Well, it’s a crazy time to be doing a financial review. We’re in the middle of the Covid19 pandemic. The stock market has been incredibly volatile and down overall in recent weeks. The world is strange and unsettled.
I picked a heck of a year to focus on optimism over cynicism. It hasn’t been easy, but I’m working to focus on the future being better than the present. It reminds me of a favorite phrase from childhood thanks to the movie Airplane: “I picked the wrong week to..”
Much of my progress in life has been the result of consistently moving forward with plans and goals, even in the face of challenge. To that end, we are pushing forward with our quarterly financial review despite the chaos.
We are incredibly lucky to still be working, and getting paid, at least for now. Many others are struggling. This post is simply a continuation of our review and reporting habit – feel free to give it a skip.
As a reminder, since we started pursuing financial independence, we follow a process to set effective financial goals. We have a financial independence target. Each year, we set annual goals, and then build medium- and short-term actions to help us achieve our annual targets.
We discuss our progress monthly, but do a formal review quarterly. This is that review.
Here’s the color system we use for our goal reviews:
|We’ve either already met the yearly goal or are on track to do so and have added something.
|On Track / Done
|Exactly as it sounds. We’ve taken the necessary action to get there by year-end. Or, it’s already done.
|Actions that we haven’t yet taken, or need to adjust to reach the goal.
|We won’t make it without significant changes.
From time to time, we also just change or adjust a goal or action due to a change in circumstances. This isn’t bailing on a goal, it’s adjusting in the face of new information. You’ll see several of those in this review.
It’s also important to note – we focus on actions rather than the result. Atomic Habits by James Clear, and Thinking in Bets by Annie Duke are two books that drive our approach. Consistent action and avoiding “resulting” matters a lot – especially in a chaotic market.
Here are the goals we set for 2020, and the actions we said we’d take.
|Long Term Goal
|Financial Independence by July 2022
|Check net worth quarterly, reevaluate goal in Dec. 2020
|Max out tax advantaged investing accounts
|Brokerage Investments of $24000
|Create long-range housing plan
|Create a rental house security fund of 6 months gross rent
|Implement consistent meal prepping
|SHORT TERM GOALS
|Short-term goal 1
|Adjust automatic payroll withdrawals to 2020 limits
|End of January
|Short-term goal 2
|Open and meet minimum spend for travel rewards card
|Short-term goal 3
|Develop meal prepping calendar of 3x days per week
|Short-term goal 4
|Fund 50% of rental security fund
|Short-term goal 5
|Create a timeline and process for our housing decision
How Did We Do in Quarter 1?
Annual Goals for 2020
|Goal 1 – Max Out Tax Advantaged Investments
Last year, for the first time ever, we maxed out all our tax-advantaged options. This is an area where educators actually have some financial independence advantages. We’ve automated our HSA, 403b, and 457b contributions so those take care of itself.
We’ve made 1 of our 2 Roth IRA contributions. We’ll soon complete the second. So, we’re solidly on track for this one. Amazingly, this will total $96,000 this year.
|Goal 2 – Additional Brokerage Investments of $24000
We have an automated $500/month into a Fidelity international equity fund. That will account for $6000 of this.
The rest we planned to contribute after making our Roth IRA contributions and meeting Goal #4.
We haven’t made any additional contributions yet, so this one isn’t on track. We aren’t too panicked, because we think we’ll get there, and maybe eventually exceed this after our housing situation settles down.
|Goal 3 – Develop a Long Range Housing Plan
|On Track +
Just as in 2019, our housing situation has changed dramatically. We crushed this goal early by deciding to move back into our rental property.
After downsizing last year, we’d decided to rent while we experimented with a new area and developed a long-term housing plan. This winter, we started the process to convert our rental back into our primary residence. We used the cash we’d been holding for long-term housing to pay off the remaining debt on the rental house.
Yes, we chose mortgage freedom over optimization, and have been thrilled with the result. In addition to losing less during the downturn, we’ve also felt more secure during this chaotic period.
We’ll live in the rental for at least two years to gain access to partial capital gains forgiveness. After that, we’ll see what happens. We can either go back to renting to offset a housing change, or sell and use the equity to do the same. I guess it’s more of a medium-term housing plan – but we’ve already executed it.
Now, over the next two months we’ve got rehab work to do, address changes on all accounts once again, and a second move in less than 12 months. It’s additional chaos, but the stability at the end makes it totally worth it.
|Goal 4 – Create a rental house security fund
|No Longer Applicable
After some surprising repair expenses on our rental property in 2019, we’d realized we didn’t have adequate savings for the operation of our rental house. We’d planned to create a fund with 6 months of gross rent.
