Qtr 3 2021: Goal Review

I’ve been early retired for 3 months now and it’s been great! As readers will have noticed, it’s been an extended transition period without my usual routines. It’s time to get the systems back in place. Look for my regular Monday posting schedule to resume next week with a write-up on the surprising parts of my early retirement transition!

In the meantime, we’ll get things moving again with one of our most important personal finance systems – our goal reviews. Setting regular financial goals, and following a system to frequently review and adjust those goals has made it possible for us to go from (relatively) financially clueless to early retired in less than a decade.

As a reminder, our theme for this year is do not fear change. Appropriate for the constantly shifting phases of the pandemic, and my transition into a work optional life.

Our Financial Review

Quick Overview: Each year, we set annual goals and then build medium- and short-term actions to help us achieve our annual targets. The short-term actions are updated each quarter.

We discuss our progress monthly, but do a formal review quarterly. This review covers July – September.

Here’s the color system for our goal reviews:

Goals are good targets, but it’s important to adjust along the way if they don’t make sense or circumstances change. We’ve changed our goals up more often than down on our journey, but we’ve also missed or dropped some entirely. That’s okay. Sticking rigidly to a bad goal is as harmful as not meeting a good goal.

This year, we dropped net worth as a target. Once we reached our FI goal, it was no longer useful. I know that indicator is important for some readers – we still track our net worth and I’ll report it as a percentage against our original target at the end of the post.

2021 Goals

Here are the goals we set for 2021, and the actions we said we’d take:

How Did We Do in Quarter 2?

Annual Goals for 2021

Tax-advantaged investing options are great for many educators and were a key driver in our financial progress. We were lucky enough to have four places we could invest with tax advantages: 403b, 457b, Roth IRA and an HSA option.

In recent years, we’ve maxed out our 403b/457b contribution limits each year. The progress was incredible!

While I worked the first half of the year, we loaded up on the ones available to me. For this second half of the year, we’re still contributing to my partner’s 457b but have dialed back on the others.

We automate all of this one, so we’re on track. Just three more payroll withdrawals for TFI and we hit this goal. It’s essentially done, but the money isn’t quite all in the accounts yet.

This was definitely our stretch goal for the year. With the job transitions coming, we wanted to continue to add to our brokerage investments but knew this would be a challenge. It’s still possible, but we are waiting on some final bids for a home improvement project

This one will come down to the wire when we do our annual review in December. We’ll move whatever we consider “extra” from our transition savings into investments. If I had to guess, we’ll fall short. But we still have a quarter so we’re reaching for it!.

We decided to take a small crypto position this year. Our contributions were complete in quarter 2. The market has fluctuated but we are well up. The total amount is still between the 1-2% target so no adjustments are necessary.

This was our main action for quarter 3. We stopped doing a detailed monthly budget years ago, and typically do a quick budget review and annual plan. However, since we’re now bringing in less income we reviewed and set a loose monthly budget for this quarter.

The good news – our expenses are covered and we can even continue to invest a bit. The bad news? We won’t be buying a private jet. Otherwise, it’s all good.

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 meet our long-term goal.

After each quarterly review, we set new ones for the next quarter. So, how did we do in Quarter 2?

As mentioned above, we are paying closer attention to our expenses than we have in years. This is mostly precautionary. Financial awareness is like physical fitness. It takes more work to build initially than to maintain. We’re just more aware of our money these days – so even without focused attention we still make better choices. At least, I hope that’s true – but we’ll pay close attention for a bit just in case!

Last quarter, I received my final paycheck. Our new investment contributions were going to drop by 80% – it was time to make sure all the automatic investing systems we had in place were aligned with the new reality.

Done! I didn’t even miss any. Everything has worked as planned the last two months.

Well, this one is met but not without a small hiccup… I’m now enrolled in health insurance and fully covered. I made a timing assumption mistake, however, and had a one month gap with no coverage. My prescriptions were up-to-date and I’m generally healthy so fortunately this wasn’t a major problem. Certainly risky, though.

It highlights just how much complexity there is in the system. Health care continues to be one of the major challenges of financial health. I really hope we create a rational system here in the US someday.

Quarter 4 Short-Term Goals

We consider this quarter our final transition into the new financial reality of optional early retirement. To that end, we’re staying focused on smaller concrete goals. Our annual review and goal-setting for next year in December will be fascinating. What will our future financial picture look like?

The next three months are largely about maintaining and adjusting. We’re going to knock out some concrete things while we test our new budget and expenditures.

We have two final projects on our house (we moved back into our rental and are rehabbing it) that we want to complete. So, we’ll get those bid and done. Costs right now are insane due to demand and supply chain issues. This has created a big unknown, but both are projects we’d rather complete than leave undone while chasing an “optimal” time.

Speaking of expenditures – we’re at our phone replacement time. Unlike many in the personal financial space, we don’t use budget phones or chase a discount carrier. We aren’t extravagant, but we will replace with later-model devices.

Finally, in December we’ll do a review of all our remaining savings. We stayed more liquid than usual through this transition. At the end of the year, we’ll sweep back down to our usual security fund levels and invest the rest. That’s when we’ll see how close we get to annual goal #2!

Here are our short-term goals for Quarter 3:

• Short-term goal 1: Complete two home improvement projects
• Short-term goal 2: Phone replacement cycle
• Short-term goal 3: Reset liquidity level – invest in brokerage account

Net Worth Review

Net worth used to drive our financial moves. We hit our net worth target over a year ago, and have been well above it in recent reviews. We mostly stopped paying attention.

I was very interested in net worth for this review, since it followed our first quarter with no income from me. Since TFI is a teacher and receives all her paychecks in June (no, teachers don’t get paid for the summer) that meant we would have three months with no new income and our summer travel expenditures.

The result? Our net worth actually ticked up slightly! Our expenses were well-planned. Our investments weren’t pumping but we had some return. As a result, our net worth is at 132% of our early retirement target.

Not a bad outcome for our first quarter of early retirement.

Summary

The last three months have been a transition period. After years of hard-charging financial work, things seem….relaxed. We’re still making progress but now pay less attention to our finances than before. It’s one of the most surprising things about this shift.

This coming quarter, we’ll complete the transition by staying the course and knocking out some concrete actions.

I look forward to defining the future in this new reality. I’m not sure exactly what it will all look like. But these goal reviews will continue to be part of it! Thanks for reading.