2011: My Financial Strategy For The Year Ahead
In 2010, I made significant progress in my financial life and took some large steps towards where I want to be. I established some foundational type stuff with my finances. I made some purchases of some items I needed to get out of the way (long-term asset purchases, not consumer-type purchases). I got my DRIP investing up and running and off to a great start, and I got my feet wet with some precious metals investing. All things I needed to take care of.
In 2011, my strategy is all about accumulating capital. Capital is essentially a fancy word for money or cash. I want to accumulate capital so that I can take advantage of opportunities I see coming in the next few years.
This ties in big time with my overall economic views. With a continuous distressed economy, there will be opportunities for people with money. That is the key. You need some money. If you have money when others are struggling to get it, you can buy distressed assets at very cheap levels. This might be stocks, real estate, a car, you name it.
There are two keys to investing in this manner. One, we’ve already covered it – you need capital. Two, you need to be patient. These opportunities might not come in 2011. In fact, I kind of hope they don’t because I’d rather have a few years of accumulating capital than a single year.
Now, what does this look like. Do you halt all other forms of savings and investing in order to pool cash? Probably not, but you could if you wanted. For me, I don’t have a 401(k), but I’d probably keep that going if I did (assuming there is a company match). I will keep my DRIP investing going – it is only a few hundred bucks a month at this point, so it’s not huge money.
I do have a Roth IRA and I will decide at the end of the year whether to allocate $5,000 of the money I save towards that ($5k is the annual max contribution). Since I already have $5,000 to put into the Roth immediately upon the start of the year, 2011 is taken care of – I usually save $5,000 over the course of the year, then put it into the Roth after the start of the year and thus, knock out that year’s max contribution immediately.
So, 2011 is all about pooling cash. How to accomplish this. Well, I’ll try and get a tight grip of my expenses – I’m not the ultra frugal type, I like to eat out occasionally, and go to Starbucks – but I plan to live wisely and spend wisely. Next, I hope to continue to increase my online income. This $1,500 – $2,000 each month goes a long way towards these types of goals.
As I’ll be outlining in a post here in a few days, I’m going to challenge everyone to save either $10,000 or $20,000 in cash this year. I’m going for $20k. We will outline the challenge and some specific tips in a post here in a couple days.
As we continue to look toward 2011 and what it will bring, we will also have the follow posts:
- Personal Finance Risks – what risks will arise in 2011 and prevent us from hitting goals like the one discussed here?
- Sources of possible volatility in 2011
- What I expect in the political arena in 2011
- Finally, the $10k/$20k challenge for 2011
Look for these posts in the coming days. Happy New Year!