Six Month Review Template – Celebrate

This is the Fifth and final part of my “Six Month Review” template. Previously I looked at the performance of my investments, re-balanced them, and then reviewed my budget and goals. For those that followed along, you could see that I had some ups and downs (especially with investments), achieved some goals, and decided to alter/drop a few others. The final step, and one often not done by FIRE people, is to celebrate my “wins.”

Too often folks fail to give themselves credit for when they achieve goals. Giving thanks is a major reinforcement for keeping going along a path (as I’m sure many of you have read before). If you give yourself credit, you’ll be surprised how “pumped up” you continue to be. For those of us on the path to FI, who have done most of the steps to put us there, but who now have to wait as we accumulate, this is one of the things we can do to keep going.

So how are Mrs. 39 Months and I celebrating?

We look for things that we like to do, and we do them.

 

  • Travel: Headed out for 3-day weekend to Lancaster County, PA. Lovely country. Mrs. 39 Months is attending a Dulcimer convention and I’m going to attend a wargaming convention called Historicon, going on at the same time.
  • Hobbies:  As part of our trip, we’ll both be engaging in hobbies we like. In addition, I’ll probably be on the lookout for some antique hand tools for my woodworking hobby (Lancaster has a lot of them).
  • Reading: I’ve brought along 3 books to read, one classic, one historical, one about finances. I hope to have time to knock some major reading out.
  • Good discussions: Mrs. 39 Months and I have a 2 hour drive there + 2 hours back. We’ve been talking about our lives after we hit FI, what we might do, where we might travel, etc. Fun discussions.

While we are spending money on the two conferences (and maybe a spare tool or two) we aren’t really going to burn up the bank with spending however. Guess we really are interested in FI.

 

So how do you celebrate your wins?

 

Mr. 39 Months

Six Month Review Template – Goal Review

This is the Fourth part of my “Six Month Review” template. Previously I looked at the performance of my investments, re-balanced them, and then reviewed my budget. From that, I could see how I was doing on the goals that I set for myself at the beginning of the year. Now its time to review those goals and see if any need to be altered, dropped, or if new goals need to be put in place.

So how am I doing in comparison to my goals for 2018?

My Goals for 2018 (some financial, some not):

Finance:

  • Save $81K in tax-advantaged accounts (saved almost $37K in 2017): I’ve saved a little over $51K in them in the first 6 months (thanks to my bonus payment). On track to get around $81K.
  • Save $9K in regular: Complete
  • Increase dividend income from all accounts to $24K/year: Right now I am at $10.6K a year. Since I usually get a big bump at the end of Q4, I think I should be able to hit this.
  • Passive income covers 33% of base living expenses in retirement, i.e. $24K of my $72K expected expenses: As above, I think I’ll hit my $24K in dividends, which would put me over 33.3%
  • Beat net worth growth rate of 7%: Well, with the market only getting back to “0” right now, I am not sure I am going to hit this one. We will see. I’m not going to change it, but we will see.

Business:

  • Begin attending regular meetings of my local real estate investors association. I’ve attended six so far, but didn’t get to any in June. I plan to get to at least 2 in July. Still not sure of the value of these yet.
  • Double the number of blog visitors in 2018. Doing well here. I’m almost there, after the first six months. Should hit this before the end of July. Part of this is probably more info on my blog, more history. Also, I am linking to other blogs when I see good stuff, so maybe folks are paying me back.
  • Write/publish a book on finance.  Not doing well here. Haven’t gotten past the first couple of pages of notes here. I plan on keeping this one, but it may end of going into 2019 before its published.

