Planning For New Year Resolutions

“We cling to our own point of view, as though everything depended on it. Yet our opinions have no permanence; like autumn and winter, they gradually pass away.” -Chuang Tzu

As we approach the end of another calendar year, it is time to begin thinking about all those new year resolutions, the current state of the economy, personal finance and personal status and how we can make life better for ourselves in the coming year.

I rarely wait till the end of the year to plan for the following year and this year isn’t any different. I have a set of personal goals that I’ve been developing now for quite some time and I’m close to approaching the actual implementation phase.

This past year I had three simple goals:

1. Pay all debt off which would include a new car and my home mortgage.

I have doubts about doing this because we are entering a high inflationary period and the debt will simply inflate itself away but I would be curious to see how my FICO score would change with zero debt. I have also serious concerns about the banking system.

2. Earn 20% or better in all my accounts.

3. Develop a Trust/Tax strategy.

The first goal is partially complete as I paid off one new car and about 50% of the remaining mortgage this year. I continue to have doubts about using cash reserves to pay down ALL debt but I’d rather the money go to paying debt than disappearing into government coffers somewhere.

The second goal I reached but am currently showing massive paper losses on account. Despite the downturn in the stock market, I continue to generate cashflow from my investments that exceeded 20% return on investment.

The third goal I didn’t even touch and will roll over to the following year.

I’ll publish the new set of goals later but one goal that ties into this post is to continue to improve myself on a personal and professional level. To that end, I’ve taken up studying more eastern philosophies as well as ancient and forgotten studies from places all over the world. If there is anything to take from the events of this past year it is one thing: change. Fundamental changes to our banking system, fundamental changes to politics, fundamental changes to our economy and fundamental changes about our perception of what is and what should be so I need to embrace as many of those things as possible.

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3 Responses to “ Planning For New Year Resolutions ”

Comments:

davmp says:
December 3rd, 2008 at 10:41 pm

I’m curious in learning more about why you decided to pay down the auto and home loans this year. Given your ETF covered call and other capitalist activity track records, it seems like you would have other uses for the money that earned a better return on the capital. Was it just de-leveraging you were going for or something else?

Not that I did anything different myself. But in my case, I didn’t have any sort of equivalent track record so my options weren’t as great — unless I wanted to do some gambling. Plus, there was the need for an emotional win as I talk about on my own PF blog.

BTW: I’m really enjoying reading your blog. Thanks for taking the time to write it up!

RichSlick says:
December 4th, 2008 at 8:14 am

I love having low interest debt during inflationary periods as debt becomes worthless as inflation makes debt worth less and less each year. During these periods, I borrow in a low interest environment and invest in a high interest environment.

There are now two major reasons for paying down as much debt as possible:

1. We are in a deflationary trend and debt becomes GREATLY MORE burdensome during a deflationary period than inflationary period because the inverse happens. If you owe $1000 and everything is deflating then that $1000 is actually “worth” a great deal more. Imagine an LCD TV that once sold for $3000 and you bought it on a credit card except now that LCD TV is worth $500 and you could buy a brand new one today for $500 but you still owe $2000 on the old one.

In this scenario you’re better off having cash and NO DEBT to take advantage of these great deals.

This has happened with houses that were once worth 500k now go for 200k; Cars that went for 50k have 20k off MSRP and are selling at 30k.

Imagine if you’re the sucker that bought a house or car and are now holding that debt.

This is exactly why people are walking away from homes, soon cars, and soon other debt like credit cards.

The other major reason for pulling out is that the government keeps changing the rules of the game with regards to investing and the stock market. I don’t know what that crazy treasury secretary is going to do from day to day. One day he’s going to support the banks, the next he’s going to support consumers, the next he’s helping insurance companies or mortgage lenders or whatever the roulette table tells him to invest. How the hell can anyone invest in an environment like this?

Will shorting be banned next week? Will banks get bailout money? Will the big 3 autos get a bailout? All those decisions impact the stock market in a way that it shouldn’t be but the government keeps meddling and until they stop, I’m keeping my money out of the market.

I hope this explains my position a bit more clearly.

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