Q4 2019 Financial Scorecard: Kinda Sorta Financially Independent!

stock-market-2616931_1920The U.S. stock market finished the decade on a strong note, with returns of 8.5% for the S&P 500 during the fourth quarter of 2019. For the full year, the S&P 500 climbed 29%, its best performance since 2013!

Those great returns helped our financial situation improve more than expected over the last three months of the year. As a result, the ROMT family achieved one of the three financial goals we set on our path towards financial independence and early retirement!

I. Net Worth: 101.8% of Goal (+5.1% during Q4 19)

Three months ago, I hoped we’d reach our net worth goal during the first half of 2020. Thanks to the fourth quarter’s great stock market returns, we ended 2019 above that threshold!

Our net worth climbed by more than 5% during Q4, allowing us to hit our long-term goal a year and a half before our target FIRE date. For the full year, our net worth increased by 28%!

Since we hit our net worth goal early, we need a new target to make sure we don’t lose focus on our finances. My 2019 bonus should be paid before the end of the first quarter, which will give our net worth a nice boost, so our new short-term goal is to get to 110% of our original target by mid-year. 

II. 529 Account Funding: 75.2% of Goal (+7.1% during Q4 19)

Strong stock market returns, and some additional contributions, buoyed the value of our children’s educational accounts over the past three months. The value of our 529 accounts climbed by more than 10% during Q4, pushing us 710 basis points closer to our target funding level than we were at the end of September. We also hit our short-term funding target early, which was to get to 75% of our long-term goal by April.

Our new short-term 529 funding target is to get to 80% of our goal by July 1. We’ll likely need both a supportive stock market and some additional contributions to make it there!

III. Passive Income: 38.3% of Goal (-0.6% during Q4 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.

Passive income is the goal we’ve had the most difficulty with. Despite the supportive stock market, we actually moved in the wrong direction during the fourth quarter for the first time since we started tracking our progress. Lower interest rates were the key culprit, as we’ve had to reinvest maturing CDs at less attractive rates than we were previously receiving.

Because we moved in the wrong direction on this metric during Q4, we once again missed our short-term passive income goal, which was to get to 40% of our target by the end of last year. Our new short-term goal is to get to 39% of our target by April 1. We’ll probably need to use my annual bonus to purchase a handful of dividend stocks and corporate bonds to achieve this, as income from CDs is likely to continue shrinking.

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

As I write this, we’re only six quarters away from our Target FIRE Date!

Over the past ten quarters, we’ve made progress on each of the three metrics we’re tracking on our path towards financial independence:

ROMT Goals Q4 19

With the exception of the fourth quarter of 2018, our progress has been fairly steady on our net worth and 529 funding goals. 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 we’ve now technically hit our net worth goal, I recognize our ultimate success remains dependent on future returns generated by the stock market. As we learned when our net worth dropped by 7.5% in the fourth quarter of 2018, there are no guarantees when dealing with the financial markets. Hopefully we can stay above our original net worth goal in the coming years!

Achieving our 529 goal by the middle of next year 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 near an all-time high, probably needs to climb another 10% by mid-2021 for us to have any chance at achieving this goal. My hunch is that’s unlikely, given we’re already over a decade into the longest bull market in U.S. history and geopolitical uncertainty seems to increase every 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 six quarters, we’re going to continue trying to increase that figure every day! I’d view it as a big victory if we can get to 50% of our target by the summer of 2021!

Leave a Reply