That’s all gone out the window. This goal doesn’t matter anymore. We discussed replacing it with something new, but decided to just reduce our annual goals by 1 for this year. With the current state of the world, we can live with this. It feels reasonable, not like we are letting ourselves off the hook.
|Goal 5 – Implement Consistent Meal Prepping
We didn’t meet this goal in 2019 after changing our routines dramatically with a mid-year move. Yet, when we were able to do it we saw the benefits. So, we rolled it over to 2020 and committed to doing better.
So far, we’re failing miserably. I wish I could blame it all on the covid 19 outbreak, but we were only partially successful before that blew up our routine once again.
Once we went into closure status, competing pandemic priorities wrecked our schedules. We’ve also intentionally eaten more take-out to help the local restaurants we love. Yes, those are excuses. They’re also true. The result – we are only haphazardly meal prepping for a couple meals a week.
Right now, I’m looking at the eventual return to normal operations (maybe not for awhile!) as an opportunity to reset our patterns and habits. We’ll include meal prepping as an intentional part of that reset. We will meet this goal!
Short Term Goals
Our short-term goals are quarterly actions explicitly linked to achieving the long-term goals. If we do these, we are very likely to meet our annual goal and therefore more likely to meet our long-term goal.
After each quarterly review, we set new ones for the next quarter. So, how did we do in Quarter 1?
|Short-Term Goal 1 – Adjust Automatic Contributions
By mid-January, we adjusted our automatic withdrawals to the new 2020 403b and 457b contribution limits. This meant they’d be in effect for the first payroll cycle and we’d hit our annual caps.
We took this action. In our review, we discovered that TFI’s employer hadn’t followed through on the contribution adjustment of her 457b, so we’ll follow-up and get that fixed! Another example of why regular financial review is important.
|Short-Term Goal 2 – Open and Meet the Minimum Spend on a Rewards Card
We’d planned to open and meet the minimum spend on the Chase Sapphire Preferred card. Thanks to the rental rehab costs, we did this easily. So, we also opened and met the minimum spend on the Capital One Venture card.
We’ve got lots of travel rewards saved up! It’ll be awhile before we can use them. For now, we’re taking a pause on new cards and just focusing on cashback with our Discover It which doubles cash back in the first year.
|Short-Term Goal 3 – Create a meal-prepping schedule
We failed at this one. We’ll roll it over into quarter two and try to have at least three meal-prepped meals per week. We’re intentionally gathering some meal prep ideas to expand our arsenal.
It’s good for our health and wallets. We’ll get this done at some point!
|Short-Term Goal 4 – Fund 50% of the rental security fund
We did not meet this because we adjusted course on the related annual goal.
|Short-Term Goal 5 -Create a process for long-term housing decision
Yep, we did better than this. We made and started to execute the decision.
Quarter 2 Short-Term Goals
Recognizing the significant uncertainty of the Covid19 closure and the work ahead on rehabbing and moving to the rental house, we decided not to add aggressive new short-term goals. Here are our short-term goals for Quarter 2:
- Short-term goal 1: Implement meal prepping for at least 3 meals / week (Yes, I’m stubborn)
- Short-term goal 2: Make second Roth IRA contribution
- Short-term goal 2: Move to rental house / eliminate rent
- Short-term goal 3: Calculate new bare-bones budget
- Short-term goal 4: Exit Quarter 2 with emergency fund (6 months expenses) intact
Net Worth Review
As part of our quarterly review, we calculate our net worth. Yes, I use personal capital to easily track my net worth for free (affiliate link). During the market volatility I deleted the app to keep me from checking. Every quarter, I do a spreadsheet calculation anyway.
We experienced a drop as would be expected given the market downturn. Thankfully, it was less than I’d mentally anticipated. This is due to a few factors:
- We were holding a larger than usual amount of cash while we resolved our housing situation
- We continue to contribute a significant amount of new money monthly
- We calculated on March 28, after the market had run up some. I think it’s likely to drop again. (And has so far this week!)
All told, our net worth was about $70,000 lower than when we calculated in December. Painful, but not catastrophic. We continue to invest for the long-term.
We’ll review our FI goal once the move settles and we have a grasp on our new expenses. For now, we are at 67% of our financial independence target.
Summary – Quarter 1 2020 Goal Review
In all honesty, there are more important things to pay attention to than our financial goals right now. However, the fact that we are able to focus on something other than money is a result of the changes we’ve made the past few years. During this review, we reflected on how different it would have been had this crisis hit us 5 years ago when we had no savings and were spending every penny we made. Despite losing some ground in Quarter 1 2020, that feels like real tangible progress.
Quarter 1 ended on a chaotic note. I expect quarter 2 will be the same. We’ll continue to execute our plans while focusing more on helping others. We recognize how fortunate we are, and rather than obsessing over every dollar, plan to spend and give more in the coming months to help others get through this.
If you’re looking to set your own financial goals, I’ve also compiled a comprehensive list of short, medium, and long term financial goal examples.