Happy New Year everyone! It's time for my goals and predictions for 2016. As always, the New Year brings a bunch of hope and excitement. Too bad I think 2016 is going to be a whole lot of nothing if you're depending on the stock market or real estate market to boost your wealth!
I sincerely wish everybody reading Financial Samurai upgrades their side hustle engine from a two stroke to a rumbling V8 because we're all going to need to do more. Every year end I put together a year in review post and follow up with an outlook of the new year. Thus, I'm presenting my goals and predictions for 2016 today.
Goals And Predictions for 2016
I've listed out 15 measurable goals I'd like to achieve, and I've also offered up five predictions for 2016. Some of you might spit out your milk with my last prediction, so it's best you not eat anything while reading.
GOALS FOR 2016
LIFESTYLE BUSINESS GOALS
1) Test out a new layout for FS so that more articles can be seen above the fold.
My current design is going on its third year and I'd like to try a new design with at least one more column to show more posts above the fold. I think it will be useful for publishing my usual long form pieces plus publish more current event / short form posts. With the new layout, I won't feel bad publishing more because at least two articles will stay above the fold at the same time.
2) Produce another FS product e.g. book, course, subscription product.
The easiest thing I can do is write a new book each year and publish it under the Financial Samurai brand. I've got a lot to say on real estate, early retirement, building a lifestyle business, and adventures on Wall Street. The key will be to pace myself. Otherwise, I'll feel overwhelmed and accomplish nothing. It takes courage to put myself out there when I write goals and predictions for 2016 and every other year. Most people don't make their own public, but I find doing so pushes me further.
3) Inject more humor. I used to be funny once, I swear! But the fun posts such as, How To Get Girls If You Live At Home With Mom And Dad and Stay At Home Men Of The World, UNITE!, have all but gone away for more serious subjects. What happened? I donno. My goal is to poke fun at more serious trends while offering some solutions as well. Feel free to let me know what other categories you'd like me to write more about.
4) Open up a digital wealth management (roboadvisor) account and publish its performance.
Digital wealth advisors are all finally going mainstream now that they each manage billions of dollars. They're cheap (0.25% or less), automated, and do tax loss harvesting, which is all most of us really need. I'm often a mid-stage adopter of technology because 1) I don't know whether they will be around long enough to make the effort (MP3 players anyone), 2) I like to see how industry dynamics, competition, and user feedback plays out, and 3) I tend to get lazy and want to keep things simple.
Given Wealthfront is based here in San Francisco, was one of the first digital wealth advisor founded in 2011, and manages the first $10,000 for free, I'm going to start with them. If things go well over the next year, I will definitely consider allocating a larger slug of my passive index portfolio to them in the future. I think there is a real opportunity for many of these pure robos to help millions of people mobilize their underutilized cash. I've got over $550,000 in CDs expiring in the next two to three years which needs to find a home. My hope is that Wealthfront is it.
Finally, one of the biggest mysteries with the roboadvisors is that I can't easily find the actual performance of these roboadvisory offerings. I plan to fix that by just publishing my own performance every month or quarter and comparing it to several indices. When it comes to making public goals and predictions for 2016 and beyond, it takes courage. Outperform or underperform, there is nowhere to hide!
5) Focus on profitability, rather than growth.
It seems obvious that many private companies will fail in 2016 because they aren't profitable. The only reason they continue to exist is because of new funding. I've spoken to several insiders from private companies which have had Series C or D funding rounds. These companies have at most 18 months of runway at current burn rates before they will have to raise again or shut down. Now imagine what the runways are like for Seed, Series A, and Series B companies. Things are getting dicy.
After experiencing a ~50% increase in operating profit in 2015, I would love to see another 15% profit increase in 2016. However, based on current trends, there's over a 50% chance my business will see negative growth in 2016. Thus, if I'm to meet a positive operating profit goal, I'll have to hustle and find new partnerships with businesses which have great products (e.g. PolicyGenius for life insurance), plus produce new products on my own (e.g. a new FS book on real estate investing).
My plan is to build out the following categories: Insurance, Investing, Automobiles, and P2P Lending. It's important to diversify my article topics and create more depth in each category. Retirement continues to be my most important category, which I will continue to write about at least once a quarter.