Personal:

  • Increase weight lifted by 10% from 2018 (increased by 12.7% in 2017: Getting sick and then going backpacking didn’t help this. I was pleased to go back into the gym last week and find that I hadn’t lost that much muscle, and was able to keep the lift value about where it was. Need to start building back up.
  • Average 3 hours of cardio per week (currently averaging about an hour).Not doing well here. Getting to 3 hours is a struggle. I will drop this goal down to 2 hours a week for the 2nd half of the year – something that will probably be attainable.
  • Take part in at least one long bike ride, like MS bike-a-thon (80 miles): Going to drop this one. With everything else going on, I just don’t have the time to train for this.
  • Backpack over 100 miles on AT (did over 100 in 2017): Having to bail out a day early back in June put this in jeopardy. I will probably just get over 90 miles this  year, so I’ll adjust the goal to that.
  • Begin volunteering at Pennsbury Manor at their joiner’s shop (woodworking): Started volunteering in May, began training to be a guide at the beginning of July. I am enjoying this.
  • Reduce weight by 20 lbs. from Jan 2018 (lost 9 lbs. in 2017). Doing OK here. Down to 226 lbs (Loss of 11 for the year). However, I’m going to cut the goal to a 15 lbs loss for the year, because I think that is about what I can do for the last six months. We will see.
  • Read at least one book a month. Really kicknign this one out of the park. Got ten books done in the first six months, and already knocked one out in July. Starting Dickens David Copperfield today.

Travel:

  • Visit a national park (visited Shenandoah NP in 2017): Got two parks completed (Crater Lake and Redwoods NP in California). Really enjoyed them, and looking forward to next year’s parks
  • Visit family in Tennessee, Vermont and New York. Plans in place for November trips to NY and TN.
  • Visit Portland, OR and northern California: Complete and had a lot of fun
  • Visit Ellis Island. Still want to do this, just have to find the time. Its only 1-1/2 hours away.
  • Go on an international trip. Going to drop this one. Don’t think I will have the time for this in 2018
  • Visit the Asheville NC area. It’s one of the areas that we are considering retiring to (close to my old home in Tennessee, interesting crafts, shops & outdoor sports, etc.). Trying to learn more about the area (we’ve been there a couple of times). Going to drop this one as well. Don’t think I will have the time in 2018 for this, and blew through all my work vacation time.

New Goals?

Nothing major, just to do some furniture projects that came up. Otherwise, just concentrate on getting done what I have above.

So you can see, I do a review, and I tend to drop some goals (3 or 4) that it turns out I don’t think I can hit, and alter a few (weight loss, cardio). This way, I don’t stress myself out over not hitting everything, and I give myself something to shoot for in the next year.

 

 

Mr. 39 Months

Six Month Review Template – Budget review and adjustments

This is the third part of my “Six Month Review” template. I track spending both for our “family” account (groceries, home, utilities, etc.) and my personal account (auto, clothes, food/snacks, hobbies, etc.). Halfway through the year, I take the opportunity to look at what I expected to spend on, both in our family account and my personal account – and compare it to actual spending. From there I make adjustments either to the budget, or to my spending over the next six months, so I can try and bring it into alignment.

Family Budget

Typically what I do is compare my spending to the money that I budgeted at the beginning of the year. I usually use the previous year’s actual spending, with some adjustments, to create the budget. Some of the numbers I can predict in advance (insurance, charity, Roth IRA, etc.) but some vary somewhat, month-to-month.

 

Revenue Budgeted 2018 YTD Actual 2018 YTD Variance
Salary $24,850.32 $25,955.67 $1,105.35
Other $0.21 $0.20 ($0.01)
Total Revenues $24,850.53 $25,955.87 $1,105.34
Expense
Home
Property Taxes ($3,043.81) ($3,043.81) $0.00
PSE&G ($1,041.52) ($1,191.00) ($149.49)
Verizon ($1,722.10) ($1,765.21) ($43.11)
Water Bill ($163.80) ($183.85) ($20.05)
Life Insurance ($241.73) ($263.70) ($21.98)
Home/Auto Insurance ($1,375.97) ($1,302.70) $73.27
Groceries ($2,259.34) ($2,641.38) ($382.04)
Medical ($1,193.24) ($1,010.93) $182.31
Roth IRAs ($6,500.00) ($6,499.98) $0.02
Charity ($2,400.00) ($2,400.00) $0.00
Dining Out ($600.00) ($707.48) ($107.48)
Home Repair ($600.00) ($882.74) ($282.74)
Other ($600.00) ($233.01) $366.99
Total Expense ($21,741.49) ($22,125.79) ($384.30)
1.8%

 

I track each month separately for these categories, and the sheet has year-to-date budget & actual columns which sum up all the months together. That is where I got the data above.

