Month: April 2017

2017 Goals and Quarterly Updates

/ humblefi / 2 Comments

NOTE: Fourth Quarter, 2017 Update….on 12/22/2017

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).

For 2016, I achieved most of the goals I set out for myself (here). The two goals where I failed badly are: Keep eating expenses under $200 per month & Estate planning. I will try again this year i.e. in 2017.

The Financial Independence criterion for me (2017) are:

Financial Independence Criterion
Emergency Fund $60k (as of 2017)
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 2017, I have thought about the following goals to get me closer to the above financial independence goals. What is the current status of the goals:

  • Ones in Red are not complete
  • Ones struck-through are complete

Financial Goals

  1. Keep scouting for a possible home/multi-family residence/rental real estate
    1. 03/31/2017        Visited many open houses…single/multi family…prices still crazy
    2. 06/30/2017        Visited two open houses….prices even more crazy this quarter…
    3. 09/30/2017        8 more….we finally know what we want….need the $$$ now 🙂
    4. 12/31/2017        0 homes….prices shot up & pushed most houses out of our budget
  2. Contribute $15000 towards Home Downpayment Fund
    1. 03/31/2017           $10272/$15000            $4728 remaining
    2. 06/30/2017           $13772/$15000            $1228 remaining             
    3. 09/30/2017           $16701/$15000            Done..but price rises outpacing savings 😦
    4. 12/31/2017           n/a
  3. Contribute $3600 to 529 College Fund 2 
    1. 03/31/2017        $305/$3600 done                     $3295 remaining (behind…)
    2. 06/30/2017        $1966/$3600 done                   $1634 remaining 
    3. 09/30/2017        $3467/$3600 done                   $133 remaining
    4. 09/30/2017        $3600/$3600 done                   $0 remaining
  4. Contribute $3000 to 529 College Fund 1
    1. 03/31/2017        $605/$3000 done                    $2395 remaining (behind…)
    2. 06/30/2017        $1767/$3000 done                  $1233 remaining
    3. 09/30/2017        $2427/$3000 done                  $573 remaining
    4. 12/31/2017        $3000/$3000 done                  $0 remaining
  5. Contribute $16k to Passive Income Streams (stretch goal of $24k) 
    1. 03/31/2017        $10150/$16000                       $5850 remaining ($13850 for stretch)
    2. 06/30/2017        $29970/$16000                       $0 remaining 
    3. 09/30/2017        n/a
    4. 12/31/2017        n/a
  6. Max out 401k contributions for both me and my wife ($36K total)
    1. 03/31/2017        $10489.19/$36K                     $25510.81 remaining
    2. 06/30/2017        $19774.94/$36K                     $16229.06 remaining  
    3. 09/30/2017        $33890/$36K                          $2109.47 remaining    
    4. 12/31/2017        $36K/$36K                              done
  7. Keep eating out expenses under $200 pm
    1. 03/31/2017       $358.61                                      Way above budget…
    2. 06/30/2017       $401.83                                      Out of control 😦 
    3. 09/30/2017       $301                                           Pulled in the expense some…
    4. 12/22/2017       $273                                           Pulled in the expense a little…
  8. Start and finish Estate Planning (Will, POD beneficiaries, Caretaker for children, etc)
    1. 03/31/2017  No progress yet      
    2. 06/30/2017  No progress yet
    3. 09/30/2017  Set up an appt with a financial planner….will discuss and decide
    4. 12/31/2017  Financial plan done; Will, POD, etc next year

Personal Goals

Starting this year, I am trying to track some personal goals. Without adding all the details and boring everybody, I will try to keep this simple. I am hoping tracking this in my blog will keep me motivated to reach my goals. Here they are:

  1. Health Body goals (healthy eating, gym visits, popping multi-vitamins, etc)
    1. 03/31/2017       21.4% success rate  ….nothing but improvement ahead 
    2. 06/30/2017       17.1% success rate ….oh boy…eating too much/no exercise…. 
    3. 09/30/2017       20.0% success rate….behind on flossing, popping vitamins mainly
    4. 12/30/2017       14.1% success rate ….no exercise…. 
  2. Simplify Life: Donate unused books once a month
    1. 03/31/2017       0/3 done                                
    2. 06/30/2017       3/3 done
    3. 09/30/2017       2/3 months done….got my kid to donate old books 🙂
    4. 12/31/2017       2/3 months done….books donated to two libraries  
  3. Simplify Life: Donate unused (old and new) clothes once per quarter
    1. 03/31/2017       1/1 done 
    2. 06/30/2017       1/1 done
    3. 09/30/2017       3/3 done….this time, it was clothes, toys and garage junk!!
    4. 12/31/2017       1/3 done…big kids toys cleanup done; waiting for donation  
  4. Simplify Life: Shred all unnecessary documents once a month
    1. 03/31/2017       1/3 done
    2. 06/30/2017       2/3 done….only 10 folders left…even found 10 year old docs! 
    3. 09/30/2017       1/3 done….a few more folders done….cabinet is so empty now 🙂 
    4. 12/31/2017       1/3 done….did not get to work on this much this qyarter 

Possible candidates for 2018 Personal Goals

I decided to start this section in the last quarter of 2017 (Oct-Dec) so that I can capture possible candidates for Personal goals in 2018.

  • Get together with a Financial Planner and checkpoint the overall state of our finances.
    • My goal was to generate $1000 pm in dividend income and then purchase our primary residence. I am close to the former but way behind the latter.
    • So, I want to set a plan for the next five years and getting a plan review from a qualified professional is timely now.
  • Prepare to find a new job with a better compensation package.
    • To support the house purchase, I need something more that the salary. I would like to add some additional options like a better bonus option, stocks, etc
    • This means I need to do really really well in the interviews…need solid preparation before I look into the market.
  • Get into a PE class of some sort and get my health in order.
    • Need the disciple of a class to help my will power.

Uncertainty….some thoughts.

/ humblefi / 2 Comments

I met a few friends for lunch recently and I was struct by the randomness of events that each one of us was going through…

  • Friend  1 developed kidney stones suddenly and spent a couple of painful hours in Emergency….just came back from a visit.
  • Friend 2 developed twitching on one side of the jaw and that was diagnosed to be a neurological condition….
  • Friend 3 experienced an unexpected job loss…we are trying to help out with job leads…
  • Last year and a half, I have experienced unexpected hospitalization, unexpected job loss and an unexpected crisis of confidence….so, I am not that behind 🙂

Some friends expressed the inability to forecast how the next 5-10 years will look like and how it was creating a lot of stress in their respective lives. Ironically, a similar pattern is what forced me to discover Financial Independence 🙂

That led me to think about Uncertainty about the future and its effect on Happiness today. I came to the sudden realization that the dramatic popularity of FIRE (Financial Independence and Early Retirement) over the last few years is directly proportional to the level of Uncertainty in the society as a whole. Let me think aloud on this a bit. Read on if you are interested!

What is Uncertainty?

There are many definitions of what Uncertainty is.

  • According to Merriam Webster dictionary, Uncertainty is defined as the quality or state of being uncertain.
  • According to probability theory, any event can have many possible outcomes. If the result of many of these outcomes cannot be predicted ahead of time OR worse yet, the outcomes itself cannot be predicted, then there is supposed to be Uncertainty.
  • I remember reading on a bumper sticker that the oldest emotion of man is fear and the strongest of the fears is the fear of unknown. Not sure who said it, but it seems right to me. When there are unknowns in our life, there is Uncertainty.

Uncertainties in life

Let us take me as an example. There are four main uncertainties that I can think of in my life.

  • Income uncertainty
    • I am in a profession where assuming income certainty does not exist. I got half a day notice to pack my bags and leave in my previous job.
    • Planning for the long term like buying a house, paying for college, saving for retirement, etc requires sustained income for atleast 15-20 years.
  • Health uncertainty
    • All the years spent slogging, both student years and work years, have taken their toll on my body. Another decade of stress and the certainty of failing health is guaranteed!
  • Family Relationships Uncertainty
    • Uncertainty of aged parents’ health on both mine and my wife’s side
    • Uncertainty of a vagabond life (moving to different rental houses) on kids and wife
  • Social Network Uncertainty
    • Social network includes family and friends whom I can count on in case of an emergency. The pressures of the HCOL area economy has driven a couple of close people out of town and out of state….some due to job loss and some due to high cost of living issues.