PERSONAL GOALS
6) Live in Asia for one month. Target locations: Chiang Mai, Beijing, Taipei, Saigon.
I had such a blast visiting Asia for 3.5 weeks in 2015, that I want to try some digital nomad living by living and working overseas for at least a month. Between 2011 – 2014 I went to Europe for two plus weeks a year, so it's time to focus on Asia, and then perhaps South America. I realized my happiest times are when I'm actually fully utilizing my freedom by traveling. It's nice to work from home in San Francisco, but working from home is no longer something special.
7) Finish the deck off the master bedroom and do some landscaping to improve curb appeal.
Instead of creating a 700 sqft extension to my home for ~$200,000, I'd rather just build a nice 130 sqft deck off my master bedroom for < $30,000. Less stress, less money, happier life! Almost all the windows in my home have been changed, except for the master bedroom's because I plan on creating sliding doors where the windows currently are.
It will take about three months to get my plans approved from the planning department. During the summer, I'd love to be able to walk outside my bedroom, do some yoga in the morning, and write a post in the afternoon while overlooking the ocean. Not having to do much remodeling anymore is another reason why I really want to start travelling again.
8) Get rid of all the old clothes I haven't worn in over a year.
Downsizing to a smaller house helped me donate at least eight boxes of stuff. Having a bunch of unused inventory really bums me out, especially when I know there are other people in need. And it's not just clothes either, but putting a limit to the amount of new retro tennis shoes and the amount of stuff I buy. Now that I've grown accustomed to my new smaller house, once again, things have begun to accumulate.
9) Attend at least four world class tennis tournaments.
I'm a first class tennis junkie. I can watch for 10 hours in a row. Going to Paris seven years ago to watch the French Open and being a tourist was just wonderful. I long to go back and visit the museums, walk the streets, and eat the baguettes. Attending Wimbledon in 2014 to watch Roger Federer and Rafael Nadal play on center court with better seats than the Royal Box was amazing! I definitely plan to go back to the US Open in NYC because my sister and nephew are there as well.
10) End the year at under 163 lbs while winning at least two 5.0 level tennis matches.
It's much easier to stay in shape if there's a purpose. Break up with your significant other if you want to get in the best shape of your life! My purpose is to join a better 5.0 team and win a couple legit 5.0 level matches. 2015 was the first year I was a 5.0, so as a result, I ended up playing with a bunch of 4.5s and newly promoted 5.0s.
A weight of 163 lbs at 5'10” is just about right for my frame, with an upper bound limit of 168 lbs. After visiting my doctor about sleep apnea, and discovering there is a tight correlation with weight gain and sleep apnea, I've decided to get down to 155 lbs instead!
Related: The Ideal Body Weight Pisses Me Off: Time To Get Back In Shape!
PERSONAL FINANCE GOALS
11) Don't go back to work full-time unless the work AND pay are amazing.
Each year for the past three years I've been able to find work with interesting new companies as a consultant. 2016 will be no exception. I plan to look outside of fintech because I've had enough. I attended too many fintech startup meetups, parties, and presentations in 2015.
At least I was able to write some interesting posts such as, Advice To Startup Employees: Sleep With One Eye Open, when I discovered how poorly the vast majority of startup employees are getting compensated. I'd love to bring new insights into a different industry for 2016. I'm thinking about fashion, fitness, and retail. Industries that are completely out of my wheel house!
12) Increase net worth by $500,000.
2016 is going to be a difficult year for the stock market and real estate market. As a result, I can't count on my investments providing any increase in net worth. In fact, I'm bracing for at least a $300,000 decline in my asset values in 2016. As a result, I plan to increase my net worth through a 60%+ after-tax savings rate, defending my business income from no more than a 20% decline, and potentially new consulting opportunities. My plan is to track my net worth as usual with Personal Capital's free financial tools. I've taken a snapshot of my net worth on Jan 1, 2016, and will measure the progress every single month to make sure I'm on track!
