Progress Not Perfection: Quarter 1 2019 Goal Update

Progress, not perfection. After years being hampered by a near-crippling fear of making a mistake, I adopted that phrase. It’s an apt heading for my goal updates.

This will be the first quarterly goal update I’ve published. Educator FI is a mix of professional thoughts and personal journey. I’m still unsure how much readers really want to know about my personal journey to financial independence. Yet, I also feel it’s important to give some information and context.

Monthly seems like too often. We’re firmly in that grinding accumulation phase. We will reach financial independence as long as we continue doing what we’re doing. All indications are that the big moves are (mostly) behind us. Things just don’t change that rapidly. So, my plan is to do quarterly updates in April, July, and October for the preceding quarter and publish a yearly (including the final quarter) update in December.

The quarterly posts will contain updates on our yearly goal progress, unexpected wins, and reflections or adjustments.

Each header will list the goal. Here are our 2019 Goals if you want the full context.

I’ll rate the goals like this:

Goal Updates

An Important Note:
Before diving into goal updates, I want to mention a speedbump we hit. Due to a withholding error in TFI’s pay (my fault for not catching it) and underestimating the impact of the State and Local deduction cap, we were hit hard by an unexpectedly large tax bill this year. That $6700 surprise has slowed our progress, which will show up in a few areas below.

We (now) make a good income. I feel privileged. I will employ tax reduction strategies but don’t begrudge paying taxes. I just wish the SALT cap change had been part of a better tax system overhaul. That income enables us to catch-up on FI progress since we started late. Had we started earlier, these numbers would have been much smaller.

Goal 1: Max out Pre-tax retirement accounts

ON-TRACK +

As part of our strategy for Artificial Tightness to unwind lifestyle inflation, we’ve set up automatic deductions to max out both our 403b and 457b. This would qualify us for being on track.

However, we discovered in January that TFI was eligible for a 403b catch-up option due to working in her district for more than 15 years. She can contribute an additional $3000/year to her 403b. A small money win which we immediately took advantage of. We’re on track to contribute almost $80k pre-tax thanks to the 403b and 457b availability!

For those who haven’t read my 457b is Fire Magic post: the 457b operates in our FI strategy much like a taxable brokerage account. We can access it upon separation from employment. I note this, just to prevent anyone from (rightly) saying that we are overweight on retirement accounts if pursuing FIRE.

Goal 2: Make Roth IRA Contributions – $12000

NOT YET

For 2018 we had to use the Backdoor Roth conversion. Thanks Physician on Fire for the helpful guide! We made those conversions in December with extra savings we had carved out.

We plan to contribute the full $6000 each to Roth IRAs for 2019, but the aforementioned tax bill has delayed this action. This is still a priority but has not yet been met.

Goal 3: Additional Mortage Paydown of $21,500

NOT YET

This goal has two components. We originally planned to continue $16500 of mortgage paydown. This was set with automatic payments of an extra $1375 each month. We are On Track to meet the original goal.

We also set a stretch goal of an additional $5000 paydown. This may still be met, but is our lowest priority after the tax bill. We’ve also made a housing decision (see reflections at the end) that makes this less important. So, our stretch goal is At Risk and may eventually doom this goal. (But, by choice)

Goal 4: Taxable Investments – $9800

ON TRACK

In order to bring a bit more balance to our portfolio, we contribute $400 a month to Fidelity’s zero fee international index. Our 403b and 457b are in VTSAX, a target date fund, and a bond fund, so we are underweight on typical international exposure.

We will contribute an additional $5000 to our brokerage account (VTSAX) in July. I get a payout for unused personal days, and TFI gets three paychecks as she enters her summer schedule. This is an ideal time to make a contribution and prevent spending increases.

Goal 5: Increase % Going to Charity by 1% Each Year

On-Track +

During last year’s review, we realized that our charitable giving hadn’t grown as quickly as our income. After discussing how to balance our FI path with our desire/need to contribute we decided to step it up by 1% of spending each year until it’s at 10% of our annual spending. This will allow us to give 10% or more each year even after financial independence.

I’m happy to say that we have already met this goal with our contributions in the first quarter of 2019. We donate to more of our significant causes early in the year. There are a few donations to be made later in 2019, so we’ll likely be a year ahead of our planned timeline. We’re content with this, and will continue to include giving as part of our financial plan.

Goal 6: Meal Planning / Prepping

ON TRACK

It was a bit challenging to rate this one since it isn’t a hard number. We have begun implementing meal planning and prep. We still struggle with the variability of our schedules and travel and have not yet built a consistent routine. However, planned and prepped meals have become a higher proportion of our weekly meals over the quarter. We are experimenting with new meals and adding them to the rotation. It hasn’t been an instant win, but the progress is clear. Therefore, we are on track.

Goal 7: Credit Card – Select A New Travel Rewards Card

NOT YET

We haven’t yet started our travel rewards work. This will become a greater priority as we plan for our coming 20th-anniversary trip. We did decide to delay our planned Fiji trip until retirement due to the tax bill and realizing that we wanted it to be long and leisurely. We’ll do something shorter, and less costly, in December of 2019. Planning is underway and we consider this a choice not a sacrifice.

Other Wins

Maxing out my HSA contribution

One positive side effect of our tax bill is it made me more diligent about searching for every possible reduction. In so doing, I discovered I was $1375 short of maxing my HSA contribution for 2018. (I know – PF blogger fail!) We immediately contributed this for 2018, and I’ve adjusted contributions for 2019.

Increased 403b – Employer Contribution

As part of a contract update and retention strategy, my employer will now contribute $6000 to my 403b for 2019. Employer contributions to a 403b don’t count against the individual contribution cap (unless it’s a cumulative contribution of >$56k.) We are currently considering reducing my individual contributions to increase contributions to our taxable accounts, but have not made a decision. Either way – this is an unexpected money win!

Net Worth Update

After a successful quarter in terms of both contributions and market returns, our net worth is now 60.25% of our FI target.

Reflections

Overall, it was a very successful start to 2019 – our third year on the journey to financial independence. We are definitely feeling the “grind” aspect of just waiting for the accumulation, but can also see the end in sight.

Perhaps the most significant action in the first quarter isn’t captured by any of our goals. For spring break, we took a road trip to start testing our planned retirement travel. The hours of driving replaced our monthly walk to talk about financial goals. Over that time, we thoroughly discussed our oft-debated decision about housing.

I’ve mentioned frequently that our house is larger than we need. It’s certainly a larger component of our costs and net worth than is optimal. Yet, we love the location for a variety of reasons. That said, we’ve come to terms with the fact that we could live with less. And, with significant travel, it makes no sense to leave it unoccupied for months at a time. Therefore, we have decided to start looking for a smaller, but ideal, house and downsize prior to financial independence. I plan to write a more comprehensive post about this soon.

While I mentioned market returns in our net worth update, I don’t consider them as part of our progress. I set goals based on our actions rather than return numbers to allow us to assume the correct market orientation – we’ll gain over time, but individual quarters shouldn’t matter.

Summary of Goal Progress

Progress, but certainly not perfection. Overall, I’m very satisfied with our first quarter. We’re well on our way to financial independence.

How did the start of 2019 go for you?