Annual Goals and Resolutions Review

goals and resolutions

2016 was a reset for my personal finances. In lieu of achieving epic goal reaching success, I focused on building a more solid foundation from which my wealth can grow. Not all the changes were easy, but the results have set the stage for the years ahead.

A sneaky cash flow problem became apparent in early 2016 as a result of taking on car debt and not accounting for the increased cost of preschool for two of our three kids. Combined, these produced a $1200 swing from positive to negative cash flow which made it difficult to invest as much cash as previous years.

Once I realized it was time to change shit up, we executed a few powerful financial maneuvers to help get us back on track.

The first major move was a mortgage refinance. During the interest rate dip over the summer, we sneaked in a refinance for a 30-year fixed rate loan at 3.375%. No points. We used LendingTree to find the best rates. The refinance saves us about $3,000 per year for each of the next 30 years!

The second powerful maneuver was to eliminate car payments from our lives. We own a minivan. It was costing us $563 per month in payments. We aggressively set aside the cash to pay the loan off and did so with one big chunk in September. This move freed up $563 per month for the next 20 months.

Setting the cash aside for the refinance and debt pay down made it more difficult to attain one or two of the financial goals I set out in 2016. But I’m OK with that. We’re in a much better financial situation. From here, the foundation is more secure to build upon.

2016 Resolutions Revisited

I’m not usually a resolutions person. They’re difficult to keep and I’m not very disciplined. But alas, I still set two resolutions in the goals and resolutions post last year. They were:

  1. All workdays I will shut off my smartphone between the hours of 4 pm and 7 pm.
  2. I will develop plans and start preparations for a near-term, pre-retirement lifestyle adjustment.

Resolution #1 Result

All workdays I will shut off my smartphone between the hours of 4 pm and 7 pm.

Fail. I was not able to completely turn off my phone every work day from 4 pm to 7 pm. The main reason is that I started a new project for my job. Early in the year, I felt the need to be available during those hours for my team. So I’d leave my phone on and nearby. Of course, with the phone on and nearby, I’d look at it for reasons other than work.

This resolution started strong. I did shut it off in January. And I still often put it out of sight during these hours. But not daily.

All was not lost. The resolution certainly made me more aware of my phone, and I used it much less than the previous year, especially when spending time with the kids. I partially made up for this failed resolution by deliberately spending more focused time with my kids on weekends and at bedtime. For 2017, I’m modifying the resolution.

Resolution #2 Result

I will develop plans and start preparations for a near-term, pre-retirement lifestyle adjustment.

Pass. #2 was definitely vaguer. So vague that my Dad messaged me after he read it asking what I meant. It was meant to be vague because I wasn’t sure what the answer was.

My goal with retirement has always been to retire at age 55. That year is based on the age my Dad retired, age 56 (get it, retire before Dad). Considering the average retirement age is around 62, 55 is retiring early.

However, inspired by many other early retirees, I may be able to make the math work earlier. By changing our views on spending, building income streams, prioritizing what’s important in our lives, and adjusting our definition of retirement, I reckon our early retirement date may not be aggressive enough.

Over the year, I assigned some numbers to this idea and realized I may be able to “retire” even earlier. But it’s not the traditional retirement that I’ve always envisioned. It’s more of a hybrid between financial independence and creative entrepreneurship.

The new plan is to accomplish this lifestyle adjustment within a five-year time frame. I may put it on the line and share the details here eventually to hold myself accountable. But I haven’t decided if the planned is finalized, or fully possible. So for now, it remains in a spreadsheet awaiting further refinement.

However, every financial decision we make going forward will be made in the context of our new plan.

Financial Goals Revisited

Last year, I made my goals a bit loose because I expected some volatility from my job and due to selling the rental property. My job/project did change, but the financial consequences were minimal. I expected to sell the condo in 2016, but the opportunity did not arise. Thus, I’m still a landlord and a healthy amount of equity remains tied up in the property.

