Q3 2019 Financial Scorecard: Slow But Steady Progress Towards Our Goals
After a great first half of the year financially, the third quarter of 2019 was less eventful for the ROMT family.
The S&P 500 climbed 1.2% during Q3, which helped offset our spending being a bit higher than normal, as we took a few trips over the summer. Although our progress slowed from the pace we set earlier in the year, we continued to move closer to each of the three goals we are tracking on our path towards early retirement and financial independence – net worth, 529 account funding, and passive income.
I. Net Worth: 96.7% of Goal (+0.9% during Q3 19)
While we didn’t increase our net worth quite as rapidly as the stock market grew during the third quarter, we still moved in the right direction. Our net worth climbed by 1.0% over the past three months, allowing us to finish September 90 basis points closer to our long-term goal than we were at the beginning of July.
Our short-term net worth goal remains to get to 97% of our long-term target by the end of this year. The stock market has been volatile over the first two weeks of October, but barring a major downturn, we should be able to hit this target. If markets remain sound and we can get to 97% over the next three months, we should be well-positioned to reach our ultimate net worth goal during the first half of 2020!
II. 529 Account Funding: 68.1% of Goal (+3.3% during Q3 19)
We did better with 529 account funding in Q3 than we did with our net worth, as we transferred a bit of money to our children’s educational accounts over the past three months. The value of those accounts rose by more than 5% since the end of June. As a result, we’re 330 basis points closer to our target funding level than we were three months ago. We also hit our short-term 529 funding target, which was to get to 65% of our long-term goal by the end of September!
Our new short-term 529 funding target is to get to 75% of our goal by April 1, 2020. We’ll likely need both a supportive stock market and some additional contributions to make it there!
III. Passive Income: 38.9% of Goal (+0.7% during Q3 19)
Our passive income target is our “stretch goal” as we pursue early retirement and financial independence. While it would be incredible to fund our lifestyle entirely via passive income, realistically there’s no way it will happen by our Target FIRE Date.
Our progress was modest during the third quarter, as our expected annualized passive income climbed by 2.0%, moving us only 70 basis points closer to our admittedly ambitious goal. We’re now 38.9% of the way to our target, meaning we failed to hit our interim goal, which was to get to 40% of our long-term target by the end of the quarter. Falling interest rates were the key culprit, as we had to reinvest a couple of maturing CDs at lower rates than we were previously receiving.
If at first you don’t succeed, try, try again. We’ll attempt to get to 40% of our long-term target by the end of the fourth quarter. With a handful of additional investments into dividend stocks or corporate bonds, I’m hopeful we can get things right, albeit a quarter later than we had hoped.
IV. Target FIRE Date: Friday, July 2, 2021
As I write this, we’re only seven quarters away from our Target FIRE Date!
Over the past nine quarters, we’ve made significant progress on each of the three metrics we’re tracking on our path towards financial independence.
With the exception of the fourth quarter of last year, our progress has been fairly steady. That’s been driven by a generally rising stock market, conservative spending relative to our income, and saving and investing the majority of my year-end bonuses. While right now we’re very close to achieving our net worth goal, I recognize our ultimate success remains dependent on the returns generated by the stock market over the coming years.
I’ve long believed we could hit our net worth target next year if everything went well, and we’re close enough now that I think this remains a realistic goal. As we learned when our net worth dropped by 7.5% in the fourth quarter of last year, however, there are no guarantees when dealing with the financial markets!
Our 529 goal remains possible, but unlikely. We’ll continue adding money to our children’s educational accounts, but outstanding investment returns are imperative if we’re going to hit this target. The S&P 500, which currently stands at 2,970, probably needs to climb to close to 3,500 by mid-2021 for us to have any chance at achieving this goal. My hunch is that’s unlikely, given that we’re already more than a decade into the longest bull market in U.S. history and geopolitical uncertainty seems to increase by the day.
Passive income has always been our most ambitious goal. While there’s no way we’ll get to 100% funding of our anticipated lifestyle through passive income over the next seven quarters, we’re going to continue trying to increase that figure every day! I’d view it as a win if we can get to 50% by the summer of 2021!