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Journey to BA: First Year Goals

June 9th, 2007 at 08:49 am

My goal is for my household to reach 2.0 on the "Balance Sheet Affluent" scale by the time we are 60. At the end of April (when I first calculated where we were), we were at 1.32. My first annual goal is to reach 1.36 by end of April 2008.

Although this will probably give the accountants in the group fits, my "BA quarters" will be: May-Jul, Aug-Oct, Nov-Jan, Feb-Apr. This works for me for a number of reasons:
- The most obvious one is that it is based on when I started tracking my numbers.
- Coincidentally, this works very nicely because one estimated tax payment will fall in each of my BA quarters. [As those of you who are self-employed know, US estimated taxes are not done every 3 months, but in Jan, April, June, and September] Each time I make an estimated tax payment, our net worth takes a hit. One hit per "BA quarter" and it all balances out very nicely.
- Finally, with my "BA year" ending in April, I will assure that I have completed my income tax return and will know exactly my past year's income, and can adjust my "7-year income average" accordingly.

So....These are my first-year goals:
- By end July: 1.38
- By end Oct: 1.37
- By end Jan: 1.36
- By end Apr: 1.36

This is why I'm aiming for a big push the first 3 months, then tapering off to my goal of 1.36:
- DH's business has a "peak season" and he brings in about 80% of his annual income in our first BA quarter. When we get to the end of July, we will have a pretty good idea what sort of shape we are in income-wise for the year ahead.
- My business will cease in the middle of our second BA quarter. I do not know how soon after our move I will be bringing in income. Also, I am continuing to bring in a bit of $ from the sale off our our possesions prior to our relocation, but that will stop in our second BA quarter.
- In our second BA quarter, we are going to have the expenses related to our move which are not insignificant.
- So, the overall goal is to make as much money as possible the first quarter, taper off a bit the second and third quarters, and then hold steady the fourth quarter.

To reach our goal of BA by 2.0, we will be focusing on the 4 quadrants of Financial Fitness that Susan Feitelberg outlines in her really excellent (but unfortunately overlooked) book "The Net Worth Workout":
***Earning
***Spending
***Saving
***Investing
I will explain more about this later, but I do highly recommend this book for anyone looking for a good personal finance book, and it especially speaks to people who are interested in physical fitness because it explains finance in terms of a "workout."

Finally, a brief note on why the BA formula is actually NOT linear (as some have suggested): The income portion of the formula is "Total Annual Realized Household Income" which means that it is not just salary income, but income from all sources (including interest, dividends, capital gains, etc). As savings grow, passive income grows, and so (hopefully) if you chart your Total Ann. Realized Income over time it will not be a straight line but a curve.

Well, thanks for reading this rather dry post! My first goal of 1.38 by end of July is pretty steep, so let's see how I do!

4 Responses to “Journey to BA: First Year Goals”

  1. monkeymama Says:

    Doesn't bother me. I tend to do the same because my raise every year kicks in the the 16th of January but I budget monthly and so only get my raise for half the month. So I revise my budget/savings goals every February instead. & those estimates are so annoying and bizarre - april, june, september, january - what the heck. LOL. I understand april - but what's with january - I guess didn't want to make you pay estimates so close to christmas or something, though probably no money left in january anyway - for most people. Wink
    I understand!



  2. monkeymama Says:

    Oh I wanted to say good luck too!!

    I wanted to get that book but our library doesn't even have it! Maybe with all my book store credit I can go find it. I don't even think I saw it recommended, just looked interesting to me in my own net worth wonderings. Glad to hear some positive feedback on it - I am interested.

  3. scfr Says:

    monkeymama - I see that half.com has a copy of "The Net Worth Workout" for $4 + Media Mail shipping. [No - I'm not the one selling it! I'm hanging on to my copy, which I also bought from half.com]

  4. Ima saver Says:

    This all sounds very interesting. Good luck!

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