2017 Goals and Quarterly Updates

NOTE: Third Quarter, 2017 Update….on 10/07/2017

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.

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        
  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        
  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. 12/31/2017    
  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       
  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
  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        
  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. 12/31/2017   
  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  

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. 12/31/2017  
  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  
  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  
  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  

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.
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How long does it take to accumulate $80000 in a 529 College fund?

When I defined what Financial Independence means to me (here), $80000 dollars in a college fund for my kid seemed good to me….how I came up with that number is listed here. I did not have any notion of how to get there apart from creating a 529 fund and regularly depositing money into it.

The next question for me now is: how long before I get $80000 in the 529 College fund? This post will talk about how to come up with a time estimate.

Savings Calculator

There are two nice calculators that we can use to estimate how many years it will take to accumulate a certain sum of money, if we know the monthly investment that one is ready to invest.

  1. Savings Calculator from FINRA
  2. Bankrate.com’s Savings Calculator

The college fund for my kid is invested in a Vanguard 529 plan. I am going to assume that this fund returns about 3% average over the next 9 years. This is when my kid will be ready to enter college. I am going to use the Savings Calculators listed above to estimate when the 529 plan will reach a target amount of $80000.

Parameters for the Calculator

The input that the calculator needs is as follows:

  1. Initial Savings Balance: $25,310
  2. Deposit Interval: Monthly
  3. Deposit Amount per interval: $400
  4. Number of Deposits: 108 (12 months * 9 years = 108)
  5. Annual Return: 3.0% and 5% (conservative and average growth rate for the 529 Plan)
  6. Inflation Rate: 3.0%

Now, lets calculate the time required to reach $80000 at two growth rates: 3% and 5%.

Case 1: Calculator Results at 3% Return

By inputting the above parameters to the calculator, here are the results after 104 months of investing $400 at appx 3% average rate of return per year.

  • Ending Balance: $82,576
  • Inflation Adjusted Balance: $59,030

No   Period        Deposit      Balance           Inflation Adjusted Balance
1     Jan-2015  $400.00     $25,773.41     $25,693.43
13   Jan-2016  $400.00     $31,424.26     $30,179.91
25   Jan-2017  $400.00     $37,244.63     $34,460.31
37   Jan-2018  $400.00     $43,239.62     $38,542.51
49   Jan-2019  $400.00     $49,414.46     $42,434.08
61   Jan-2020  $400.00     $55,774.54     $46,142.32
73   Jan-2021  $400.00     $62,325.42     $49,674.25
85   Jan-2022  $400.00     $69,072.83     $53,036.64
97   Jan-2023  $400.00     $76,022.66     $56,236.01
98   Feb-2023  $400.00    $76,611.14     $56,495.46
99   Mar-2023  $400.00    $77,201.07     $56,753.83
100 Apr-2023  $400.00     $77,792.46     $57,011.12
101 May-2023 $400.00     $78,385.30     $57,267.33
102 Jun-2023  $400.00     $78,979.61     $57,522.46
103 Jul-2023   $400.00     $79,575.38     $57,776.53
104 Aug-2023 $400.00     $80,172.62     $58,029.53

Case 2: Calculator Results at 5% Return

By inputting the above parameters to the calculator, here are the results after 90 months of investing $400 at appx 5% average rate of return per year.

  • Ending Balance: $80,050
  • Inflation Adjusted Balance: $60518

No Period         Deposit       Balance          Inflation Adjusted Balance
1   Jan-2015     $400.00     $25,814.75     $25,734.64
13 Jan-2016     $400.00     $32,034.51     $30,766.00
25 Jan-2017     $400.00     $38,565.27     $35,682.22
37 Jan-2018     $400.00     $45,422.57     $40,488.33
49 Jan-2019     $400.00     $52,622.72     $45,189.15
61 Jan-2020     $400.00     $60,182.89     $49,789.36
73 Jan-2021     $400.00     $68,121.07     $54,293.46
85 Jan-2022     $400.00     $76,456.15     $58,705.82
………………………………………………………
90 Jun-2022     $400.00     $80,050.93     $60,518.23

Conclusion

From the calculator’s results above, we can see the following results for investing $400 per month in a 529 plan.

  • At 3% annual return, it takes 104 months (approximately 9 years) of investing.
  • At 5% annual return, it takes 90 months (approximately 7.5 years) of investing.

Wish me luck that I can get this done within 7.5 years!!

College Funding for our kid

When it comes to college funding, there are a few main questions to answer.

  • How much to fund?
  • Where to fund?
  • What if unused for college purposes?

How much to fund?

College cost is soaring like crazy…looks like there is no end in sight. I wish I could fund the entire cost, but I am not sure I can. So, I have set a target of $20000 per year for 4 years. Anything more than this, the kid has to manage.

Where to fund?

I wanted a most generic college funding option. By generic I mean the following:

  • 529 plan
  • basic age based investment option
  • passive fund is okay
  • good set of low-cost investment options
  • acceptable in any college across the US
  • any state tax advantages
  • online acct management possible
  • automatic investment possible

Since I am a fan of Vanguard, I have a bias towards Vanguard 529 plans. But, I did dig into many articles on the web to find a good 529 options. Turns out, most of the good plans happened to be Vanguard ones. I picked Nevada 529 plan as satisfied all the above requirements.

What if unused for college purposes?

If unused, the 529 plan can be withdrawn but with a 10% penalty. The penalty is applicable ONLY on the earnings in the plan and not on the principal (because I am using post-tax money for investing into the 529 plan). There is a wonderful article from savingforcollege.com that I will refer to here for further reference.

Starting Status

07/25/2014        $22600        28.25% complete

09/29/2014        $23185         28.98% complete

….. (see Progress Report for more updates)