2020 Financial Review – We Made It!

In preparation for this post, I reviewed last year’s goals round-up, in which I said “2019 was one of the best years of my life!” Wow, what a difference one year makes.

Collectively, 2020 was one of the worst years in recent history. Pandemic, civil unrest, and insurrection to go with an unstable market and massive job losses.

So much happened in 2020 in education, too.  Locally, schools closed and moved to distance learning for the final three months of the 19-20 school year.  We absorbed furlough days and then spent summer figuring out how we were going to reopen.  Most of my energy and attention has been on the impact all this had on students and families.

Somehow, despite all the distractions (election, election challenges, insurrection, and now impeachment) we managed to spend a bit of time reviewing our finances.  The results were surprising, and I opened up the year with forward-thinking posts: I’m walking away and we have new goals for 2021. 

Still, an important part of our progress is how consistently we set financial goals, review our results, and adjust as needed.  I feel so strongly about this process and its importance that I’ve written both about setting effective financial goals and provided a list of financial goal examples.  So, I couldn’t go without publishing our final wrap-up of 2020.

As always, I want to acknowledge how fortunate we are.  Our jobs were disrupted, but not eliminated.  We’d made the financial choice to downsize our home and go mortgage free, so housing was never in danger.  While others struggled, 2020 turned out to be a strong financial year for us.  It doesn’t seem right.

2020 Goals

Here were our goals for 2020:

We also set quarterly goals, which we review and change throughout the year.

If you’re interested you can see how this shows up in our quarterly checks:

• 2020 Quarter 1
• 2020 Quarter 2
• 2020 Quarter 3

This post focuses on how we did with our annual goals.

Here is the system we use to rate our goals at the end of each year: 

Let’s see how we did.

GOAL REVIEW

GOAL 1

I’ve often said that educators have a potential huge advantage due to the amount of tax-advantaged investing available. It’s unfortunate that the 403b and 457b availability still varies so much by district, but if you have good options the potential is incredible.

We are lucky to have good options across the board, including access to an HSA in my contract.

For several years, we worked to reach full investment in these accounts and called them out separately. In 2020 we just lumped it all together because most are set-up as payroll withdrawals. The Roth IRA is the exception. We planned to do that in quarter 2 after clearing our taxes.

Our total tax-advantaged options looked like this:

That was a huge goal. And emphasizes how powerful it can be for educators! Don’t forget to check the 403b and 457b 2021 contribution limits to see how much you could potentially put away this year.

We completed the two Roth contributions in the spring and the rest was taken care of automatically each paycheck.

Total contributions for the year – $96,550

Goal 1: MET

GOAL 2

With our housing switch (more on that in goal 3/4) and shifting money out of a CD, we didn’t track this as clearly as I’d have liked. The goal here was $24,000 in new money and we definitely exceeded that once our monthly expenses dropped significantly. However, some of the total investment was the remainder of our proceeds from downsizing.

We put $83,000 into our brokerage accounts in 2020. We contributed this weighted to maintain our desired allocation across stocks (US/international), bonds, and REITs. Vanguard is our primary brokerage and we hold total market funds of each. Near the end, we also began establishing a very small (less than 1%) crypto allocation.

Goal 2: Exceeded

GOAL 3

In 2019, we downsized our home and moved into a townhouse as a test plan. The test didn’t work out. So, we entered 2020 knowing we needed to decide on our long term plan. The goal was to have this created by mid-year and then execute our plan in the coming years.

Things changed quickly. Early in the year we moved back into our rental and paid off our last outstanding debt – the mortgage. We’ve loved it and haven’t looked back.

It did mean a goal to create a plan became obsolete when we were already done by the second quarter of 2020. Plan complete and executed.

Goal 3: Exeeded

GOAL 4

We entered 2020 with a rental home. We’d just been covering maintenance costs as they came up. That isn’t good planning, so we set a goal to build a security fund equal to 6 months rent. That would let us deal with big expenses and weather any vacancies.

Of course, if you’ve read goal 3 you know we made a very different choice. The rental is now our mortgage free home and we didn’t need the security fund. Goal dropped.

Goal 4: Not Rated

GOAL 5

I’m irrationally excited about rating this goal. After failing at it specatcularly in 2019, we were stubborn and added it again for 2020. Eating out often was a big part of our lifestyle inflation. Meal planning for several days a week was both a financial and health choice. We just didn’t do it consistently because our work life would throw us out of routine.

This year, we got it settled. The work from home periods during the pandemic were helpful, but it’s now just part of our regular routine. Done!

Goal 5: Met

Net Worth Update

When we hit the 7-figure milestone, I did a few interviews and articles with specifics of our net worth and allocation. Since then, I’ve intentionally been fuzzy about our overall numbers for security purposes. I do publish specific numbers for our annual goals and results.

Despite the craziness of 2020 and some income loss we suffered, our net worth still grew substantially. We stayed the course and even invested a little extra cash during the market downturn. This helped. This was also the year that downsizing our house really paid off. We had extra money freed up for investments and our monthly expenses are substantially less.

The result? Our net worth grew by almost 30% in 2020 and we hit our goal. This is the last time we’ll ever have a net worth target. Wow!

Net worth: 103%

2020 Summary

It’s good to see 2020 in the rearview mirror. It’s not a year I’ll remember fondly, despite our significant financial progress. The future is brighter, and we are focused on that.

We’ll remain in our wealth accumulation phase for about 6 more months, and then it’s all about designing our life for financial independence. By then, I’m hopeful the world will also be in a better state.

Thanks for reading and here’s to a great 2021!