Q4 2017 Financial Scorecard: Slow And Steady Wins The Race!

Personal FinanceWith the calendar finally turning to 2018, it’s time to report on the ROMT family’s financial status as of year-end 2017!

We made progress on each of our financial independence and early retirement goals during the fourth quarter, increasing our Net Worth, 529 Account Funding, and Passive Income.

Measuring our progress on a regular basis certainly helps keep our eyes on the prize, but we’ve found there are really no secrets to continuing to move in the right direction.

For those of us who aren’t founders of tech startups, first round NFL draft picks, or lottery winners, slow and steady progress is the surest way to build wealth over time.

Keeping our personal finances in order is largely a matter of doing the basic blocking and tackling on a daily basis.  Trying to save a larger portion of our income, making sure our money is working as hard for us as we are, avoiding unnecessary expenditures, and taking full advantage of any free money that is available, such as 401(k) matches and credit card rewards, may sound boring, but are all tried and true ways to continue moving towards financial independence and early retirement.

And we used all of those methods to move a little closer to our goals during the fourth quarter.

I. Net Worth: 77.9% of Goal (+2.1% during Q4 17)

Our actual net worth (excluding home equity and 529 accounts) rose by 2.8% during Q4 17. I am disappointed in this result given that the S&P 500 was up more than 6% during the quarter.

Not all of our assets are invested in the stock market, and money we contribute to the children’s 529 accounts is not included in this net worth calculation, so I don’t expect our net worth to track the stock market perfectly, but I still think we should have done better. While most of our investments are in index funds, we don’t own any of the FANG stocks in our individual stock portfolio. Being underweight technology clearly cost us money in 2017. That said, we still moved 210 basis points closer to our FIRE goal in the fourth quarter, and we’re now 77.9% of the way to our target net worth.

In recent years, the first quarter has been our best quarter for generating income, as that’s when my employer pays out our annual bonuses. I’m hopeful that my hard work over the last year will be rewarded with a good bonus, which would give our net worth a nice boost before the next time I report on our finances. I mentioned last quarter that I thought we could get to 80% of our net worth goal by the end of Q1 18. Barring a major stock market correction or a very disappointing bonus, I still think we will pass that milestone before the end of March.

II. 529 Account Funding: 41.5% of Goal (+4.2% during Q4 17)

In contrast to the modest growth in our net worth, I’m very pleased with the progress we made towards our funding target for our children’s 529 accounts during Q4. The total value of our 529 accounts climbed by more than 11% during the quarter, driven by both additional contributions and market appreciation. We improved our 529 funded status by 420 basis points, to 41.5% of our target, from 37.3% at the beginning of the quarter.

I mentioned last quarter that I moved 25% of our 529 holdings into a more conservative age-based option, from the most aggressive equity-focused option available. This cost us some money during the fourth quarter, but did help me sleep a little better at night. If markets continues to rally in 2018, I may consider another similar move later this year. We plan on using the 529 accounts to begin paying for college expenses in less than eight years, so capital preservation will become increasingly important to us as our children get older. I haven’t made any changes to the relatively aggressive asset allocation in our retirement accounts, as we don’t plan on touching that money for at least 15 years.

We still have a long way to go to hit our 529 account funding target. We will need many more quarters with both strong investment performance and additional contributions to achieve our goals. Fortunately, our home state offers a state income tax credit on a portion of our contributions, so we remain incentivized to continue funding our college savings plans. If the markets cooperate, I think we can be half of the way to this goal by the middle of 2018.

III. Passive Income: 27.3% of Goal (+1.3% during Q4 17)

Our passive income target is our “stretch goal” on our path to FIRE. I don’t think there is any way we’ll be able to fund our anticipated early retirement lifestyle solely through passive income by 2021. We’d have to increase our net worth by an insane amount over the next three and a half years, and invest most of that money into dividend stocks, bonds, and cash flow positive real estate, to have any chance at achieving this goal.

That said, we made decent progress on this ambitious target during Q4, as our expected annualized passive income rose by nearly 5% since the end of September. We moved some money from lower yielding bank accounts into higher yielding certificates of deposit, which along with additional purchases of dividend stocks, increased our passive income. Unfortunately, we were hit by dividend cuts from a pair of individual stocks we own, struggling conglomerate General Electric Company and mall REIT CBL & Associates Properties Inc., which offset some of our gains.

As with our 529 account funding goal, we have a very long way to go with our passive income target. All of our efforts improved our funded status by just 130 basis points during Q4, to 27.3% of our target, from 26.0% as of October 1st. It’s great we’re moving in the right direction, but with just 14 quarters between now and early retirement, the math is not on our side to achieve this goal. We’re not quitting though – my goal for Q1 18 is to continue focusing on making sure our assets are working hard for us, and to get our passive income to 30% of our target over the next three months.

IV. Target FIRE Date – Friday, July 2, 2021

Another quarter of tracking our financial performance for Retiring On My Terms is in the books, and we now have only three and a half years until our Target FIRE Date!

If I were a betting man, I’d still wager we can reach our Net Worth Goal in 2020, and our 529 Account Funding Goal by our Target FIRE Date in mid-2021. Math tells me our Passive Income Goal is not achievable within three and a half years, but that doesn’t mean we won’t keep trying!


  • HP @ Full-Time Dollars

    January 6, 2018

    Hey ROMT, question -do you use a retirement countdown calendar? I have one on my phone that I used when I was working. Your FIRE date is oh-so-close, 3 1/2 years will be here in no time. A few years ago I set my preliminary FIRE date at mid-2020 – just to have a date to work towards. Realistic or unrealistic just depends how well I want to live the remainder of my days. After taking over a year off, it gave me new insight. I’m going all in this year to find my final 9-to-5, so I’ll see how it turns out!

    • ROMT

      January 6, 2018

      I don’t use a retirement countdown calendar, but that’s a cool idea. It looks like there are a bunch of apps out there. As if I already don’t have enough motivation, I can see the seconds, minutes, hours, days, weeks, months, and years moving by! Thanks for stopping by, and good luck finding your final 9-to-5!

  • Prudence Debtfree

    January 10, 2018

    Well done, ROMT! I admire you for getting on track at this stage of life. We had a wake-up call after years of bad money management late in the game (I was 49, my husband was 53), and after 6 years, we’ve truly turned things around. I often wonder where we’d be if we started 10 years earlier – or 20 years earlier … But you won’t need to wonder such things. You’re doing it! “Slow and steady” adds up more quickly than you might think. (And if you ever do win a lottery, you’ll actually follow-through and get to your goal faster : )

    • ROMT

      January 11, 2018

      Congratulations on all the progress you have made! As good shape as we are in, I wonder about the same kinds of things as you. If we had invested more aggressively, or chosen a different home or job, or learned about FIRE earlier, where might we be right now? But slow and steady definitely works over time. Hitting the lottery would be a nice bonus, but I generally only play when PowerBall or Mega Millions get to the really high levels they were at last week!


Leave a Reply