13) Finally achieve my $200,000 a year passive income goal. Although I will be a year late at reaching my goal, it's better late than never. Rents on two properties are going up per my contracts, I've got a new rideshare referral program generating $500 – $800/month, and my severance negotiation book sales have also ticked up by ~$200 a month due to a new edition and an increase in price. If I can successfully publish a new book in 2016, I don't see why I can't achieve my goal. Here is my latest passive income details.
14) Start hacking away at my vacation property mortgage. I plan to pay down at least $20,000 in extra principal to my ~$419,000 Lake Tahoe vacation property mortgage. The mortgage was modified for free by Bank of America from 5.875% down to 4.25% several years ago. 4.25% is not high for a 30-year fixed mortgage, but it is still almost double the risk free rate of return.
I don't plan to be more aggressive because this asset is the largest laggard in my net worth. It might be worth $550,000 from $700,000+, but I'm not sure. It's never good to throw good money after bad, but I think the Lake Tahoe real estate market has finally turned the corner, and I still plan to hold onto the property forever.
15) Set up a new car fund. In two years I'll be 40, and I know I'll have a mid-life crisis then. In two years, the lease on my 2015 Honda Fit coincidentally runs out as well. Given I will go through a mid-life crisis, I should set aside a separate savings account now to pay for the perfect mid-life crisis car, like a Porsche 911.
This car costs about $60,000 second hand. As a result, I've got to put aside roughly $2,500 a month into an online savings account so the money can at least earn 0.75% interest rather than the 0.1% or 0.2% with a bricks and mortar bank. If I don't go through a mid-life crisis, then at least I'll have saved an extra $60,000!
PREDICTIONS FOR 2016
1) The S&P 500 ends down 1.4% excluding dividends.
My first of five predictions for 2016 is the S&P will end down 1.4% excluding divs. If we include 2009, we've had a good seven year run since the crisis. Be prepared to be absolutely disappointed with the stock market in 2016.
Valuations are at the upper bound range, earnings growth is slowing, interest rates are rising, and geopolitical uncertainty is heightened. I think there's about a 70% chance the S&P 500 ends negative for the year, so I've created a very defensive Motif portfolio for 2016. A 1.4% decline on a 2,044 Dec 31, 2015 S&P 500 closing price = 2015 target for 2016.
2015 on the S&P 500 is relatively bearish versus consensus S&P 500 target estimates by most Wall Street strategists below. The general range is 2,100 – 2,300 for a 2.6% – 12.5% gain. I'm happy to be wrong! But I'm not going to wait around and see if I want to achieve my +$500,000 net worth goal.
2) The 10-year yield stays under 2.75%.
My second of the predictions for 2016 is the 10-year yield stays under 2.75%. Despite the Fed rate hike, the 10-year yield will continue to stay suppressed because there's a flight away from stocks and towards US Treasuries for safety. I've made a low interest rate environment call for over 10 years, and I maintain my belief that interest rates aren't going up for a very long time.
The Fed could raise interest rates by another 0.75%, and I still don't think the 10-year yield (~2.3%) will be above 2.75%. In other words, the yield curve flattens, and buying Treasuries is not going to be a bad trade for those who want to protect capital.
3) The real estate market slows down drastically, and goes negative in many noncoastal cities.
My third of five predictions for 2016 is a slowdown in real estate. Despite continued low mortgage rates, the hottest real estate markets in the country (SF, San Diego, Denver, NYC, San Diego, Portland) will see a median price increase of less than half the percentage increase seen in 2015, i.e., ~4% – 6% instead of 10% – 18%+. Math dictates that without corresponding wage growth, demand shall slow. Supply is also growing as well.
The national median home price increases by 2%, matching the rate of inflation i.e., no real appreciation. Please be in no hurry to buy a home in 2016. Be picky, ask for concessions, make real estate agents lower their 5% commission already! Read: Should I Buy A Home In A Rising Interest Rate Environment
4) Brazil, Gold, and Oil all surprise on the upside.
