It’s always good to have an idea of where we are headed in this journey toward FI. Here are some thoughts I started with in November 2018 (I will update post as changes occur):
Personal financial philosophy & investment strategy (a work in process – started in 11/18)
Purpose :Set sites on a goal to be independent of regular salary by age 58 (youngest child entering undergrad university and house paid off) with savings of 25x living expenses of $40k annually
Investments : Retirement savings will be managed by me and held at Vanguard due to low fees and availability as part of employer-sponsored 403b. 95% will remain in VTSAX (Total Stock Market Index Fund), 5% will be in Bonds, until redistribution at age 57.
100% of my taxable savings will be managed by me in Vanguard Money Markets and EFTs (80% of this account), and individual stocks (no more than 4 and no more than 20% of this account)
Emergency fund of 6x my monthly living costs will be kept in liquid funds.
I will contribute $1k to each child’s 529 college savings plan annually on their birthdate until they reach age 17. This fund is managed by T. Rowe and is in an indexed, low-fee Total Stock Market fund.
When my children begin to work for income, prior to the age of 18, I will open a Roth-IRA in their name and match any $ they contribute. They will be required to put 30% of any income in this fund which will be invested in Vanguard’s Total Stock Market Fund. Any amount above 30% will also receive the ‘awesome mommy-match’.
Investment/ savings rate : I will invest the maximum ($18,500 in 2018) in my company’s 403b (T-IRA) in Vanguard funds annually until age 50, at which point this maximum will increase to $24,500 annually. As of November 2018 I have a 8% employer match in this fund.
I will invest the maximum ($5,500 in 2018) annually into a Vanguard Roth-IRA until age 50, which will increase to $6,500 annually thereafter.
After these investments are made, my goal is to save an additional 20% of my gross income in a taxable account meant to be used for FIRE and any emergencies which arise outside of my emergency fund.
Debt :I will pay off all credit cards monthly.
I will continue to pay an additional amount of principal on my home loans (mortgage and future HELOC if needed for home improvement/maintenance) to allow me to pay off these loans in 15 years from the date of purchase in 2015 (also the year the youngest child graduates from high school).
Insurance: I will hold term life insurance through youngest child’s 18th birthday. Children’s father also holds term life insurance at double the amount of my policy.
I will purchase short and long term disability through my employer.
I will not purchase long term disability as of now (2018) but will include medical costs as part of my retirement planning to offset such costs – I will re-examine this choice at age 50.
Keeping on track : I will do an ‘end of year’ analysis to determine if I am meeting my savings goals. I will calculate and document my net worth every six months.
Income not spent on monthly expenses will be transferred into a savings account to be used for taxable investing, family & personal travel, and ‘out of the ordinary’ experiences.
Each anniversary month of my employment hire date (November) I will re-evaluate this savings account to determine if I can put aside funds for a car purchase or other extraordinary expense.
Estate planning : Review documents annually (will, power of attorney for health/finances) and maintain current beneficiaries on retirement and insurance accounts.
I plan that the majority of my inheritance will be passed on to my children in the form of unused Roth-IRA funds.
Please post comments or your own plan below – join the discussion!
