Our 2018 Scorecard and 2019 Personal Finance Goals

It’s a new year and that means new resolutions, right? Last January I set some personal finance goals for our household. I wanted to take a moment and look back at the past year. Did we meet our goals for the year? Did we bomb in epic fashion? My grading system is simple PASS or FAIL. Read on for the results!

2018 Goals

I covered last year’s goals in our post Our 2018 Savings and Investment Plan  and you can read the full article to see our thinking behind those goals. However, I’ve listed our goals below with details on how well, or poorly, we performed.

Increase Our Savings Rate to 32%

First off, I need to qualify this one. Back when I came up with this goal I was calculating our savings rate based on our gross income.  Now I calculate it based on our take home pay (dollars of savings/take home pay). In 2017, using gross income as the basis, we had a savings rate of 6%. Yuck, by any measure. Factoring in our destruction of our last student loan and this jumped up to 28%. Trying to convert these values to a “take home pay” basis is challenging, but I would jump these numbers to approximately 9% and 42%, respectively. In 2018, we had a savings rate of 38%, which jumped to 50.7% when you factor in employer contributions for 401k and Health Savings Account (HSA). Seems like we knocked this out of the park right? Wrong. All is not as it seems. We saved $41,700 ourselves and $51,763 when employer contributions are added in.  In 2017 our total savings plus debt paydown is nearly the same. The saving rate jump is more a function of a reduction in take home pay due to increased 401k contributions. Using my old method of calculating a savings rate based on gross pay results in a savings rate of about 26%. So we actually went backward a bit. Two words explain the decline: New. Car. I ended up buying a new car in 2018. Originally, I was targeting a lightly used car, but ultimately decided to go new. You can read more about the decision process in our post The New Car Purchase: Dissecting the Decision. As it was, the money spent on the car kept us from saving substantially more. So for this goal, even though we PASSed numerically, I am marking us down as a FAIL, since we didn’t measure up to the intent of the goal.

Max out our 401ks

In 2017 only one of us was contributing to our 401k. This was a tactic we used to speed pay off of our student loans. I don’t recommend this approach for others.  Needless to say, we wanted to take advantage of our 401ks in 2018. Things got off to a slow start. We both began the year contributing 4% which was the bare minimum to get the full employer match.  This was intentional as we wanted to save up as much cash as possible to purchase the car. I bought the car in March and we paid off the small remaining loan balance in the middle of the summer.  At this point we were able to begin contributing significantly more to our 401ks. While we will not max our full contributions for 2018 (mark down another FAIL), we are now contributing at a level to easily do so in 2019.

Contribute to a Traditional IRA

We did not fund a Traditional IRA last year. That’s a Hat Trick of FAIL right there. Why? This is really due to a change of circumstances. I learned of a possible opportunity to buy into my company that could present itself in the next year or two. While far from certain, this opportunity could be fairly lucrative. As a result, we shifted gears and began to stockpile cash, which makes sense when you have a short term savings goal.

Contribute to a Taxable Account

I didn’t believe we would put much in our taxable account at the beginning of the year. For most of the year this was the case. However, I received a better work bonus than anticipated and also received some cash from an accident settlement. A portion of these funds went into our taxable account. Finally, we have a PASS!

Invest in My HSA

I have a high deductible heath insurance plan with my employer. To compensate, they offer a Health Savings Plan (HSA) and contribute $1,000 for employees who contribute to the plan. The beauty of the HSA is that you can invest your contributions. There is a minimum account balance necessary to invest. Thankfully, there are some low fee index funds available as investment options, including the Financial Independence | Retire Early (FIRE) community’s favorite: Vanguard’s Total Stock Market Fund (VTSAX). I am happy to say that I was able to max out my HSA this year. Big PASS here.

Re-quote Our Insurance

I have had State Farm insurance since I got my driver’s license… about 18 years. My wife and I knew there had to be some savings to be had, but we had never checked it out. We finally did, and it was definitely worth it! We switched to AAA and will be saving about $750 in annual premiums as I wrote about in Can You Save Big on Insurance? Here’s How to Find Out! Hard PASS here!

Take Aways

We met half our goals. That doesn’t sound great, but when I look at where we started the year, the progress looks and feels significant. In my opinion, 2018 laid the groundwork for substantial acceleration on our journey to Financial Independence.  I truly think the sky is the limit! With that in mind, what are we targeting for in 2019?

2019 Goals

Increase our Savings Rate by 5%

This would put our savings rate (based on take home pay) without employer contributions at about 43%. With employer contributions added this would jump to 56%. Please note that I am not including the employer contributions as income in this analysis, since they will not be part of our take home pay (i.e. we are aren’t living off of them).

Reduce Discretionary Spending By 20%

I am including retail purchases, dining out, entertainment, and booze in this category. I think this is achievable and more importantly, I believe this can be done with little in the way of deprivation. To the contrary, I believe we may be able to enjoy more!  As an example, we will likely save a lot on travel, thanks to travel hacking.

Save an Additional $12,000 in our High Yield Savings Account

This would most likely set us up to take advantage of an opportunity to buy into ownership at my company. The timeline and actual amount are yet to be determined but this should cover us.

Contribute a Minimum of $5,000 to our Taxable Investment Account

We started making contributions into this account at the end of the year, but I would like to pump this up. I like the idea of having some cash that is accessible for shorter term opportunities but don’t want everything languishing in the savings account. Additionally, if we want to retire early then we will need some savings to bridge the gap until we can draw down from our retirement accounts. This could be at least 5 years, so we need to get money into the market and let compounding do its thing.

Stretch Goal: Develop or Acquire at Least One Additional Income Source Earning at Least $500

I am not sure what this will be.  It could be some online service, or it could be outsourcing handyman services, it could be this blog, or something else entirely. Beyond earning a few extra bucks, I view this as a means of figuring out what I want to do once I reach Financial Independence. I also like the challenge of learning something new. So here’s to a successful 2019! What personal finance goals are you setting this year?