End of a year and you know what that means!

[spotty_dog]

XIRR time!

This year we made almost 19% return on our investments. That's with a rather conservative target allocation of 65/35.

But...the even more conservative Vanguard Target Retirement 2025, with a target allocation close to 60/40, made 19.63%. We experienced a lot of cash drag because DH spent the WHOLE YEAR (and most of last year) announcing that stocks were overpriced and collapse was imminent. Sigh.

Thanks to that growth, we did hit a milestone this year. We've reached financial independence, in the sense that we *could* maintain our current levels of spending indefinitely even if our household ceased earning income. Statistically speaking, at least. So that's cool, and has been a definite source of stress relief as we navigate some hiccups in his job.

How are your financial goals shaping up at the end of 2019?

[OrionGrad]

Congratulations! So now that you’ve reached FI does that mean you’ll get rid of disability insurance? 🧐


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[spotty_dog]

Congratulations! So now that you’ve reached FI does that mean you’ll get rid of disability insurance? 🧐

Gosh, that's a good question (one he asks every time we have to pay the premium, LOL.) I'm thinking not quite yet. Mostly because I don't REALLY trust that we're at FI, that our expenses won't increase or that investment values won't decrease, etc. And anyway we don't actually have a lot of coverage (something like $3k a month?) so it's not too horribly expensive. But it's exciting to think that shift is on the horizon too!

[SoonerTexan]

Nice job! We meet with our FA on the 9th. I sent her a whole list of questions and I'm hoping the end result will enable us to build a solid financial plan for the first 2 years out of residency. I confess I don't know what our 2019 rate of return was...but it is kind of hard to care too much at this point when there isn't a whole lot invested. I'm kicking myself because we didn't get DH's retirement contributions from residency rolled over into a Roth in time. It wasn't a huge amount of money, but if there was ever a year to do it, this was it.

My goal for this year...positive net worth! LOL

[civilspouse]

Congrats on FI [MENTION=985]spotty_dog[/MENTION]! We are adjusting to the paychecks after training and trying to make all the right decisions.


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[ladymoreta]

That's awesome!! We are maxing DH's 401k, and that's about it. We have college savings accounts for the kids, but we will need to step those up once we get down to one property again. No doubt a financial planner wouldn't have let us get into this situation, but here we are...

[poky]

I just did this yesterday! We got 22.44%, for 2019. We're finally at the point where we've got an emergency fund and are able to max out our tax-advantaged accounts by April this year, and should be further ahead next year. I've done a bunch of number crunching, and we *should* be able to very comfortably retire in 11 years, which is also when our mortgage will be paid off.

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[poky]

Oh, and our overall annuallized XIRR since 2010 is at 8.35%, now, and since 2016 (when I know the numbers are fully accurate), it's almost exactly 10%.

[spotty_dog]

My goal for this year...positive net worth! LOL

Digging up to zero is HUGE! I'm sure you've seen the WCI guys call it "getting to broke" LOL! You can do it! Oh, and I don't know about conversions, but for a lot of actions you have until April to do stuff and still apply it to the 2019 tax year. And also, a 1/2 year of residency (or even residency + moonlighting) might still be a way better tax bracket than a full year of post-training salary. Yesterday might have been ideal, but tomorrow is at least better than a year from now?

[spotty_dog]

Oh, and our overall annuallized XIRR since 2010 is at 8.35%, now, and since 2016 (when I know the numbers are fully accurate), it's almost exactly 10%.

I should really combine all the calculations over the years and figure out the cumulative/annualized. Because there have been some baaaad years in there. I'm still not forecasting based on anything much more than 4% going forward. (Okay, MAYBE 4% real after inflation.)

[poky]

I should really combine all the calculations over the years and figure out the cumulative/annualized. Because there have been some baaaad years in there. I'm still not forecasting based on anything much more than 4% going forward. (Okay, MAYBE 4% real after inflation.)

Yup; 2018 was pretty bad! (I'm showing -7%ish!) My FV calculation I have set up so I can play with the expected return percentage, and I've been putting 4 and 5% in...am I correct in assuming that if we I use 5% in that, and we get 5% *real* (which it seems like we have been; I can just subtract 3-ish from the actual XIRR number, right?), then the number I get from that calculation is then "in today's dollars", since the 'real' means inflation is accounted for?

[SoonerTexan]

Digging up to zero is HUGE! I'm sure you've seen the WCI guys call it "getting to broke" LOL! You can do it! Oh, and I don't know about conversions, but for a lot of actions you have until April to do stuff and still apply it to the 2019 tax year. And also, a 1/2 year of residency (or even residency + moonlighting) might still be a way better tax bracket than a full year of post-training salary. Yesterday might have been ideal, but tomorrow is at least better than a year from now?

Actually, with our house equity I think we are positive now, but not by a whole lot.

For back door Roth contributions, you have til April, but for Roth conversions, it has to be done by Dec 31st to be included/taxed at that years income level. Next year is still better than future years, but this year would have been way better. We actually need to talk about whether or not converting it to a Roth is even the best plan now :/

The other thing we are working on is getting our spending in line. The moonlighting has been awesome this year--it is a great problem to have. Unfortunately our spending has increased to match it (eating out is the biggest culprit). I went through three months of transactions on Mint last week and planned out a new budget for the next 6 months.

[civilspouse]

We converted DHs residency account this year. We will see how it ends up when we do taxes but our income this year is definitely lower than it will be in the future. Not sure how your DH will be paid but my DH is paid based on production and there is a lag so his income is only now starting to reach the level we can expect going forward.


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[MAPPLEBUM]

@civilspouse that's exciting about income going up!

And @SoonerTexan you know I'm totes jelly about your finances. +NW first year out of training is amazing!!


I wasn't sure if I'd get to a spending review today but I did and it was on the lower end of what I was expecting. Which was like doomsday WeSpendTooMuch expectations so it's not like I'm pleasantly surprised. The insane thing are our travel, gym, entertainment, and dining expenses are almost identical to the previous year! Like, the difference in dining from 2019 to 2018 was $163.72

The biggest difference was "Merchandise." Through the roof since we got rid of hand me down furniture and bought our own. But 2018 he bought a car which is not factored in so I guess it evens out.

Despite that we did exceed my goals for the year, which were simple: save 20% and reach +NW by the end of the calendar year. I hit both sometime late September / early October. Mid year I set a tepid third goal of doubling up on 3 loan payments which I hit 12/1

2020 goals are the same. Save at least 20%, double up on loan payments at least 3 months a year, travel less, buy less shit.

[spotty_dog]

Yup; 2018 was pretty bad! (I'm showing -7%ish!) My FV calculation I have set up so I can play with the expected return percentage, and I've been putting 4 and 5% in...am I correct in assuming that if we I use 5% in that, and we get 5% *real* (which it seems like we have been; I can just subtract 3-ish from the actual XIRR number, right?), then the number I get from that calculation is then "in today's dollars", since the 'real' means inflation is accounted for?

Yeah, I think that's how I'd wrap my head around it. You remove inflation from the annualized growth, therefore the FV result is smaller because the buying power is smaller. I think.