As you can see, I ended up with about $1100 more in revenue, but spent about $384 more than budgeted (groceries, home repair and utilities seem to be the prime offenders). I always have difficulty at the start of the year estimating my revenues/pay. I get a pay raise in there, but the tax codes change and I ended up not getting it exactly right. Still, the family budget seems to be going well, and we are in the black. Since the variances in the categories are not dramatic, I won’t adjust the budget for the remainder of the year.

Personal Budget

I take $1,100 a month from my paycheck and put it into a separate account. This is used to pay my personal expenses (car fuel & repairs, lunch & snacks, hobbies, etc.). I’ve found that I work better when my personal funds are not intermixed with the funds we need to pay for things as a family. I also don’t feel guilty if I chose to spend some of this money on fun things for myself.

Revenue Budget 2018 YTD Actual 2018 YTD Variance
Salary from NFI  $      6,600.00  $      6,600.00
Travel Reimburesement  $         409.30  $                  –
Other  $                  –  $             3.36
Total Revenues  $      7,009.30  $      6,603.36
Expense
Auto
Auto Fuel ($720.00) ($833.62) ($113.62)
Auto Repair ($600.00) ($338.38) $261.62
Auto Registration ($30.00) $0.00 $30.00
Auto Tolls ($300.00) ($181.75) $118.25
Food/Snacks ($2,400.00) ($2,921.39) ($521.39)
Books ($150.00) ($179.64) ($29.64)
Clothes ($300.00) ($282.57) $17.43
LA Fitness ($194.76) ($194.76) $0.00
Postal/office supplies ($150.00) ($20.83) $129.17
Hobby ($1,200.00) ($1,208.08) ($8.08)
Outlooks for Hair ($120.00) ($129.00) ($9.00)
Other ($840.00) ($678.49) $161.51
Total Expense ($7,004.76) ($6,968.51) $36.25
Operating Revenue ($365.15)

So, while I was OK with the family budget, I’ve overspend by about 5% with my personal budget. This is primarily due to:

  1. Being about $400 short in revenue, because I haven’t been traveling much for work and getting reimbursed for mileage, tolls, etc.
  2. Way overspending on food/snacks for the last three months.

After reviewing this, I decided to work on cutting back the snacks & food I was eating, buying it cheaper at the grocery store and bringing it in to work. We’ll see how I do for the last six months. Who knows, it might help me lose some more weight!

 

So how did your spending go for the first six months?

 

Mr. 39 Months.

 

 

Six Month Review Template – Re-balancing portfolio

This is the second part of my “Six Month Review” template. Previously I looked at the performance of my investments, with emphasis on what seems to be trending well, and what is not. Based on that, I can make decisions on whether to sell off certain assets or to put money into others.

The next thing I do is to look at my asset allocation, and determine if it has gone “out of whack” with certain investments performing well, and others doing poorly. If they vary too much, you want to sell off your “winners” (sell high) and use the funds to buy your “poor performers” (buy low). In this way, you get your asset allocation back in line with your plan, and hopefully set yourself up for when your “poor performers” jump up, and your “winners” lose steam.

