ROMT’s Financial Resolutions for 2018
2017 was a good year for the ROMT family’s finances.
We had solar panels installed on our roof, which over the second half of 2017 cut our electric bill by over 90% from what we paid during the same period in 2016!
We learned about financial independence and early retirement (FIRE), and developed a plan we hope can lead us down the path to FIRE before Mrs. ROMT or I turn 50. As of January 1, 2018, we were almost 78% of the way to our net worth goal!
2017 wasn’t without some missteps. My commute is still too long and too expensive, I’ve done a poor job taking care of myself, and our participation in the neighborhood garage sale was an abject failure!
But all in all, it was still a good year for our bottom line.
As I mentioned last week, I believe for many of us achieving financial independence is more of a marathon than a sprint. If you work hard, make smart choices, avoid lifestyle inflation, invest wisely, are fortunate enough to have a good start in life, and get lucky, there is potential for many of us to accumulate meaningful wealth over an extended period of time.
While I didn’t learn about the concept of FIRE until last year, I have always been a saver and investor, largely because of the example set by my parents and other relatives. We’re very fortunate financial independence for our family could be just a few years away, but even though I didn’t know about FIRE until last year, we are by no means an overnight success story.
Our progress has literally been decades in the making. I have Social Security earnings dating back to the 1980s, which is also the decade I graduated from high school. My 25th college reunion is scheduled for later this year. I’ve earned paychecks from five different companies since receiving my undergraduate degree, and have spent time working in over a dozen states and three foreign countries. We’re blessed that we may be able to retire on our terms before hitting 50, but it has been a long, slow journey to get to where we are today.
And our goal is to keep that momentum going, which is why I am outlining our Financial Resolutions for 2018. If we’re able to achieve all of these goals, we’ll likely still be on sound financial ground a year from now, regardless of what happens in the markets.
Max out our 401(k) contribution
When I first got out of college, my goal was to contribute as much as I could to my 401(k) account in an effort to maximize the matching funds offered by my employer. I tried to bump up my contribution as much as possible from year to year, with varying levels of success. Now that we are on sounder financial footing and not living paycheck to paycheck, I’ve been able to max out my contribution for the past few years, and my goal is to do the same in 2018. The IRS limit increased to $18,500 this year, so if we can hit this goal, we’ll save nearly $25,000 for retirement given my company’s 33% match. That will go a long way towards ensuring our net worth will be higher a year from now.
Complete several home improvement projects
As I mentioned at the top of this post, we paid off our mortgage and had solar panels installed on our roof last year. The solar panels were our major home improvement project in 2017, and between that and a very busy year at work, we didn’t focus on much else around the house. This year, I’d like to knock several smaller projects off the list. Outside – once the temperature is above zero degrees – I’d like to rebuild a retaining wall, take down at least one tree, power wash the exterior of our home, and reseal the driveway. Inside, I need to put up some new closet doors and do some painting. It’s also likely Mrs. ROMT has some additional projects on her mind I’m not aware of, or have conveniently forgotten about. Some of these projects will be more expensive in terms of time, some will be more expensive in terms of money, but I’d like to get caught up with many things that I have been putting on the back burner for a while – especially since our home is now 100% ours!
Make sure our money is working as hard as we are
Writing this blog has helped me focus my attention on our finances. Last year after I researched bank products we moved a lot of our savings from our credit union and local bank to online certificates of deposit (CDs), which increased the amount of interest we were earning materially. As those CDs begin maturing and we earn additional money, I want to remain diligent in making sure we’re maximizing what we earn on our savings, and continue investing excess funds into stocks, bonds, and mutual funds.
Contribute enough to our children’s 529 plans to maximize state tax benefits
The funding of our children’s 529 education accounts is one of the three key metrics we are tracking to determine when we can declare ourselves financially independent. As of December 31, 2017, we were 41.5% of the way to our goal, and I’m hopeful we can get halfway to our target by mid-year. To get there, we’ll need the stock market to continue performing well, as well as make additional elective contributions. Over the course of the year, I want to make sure we contribute enough to maximize the state tax credits we can claim when we file our 2018 taxes.
Follow the markets closely – but not obsessively
We own a number of individual stocks and corporate bonds, in addition to mutual funds. I’m sometimes tempted to follow the price action on the individual securities we own throughout the day, but quite honestly, we are largely long-term buy and hold investors. 99% of the time, I’m not going to sell a position I believe in because of a single negative headline or analyst downgrade. In 2018, I want to make sure I’m aware of what’s happening with the investments we own, but I want to avoid becoming a day trader. Perhaps there will be time for day trading once I am enjoying an early retirement!
Blog more consistently at Retiring On My Terms
I started Retiring On My Terms in May 2017. Blogging is more work than I anticipated and sometimes tough to balance with work and family life. Consequently, my performance has been inconsistent. In good months, like June, I posted ten times! In bad months, like November, I posted just twice. I enjoy writing, sharing my experiences, and interacting with readers, and I learn a lot about our finances and investing when working on the blog, so my hope is to contribute to it more consistently this year. I’d like to write a minimum of four posts every month, and at least 60 posts overall in 2017.
Continue increasing our passive income
Building up enough passive income to support our lifestyle is our “stretch goal” on our path to FIRE. As of December 31, we were just 27.3% of the way to being able to finance our anticipated lifestyle solely through passive income. Unless we hit the lottery, there is no way we’ll be able to reach this goal before turning 50. Quite honestly, I think it would be very tough to do before turning 55. But more passive income is better than less passive income, so I want to make sure we keep investing in good dividend stocks and solid corporate bonds over the next twelve months to keep this number moving in the right direction.
Don’t “invest” in Bitcoin
I have some understanding of the potential value of Blockchain technology. And I can’t lie, I am intrigued by the incredible run up we have seen in the value of the likes of Bitcoin, Ethereum, and Ripple over the past several months. The thought of putting some of our savings into a cryptocurrency and then having its value, double, triple, or increase by 50x in a period of years, weeks, or minutes is tempting. But I have no clue which, if any, cryptocurrency will eventually become the gold standard, and I don’t have the time or interest in trying to figure it out. We’re close enough to potential financial independence that I don’t want to mess things up by investing in something I don’t completely understand. I know people who are smarter than me that are all in on cryptocurrencies. I wish them the best of luck. But the current valuations and hysteria around cryptocurrencies remind me of the dot.com bubble. Fool me once, shame on you. Fool me twice, shame on me. Mr. Money Mustache recently posted an entertaining article outlining his take on Bitcoin here.
Proactively cut unnecessary expenditures
Last month, I wrote about how much money can be saved by making a few simple phone calls, which has proven to be one of this site’s most popular posts. While I am locked into the lower rate I negotiated with Comcast for another year, the lower cost deals I struck with the Wall Street Journal and SiriusXM will be up for renewal before the end of 2018. Assuming those companies ask me for more money to renew, I’ll need to do my research and make some calls to minimize those expenses. Other regular expenditures I’m planning on taking a closer look at this year include our auto and homeowners insurance, waste collection, and some other subscription services. A few weeks ago, I downgraded our Costco membership from the Executive package to a normal membership, as we haven’t been getting enough value out of it. CashflowKat has a great article about the end of her love affair with Costco here.
What about you? What are your financial resolutions for 2018?