Three Financial Resolutions I'm Commitment to in 2025
I establish financial objectives for myself annually. This helps maintain my focus on my extensive financial plan. It additionally allows me to modify my strategy as circumstances evolve.
My primary long-term aim is to achieve financial autonomy by accumulating enough passive income to cover my regular expenditures. With this objective in mind, my annual financial goals align with my pursuit of increased financial liberty.
Here are my top three financial goals, aiming to spark inspiration for your own goals.
Expand my emergency savings fund
Currently, I have a substantial emergency savings fund. It could cover roughly four months of my family's living expenses. While this exceeds the three months recommended by many financial advisors, I feel less secure with this level. I aspire to enhance my emergency savings to cover approximately six months of fundamental living expenses.
The main reason is my self-employment status and my wife's part-time contract work. We lack the security of unemployment benefits if both lose our jobs. Furthermore, our income is inconsistent.
Furthermore, as a writer, I can't ignore the potential of generative AI. While I don't believe the technology will entirely replace me in the future, I may struggle to maintain my current income level if AI replicates the type of writing I engage in at a lower cost.
Given the uncertainties surrounding my future income, I intend to continue augmenting my emergency fund over the next year. My goal is to reach the six-month mark by the end of 2026 by setting aside a bit more money each month.
Enhance my projected annual dividend income by 20%
Dividend stocks constitute my primary source of passive income. My present annual dividend yield could offset about 20% of my basic living expenses. My aim is to elevate that figure by 20% by the end of 2025, which would cover nearly a quarter of my expenses.
I have a two-pronged strategy to attain this objective. First, my existing portfolio of dividend stocks primarily comprises companies that incrementally boost their payouts. For instance, my top dividend payer is Energy Transfer (ET -0.08%). The master limited partnership (MLP) intends to enhance its distribution by 3% to 5% annually. Another top payer in my portfolio is Brookfield Renewable (BEPC -0.36%) (BEP 0.35%). The renewable energy company expects to increment its dividend by 5% to 9% annually. Given my focus on dividend growers, I anticipate my dividend income to rise by at least 5% next year due to increases alone.
The second facet of my strategy is to persistently acquire additional shares of high-yield dividend-paying companies. This enables me to generate more passive income from each dollar invested. As of now, Energy Transfer and Brookfield Renewable offer yields of 6.7% and 5%, respectively. This is significantly higher than the 1.2% yield I could earn from investing in an S&P 500 index fund.
However, I don't chase yields. I emphasize dividend stocks backed by a robust financial profile. For instance, Energy Transfer and Brookfield Renewable both generate stable cash flow backed by long-term contracts, have conservative dividend payout ratios, and boast investment-grade balance sheets. This enables them to pay a sustainable dividend that they can continue to grow. I seek companies with the potential to increase their higher-yielding payouts, like Energy Transfer and Brookfield Renewable, rather than those that may reduce their payouts, causing my dividend income to decline.
Enhance my passive income from non-dividend investments by 25%
While dividend stocks form my primary source of passive income, I've diversified my portfolio beyond the stock market via alternative investments over the years. Primarily, I invest in private real estate and private credit through online platforms like EquityMultiple, Arrived, Groundfloor, and Fundrise.
Private real estate and credit investments typically yield higher returns than what is available in the public stock and bond markets. Moreover, they have a lower correlation to the public markets. This makes them an effective way to further diversify my passive income and reduce my risk profile.
I have been increasing my allocation to alternative investments lately, which I plan to continue in 2025. My aim is to amplify my projected annualized passive income from these sources by 25% in the next year. I intend to achieve this objective by continuing to invest in alternative passive income sources and hoping for some non-performing investments to resolve and commence yielding income.
My aim is to enhance my financial security in 2025
My near-term goal is to be able to sustain myself using a combination of my emergency fund and passive income for one year if necessary. This would relieve pressure if I were unable to work. In the long term, I aspire to generate enough passive income to completely offset my expenses. I have a strategy in place and am making steady progress towards my goal each year. I hope 2025 will take me another step closer to my dream of financial independence. I also hope you'll take some time this new year to assess your family's financial situation and make some financial resolutions if you haven't already.
To achieve my financial objectives, I plan to invest strategically. I will diversify my portfolio, focusing on dividend stocks like Energy Transfer and Brookfield Renewable, aiming to boost my annual dividend income by 20% by 2025. Furthermore, I will continue to explore alternative investments such as private real estate and credit, aiming to increase the passive income from these sources by 25% in the next year. This comprehensive investing approach is crucial as I strive to enhance my financial security and progress towards financial autonomy.
As I invest, I remain diligent about my emergency savings fund. Despite already having a substantial fund covering four months of expenses, I aim to further build it up, covering approximately six months of essential living costs. This financial cushion provides crucial peace of mind, given the inconsistent income that comes with my self-employment and my wife's part-time work.