401K/IRAs

My general rule of thumb here is that I only rebalance if they are more than 1.0% out of line with my asset allocation. If you remember, my planned allocation for my IRAs is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund
Name Note Actual
TRowe Price S&P 500 Wife’s IRA 18.5%
Extended Equity Market Index Wife’s IRA 19.2%
International Equity Index Wife’s IRA 17.0%
Real Estate Wife’s IRA 18.2%
US Bond Enhanced Index Wife’s IRA 27.1%
Equity Index 500 Wife’s Roth IRA 17.9%
Extended Equity Market Index Wife’s Roth IRA 18.4%
International Equity Index Wife’s Roth IRA 17.1%
Real Estate Wife’s Roth IRA 17.5%
US Bond Enhanced Index Wife’s Roth IRA 29.1%
Vanguard 500 Index Fund My VG IRA 17.9%
Vanguard REIT Index Fund My VG IRA 17.5%
Vanguard Small-Cap Index Fund My VG IRA 18.5%
Vanguard Bond Index Fund My VG IRA 29.3%
Vanguard Int’l Index Fund My VG IRA 16.8%
Vanguard 500 Index Fund My Roth IRA 18.2%
Vanguard REIT Index Fund My Roth IRA 17.5%
Vanguard Small-Cap Index Fund My Roth IRA 18.3%
Vanguard Bond Index Fund My Roth IRA 29.0%
Vanguard Int’l Index Fund My Roth IRA 16.9%

For July 1, here is how they looked:The one’s highlighted in bold are the ones that are more than 1% out of alignment. I’ll sell a portion of those off to fund purchases in those areas below (typically bonds and/or international).

For my work 401K and Deferred, they don’t have a REIT option, so my allocation is a straight 25% for each area:

Eagle Small Cap growth My 401K 27.6%
Vanguard 500 Index Fund My 401K 26.8%
Vanguard Total International Index My 401K 21.4%
Vanguard total bond Mkt My 401K 24.1%
Eagle Small Cap growth My Deferred 27.0%
Vanguard 500 Index Fund My Deferred 26.3%
Vanguard Total International Index My Deferred 22.4%
Lord Abbot Total Return My Deferred 24.3%

Again, I’ve highlighted those areas that are above 1% in variance. I’ll sell those off and buy additional shares in the International and bond funds.

For my dividend account (my father’s inherited IRA), my allocation is 25% dividend stocks, 25% REITs with good dividends, and 50% bonds.

Pop’s IRA @USAA 26.6% 25.00% Stocks
Pop’s IRA @USAA 23.9% 25.00% REITS
Pop’s IRA @USAA 49.5% 50.00% Bonds

Usually for these, I use the dividend money they throw off to purchase additional shares in those that aren’t doing well. I’ll try not to sell of shares of stocks or REITS – just keep them as they are and use the dividends to re-balance.

Most mutual funds (Vanguard, TRowe, etc.) make it relatively easy to do the re-balancing, often on just one page. It’s when you are dealing with your own stocks & bonds (like in my dividend account) where you have to break out the calculator/spreadsheet and do the math yourself.

Overall, I have a few adjustments to make, but not as much as I have had to do in the past. Last January, after that great stock market climb in 2017, I had a lot of re-balancing to do to bring everything back into alignment. I sold off my stocks in Jan 2018 when high, and purchased other assets. The stock returns have just recently got back to above 0, so it was a good move.

Next time, we’ll talk about how I analyze my budget for the first six months, and make adjustments.

 

Mr. 39 Months.

Six Month Review Template – here is what I do

Well, it is halfway through the year, and typically that is time for FIRE folks to take stock of their investments, finances and goals, and to make adjustments, change allocations, re-balance portfolios, and see how they are doing. I figure it would be a good series of postings if I went over what I do in early January and July, every six months. You may have different timing (more frequent, different times of the year, etc.) – but I think a lot of these are things you could include in your own mid-year and end-of-year reviews.

Typically, I spend several hours on this, and my sequence of review is as follows:

  1. Review Investment performance/make decisions on any changes: Emphasis on performance of any individual stocks I own.
  2. Review asset allocation: Do I keep current allocation or change, what is current percentage allocation vs. plan, etc. Rebalance as necessary
  3. Review spending of last 6 months vs. budget: What went well, where am I falling down, what adjustments need to get made
  4. Goals: How am I doing against my planned goals for the year? Are there some that need to get added? Are there some that need to get dropped? What do I need to emphasize over the next 6 months to attain them
  5. Celebration: This comes at the end, when I take the time to celebrate my “wins” in some fashion. Too often folks concentrate on things that went wrong, and don’t practice “gratitude” for the good things that happen to them. Take the time to do this for your emotional well-being

Again, doing this takes several hours of work, typically spread out over a week. I find it very useful to keeping me on track.

