Financial Independence Progress Report for January 2016

Happy new year everyone! May 2016 bring you closer to all your goals, with a good helping of peace and prosperity.

Emergency Fund ($72K) 100.0% 100.0%
College Fund (80K) 38.08% 37.11%
Passive Income Streams ($4000 pm) $557.78 pm (01/2015)% $592.90 pm (1/2016)
Retirement Fund ($900K) 57.76% 56.02%
Roof for our Family($1 mil) 00.00%
Medical Fund 00.00%
Life Insurance Done (term life insurance payments initiated)

Main Takeaways

2016 started off with a bang huh…;-) Yes…just like the whole world, my entire stock portfolio took a beating in January…college fund, retirement fund, and passive income mutual funds…all of them got beat.

In addition, the company I worked in got bought over and the buyer decided to conduct a massive layoff. I was impacted as well. Losing to job to start the new year, with no severance to boot, is definitely not the way I wanted to start the new year….but, hey, life has to move on right? Onto the next job. Thankfully, I had two weeks of vacation left over and I got paid for that. This event has reinforced my decision to reach for Financial Independence and I am now more motivated to reach FI now.

Now, for some good news.

  • Surprise winner for January
    • The only surprise winner that stayed positive in all of this, inspite of the Fed raising interest rates, was VCADX…my California MUNI bond fund that is part of my tax efficient passive income streams. Looks like the fear of stock market tanking is driving the bond fund up. Anyways, I am not selling this fund now but if I did, I would get decent capital gains 😉
  • Dollar Cost Averaging
    • Since the market had huge dips of multi-hundred points on many days, I took full advantage of this and boosted my investments to dollar cost average VDIGX, VHDYX and VTMGX. I contributed all of my vacation payout from my job loss towards this. Infact,   I contributed more towards VTMGX (Vanguard Developed Markets Index Fund….my non-US exposure mutual fund). I want to have some of my passive income streams to not come from US companies. VTMGX diversifies my passive income streams to include companies from Greater Europe, Greater Asia and a bit from Canada.
  • Passive Income Streams
    • Passive income for January 2016 ($592.90) continued the winning trend vs January of last year ($557.78).
    • I compute Passive Income per month as (total passive income in this year) / number of months completed this year.
      • Total passive income is a sum of dividends + capital gains distributions.
      • January Passive Income = (total passive income in this year) / 12 == $49.41
      • Doing it this way keeps the monthly passive income more realistic because I can instantly know which of my monthly expenses are covered by this amount. I keep a separate tracker for this which I will write about at a later date.
    • My final FI goal for passive income is $4000 per month (pm). This is going to take a while. So, my intermediate goal is to get $1000 pm in passive income first. How close am I to $1000 pm?
      • I ended last year with a monthly passive income of $621 (averaged out).
      • Assuming a 3% dividend return and a conservative 0% dividend growth, it will probably take me at least 3 more years to reach $1000 pm with a chunky sized investment each year. After reaching that, I plan to pretty much leave the investments on auto pilot. Wish me good luck 🙂
      • Imagine taking the $1000 passive income per month and investing it back into the passive income streams….income compounding will kick start in a hurry….eagerly waiting for that day!

2016 Goals and Quarterly Updates

NOTE: Quarterly Numbers Updated on 12/30/2016…

I started my humble journey towards Financial Independence in 2014. But, I really did not have any formal goals for 2014. I just wanted to create multiple passive income streams, protect my family with life insurance, etc. I established what Financial Independence means to me and what the goals were. I accomplished all the implicit goals I had for 2014.

For 2015, I was a little bit more formal about goal setting and set my 2015 goals and updated my progress quarterly (here). In addition, I also tracked my progress via a Monthly Progress Report (here). At the end of year 2015, I reviewed my progress towards FI and I was happy to have reached and/or exceeded most goals I set (here). I did fail to reach some goals and they will be rolled over to 2016 (below).

For 2016, I have achieved most of the goals I set out for myself. The two goals where I failed badly are: Keep eating expenses under $200 per month & Estate planning. I will try again this year.

The Financial Independence criterion for me are:

Financial Independence Criterion
Emergency Fund $72k $60k (as of 2016)
College Fund $80k
Passive Income Streams $4000 per month
Retirement Fund $900k
Roof for our Family $750k….HCOL area 😦
Medical Fund $100k
Life Insurance To protect my earning years…..

For 2016, I have thought about the following goals to get me closer to the above financial independence goals.

  1. Keep scouting for a possible home
    1. 03/31/2016        Not much scouting done…job hunting kept me busy
    2. 06/30/2016       Went to two open houses….prices are un-affordable still….
    3. 09/30/2016       Went to three open houses….prices are even more un-affordable…..
    4. 12/31/2016        Decided to wait for interest rates to go up and prices to go down…
  2. Contribute $9600 towards Home Downpayment Fund
    1. 03/31/2016           $3100/$9600 done                         $6500 remaining
    2. 06/30/2016          $5314/$9600 done                         $4286 remaining        
    3. 09/30/2016         $8495/$9600 done                         $1105 remaining
    4. 12/31/2016           Done
  3. Contribute $2400 to 529 College Fund 2 DONE (03/2016)
    1. Vanguard 529 Plan
      1. 03/31/2016        $3k/$2.4k done   Minimum investment 3k
      2. 06/30/2016       Done            
      3. 09/30/2016       n/a 
      4. 12/31/2016    
  4. Contribute $4800 to 529 College Fund 1
    1. Vanguard 529 Plan
        1. 03/31/2016        $1400/$4800 done   $3400 remaining
        2. 06/30/2016       $2400/$4800 done   $2400 remaining    
        3. 09/30/2016       $3600/$4800 done   $1200 remaining
        4. 12/31/2016        Done    
    • Contribute $16k to Passive Income Streams (stretch goal of $24k) DONE (03/31/2016)
        1. 03/31/2016        $36k/$16k done       $0K (severance,tax refund, espp)
        2. 06/30/2016       Done
        3. 09/30/2016       n/a  
        4. 12/31/2016
    • Max out 401k contributions for both me and my wife.
      1. 2016 401k limit is $18000 per person => $36k contributions for family
        1. 03/31/2016        $8.6k/$36k done         $27.04k remaining
        2. 06/30/2016        $27k/$36k done          $8.97k remaining
        3. 09/30/2016        $32k/$36k done          $4k remaining
        4. 12/31/2016         Done
    • Keep eating out expenses under $200 pm
      1. Last year, it ballooned to $377 pm..
        1. 03/31/2016    $356 pm     ….job hunting lunches 😦
        2. 06/30/2016   $393 pm     ….still out of control…need to tighten up….. 
        3. 09/30/2016   $362.53       ….not much improvement….$30 pm is less  
        4. 12/31/2016    Failed badly….     
    • Start and finish Estate Planning
      1. Will, POD beneficiaries, Caretaker for our child, etc
        1. 03/31/2016  No progress yet      
        2. 06/30/2016  No progress yet        
        3. 09/30/2016  No progress yet      
        4. 12/31/2016   Motivation lacking….perhaps due to tough choices…
    • Get a more stable job. DONE (03/2016)
      1. Current job is on very shaky foundations
        1. 03/31/2016  New job yeah!!      
        2. 06/30/2016  3 months into new job…doing okay.      
        3. 09/30/2016  6 months into new job…doing okay.      
        4. 12/31/2016  9 months into new job…doing okay