Here were the financial goals I set last year:

  1. Complete Goal #4 from 2015 – reduce top holdings weight and income percentages to below 20%.
  2. Save $30,000 in tax-advantaged accounts.
  3. Invest no less than $2,000 of new (taxable) capital each month into stocks and Lending Club.
  4. Receive $5,200 in dividends and $1,000 from peer lending activities.

Financial Goal #1 Result

Reduce top holdings weight and income percentages to below 20%.

Fail. When I look at my entire taxable stock portfolio, four or five stocks are majority holdings. In part, this is because I’ve owned Chevron for 20 years, and Coca-Cola for almost the same. Apple is another dominant holding, and Verizon and AT&T both pay large dividends.

At year’s end, my top four largest holdings (AAPL, CVX, VZ, KO) make up 24% of my portfolio’s weight. That’s only a 1% improvement over last year. I didn’t add to any of these holdings, aside from reinvesting dividends. Chevron had an excellent 12 months. That success hampered achieving this goal. Overall, not investing a lot of new capital this year was most detrimental to reaching this threshold.

As for the percentage of income, my top four income holdings (VZ, CVX, T, KO) make up 28.7% of the forward dividend income I’ll receive in 2017. Again, about a 1% improvement over last year.

Clearly, I need to put more new capital to work next year to fix this allocation problem. The alternative is to sell some shares. However, I can’t complain too much about these stocks because each increased its dividends.

goals and resolutions

Financial Goal #2 Result

Save $30,000 in tax-advantaged accounts.

Simple goal. Simple results.

401k          $18,000
College 529   $10,800
Roth IRA       $5,500
Total         $34,300

 

Pass.

Not bad. Feels good to nail at least on goal. And if we can, we also plan to put $5,500 to Mrs. RBD’s spousal Roth IRA for 2016 before April 15th of next year.

Financial Goal #3 Result

Invest no less than $2,000 of new (taxable) capital each month into stocks and Lending Club.

Fail. For the reasons explained earlier (paid off the car, cash flow problems etc.), I did not achieve this goal. Some months were thin before the car pay off and refinance. I cut back quite a bit on Lending Club investing and dollar cost averaging into Loyal3 stocks. Our cash flow needed improvement this year and this goal suffered as a result. Hopefully, we’ve laid the foundation for a better 2017.

Financial Goal #4 Result

Receive $5,200 in dividends and $1,000 from peer lending activities.

Pass. Looks like my received dividend income from taxable accounts in 2016 totaled $5,235.72. Lending Club interested income totaled $1,034.94 before December’s numbers.

I’m very pleased with reaching both of these numbers. Both were estimated goals that I wasn’t sure I’d hit. Regardless of how I came to the number, it feels good to be paid more than $6,000 doing very little work aside from keeping up with my portfolio and monitoring LendingRobot automation.

Add those numbers to the amounts I received from interest on cash, and positive cash flow from my rental property, my total investment income received (i.e. passive income) should settle at just over $7,600 for 2016.

2017 Goals and Resolutions

When resolutions and goals become too many or too detailed, they tend to get lost. For that reason, I try to keep mine simple and attainable.

2017 Resolutions

  • All workdays I will put aside my smartphone between the hours of 5 pm and 7 pm to focus entirely on my children.
  • Each financial decision we make in 2017 will forward the progress of our newly implemented five-year plan to achieve a pre-retirement lifestyle adjustment. 

First, the smartphone rule will stay in place. I’ve modified it to be an hour shorter, which helps me deal with late day work related items. I’ll also not completely shut off my phone, but instead put it in another room with the ringer off. If I’m out and about with the kids, it’s best to have it on my person in case Mrs. RBD needs to communicate. We can all look at our phones less. These rules help me during the time of the day I need to most.