 Step 1: Investment Performance

I use a simple excel spreadsheet to track my investment performance. I know there are all sorts of online tools and software available, but when I have used them in the past, I find that keeping them up to date is sometimes difficult, linking them can lead to issues, and it is almost impossible to fix an issue online or in the software once it is in place. I had all sorts of travails with Quicken’s software and its linkage to my accounts – I ended up spending as much time fixing issues with its downloads as I would if I just tracked it myself  – so about ten years ago I started manually tracking it with an excel spreadsheet, and I’ve been happier ever since.

I set up my excel sheet so that I could go online to each of my accounts and hand key in the updated stock price and shares (shares may go up with reinvested dividends or my monthly contributions). A formula in the next column comes up with the total, which I can compare to the online value. I then have a column for the previous month’s value and what I contributed that month. I can also do this for the Jan 1 value and the six months of investments. By doing this and comparing, I can see how each investment did and how I did overall (see sample below, showing IRA and Roth IRA):

 

Name Current Price Current Shares  Current Value  Cost Basis as of 1/3/18 + investments Gain/ Loss for six Months 2018
TRowe Price S&P 500  $            72.93 411.9  $           30,041  $                 29,540  $                               500
Extended Equity Market Index  $            29.89 1,043.3  $           31,185  $                 29,673  $                          1,513
International Equity Index  $            14.01 1,977.1  $           27,699  $                 28,806  $                       (1,107)
Real Estate  $            28.29 1,045.2  $           29,568  $                 29,580  $                               (12)
US Bond Enhanced Index  $            10.68 4,123.8  $           44,042  $                 44,612  $                            (570)
Equity Index 500  $            72.93 226.6  $           16,636  $                 16,359  $                               277
Extended Equity Market Index  $            29.89 570.3  $           17,154  $                 16,328  $                               826
International Equity Index  $            14.01 1,126.1  $           15,885  $                 16,509  $                            (624)
Real Estate  $            28.29 572.6  $           16,306  $                 16,274  $                                  32

So how did we do? Well, like most folks for the first half of the year, we pretty much treaded water (or lost a little).

Retirement Accounts: Remember, my allocation for these is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund

I ended up being about 0.14% up here. Not a lot to scream about, but at least I’m back in the black here for the first time since January. Winners were the small cap funds, and a little with the S&P500. International and bond funds were losers, with REITs staying about even. Everybody has fluctuated a lot this year, but the asset allocation has smoothed it somewhat. I was thinking of moving out of REITs a bit (going to 10% allocation) but after seeing their improved performance, I think I’ll stick with the allocation I have.

Dividend Income Account: Allocation:

  • 25% Dividend Stocks
  • 25% REITs
  • 50% Bond Index Funds

For the year, this account is down -0.2%. Since its 50% bonds and bonds suffered, I can see why it’s down. It continues to kick off dividends at around a 3.2% overall rate, so it is doing what it was designed to do. Not much capital appreciation though, so until interest rates rise, you really can’t look at surviving on dividends alone in a retirement situation.

Value Investing Account: Allocation:

  • 4% in individual value stocks I picked myself (2 stocks, 20% for each)
  • 60% in Vanguard Value Index fund & USAA Total Stock Market Fund

Here is where I really “crapped the bed” for the first six months. Overall, counting the $9K I invested in it, I am down -18.9% (-$10,089). The key culprits are the two stocks I have remaining in this. I tried to use value investing methodology to pick two stocks which seemed down, but they have continued to drop. Gilead Sciences is down -8.9% from my purchase, and Cia Basico is down -47.0%!  As I’ve noted, it appears I am a terrible individual stock picker. When I look at both of them, the both appear much undervalued, but I may not have complete data. As I have stated before, I’m going to keep them till the end of the year, but if I don’t see any real improvement, then I’ll end up just selling and going to a “total market” index fund.

Next time, we’ll look at how I re-allocate funds in mid-year.

 

Mr. 39 Months.