My second to last of my predictions for 2016 is we get some upside on Brazil, gold, and oil. Brazil is at a 10 year low. Gold is at a five year low. And WTI is down to $38, a level where it was during the 2009 financial crisis. I see opportunity in all three asset classes, although the trend is down. As a result, I'm nibbling into EWZ (Brazil ETF), GDX (Gold Miners), and refiners like Exxon. In 2016 I will take a dumbbell approach to investing. I will be trying to get roughly 50% of my portfolio in defensive positions like bonds, 40% in the S&P 500 index, and 10% in more speculative, bombed out names like the ones I've mentioned in this prediction. The logical investment trend is to invest in companies that benefit from USD strength and weakness in commodities.
Here's my Motif portfolio with 41% in bonds, and some small positions in the names I mentioned above which are already causing me pain. I like autos and airlines due to low energy costs that allow for lower input costs and higher profits.
5) Hilary Clinton wins the US Presidential election.
My final predictions for 2016 is Hilary wins. Despite Hilary sounding like a robot who reads populist lines from a script to convince the middle class to vote, she goes on to defeat Donald Trump because she captures the majority of minority and female voters on top of all the Democratic voters. While I like that Donald Trump speaks his mind and can't be bought because he's already a billionaire, his rhetoric is too incendiary to capture the majority of voters. For example, Latinos make up roughly 18% of the electorate, maybe more.
To win, candidates really need to be more political by kissing everybody's ass. Donald suffers the same disease as Mitt Romney. Because they are so rich, they just seem too arrogant to understand the math necessary to win a majority. Mitt never understood that winning 100% of the top 10% still loses to Obama winning 30% of the remaining 90%.
I'd love to see a noncareer politician win. Unfortunately, the reason why politicians win is because they are experts at being politicians!
WHAT WILL 2016 BRING?
What are some of your goals and predictions for 2016? Are you as pessimistic about the year as I am? I'd love to hear bullish reasons why 2016 will be a great year for stocks, real estate, or other asset classes! Here's a recap of my 2016 year in review if you're curious. It's always fun to set goals and see how things turn out. What are your biggest predictions for 2016?
Above all else, you must focus on what you can control to build wealth. Track your net worth, come up with a financial plan, raise your savings rate, learn all you can about investing, and properly allocate your assets in a risk-adjusted manner. Hustle to generate more income on the side. Don't wait until you are fired or just can't stand your job to begin planning something new. Start today!
Wealth Building Recommendations
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Make one of your goals and predictions for 2016 to end the year in your best financial shape. I bet you can achieve that target if you set your mind to it.
Big oops on that last one.
Still a bit to go, but predictions 1 and 4 aren’t looking good either. What would you do differently in hindsight?
Hey sam, love reading your blog. Now that it’s much later in the year who do you think is going to win the election?
Anyway, I’m glad that there’s somebody else out there trying to meet their fitness goals. I started the year at 157 and all of my clothes were tight. I’m 5’10” like you, but I have a small frame, so it really shows. I got down to 148 by the summer, but I’ve definitely bounced right back! It’s a constant battle. Oh to have the 28 inch waist of my college days back! Hope your exercise has been better than mine and that you’re at the ever elusive 155!
Hi Aaron, I’m pretty confident that Hillary Clinton will win. It’s just gonna be more of the same, which for an investor is generally a good thing as there Will be less surprises.
I’m doing a terrible job with my weight and I’m currently at 168 pounds. But I do feel good and I feel like I’ve gained some muscle along with some fat!
Sam
Not good about trump. Horribly indeed.
Hi Sam, any plans to update this mid year, if we can get mid year update it will be awesome :)
Very much admire your depth of financial knowledge! Some of your passages inspired me a lot! We are planning purchasing our first house in Seattle. As you said, the return of renting is zero. Given the stock performance in the first week 2016, I am wondering maybe I should wait. But Seattle area is see huge inflow of people month by month, but the inventory is in historical low. Plus people are afraid of following rate hikes, so the price is pushing up rapidly. Wondering what is your suggestion in such situation! Thank you in advance.
Check this article out: Utilize The Spray And Pray Method To Buying Real Estate and The Best Time Of Year To Buy Property.
Seattle is at an all time high right now. Do not rush and get emotional buying. Real estate often follows the stock market. Right now, the stock market is getting rocked!