Second, we start this year with a vision of where our family will be in five years. We see our lives with more freedom and time to focus on our chosen pursuits and the lives of our kids. The priorities we set and the decisions we make today will determine if we can make it. Each and every purchase must be considered a lifelong burden. Every investment must build our passive income.

2017 Financial Goals

  1. Complete Goal #1 from 2016 – reduce top holdings weight and income percentages to below 20%.
  2. Save $35,000 in tax-advantaged accounts.
  3. Add two new income streams to diversify our passive income and increase the likelihood we’ll succeed in our new five-year plan. 
  4. Increase our forward 12-month investment income (F12MII) to $9,000.

The first goal is a no-brainer. I’ve failed two years in a row now. This is important to keep a healthy stock portfolio.

The second is a step up from this year. Based on nearly reaching this amount in 2016, it’s a realistic goal to set. As long as we maintain our current pre-tax investing and add to at least one Roth IRA, we should hit this target again.

Third, I want to further diversify income streams. The more passive, the better. The leading candidates to add more income streams are FundRise and RealtyShares, both real estate crowdfunding websites. Crowdfunding is ideal for real estate because it pools funds to spread risk while offering solid returns to investors.

Both FundRise and RealtyShares are interesting options to add some higher yield returns to my portfolio, helping to increase my F12MII. Plus they’ll add more real estate exposure if I sell my condo.

Lastly, instead of focusing on dividends, I’m focusing on building my taxable forward income. After all tax-advantaged investing, I’ll need to put quite a lot of capital to work. Now that I’ve fixed my cash flow problem, the money should be there barring any major home or medical expenses.

Challenges for the New Year

I want to end on focusing on some hurdles and challenges for the new year. My rental property is still a wildcard. The tenant is ideal, they’ve been paying on time for more than four years, even after a rent increase. However, I’m still expecting them to move out in the coming year. What I do at that point is still up in the air.

If I sell the condo (aka the Banana Stand), my passive rental income (contributing to F12MII) will decrease by $1,200. But I’d walk away with more than $100,000 in cash. That cash would be carefully considered in the context of our five-year plan. The cash will likely sit in a high-interest savings account for at least the remainder of the year before deciding what to do with it.

The whole idea of selling the condo is to simplify our lives and to use the cash to give us more options… options to change our lifestyle for the better (i.e. less work, more travel). $100,000 can do that. But selling will throw off the F12MII numbers.

Alternatively, we’re still considering holding onto the condo for the next five years, using it to build more equity and hopefully finally see some capital gains. Our cash buffer supporting the property is plentiful, so the risk/return equation is in our favor. But I’m leaning toward simplicity.

Another challenge is my day job. The new project for 2016 has been good, but visibility is foggy. I’m still with my mediocre employer of 13 years, but I’m considering options to leave the company while maintaining my role with the client (long story). Switching employers will change up my salary, cost of benefits, among other things. All of this may impact our plans.

That’s all for 2016. Happy New Year.

Did you make any short-term goal sacrifices to focus on longer term stability? What are your top goals and resolutions for 2017?

Photo by duncan c

12 Responses to Annual Goals and Resolutions Review

  1. STEVEN GIL December 28, 2016 at 10:02 am #

    Great post. I like seeing someone else’s plans and thoughts. I’m new to the whole FI movement. Started kinda late I’m 44, so 55 might be doable. Just not sure where to start. On a side note do you find that your investment returns beat a simple low cost index fund. I’ve always leaned toward simplicity when it comes to investing. Might be something I need to rethink.

    • Retire Before Dad December 28, 2016 at 1:30 pm #

      Thanks. Our IRAs are primarily invested in index funds. Since I’m building passive income for early retirement as opposed to planning to use the 4% rule, I aim for higher yields and dividend growth instead of total return for this portion of my assets.
      -RBD

  2. brian503 December 28, 2016 at 2:03 pm #

    Great recap and look ahead RBD. Interested to see how the add two new income streams goal unfolds. 2017 will be the year we send two children to college. Our goal is to cash flow it and take on no new debt to do so. It will take some tightening of the belts for sure.

