2020 was a year to remember for all the wrong reasons. People still laugh at the resolutions they set on New Year's Eve last year! So, why not make 2021 the year to set goals that are actually achievable? I'll make the start by setting my financial goals for 2021, both for my business and my personal life.
Last Year's Financial Goals
Last year my goal was to save as much money as possible and invest most of it. Saving money has been my goal since January 2019 when I set some strict financial rules. It took me 40 years to learn about personal finance. Better late than never.
We had been spending a lot more money that we do nowadays. Yet it wasn't the spending money itself that bothered me. It was that it didn't feel we spent that much. I got no excitement over our way of living, no matter how much we spent.
So in 2019 I decided it was time to set some money goals.
I decided to cut our family spending, without having a major impact on the quality of life. That proved a good exercise to realize how much stuff we buy for no reason. Or to fight depression. Or to call ourselves minimalists. But those are topics for another day.
Surprisingly, 2020 was a good year for me financially, as I discussed in a recent video. I met my financial goals of saving and investing as much money as I could. I don't expect 2021 to be much different.
The general thinking is to spend the same amount of money I did in 2020. I don't believe I can improve much over a year with a pandemic and two lockdowns. Unless, of course, a war starts or a meteor hits the earth! What a crazy year.
My Business Financial Goals for 2021
My web publishing business did OK in 2020, considering the circumstances. It's true that more people spend time online. But advertising budgets shrank as businesses stopped operating.
"But Jim, your websites will now enjoy more traffic due to the lockdown. You will make more money!"
Nope, that's not what happened. It's true that 30% more people visited my websites in 2020 compared to previous years. At the same time though, every click on an advertisement cost 50% less!
Why? Consider companies such as airlines. Their revenue plummeted. They would go bankrupt if they weren't bailed out by governments. If no one is traveling, why should they spend on advertising? The market was out of customers.
How the Pandemic Affected Online Advertising
So, they didn't bid for an advertising spot in my websites. That allowed other advertisers to win the ad spot for less money.
That also took place on social media advertising. As the big companies dropped out of advertising, regular publishers like myself could advertise for less. Although I didn't, I'm sure many publishers took advantage of the lower than normal advertising cost in 2021
In short, advertising is a bid war on every page load!
Of course, airlines are the tip of the iceberg. It's the most popular example of companies that pandemic seriously affected. They are not the only ones. Think of retail stores, travel-related businesses and every industry that had to shut down.
They suddenly had no income. For months. So they had to cut their spending. And the first thing to cut, is advertising, since there are literally no customers!
Meanwhile, e-commerce thrived. As the world is changing forever, internet-based industries enjoyed huge growth. If my business had been in the e-commerce space, I might have made more money. Since it's not, I didn't grow. Fortunately, I didn't do worse either.
2021 Business Growth Expectations
Going into 2021 I expect a slight improvement. Given I've spent a lot of time this year to improve my websites' rankings, I'm not expecting a drop in traffic. In the meantime, as lockdowns are lifted, cost-per-click should improve. This will likely result in increased revenue.
So, my business financial goal for 2021 is to make at least 10% more than 2020.
Saving Money as a Business
When it comes to cutting business expenses, again I don't expect to outperform 2020 in that aspect. This year I spend the most money I ever did on web services to grow my business. Yet, I still spent less than ever before. That sounds strange, doesn't it?
I outsourced tasks, I hired the most freelancers I've ever done, and yet my business expenses didn't top previous years. A key moment for that was that I didn't spend on equipment much, other than upgrading my personal computer.
In 2017, I had spent ten times more on camera gear and to this day I'm questioning myself of that spendthrift!
At least, I'm putting that gear to good use lately!
So, my financial goal for 2021 when it comes to my business costs is to spend the same amount of money. That could prove difficult though, as I am already eyeing on a couple of cameras and lenses!
Setting Personal Financial Goals for 2021
In 2020, I saved 40% of my personal income. In 2021, I expect to save more!
You see, my personal income depends on how well my business will perform. I already explained that I'm expecting it to perform better and spend the same. That will result my business into making more profit. I will then have a choice of either reinvesting that money into the business or taking it out as income.
Most likely I will put it back into my business to grow. This will mean buying more websites, outsourcing more and using the gained time to look into other things.
In the end my personal income will stay the same. For the most part, I expect personal expenses to stay the same, as well. 2021 will be different from 2020, as vaccines will hopefully end the pandemic. Still, I don't expect the world to get back to normal that soon. So, I don't expect to do much traveling this year, either. I also don't expect to go to restaurants that often, as well.
Previously, I used to spend 250 euros per month on restaurants and delivery food. As we cooked a lot more in 2020, I spent 100 euros less each month on eating out. That's a 40% drop right there.
