Q2 22 Financial Scorecard: Adapting to a Harsh Environment

Just when we thought things couldn’t get any worse… the second quarter of 2022 happened.

After poor returns from the stock market during the first quarter of 2022, things got even more challenging during the second quarter of the year. From April through June, the S&P 500 fell more than 16%, marking its worst quarterly performance since the COVID-19 pandemic started in Q1 2020.

For the first half of the year, the S&P 500 was down around 21%, its worst performance since the global financial crisis in 2008.

Add in the highest inflation experienced in the United States in forty years, declining consumer confidence, and a highly politicized and ineffective response to the pandemic, and its no shock that President Biden’s approval ratings continue to plunge to historically low levels.

Unfortunately for our family, the challenging economic environment had a significant impact on our finances over the past three months… and early retirement remains an aspiration, rather than an achievment!

I. Net Worth: 114.7% of Goal (-6.4% during Q2 22)

Our net worth took a significant hit during Q2, driven by the plunging stock market and rising prices for almost everything we purchase. Having to travel into the office three days a week while gas prices climbed to over five dollars a gallon made me appreciate the early stages of the pandemic, when I sometimes went months at a time without having a commute, or having to fill up an empty fuel tank.

The end result was that our net worth fell by 6.4% during the Q2, marking just the fourth time our quarterly net worth has declined since we started tracking our performance here in 2017. The quarterly decline was the second largest we have experienced, behind only the first quarter of 2020 when the pandemic began.

We failed in our short-term goal to get our net worth to 125% of our long-term target by mid-year. Although the stock market has been moving in the right direction over the past several weeks, our expenses are likely to rise during Q3, with travel for vacation and a long-overdue project to replace our driveway coming up shortly. With both my and Mrs. ROMT’s cars over a decade old now, there’s also potential for us to purchase a newer vehicle over the medium term. If we can finish 2022 with our net worth at least 120% of our long-term goal, I’ll view that as a victory.

II. 529 Account Funding: 91.2% of Goal (-9.6% during Q2 22)

With our oldest child in high school and our youngest rapidly approaching, the second quarter was a bad time for our 529 accounts to shrink by the largest amount since we started them. But that’s exactly what happened, with the value of the educational accounts dropping by nearly 10%, despite making some additional purchases during Q2 to try to offset rapidly declining account values.

Not surprisingly, we missed on our short-term goal to get to the end of June with 106% of our long-term target in the 529 accounts. Our new short-term goal is to get back to a 100% funding status on the accounts by the end of the year.

III. Passive Income: 66.6% of Goal (+0.9% during Q2 22)

In contrast to our net worth and 529 account funding goals, we actually made modest progress with our passive income during the second quarter of 2022. That said, we still failed to meet our short-term goal, which was to get to 70% of our ultimate target by mid-year.

Looking ahead over the next six months, getting to 70% of our long-term target remains our goal. With interest rates rising, we finally have the opportunity to earn a bit more when our CDs come up for renewal. Unfortunately, the rates we can earn still pale in comparison to the current rate of inflation!

IV. Target FIRE Date: Friday, June 30, 2023

For the second time since we started tracking our financial progress here over five years ago, we’ve pushed back our Target FIRE Date by a year. In my opinion, the recent hit to our net worth and rampaging inflation make it too risky to depart while I still have a relatively high-paying job. If financial markets improve over the next year and inflation falls significantly, I’m optimistic that the summer of 2023 may finally be the time to declare financial independence!

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