I will grow my Net Worth by at least 2% month-on-month and by at least 30% year-on-year. I will grow my Financial Independence Portfolio by at least 3% month-on-month and by at least 50% year-on-year.
With respect to my personal finances, I primarily track two key performance indicators:
- The Percentage Change in my Net Worth and
- The Percentage Change in my Financial Independence Portfolio.
Update: I gave-up on tracking my Net Worth a couple of months after I started. As many readers correctly pointed out, it wasn’t really adding much meaning or context and was simply just another number to report. So anything related to Net Worth on this post is now meaningless.
This year, I’ve managed to keep both indicators positive but didn’t really fix a target. But in 2011, I want to meet or exceed the targets that I’ve mentioned above. It’s going to be a real challenge!
I compute my Net Worth as being equal to the Cash equivalent of my liquid-able Assets minus the Cash equivalent of my Liabilities (note: my Net Worth includes my car but not my home). I compute my Financial Independence Portfolio as being equal to the sum of my Passive Income Portfolio and Investment Portfolio. And yes, my Financial Independence Portfolio is included in my Net Worth.
Update: I touched a 41% growth year-on-year in my Financial Independence/Freedom Portfolio. In terms of absolute numbers though, this growth represents a significant amount saved (much more than I ever have) in one-year’s time. So, while I didn’t touch 50%, while I went out and treated myself to the Galaxy S2 (this could have added a couple of percentage points), I’m however very very pleased. And it was a fantastic experience just going through this challenge. I promise to do much better in 2012.
These percentages are auto-computed on my personal finances spreadsheet; I update the numbers behind these computations once on the 15th of each month and again on the last day of each month.
Update: I did this diligently each of the last twelve months.
Other than these, the only other factor that I look at is that my free cash flow should be positive each month.
How about you? What are your benchmarks for your personal finances?