Congratulations Sam… you successfully jinxed the market on the very first trading day of the year no less. . . you are a magician!
Thanks a lot – ;-)
You bet! Welcome to a volatile and most likely, money losing ride in 2016!
Ok so I’m decent I guess at saving money but how about spending advice. Dilemma: I’m thinking about trading my car to get a more luxurious car with bells and whistles. I’d be spending an additional $15k, but I drive my car everyday and want to enjoy the experience each time. My question is what level of enjoyment does one have to achieve to justify the proportion of money one spends to attain the enjoyment?
I know this is subjective and up to the individual but any thoughts are appreciated!
My advice is to read my Mid-Life Crisis post!
I agree that this is Hillary’s election to lose. I don’t think the Republican party has learned to adapt to the changing demographics of the country and there is too much bickering for any candidate to gain enough traction to get enough of the electorate to defeat her (nominee will probably be Cruz or Jeb). I also think Sanders has the conception of being too far left to have a legitimate chance at the Democratic nomination.
Agree with your market analysis, for the most part. There is too much global uncertainty and it’s an election year, so I will say S&P takes about a 3% hit this year.
Even with all of the uncertainty and crony capitalism that is going on, I still believe we all have tons of opportunity to make great strides this year. That’s why we call it personal finance. It’s personal and I’m not dependent on the government to improve my life.
-Fire Guy
Happy New Year!
If you need help with the layout, let me know. I’ve recently redesigned savespendsplurge.com, maybe we can work something together as well :)
Anyway .. goals for this year? Earn more money than the previous year, be more productive and expand my business a little. And, most importantly, spend all the time I can with our daughter.
Great post and very much admire your depth of financial knowledge. Have you looked into any of the Machine Learning based A.I platforms such as Rebellion Research to make decisions ?
Fantastic list of goals – some challenging & some enjoyable. I agree with many of your predictions. Our Sunday paper listed 9 experts predicting the S&P500. Average of the 9 was +8% for the year, so they are more bullish than some. I agree with you on Trump vs Clinton, although I am a conservative. Little reason not to bet on her to win – especially my state: Minnesota. Our early retirement countdown ends this 4/1/16. Leaving MegaCorp (@49) for a life of leisure on April Fool’s Day. Counting down my last 90 days!
That’s very exciting! Enjoy the last three months of work! I think you’ll miss it!
Also check out, It’s Impossible To Stay Retired Once You Retire Early
Great analysis pf the markets and great goals. I wish my NW would increase by $500K…
I tested out an amount in Wealthfront for a couple of years (I deposited a starter amount in mid-2012, at a ‘high’ tolerance to risk). Their method of calculating the return (time-weighted) apparently meant I was getting an amazing return, but the math on the comparable net return (on a period of time with no deposits or withdrawals) vs an S&P or similar index for the same time period was terrible – so none of the return that an index would provide, and the downside of also paying fees. Just my 2c.
I just discovered that Wealthfront can do monthly automatic contributions. This is perfect for my mid-life crisis fund of $60,000 in two years! I love automated savings and contributions. I’m digging the ease of sign up and transfer of funds so far.
I also believe that 2016 will be more challenging for the Entrepreneurs. And I say that, Modern men entrepreneurs is driven by money and sex. If you don’t belief, I say you have lost the EDGE in todays culture. And the person who lost EDGE his business won’t growing- Depression, Anxiety and anger destroy his inner sprite.
Great post and I could write a lot more but I’ll just say that there are many places in China that are better to stay than Beijing.
It’s not just the pollution but I find the place is a terrible mess these days (I’ve being going there for 20 years), the traffic is terrible and the metro has far too small a network.
It really depends on what kind of Chinese experience you want so I’ll not suggest an alternative here.
Anyway have a great 2016!
Amazing goals and amazing blog. I’m always optimistic about markets that are growing without use of debt (or conservative use of debt). At the moment in Australia, we’re experiencing massive housing bubble. Where I live, houses sell for 900K (4 bedroom, 500 square metres) but the rent is only $500-$600 per week. Please explain…
Will definitely follow this blog.
