Looking Back on Success: 2018 Goal Review

Wow, it’s been just over a year since we started our FI journey. I’ll never forget that first weekend of talking, planning, and setting goals.  It was a time of intensity and excitement. Since then, we’ve strengthened our partnership and commitment. A key step was to create a regular monitoring plan, including our yearly review. Here it is – our 2018 goal update!

I wrote in more detail about how and why we set our year 1 goals for FI.  Throughout the year, we learned and revised our approach. Here is a list of our 2018 goals:

1. Refill Savings Account
2. Max Contributions to 403(b)
3. Create Emergency Fund – $30,000
4. Accelerate Mortage Paydown – $12,500
5. Taxable Investments – $12,500

Read on to see how we did!

Goal 1:  Savings Account

MET

This was the easiest one.  In recent years, we’ve managed to hold a $10,000 savings account balance.  In 2017 we’d drawn that down by making a large one-time purchase. (I still haven’t written about that – but I will!)  We were already starting to replenish the amount, so this was easy to check off. It’s good to have quick wins.

Goal 2: Max Contributions to 403(b)

MET

I just have to share my public shame again and say that despite being educators for over 15 years each, we had never maxed out our 403(b) accounts.  Clearly, taking this simple step had to be a primary goal. We immediately set up monthly withdrawals and contributed the full $37,000 ($18500/each) for 2018.  

We are fortunate that Vanguard is an option in both our districts.  Our accounts are in VTSAX and a Target Retirement 2040. TFI wanted inherent diversification in hers, but we chose 2040 to give it an aggressive stance.

Goal 3:  Emergency Fund

PARTIALLY MET (intentionally adjusted)

We had originally planned to build a security fund (our preferred term) of $30,000.  Then, during a podcast binge, I heard Big ERN of Early Retirement Now talk about his emergency fund approach.  I read his post about an emergency fund of $0.  

It made sense to me.  Also, we realized that with our $10,000 bank savings account, that $30,000 (for a total of $40,000) was larger than we needed for the usual 3 – 6 months of expenses.  

However, at that time we made this discovery, we already had just over $20,000 saved.  We saved a bit more and opened an online savings account with Discover because of a $200 bonus for opening an account with $25,000.  We chose it for the bonus, competitive high interest rate, the quality app, and the ease of moving money around.

The account pays 2%, and the $200 bonus was an additional instant .8% more.  Not a bad return right as the market started its slide.

We chose to move $5000 from this goal into other investments (detailed under goal 5.)  We currently have the online savings account sitting at $25,813. It’s likely that at some point we’ll move at least $5800 out, reducing this account to $20,000 for a total of $30,000 across our two savings accounts.

So, Big ERN wasn’t fully embraced but his point did influence us to scale back and get more money into the market.

Goal 4:  Mortgage Paydown – $12,500

MET

We applied the planned $12,500 to accelerate mortgage pay down.  It turns out this was our best investment for the year as the other investments were all flat or down for the year thanks to the recent market dive.

This year we got clear that we want to accelerate paydown further, when possible.  I’m aware of what the math says, and we split the difference by putting half of extra savings into mortgage and half into investments.  However, we now know that the psychological advantage of being mortgage free AND a guaranteed rate of return works best for our situation.

We are hoping to move up our FI date. We are considering downsizing and moving. However, we like both our house and its location, so we are keeping options open. Being mortgage free makes all options easier.

Goal 5:  Taxable Investments – $12,000

EXCEEDED (with an adjustment)

This is the goal we modified the most.  In the summer, I discovered we had access to 457(b) accounts.  Yes, I should have known about it before. I didn’t. It just goes to show how important financial independence information sharing is for educators!

(Important note:  I discovered it courtesy of ESI’s Millionaire Series.)

Anyway, up to that point we had put money into our Vanguard taxable account.  I’d also started an auto-deposit into the new Fidelity zero fee international stock fund.  We were underweight on international exposure and zero fees – why not?

Based on our progress through the year, our growing understanding of our spending, and the new opportunity with the pre-tax 457 we made an adjustment to our plan and we managed to get $15000 into our 457 accounts this year.  Though not taxable accounts, the ability to withdraw on separation without the 10% penalty makes them serve the same purpose for us in our financial independence plan. (Spoiler: Next year, we’ll max these out.)

We chose to open TFI’s as a bond fund, and mine as a stock index option.  The fees are higher than Vanguard due to the administration charge, but both are still relatively low. The pre-tax advantage makes it a huge win.

In the end, a goal of $12000 ended up looking like this:

Note:  These are our contributions for the year, not totals.  We are heavily weighted to total stock index overall.

So, we beat our goal of $12000 by $9600.  $5000 of that came from the emergency fund diversion.  The other $4600 was extra we carved out through the year.  Success!

Learning Goal 1 – Understand Our Spending Better

MET (and continuing)

Simply having these financial goals made us more aware of our money flows.  However, a period in mid-summer where we didn’t meet some additional goals led us to get more intentional. We committed to tracking our spending more carefully for the last 3 months using Mint.

Learning Goal 2 – Credit Card Rewards

MET (and continuing)

It is not our primary area of focus, but we knew we should make better use of credit cards and rewards.  We continue to keep an Alaska card because of the companion fare benefit. So, we decided to focus our first efforts on maximizing cashback rewards.  

We chose to the Discover It card because of the double rewards for the first year, and the 5% bonus on specific categories each quarter.  We activated it in time to use it for Christmas shopping to hit the 4th quarter Amazon bonuses. This will provide us with a solid cash back bonus.

Other Accomplishments for 2018:

Neither of these were initial goals, but two significant shifts happened due to our new FI path:

1. Our relationship is stronger than ever.  I’ll summarize simply by saying that we’re completely aligned in our goals and looking forward to our shared future FI life.
2. I decided to start this blog to support other educators on the path to FI.  It’s made a huge difference for me personally and professionally. I want to help other passionate educators find financial independence.

In doing so, I’ve found an incredible community of both those pursuing FI and those supporting it.

2018 Moving to 2019

Overall, it was a fantastic first year on the FI Journey.  Short of some windfall making us suddenly FI, I don’t believe it could have gone better.  (Well..maybe the market returns in the final quarter…) That said, as is so often the case, the journey is as important as the destination.  

Tonight, we head to our now-annual tradition of sitting down to a nice dinner and a bottle of wine to talk about designing our future FI life and setting our 2019 goals.  Read more next week!

Thank you for joining me on our first steps to financial independence. Follow me on Twitter or through my weekly email. Let’s make 2019 succesful together.