From A to B and how.
A - Knowing where you are (current net
worth)
B - Where you want to be (amount of money you need to achieve
financial independence).
How – Family budgeting vs. Income
–Savings and where to invest.
These are the financial independence
basics. One would still need to have key performance indicators. For my plan
and portfolio I want to choose following:
-
Absolute
total return on invested cash. Expressed in dollars and percentage.
In
2012 the result was $5,4 K and 3%.
-
Relative
total return (measured against S&P 500)
3%
vs. 14% (S&P 500).
-
Inflation
adjusted return.
2012 inflation was 3%, hence adjusted
return was 0%.
-
Cash
accumulated to be invested (annual figure expressed in 2010 money).
$
51 K vs. $ 40K planned.
-
Assets
& currency allocation.
To
be developed. Moving in the right direction.
-
Personal
expectation.
After
getting acquainted with inflation, I lowered my expectation of early retirement
/financial independence. However this is
still a very important indicator.
Suppose
market performed well, but you did not manage to accumulate as much money as
planned – you still on target. Sometimes market was bearish or certain assets
underperformed, but accumulated cash compensated for it. You need to have your own understanding and
aspirations.