Here comes 2019! 2018 was our first full year on the path to financial independence (FI) and it was a great one. We’re determined to make 2019 even better. And, if you’ve read anything of mine, you know that means setting some clear goals. Thanks to Atomic Habits, we’re getting better at making sure our goals are related to behavior changes that we can implement. Read on to see how we’re going to accelerate our path to FI in 2019.
For those new to FI – I acknowledge that we are in a very fortunate place as I write this. We are late-career educators who have successfully worked the career ladder. Some of these numbers may seem very high for where you are now. That’s okay. But also, don’t discount them simply because of that – know that we started out as new teachers with a negative net worth due to student loans and consumer debt. You can make it work, too. In fact, had we started earlier we wouldn’t need these numbers now!
One of our biggest accomplishments in 2018 was getting aligned in our FI approach. To ensure we stay that way, we built an intentional process. The biggest part of the process is a three-step annual review, which we have just completed. Here’s what we do:
- Review 2018 annual goals – We do the final calculations to see how we actually did on our previous year’s goals.
- Where did we miss, and why?
- Where did we do well and why?
- What do we want to repeat or eliminate?
- And then I publish the results for you to read. Transparency helps accountability.
- Financial Independence Reflection – The next evening, we go out for dinner and drinks. (This year, we split a bottle of wine.) We don’t bring laptops, spreadsheets, or anything
written. Instead, we talk about how we’re feeling about our plan, work life, and what we want retirement to be.
- Is our FI plan making us unhappy
- Do we want to push harder or back off?
- Has our vision of retirement changed? Are there any adjustments we want to make? (For example – this year we decided that we do want to downsize in retirement. That was still undecided last year.)
- Is our FI plan making us unhappy
- Data Work – The next morning/afternoon, we sit down and work through our spreadsheets. We rebuild our annual budget for the year and look for any new, unexpected, or reducible expenses. With this, we can quantify the general aspirations we set the night before.
Of all these steps, the reflection period is the most important for our partnership. I love the numbers work, but here we get to check-in to see how the FI path makes us feel. I believe strongly that we need to make sure not to sacrifice the moment for a potential future. We can build happiness/satisfaction in both.
All of this leads to…
Here they are: our 2019 goals! We set 5 measurable financial goals and 2 learning goals..
Goal 1 – Max out pre-tax retirement options
As educators, we have a huge advantage with access to two pre-tax retirement options: 403b and 457. Though we work for different districts, we can choose Vanguard for our 403b. Our 457 options aren’t quite as great, but with total fees less than .4% they are not fee-prohibitive like some I’ve seen.
The 457 was a newly discovered option last year. We didn’t manage to get it maxed, but it is our first new priority this year. The good news is the limits were raised to $19,000 for the coming year. Even better, we’ve already set-up the payroll deductions to accomplish it for both 403b and 457b.
Total: 76,000 pre-tax.
The tax savings we’ll see from this are almost as exciting as the total amount invested.
Goal 2 – Make Backdoor Roth contributions
We have always prioritized pre-tax contributions because we are in our highest earning years. Our MAGI is likely to be over the threshold for normal ROTH contributions. However, this year we believe we can carve out excess money for investments. Rather than simply putting it in taxable investment vehicles, we will make backdoor Roth contributions. This is both a new financial goal and a new learning goal for us.
Goal 3 – Mortgage Paydown
Last year, we began accelerating our mortgage paydown. We plan to continue that this year and accelerate a bit further. Despite our current decision to downsize in retirement, reducing this debt is a priority for us. We have set-up additional automatic payments for a total of $16,500.
After doing our budget review, we believe we could carve out an additional $10,000 in savings. We will apply half of this ($5000) to a one-time principal paydown before the end of 2019. The other half you’ll see in Goal 4. We split the middle on the question of “
Goal 4 – Additional taxable investments
We will continue a $400/month automatic withdrawal into the Fidelity international fund that we opened last year. This will keep us with the small exposure to international stocks that is part of our desired allocation.
The other half of the additional savings mentioned in Goal 3, will be placed into our taxable VTSAX account.
Goal 5 – Increase Charity by 1% each year
As educators, we have always tended to be generous with our time. We also believed we were fairly generous with our money. This year, during our budget process, we calculated it out and found we were only giving about 3% of our income to charity. We want that to be more.
We will increase our charitable giving by 1% per year until it reaches 10% total. This cost is included in our FI calculation.
Also, should this blog ever make a profit, at least 50% of all profits will be given to charitable causes that work to improve results for traditionally underserved students. I’d always intended to use this primarily for charity, but continue to be inspired by Physician on Fire.
2019: 4% of income to charity.
Goal 6 – Implement meal prepping/planning
To achieve some of our financial goals requires that we reduce our spending. Food continues to be the area where we are least frugal. Busy work lives, and the fact that neither of us enjoys cooking, lead us to make suboptimal choices. We’ve always known this, but now intend to change it.
For 2019, we will begin learning and implementing meal prepping/planning to reduce our food costs, simplify our life, and improve our health. This should be interesting….
Goal 7 – Credit card rewards: Select a travel rewards card
In 2018 we started exploring credit card rewards. We focused on choosing a cash-back card and selected the Discover It card for the great first-year double cash back bonus. In 2019, we’ll maximize that bonus and also select a travel rewards card. Travel is an important part of our life and will continue to be in retirement. We want to make sure we build our knowledge to reduce travel costs.
There you have it! Those are our financial independence goals for 2019! We feel good about our growing understanding of our financial life and our ability to accelerate our path. What do you think?
A bonus goal: more people on the path to FI!
I started this site in 2018 to help other educators reach for financial independence. I hope to grow my readership and connect with other people on the path. Please reach out to me if there is anything I can do to help you.
I’d really appreciate it if you’d do one of the following:
Thank you! Best wishes for an amazing and successful 2019!