Yes, I agree the markets will be rough. It has been choppy this year. I’m very interested in seeing how your automated portfolio does. Great post as usual!
Looks like our outlooks are aligned. Beat up oil and gold look undervalued, whereas the S&P has nowhere to go considering earnings. Also, the couple hundred bucks worth of EWZ I bought a few years back sitting at -60% has my attention… but falling knife and all that.
Wow you’ve got some impressive goals for 2016. Can’t wait to hear all about them! I think 2016 will be another great year. The markets probably won’t be all that great, but I plan to hold onto my positions for the long haul. Happy New Year!
If you are open to a little risk, I strongly believe you buy Under Armour right here around $80.00 hand over fist. I know diversification is key, but I am already overly allocated to real estate.
So go all in on Under Armour (UA) and 2 to 6 months from now you will be crushing the S&P. Maybe add in a little Disney and Facebook stock if you must diversify more.
Feel free to revisit this and give it to me good if I am wrong.
Happy New Year!
I would choose to live in Chiang rai over Chiang mai for an extended period. Less tourists and still a gorgeous little city.
Sounds good. Perhaps I can do both! It’s all relative to the hustle and bustle of Bangkok. How long were you there for and what did you do?
Just a couple weeks between the two. And mostly just relaxed, explored the temples and had great food!
Sam,
I just wanted to thank you for all your hard work you put into Financial Samurai this year. This site inspires, educates, challenges and motivates me on a weekly basis. Also, your commenters I feel are the best of any financial site on the internet. Keep up the good work!!
Thanks, Bill
No problem Bill! Thanks for reading and sharing. I’m having a lot of fun, and hope to continue for three more years at least until I get to the 10 year mark! I think that’d be a nice milestone.
I see that you mentioned that you would like to stay under 163 lbs for the year. While on the surface, this looks like a good goal (year long weight management), might I suggest an alternative? For your weight management, you could have 2 numbers that you track for your year – your maximum weight and your average weight. Measuing your weight at whatever interval you want (daily, weekly, monthly, quarterly, etc.) you could set the goal of never exceeding a maximum allowable weight while also seeking an average weight. For example, your average weight might be 165lbs for the year and your maximum allowed would be 172 lbs. That way the goal is structured to allow flexibility (up to a maximum) while still helping you shoot for intermediate goals that help you stay on track. How good is our health if we spend all year at an unhealthy weight, just to try to get a healthy weight in the last month? Setting tolerances helps keep us on track.
Sure let’s sounds good to me. My upper weight limit is 170, after that I feel pretty bad about myself and about my movement. I would ideally like to get below 160 pounds but knowing me it’s just not possible.
The older I get the more I want to just maintain a 162-165 pound weight range.
Hello,
I am curious as to your height. A lot of folks use BMI to set their ideal weight, but since everyone is different I am not sure that it is the best way.
I am 5’9- 190lb and borderline obese according to BMI. I have a medium build and a heavy lower body due to my previous life as an aspiring athlete, but 180 is my goal for 2016.
Caonex
Medium frame, 5’10”. The chart I follow says over 170 is basically overweight. I need to be thinner to move quicker on the tennis court. Do you do any sports?
https://www.financialsamurai.com/the-ideal-body-weight-pisses-me-off/
Man I have some real weight losing to do.
I played baseball growing up and during my early adult years. I now play basketball to get my cardio in and try to hit the gym 3 times a week. Played a little tennis early on, but it is such a grueling sport. (Still awesome.)
Predicting what the S&P 500 will do is a shot in the dark – but I’m a glass half full guy and think we’ll get between 4 and 5% excluding dividends :)
A couple of ideas/questions:
1. Have you considered reducing your liquidity risk on the vacation mortgage by creating a goal account at a roboadvisor with a steep glide-path to payoff? When the account equals principal, payoff in full. Consider any negative difference in return/interest rate as liquidity risk insurance.
2. Have you considered the roboadvisor route for that car goal as well? Just invest conservatively/defensively. Liquidate the assets for car purchase and/or mortgage payoff. If markets are off at the particular time, wait 1yr – 18mo.
Great ideas! I will look into that! Investing money with a purpose always makes contributing and investing so much easier.