2017 Financial Goals
2016 has come to a close. In my most recent post, I discussed how 2016 treated me financially, with what goals I reached and what goals I failed to reach. All in all 2016 treated me well and I think creating goals to keep me on track helped me climb each mountain to reach the peak. I had support from my wife, friends and family, readers of the blog, and many others who I look to for inspiration. Thank you for your support.
One of my favorite quotes as I prepare to discuss my 2017 goals is as follows:
” If you don’t know where you are today, you will never know where you are going.”
I mention this because I am a believer in keeping track of your income, expenses, and investments. Personally, I use Personal Capital to do all of the heavy lifting for me. Personal Capital acts as motivation for me as I see my net worth increase or a gentle reminder on my asset allocation and where they recommend I put my investments. I get fancy graphs, top notch technology driven data, and a clear picture of where I am at today, where I was in the past, and projecting my future. Sounds like an infomercial I know, but seriously I use Personal Capital as my primary source in tracking the overall picture of our finances. I recommend signing up because the whole thing is FREE and I believe once you get all of your financial data into one place to see how it works and what it looks like, you will be impressed. I now bring to you my 2017 Financial Goals.
2017 Goals Presented by the Financial Independence Unicorn
Max Out Mr. and Mrs. Even Steven 401K, H.S.A.–Similar to 2016 we have a goal of maxing out our tax deferred company plans. This is set up automatically to be taken out with each pay check. The H.S.A is stretched out for all of 2017, while our 401K is setup to reach our goal before the end of the year, allowing for larger paychecks to close out the year, a strategy I enjoyed in 2016, the wife a little less as she is a big fan of “give me my money now” strategy. It’s important to explain a little further as why we choose to max out these tax deferred investments first, rather than a Roth IRA or pay off our mortgage for example.
The higher our income the more we pay taxes, very simple. Anything we can do to reduce our income allows us to save on our taxes today. Over the next ~30 years we will let this money grow tax deferred and look to implement tax saving strategies along the way. Great articles about this are written by the Mad Fientist and Go Curry Cracker, you can always head over to irs.gov to read more, assuming you are a huge nerd or insane. Our early retirement vision or strategy is very similar to Our Next Life with rental income and taxable income used primarily in FI and allowing our tax deferred investments to grow staying largely untouched.
Max Out Mr. and Mrs. Even Steven Roth IRA for 2016 and 2017 contributions-One of the goals we failed to reach was our 2016 IRA contributions. While we were able to contribute $2,900, we left $8,100 on the table…..or did we? The IRS allows us to contribute until April 15 of the following tax year, allowing us the extra time to max out our 2016 IRA. After this is completed we will make a focus to max out our 2017 Roth IRAs.
The thought process behind contributing to a Roth IRA next is essentially hedging our bets against the tax laws in 30 years. This money will not be taxed over the next 30 years and when the time comes that we do want or need this money we are able to use access our Roth IRA without paying taxes. If there is anything that I have learned from the vast amount of personal finance articles I have read over time is to stay flexible and have options.
Eliminate PMI on our Chicago Property–We successfully paid off our Florida property in 2016, which is essential in our early retirement blueprint.
2017 real estate will once again be a major part of our financial plans. As part of our original mortgage we obtained an FHA 203K loan and we were required to carry Private Mortgage Insurance or PMI for 5 years (unless we would refinance). After 5 years, as long as we met the requirements from our mortgage company and state specific laws, PMI would be removed. The purchase of our home was made in July of 2012, so for the next 7 months, our priority will be to reach the appropriate Loan to Value or LTV to eliminate PMI expense moving forward.
Since we paid off our FL rental home, we will have less of an expense and more income in 2017, all of which will be put towards eliminating PMI and reducing our mortgage payment. I suppose the exception to this is Mrs. ESM is no longer contributing to the mortgage payment from her 9-5 job, this money is now being put towards savings.
Build a Cash Reserve for a Down Payment on a House-I was hesitant to put an actual number with our cash reserve goal, however I learned my lesson last year by not having a measurable goal with our IRA and playing catch up this year as a reminder. The number itself for the cash reserve is dependent on work, bonus, taxes, etc. and is a number that is not in our primary control. I am holding off on details of the number since it is tied directly to work and a work bonus, I know I know the secret lives we live. If we buy a house or instead decide to have a large cash reserve moving forward I will be just as pleased to reach this goal.
Build a Personal Taxable Investment Portfolio in the 5 Figures–If there is one area where we are weak in our financial portfolio it would be our taxable stock investments. While as a couple we have some money in a brokerage account it’s such a small part of our overall portfolio. Personally, I have had individual investments in the past, the sale of these actually helped pay off my student loans. My personal taxable investments stand at $0 at the end of 2016, I look forward to taking on this lofty personal goal.
As I previously mentioned our model or early retirement vision mirrors Our Next Life, just one of the reasons I like to read about their journey. Here’s a picture they use that can help illustrate our plan as well. Our early retirement is planned for 2020 at this time our income will be rental income and taxable accounts, this will be our dual income until I turn 60 in 2042, allowing our tax-deferred accounts to be utilized.*
I bring this all to light because while rental income will be the primary income during the estimated 22 years of FIRE and before any tax deferred accounts will be considered for income, taxable accounts will play a small part. I have a long term goal of a $200,000 taxable account, which amounts to $8,000 yearly or $667 monthly per the 4% rule. This income would be mostly used as a buffer during the first few years.
Max out tax deferred accounts, eliminate PMI, create a large cash reserve, and go from $0 to 5 figures in my personal taxable accounts. I suppose if I had just written that on Twitter, but since I like being long winded and sharing all the fun details I came to Even Steven Money.
Clearly life and the goals we create are more than just financial. That’s why this year I will be sharing my personal goals and a small glimpse into what I find important as I pursue FI in 2017. Thank you for reading and thank you for letting me share a little bit of my life with you.
*Mr. and Mrs. ONL, I just realized you are younger than me, this news has made me feel like an old man and also question my math skills as I read your early retirement vision.