It’s mid-July and I’m still transitioning into my optional retirement, but there is no way I was going to skip our quarterly goal review! Setting effective financial goals, and tracking them regularly, has been key to our financial journey.
Even though we’ve been fortunate enough to hit our milestone, we have no intention of stopping the practice. (If you need to get started, here are some personal financial goal examples that might help.)
Let’s dive right into our quarterly review. We conducted this at the end of quarter 2 – right before I received my last pay check (yikes).
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 April, May, and June.
Here’s the color system for our goal reviews:
|On Track+||We’ve either already met the 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.|
|Not Yet||Actions that we haven’t yet taken, or need to adjust to reach the goal.|
|At Risk||Uh uh. We won’t make it without significant changes.|
It’s critical to adjust your goals 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.
Here are the goals we set for 2021, and the actions we said we’d take:
|Long-Term Goal||Avoid drawdown of assets for 3-5 years|
|Goal 1: Tax Advantaged Investments||$63,600|
|Goal 2: Brokerage Investments||$20000|
|Goal 3: Crypto Hedge of 1%-2%||$12000|
|Goal 4: Establish New Budget|
|Action 1||Adjust payroll withholdings|
|Action 2||Complete Roth IRA contributions|
|Action 3||Establish reserve fund|
How Did We Do in Quarter 2?
Annual Goals for 2021
|Goal 1 – Tax Advantaged Investments||On Track|
The tax-advantaged investing options available to many educators (sadly, not all due to local district choices and sometimes burdensome fees) have been key to our quick progress. One of my biggest financial mistakes is failing to start using these early. Don’t make my mistake – get started now.
We were lucky enough to have four places we could invest with tax advantages: 403b, 457b, Roth IRA and an HSA option.
For this year, we loaded up on my options while I was still working for the first 6 months of the year. For the first time in several years, we aren’t maxing these out (Check out: 403b/457b contribution limits to see how much you can put in).
We did, however, load up on all of mine during the first 6 months while I still had a job. In particular, we made sure to max out both our 457b, since that provides a lot of flexibility for people pursuing optional retirement.
We are on track here. TFI has her withdrawals set up for the whole year, we’ve covered both Roth contributions, and I hit my targets for the first two quarters.
It’s not as much as in recent years, but we are on track for our goal.
|Goal 2 – Additional Brokerage Investments of $20,000||At Risk|
This was a stretch goal for us. We have contributed $4000 so far this year. An unexpected repair cost, and a decision to preserve flexibility, delayed further investments.
During this quarterly review, we decided to hold extra money for the summer to see how our expenditures went. At our next quarterly review, we should have some money remaining in our accounts that will go to this goal. When making a major financial shift, as we are, it doesn’t hurt to chose a little flexibility at first.
Whether we make the annual goal likely depends no how accurate our initial budget is, and what level of work I take on during optional retirement. Again, this isn’t a necessary goal (since we’ve exceed our net worth target), but we always challenge ourselves. It’s possible we’ll make it, but my best guess is we’ll fall short. To be determined!
|Goal 3 – Crypto Hedge of 1 – 2%||Complete|
Our target this year was to start into crypto with a small amount (1%) of our net investments. We don’t intend on contributing any more, and will rebalance out if it ever reaches 2% of our net. We’ve completed all contributions and I’m enjoying learning a bit more about the crypto landscape. Other than that, this isn’t a significant part of our financial plan
|Goal 4 – Establish New Budget||On Track|
We’ve set our initial expenditures budget since we’ve dropped down to one income. It looks like there will be space in it to still contribute a small amount to investments, but have decided to live with it for three months and see how it goes. Add to that the likely chance that I earn at least some income from side projects or interesting gigs and it will be a work-in-progress for awhile. We’re solid for now.
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?
|Short-Term Action 1 – Establish Reserve Fund||Met|
We’d planned to set up a specific fund for our vacation rental to cover future repair costs. We’d had this fund combined with our own housing fund and decided it made more sense to separate them out. We’re setting this up, and will contribute rent for the remainder of the year until it hits our target of 6 months costs.
|Short-term goal 2: Make $5000 in brokerage contributions||Did Not Meet|
As discussed above, we fell short. We made $1500 in contributions and have decided to hold the remaining for the next few months as part of our security fund. This is a flexibility decision rather than holding rigidly to our goals.
|Short-term goal 3: Make $2000 in crypto contributions||Met|
We prioritized this one to close out our total crypto investments. I’m a big fan of closing paths to limit decision-making. Done – time to move on to other decisions!
|Short-term goal 3: Create budget for 3rd Quarter||Met|
The expenditure budget is done, and all travel planned. Eliminating half of our income is pretty significant, so we’ll take time to monitor and adjust. But it’s done!
Quarter 3 Short-Term Goals
Typically, we set 3 – 5 short term goals for each quarter. These can range from specific small actions up to large investment goals.
For this quarter, we decided to take a pause and celebrate our success by NOT loading up on goals. There are three important things we need to do as we transition to the next phase.
First, we will track our expenditures more closely than we have in years. Tracking your spending very closely is really important when you’re first trying to understand your finances. It was an eye opener for us. Over time, it became more efficient to enact an “anti budget” and simply meet our saving and investing goals. With our newly reduced income and initial budget, we need to watch closely for while.
Speaking of that reduced income – it’s time to adjust some of our auto contributions that are tied to my paycheck! This was planned back in our annual goal-setting, now I just need to do the detail work to make sure those contributions are closed.
Finally, my employer provided health care runs out in three months. I should be able to move onto TFI’s insurance relatively easy during her open enrollment period this fall. We need to make sure to get that done so it goes down as an action this quarter.
Those three specific actions are important for our financial health in the coming quarter.
Here are our short-term goals for Quarter 3:
- Short-term goal 1: Track expenses
- Short-term goal 2: Adjust auto-contributions
- Short-term goal 3: Enroll in health insurance
Net Worth Review
We calculate our net worth during our quarterly review. I use personal capital to easily track my net worth for free (affiliate link), if I want to glance at it.
Every quarter, we go through everything by hand in a spreadsheet I’ve kept for years. This gives me a better feel for my overall financial picture. It also helps us ensure we’re keeping track of all our accounts, logins, and notice anything unusual.
Our net worth is at 131% of our net worth target. Whew – I can still move into optional retirement!
Optional retirement is here! We continue to make financial progress, but this quarter will really be about adjusting our lifestyle to fit the new reality. I suspect there will be more habit, routine, and mindset changes than any significant shifts in our financial picture. We will see. I look forward to writing about it and moving into the next phase!
Enjoy the rest of July – I look forward to connecting again in August.