    • Retire Before Dad December 28, 2016 at 2:17 pm #

      Oh man, good luck paying for college for two! My only envy is that it’s probably way cheaper than what I’ll start paying in 14 years. Cash flow and no debt, I love it. Hope you can pull it off.
      -RBD

  3. Joe December 30, 2016 at 10:00 am #

    Whew, what a busy year for you guys. Nice job paying off the car loan and contributing to your tax-advantaged accounts. Your passive income looks good too. We have a similar situation with the rental coming up next year. One of our tenant is planning to move out and I’m not sure what to do. The real estate market has been really good over the last few years and I think it might be a good idea to cash out. I don’t want to be locked in for another 6-7 years if the real estate market tank like in 2008…
    Happy New Year and good luck in 2017!

    • Retire Before Dad December 30, 2016 at 8:10 pm #

      Hi Joe,
      Yeah, definitely a reset kind of year. Really excited about 2017 though. Cash flow is looking good and lots of ideas for investing. If my tenants do move, it could be a large cash windfall. But I want to take my time with the cash, and possible take a sabbatical or something!

      Good luck with your property, and happy new year!
      -RBD

  4. Liz@ChiefMomOfficer December 30, 2016 at 10:06 am #

    Great work in 2016! Looks like the refinance and car payoff will put you on a solid foundation for 2017. Best of luck in your 2017 goals! My top financial goals next year are focused primarily on mortgage payoff and college savings.

    • Retire Before Dad December 30, 2016 at 8:12 pm #

      Liz,
      Though I’m not paying off my mortgage early, at least not yet, I love hearing about others pursuing it. Good luck. College savings is a necessary exercise, but isn’t too sexy. I’m putting $3600 away per kid. Tough on the cash flow, but should payoff in, I don’t know, 29 years@
      -RBD

  5. JTF January 1, 2017 at 2:39 pm #

    Nice job meeting half of your goals! I know how hard it is personally. Looks like 2016 was challenging for you, but I’m glad you were able to adjust accordingly and are now off to a good start for 2017.

    I wish I could turn off my phone like you, if I did not have to be on call 24/7 🙁 Some day, I’ll get there though.

    2016 turned out to be a good year for me and I met most of my goals. Here are my goals review for 2016 and new goals for 2017: http://journeytototalfreedom.blogspot.com/2017/01/2016-goals-review-and-new-goals-for-2017.html

  6. Buy, Hold Long January 1, 2017 at 7:41 pm #

    Looks like some winners and some not so winners this year. I guess that’s what 2017 is all about, new beginnings and trying to achieve as much as we can. I’m sure you’ll have a great year this year, all the best.

  7. Dividend Diplomats January 5, 2017 at 10:35 pm #

    Great recap RBD. You know what, life happens and you need to be flexible and be able to adapt. Despite the unexpected expenses, you were able to keep on investing and plowing along. Sure your allocation didn’t decrease as much as hoped, which was the direct impact of investing less than anticipated. But who cares, you have over 20% in 4 amazing dividend companies. You’ll get it this year. Plus, I have a hunch you are going to enter the year with some fire in your belly based on the results of 2016. Can’t wait to follow along.

    By the way, love the smartphone goal. I need to do something like that. My best days are the ones where I leave my phone in my bag or in a different room. Allows me to focus more and take care of things. That’s the goal I am most excited for you for in 2017!

    Bert

    • Retire Before Dad January 6, 2017 at 8:47 am #

      Hey Bert,
      Thanks for the encouragement. Yeah, the phone is an important goal. So far I’ve enjoyed shutting it off and spending time with the kids unencumbered. But once they’re asleep, I crave the connectivity. Seems unhealthy, but I have a lot of stuff going on online, including all of my finances, news, and the blog.

      Hopefully cash flow is fixed and I can focus on building income. Need to fund those Roths first.
      -RBD

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