, I’m aiming for saving $10,000 every year – it’s currently a stretch but possible – I hope to increase this and in five years, I hope to be saving $15,000 – $20,000 every year assuming the dollar is worth the same 🙂
  • I’m committed to tithing 10% of my money both now and in the future
  • I do not have a 401(k) since I work for a very small company
  • I’m committed to allocating a small percentage of my savings to gold & silver since I believe this is “real money” and is a great inflation hedge

Ten years from now, I hope to have a drastically different lifestyle.  I hope the percentage of my monthly income shifts dramatically towards my online income sources versus my traditional job.  If this is possible, it also means that I was generating some pretty good online income while working my normal job.  This should allow for significant savings during these years.  Hopefully, the combination of investment income and online income will result in a level of financial independence that is conducive for a very attractive lifestyle ten years from now.

The Next Writing Contest

I am going to announce another writing contest in the near future.  Some of the topic ideas I have are:

  • What is your dream job where you can realistically earn a living?
  • A contest for best business concept or plan
  • What is your favorite investment for the next 20 years and why

If you have any thoughts or feedback on these topics, let me know.  Your feedback will greatly dictate the direction I go in.  Also, be sure to let me know if you intend to participate either via email or in the comments.  If you let me know, I’ll give you a heads up prior to officially announcing the contest so you can get a head start on the rest of the crowd.

Thanks again for the great entries to the financial plan writing contest!

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