2019 Financial Goals: Journey To $100k
It’s my favorite time of year when everyone is setting goals and resolutions for the new year ahead. From diet and exercise to debt freedom and travel, social media is filled with people posting how they plan to make positive changes. Well, it is my turn to throw my hat into the crowd and declare my 2019 financial goals.
At my ripe old age of 41, I’ve had my fair share of failures. From eating less candy to losing 10 pounds, I’ve failed on multiple occasions. But that doesn’t stop me from getting back up, dusting myself off, and trying again.
I recently featured a post in my Friday Night Highlights from the blog, Six Figures Under. The husband and wife couple paid off their student loan debt in 2016 and for the past two years have been saving money, but not to the extent they thought possible.
Left uninspired by the past two years, they set a goal to pay $40,000 towards their mortgage principal in 2019. At this rate, their home will be paid off in 5 years. They called this their impossible goal.
With Six Feet Under’s goal in mind, I set out to create my own impossible goal. Something that would take me to the edge of impossible but not push me to the realm of discouragement.
In 2019, our family will save $100,000.
Yes, for 2019 I have set a goal I’m not sure I can achieve. A stretch goal that makes me uncomfortable and pushes me to the edge of possible.
Why chose a goal I am not sure I can accomplish? The whole purpose of goal setting for me is to push myself to lean into discomfort. By setting an audacious uncomfortable goal I will be reminded to spend less, earn more and save the difference.
Here is how I get to the $100,000 savings for 2019.
- Two 401k’s = $38,000
- Two IRA’s = $12,000
- HSA = $7,000
- Mortgage principal = $25,000
- Taxable brokerage account = $18,000
- 2019 Savings = $100,0000
$100,000 saved in 2019 is:
$8,333 per month or $3,846 per paycheck or $274 per day
The 401k, IRA, and HSA have become non-negotiable in our annual savings. 2019 will be the 4th year in a row that all three of these tax-advantaged accounts will be fully funded.
I find funding these buckets of money to be the easiest. Why? Because they are automatic. The HSA and 401k are pulled directly from my paycheck. My Vanguard IRA is almost as painless.
I have Vanguard pull money from my checking account the morning I am paid (bi-weekly). When I wake up on payday, my paycheck has been deposited in the bank and simultaneously Vanguard has taken my IRA money. This all happens before I even open my eyes. It goes without saying, automation is a powerful savings tool.
I have set out on a secret goal to escalate my mortgage principal payment by $5,000 every year until the beast is slain. Last year I had a goal to pay $20,000 and this year we will pay $25,000.
Our mortgage balance currently sits at $220,000 and is probably our most depressing financial number. We purchased this big fancy house that we love 11 years ago when I wasn’t thinking about financial independence.
Shoot, when we purchased in 2007, I figured our home price would double within 5 years and we would sell and walk away with half a million dollars in our pocket. Then the real estate bubble popped along with the great recession and the value of our newly purchased home sank like a rock.
The good news is we love our home and we like the neighborhood. We are above water on our mortgage and with aggressive payments, we’re gaining principal quickly. We have no plans to sell until our two boys move out to attend college.
Some may question whether the mortgage principal should be counted as savings. I say yes. For many in America, it is their only savings. It is a forced saving but nonetheless, it is savings. Mortgage principal is not easily accessed like a traditional savings account but can be accessed with a line of credit. The principal in your home fluctuates with the housing market and historically has kept up with the pace of inflation.
While I have a continuing internal debate about whether home equity should be used in my net worth, for the purpose of my 2019 Journey to $100k, I’m counting it.
Taxable Brokerage Account
After my tax-advantaged accounts are maxed and our mortgage is on pace to pay $25k, the rest of my savings is funneled into a brokerage account. The taxable brokerage account is used for my hybrid mortgage payment plan. I call it “digging a tunnel from both ends.”
Let me explain. I acknowledge that the math doesn’t always lend itself to rapid mortgage payoff. Especially with historically low mortgage rates. Our current 15-year fixed rate mortgage is 3.375%. The argument is that the extra money could potentially earn a better rate of return in the US stock market which has a historical return in the neighborhood of 8%.
I like to split the difference an do both. That’s right, I pay extra on my mortgage and invest in the stock market at the same time. When my mortgage balance equals my brokerage account balance, in theory, I have achieved mortgage freedom. I call my hybrid mortgage plan digging a tunnel from both ends.
You can read more my article 4612 Days Until Mortgage Freedom
For every dollar that I send to my mortgage, the only way to get it back is to either sell my home or refinance. Neither of these is easy or cheap. Meanwhile, access to my stock brokerage account is both easy and cheap. If I need money for an emergency, I can liquidate some index funds and have the money in less than a week with no fee or penalty. In addition to my brokerage account, I keep a savings account for my true emergency fund.
This hybrid mortgage plan helps me sleep at night. I have the psychological benefit of paying down my mortgage rapidly and the financial security of money that is accessible for a catastrophe.
Since starting this crazy financial independence journey a couple of years ago, I have strived to save half of our income. The ugly truth is, we have never hit that aspirational mark. Last year we averaged 40% savings of gross income. 40% is nothing be upset about, but I would really like to hit the 50% level, to be to the point where we are truly living on half of our income.
Why save half? Well, if we save half of our income, it means for every month my wife and I work, we are buying a month of freedom, freedom to make work optional.
The conventional wisdom in personal finance is to save 10% of your income. At that rate, it takes you 10 months of work to buy yourself one month of freedom. The big question is if you are spending 90% of your income, are you really happier.
To get to 50% savings, my plan is to keep lifestyle inflation in check while our income continues to grow with raises. I am hoping 2019 will be the year we finally hit 50%, but in reality, it will probably not happen until 2020.
To get our 2019 Journey To $100k started off on the right foot, we have decided to start January and February with some constraints.
- We plan to restart our food budget. You can read Budget Smudget: Our First Grocery Budget to get the details of our grocery budget.
- Implement 10 no spend days in January.
- No eating out for January.
- No coffee shops for January.
These self-placed constraints should free up some cash flow to help fund the increased savings.
I have created a simple handmade infographic to keep track of my progress throughout 2019. It is nothing pretty but should help motivate me with a visual reminder to stay focused.
The Privilege Of Saving
I will admit our income is considerably higher than the median American household income. Many families are unable to save any money after basic daily needs are met.
This article is in no way meant to be boastful or braggadocious. It is rather meant to inspire those at any income to look at their expenses or debts with a different view. You can change your future by saving even small sums of money.
No amount is too small to start with. Even starting with $25 savings per month builds the muscle memory of saving. At your next raise, you increase to $35 and so on. Over time you begin to accumulate wealth and build yourself the advantage of a more powerful financial position.
Journey To $100k
Maybe my 2019 goal is over the top. Too audacious to be possible, but I like it that way. I am a believer that it is better to aim for the stars and fall short than to have never aimed at all.
In setting financial goals for the past two years I have learned creating a journey is what inspires and motivates me. Living an intentional, deliberate life gives me purpose.
If I fail this year to reach $100k in 2019, you can be assured I will recycle this goal in 2020.
Thank you for reading. What are your goals for 2019? Leave a comment below.
In 2018 I set goals