As we have entered the 4th quarter i've done a quick first draft of my 2014 financial plan.
Whilst i already have a very high level forecast for the next 15 or so years, i always try to refine the closest year to better plan and manage cash flows, expenses and investments. It also helps to set objectives & targets, focusing the mind on short term financial discipline to reach a longer term goal.
I'm expecting to finish 2013 with an approximate annual net worth growth of around 35% and a savings rate around 70%, which is well above what i planned for, but also includes a couple of one-off gains that won't recur. For reference my 2013 plan had net worth growth of 21% and a savings rate of 63%.
For 2014 i'm assuming flat regular income without the one-offs. This is fairly conservative but that's how i prefer to plan. I'm assuming higher expenses based on experience from this year to date, which are running around 10% ahead of plan. This is partly a timing issue of when HK income tax payments are due, but also higher underlying expenses, in particular entertainment, eating out etc which are areas i've decided to allow some more luxury into my lifestyle! There are no large one off expenses expected next year.
The initial 2014 plan indicates net worth growth of around 15% with a savings rate of around 60%. I think this is fairly realistic, and i would be happy to achieve these figures. Net worth growth as a percentage should continue to decline as the base grows each year, and a key long term financial goal is to maintain a savings rate above 50%. My approach to calculating a savings rate is to include tax in expenses and compare total expenses to gross income. The percentage would be higher if tax was netted against income first.
I'll probably give this some more thought over the next few months and make some refinements, but the first cut looks good so far!