Remember when affected businesses didn't have the revenue to spend on advertising? Life is a cycle. I don't spend money, businesses don't have money to advertise, my business makes less.
Yet, other expenses don't fluctuate that much. Paying for power, water and internet has stayed about the same for years. I did renew my internet monthly contract for 10 euros less. Yet, this will hardly affect my spending on necessities. These come down to about 200 euros per month.
Car repairs also took a dive in 2020, as we drove around the least this year. 2021 will be no different.
So all in all, my financial goal for 2021 when it comes to saving money is to put aside 30% of my personal income. That's a reasonable amount, no need to match the 2020 record.
Finally, the fun part!
I'm investing in Bitcoin. End of story. Roll the curtains.
Joking aside, I plan to invest in stocks. I desperately need to diversify my investing portfolio. It currently consists of 80% cryptocurrencies, 10% gold and 10% cash. I need to throw some stocks in the mix.
I do not need more cash in there. It loses value quicker than ever with so much printing going on right now. Perhaps I'll drive it down to zero and buy another asset.
One of those assets is stocks. I missed a great opportunity in the spring of 2020 to invest in the stock market. Now, it feels buying the top every day it hits a new all-time record! And while I'm waiting for a dip, the market climbs even higher!
The same can be said for Bitcoin. How many people considered $20,000 a ridiculous high price tag to invest into Bitcoin, only to see it climb to $25,000?
Timing the market is a fool's game. Especially if you don't spend 12 hours per day studying the markets. Been there, done that. You're competing with professionals who do that for a living! I can't run a business 24/7 and monitor stock prices and news every minute!
So, I'm buying and holding. I'm dollar cost averaging into all of these assets: stocks, gold, crypto. At the time I hold gold and crypto. So, I need to begin throwing some money into stocks.
I'd like to invest in real estate, as well. I feel it will prove a profitable investment at this time. Having said that, it feels funny to discuss real estate investing with a 5-figure income. Let me explain why briefly.
How Real Estate Investing Works
I would need 25K as a down payment for a €100,000 loan at 4% interest rate for 30 years. I would buy an old apartment with that money and spend €10,000 more renovating it. Theoretically, the flat's value would increase to €145,000. My €35,000 investment would net me €10,000 should I decide to sell it.
Say I rent it out. What's my asking price? My annual expenses will be about €6,000 including the loan's interest. So, it needs to bring €500 per month to break even. While I'd very much like to rent it out for more, rents aren't that high in Greece.
For argument's sake, we will assume it's a 40-year-old flat in downtown. Demand is high and I manage to rent it out for €700. That brings home €8,400 before taxes. Assuming I spend €1,400 every year for repairs, I'm making €1,000 per year on my €35,000 investment. That's a 3% ROI.
As years go by, my interest payments will decrease. This will result in higher yearly ROI in the future. Yet, it will take years to compete with the 7% expected ROI of the stock market. Not to mention, crypto's ROI is much, much higher.
Investing as a broke person
Thus, I'm not looking into real estate investing at this time. It already feels ridiculous to even discuss it.
I don't have an investing capital of, say €50,000, to justify putting 70% of that into real estate. And even if I did, that would let just 30% for stocks, gold and crypto. Since I've only just started building my investing portfolio, I'm looking to take more risks for potential bigger rewards. So, I'm investing into cryptocurrencies for the time being.
Will I meet my financial goals for 2021?
I believe I'm setting realistic financial goals for next year. Summing it up, I'm expecting:
- My business to make 10% more revenue
- My personal income to remain the same
- To save 30% of my income
- To invest in stocks and continue my investing strategy in cryptos
Out of these four, I'm mostly stressed of investing in stocks. Business will likely perform better even in auto-pilot, let alone if I decide to focus on it. As a result, my personal income will hardly see a change for the worse. Meanwhile, we've been accustomed to the new way of living in 2020. So, spending shouldn't increase much in 2021.
But I will be confused when it comes the time to invest the money I'll save. I don't want to increase my exposure on Bitcoin, no matter what the predictions say. Meanwhile, I don't want to spend a ton of time researching for stocks. I'm afraid though, I will have to.
What about your financial goals for 2021?
Hopefully me talking about setting goals for 2021 will inspire you to set your own long term financial goals. It shouldn't be hard to set them for yourself. If you have been tracking your spending, it will be much easier. But if you haven't, just ballpark them and go from them.
And by the way, 2021 will be a great year to start tracking them and create a budget! I've done so for the last 5 years with this budgeting app; that's how I'm discussing my finances so confidently!
Setting financial goals for 2021 was just another step towards financial freedom. I'm documenting the journey on YouTube. And since you've made it this far into the video, consider subscribing and hitting that notification bell to not miss my future steps. Perhaps they will inspire you to embark on your own!