Priority of Uncertainties

Uncertainties about the future can eat away at the happiness. Not knowing all the outcomes and if the outcomes are known, not knowing the results can cause stress and anxiety. If I were to rank the uncertainties in the order of severity to me, here is what I came up with:

  • Severity High
    • Income Uncertainty
    • Health Uncertainty
  • Severity Medium
    • Family relationships Uncertainty
  • Severity Low
    • Social Network Uncertainty

Importance of Income Certainty

Achieving Income Certainty has an impact on all the other uncertainties. Take the example of a Government employee who has the most certain income situation I can think of. The size of the income is less important than the certainty of it is. With income certainty, I see the following advantages:

  • Improved health
    • When sustained income is assured, then long term decisions like housing, etc can be taken with less stress and anxiety.
    • Health uncertainty is reduced
  • More time to work on getting healthy
    • I have found that more uncertainty leads to working longer and harder to try and make the outcomes more certain…whether it be work OR relationships or something else.
    • More working leads to missing out on gym time, eating unhealthy food, etc
    • Income certainty to me would mean more time work on improving my health.
    • Health uncertainty is reduced
  • More time to spend with family and friends
    • When working longer and harder to overcome income uncertainty, time with family and friends is usually a casualty. When sustained income is assured, spending time with family and friends is is much easier.
    • I once went to a baseball game on a Thursday afternoon as part of a team outing from work and I found the train station overflowing with families. There was no standing room even in the station! I then realized that I had not gone to a baseball game in years and the station was packed on Thursday…a full blown working day!!
    • One person I met on that station many years ago was a post office worker. I saw a lot of happiness and joy in that man and he was the one who taught me the difference between the size of an income (small in his case) and the certainty of that income (high in his case).
    • Family relationships uncertainty and Social network uncertainty is reduced.

Conclusion

In the last two decades of my life, the uncertainty that has grown the most around me in Income Uncertainty. I used to hear about this topic rarely in social events…now it has reached me and my inner most circle of friends and families. I have seen family and friends go through it…and I have seen what devastation it can cause in life…divorces, bankruptcies, three kids and 2 adults in a 2 bedroom apartment, depression, etc etc

With so much income uncertainty, is it any surprise at the wave of populist movements sweeping across the entire developed world? With this background, is it any surprise that FIRE has taken hold in our society and across the world.

Life is meant to be enjoyed. Life with complete certainty is most probably boring. Uncertainties in life are supposed to be indicate exciting new possibilities….new places to visit, new people to meet, new adventures to experience. But, is all of this possible without Income Certainty? Does it take a certain kind of personality to live with Uncertainties but no income certainty?

I am so glad that I discovered FIRE and thanks to the education and support of the FIRE community, I am on my way towards income certainty 🙂

Financial Independence Progress Report for March 2017

/ humblefi / 4 Comments

Three months already over in the new year….this year is definitely going faster than last year! Nothing interesting this month. My passive income streams boosted by appx 16% but somehow I feel unsatisfied…not sure why. Maybe the pace of reaching my goals is slow 🙂 Anyways, let us look at the numbers for March 2017.

04/01/2017
Emergency Fund $60K 83.00% 84.135%
College Fund (80K) 50.57% 51.35%
Passive Income (2016 vs 2017) $1052.01(03/2016) $1219.83 (03/2017)
Retirement Fund 68.61% 71.45%
Roof for our Family($750K) 00.00%
Medical Fund (via HSA) 2.6% 2.6%
Life Insurance Done (term life insurance policy)

Main Takeaways this month

  • Passive Income Stream
    • Passive Income for Mar 2017 ($1219.83) is appx 16% higher than Mar 2016 ($1052.01).
    • I did not add more funds this month since all my investment vehicles are trading at peak values. Waiting for the next dip to invest more. One exception is listed next.
  • Additional Investments
    • International exposure
      • Just like prior months, I have continued to increase my exposure outside the US. Stocks in United States seem too overvalued to my simple mind. I want my passive income streams to come from many countries all over the world to spread the risk of a single part of the world going through a bad phase.
      • So, I have added some more funds to my existing investments in Emerging markets (via VEIEX) and Euro-Pacific Developed Markets (via VTMGX).
  • Build a tiny cash fund again
    • I am accumulating some money in a money market fund. I want to have a small cash fund accumulated to take advantage of any market dip(s).