The year 2013 is over. It has been a wonderful year. It passed very quickly and now we have time to reconcile our goals and set new ones.
My last year was a struggle fighting my debt. I could see how much money I was wasting on debt payments and interest. Many times I saw a great opportunity in the market, a great stock on sale, or an option contract offering a juicy premium which I had to let go because of the debt.
My eyes were weeping seeing all those opportunities go. Therefore my primary focus in 2014 will be on eliminating the debt.
This is a quick write down of my goals for 2014:
- Reduce my debt by 50%
- Make $5,000 in options trading
- Max. out ROTH IRA account
- Reach $300 monthly dividends income in combined accounts (in TD and ROTH IRA accounts).
Reduce debt by 50%
Last year, I was able to reduce my debt by 24%. It was a good achievement, but I know I could do more. For 2014, I will reduce the debt by another 50% from the current level. It is a huge task as it translates into paying down around 11,000 dollars next year. But such an achievement will save me circa $1,500 in annual interest. Definitely worth the money and work. Once I pay this off my family and I can take a decent vacation the following year. And I can increase my savings rate, which it currently is around 22%.
Make $5,000 in options trading
Last year, I made $2,400 selling puts and covered calls against stocks I like to own or I already own. My profit reached 44%. In 2014 I will increase this level and double my gains. I will build an option ladder which means that I will have at least one option contract expiring every month and I will roll them from month to month.
As I’ll have more cash available on hand while paying off the debt, I should be able to invest more into a put selling strategy. I should be able to sell puts against more expensive stocks, collect more expensive premiums, and be protected from volatility as more expensive stocks tend to be more stable.
Also the option ladder will help me buying longer term options (LEAPS) and collect more money in premiums. You can watch my Calendar how I will be progressing in this ladder building effort.
Max. out ROTH IRA account
Achieving this goal will be available only if I take into account my future bonus and tax refund if any. I know I can easily save $3,600 during the new year, so the rest of the savings must come from the refund and bonus. Since these are variables I can’t predict, I will be OK with only 3,600 dollars savings should this help achieving my debt reduction goal.
Reach $300 monthly dividend income in combined accounts
I believe that I should be able to reach this goal in my ROTH IRA account rather than in the TD account as due to my debt reduction and maxing my ROTH account goals I will be contributing to my TD account less as I did in the past if at all. So this achievement will come from the ROTH more likely. I also will be investing in stocks paying larger dividends such as MLP’s or REIT’s. REIT’s are currently under investors’ attack (negative) due to interest rates mess and in my opinion they are providing an excellent entry opportunity for long term investors.
Yet another opportunity can be seen in utilities as they are out of favor too. But that may not last long,so if you have spare cash, check them out.
The reason for allocating more money to higher yield in lieu of higher growth is that I believe this can help me to generate more cash now which I can then invest into stocks with higher growth. Of course I will strive to find stocks with balanced yield and growth, but these first two or three years of my accumulation phase I will prefer yield over the growth. Later I switch the gear and start accumulating more cash (reinvesting high dividends) to more growth oriented stocks. I plan to start investing in such stocks in 2016 and give them 10 or 15 years to grow. Some stocks can easily triple, quadruple or five fold their yield over such period of time.
Conclusion
The above described goals are quite brave and they will require a lot of financial discipline. But I believe these goals are meaningful and achievable. If reached they will get our family closer to financial freedom and possibly to retirement.
With reducing my debt as planned I can get more cash for investing and increasing income from those investments. Then I can stop worrying where can I get more cash for investing. I will be able to generate more cash.
Learning and successfully practicing put selling strategy and covered calls can help me to generate more cash with less initial cash commitment than with the stocks only and reach retirement early with smaller account.
What about your goals for 2014? What is the biggest achievement you want to reach next year?
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