What do you do at the beginning of the new year?

This is a re-post of a previous article – I think its a good way to look at your new year planning.

So it seems everyone has their own method/ideas for closing out the old year and starting the new one. There are “new years resolutions” and lists of financial and personal decisions to review and update. I find this time of year fascinating on the FIRE blogs, because you really get a chance to see where people are, how their decisions throughout the year “panned out” and what their thoughts on for the new year. Hopefully you’ll write and share yours.

For me, I typically start out my review where I’m most comfortable – the numbers! As an engineer and a FIRE guy, I enjoy looking at my spreadsheets and investments to see where I am and to plan for the future. So what do I do with my finances?

  1. Update Investment status: I track my investments monthly, and at the end of the year, I determine, for each investment, its overall growth and its percentage in my overall portfolio.
  2. Calculate dividends: I also take the opportunity for each investment to determine its dividend yield and the amount of “passive” income it has thrown off. I use this for planning the potential for retirement income in the future.
  3. Individual Investment Performance: Determine if I need to sell/buy new investments, based on performance.
  4. Updated Net Worth: Adding all of this together with my real assets (home, cars, side hustle) and our liquid assets (checking & savings) I determine our net worth, and the growth of our net worth in the past year
  5. Determine rebalancing moves/stock sales & purchases: Finally I look at each investment and what its overall percentage is in the portfolio – and then determine if I need to buy/sell items to bring everything in line (I also rebalance in the middle of the year).

With all this done, I have a better idea of where we are financially, and where we are in relation to our goals.

At this point, I turn to the “softer” items on my new year review

  1. Review previous years goals: In addition to financial goals, I’ve got a long list of goals that I was working on (fitness, reading, traveling, visits to family, etc.) I try to put real numbers or performance measures on each, so I can actually grade myself on accomplishing/not-accomplishing them.
  2. Review 5-minute journals from past year for insight: Like so many others, I use a journal on a daily basis to write about my thoughts and feelings (I use the five-minute journal). I go back and review my writing for any insights.
  3. Go through “Year End Review” list of question: I have a “year end review” list of questions I picked up from my reading that I do at the beginning of the year, that I reflect back on weekly. The idea is to answer these questions and reflect on them
  • Identify 20% of people, projects or ideas which provided 80% of enjoyment/powerful emotions for 2018
  • Identify 20% of people, projects or ideas which provided 80% of stress/pain/powerful emotions for 2018
  • Try and spot patterns from #1 and #2; Determine action steps to increase #1 and reduce #2:
  • Identify Three things to add to my life
  • Identify Three things to remove from my life
  • Ask folks close to you, what you should do more of and what should you do less of?
  • Start putting stuff into the calendar. If it is on the calendar, we will do it
  • Questions from “Happy Money”.
    • For Purchases, “how will this affect my use of time”
    • “How will I use this thing on Tuesday night”
    • $100 to most increase happiness?
    • $500 to increase happiness?
    • $1000 to increase happiness?
    • Take 20% of liquid cash, how would you apply it to increase your quality of life?

I then set new goals for new year: Based on all this, I go and set new goals for the year, and then post them where I can reflect back on them regularly

So what do you do for your year-end review?

Mr. 39 Months

Goals/Objectives for 2021

So with the start of a new year,  it is time to review the goals for 2021 and see how I’ve done. I’ve done the goal setting posts before and gone over my 2017-2020 goals in previous posts. As for most people, 2021 was a mixed bag. I failed to put as much into retirement accounts as planned, but the rising stock market and my allocation definitely were successful – in terms of my goals.

For 2021, we had already achieved our FI number, and we probably could have retired already. However, with the Chinese Covid flu in place, there really wasn’t much of an opportunity to travel and do other work. So we planned to continue to work, invest a large portion of our salaries, and stay invested primarily in stocks. We did change our allocation in Sep 2021 away from some bonds and S&P to dividend paying stocks (Blue Chips). It seems to have done well.

So what about 2021?

Finance:

  • Save $29K in tax-advantaged accounts: In early 2021, it looked like I was going to retire early, so I made the decision to stop investing in the 401K and generate more regular investments. When I determined to continue to work, I failed to put my 401K investment back in place. Didn’t realize it till December, so I wasted a lot of money I could have put into tax advantaged accounts.  Grade D –  $7,801
  • Save $41K in regular accounts:  I put away my entire bonus, as well as a lot of excess money, and even saved enough to do a $60K Roth conversion in December and pay the taxes for it. Grade A – $44,500
  • Increase dividend income from all accounts to $30K/year: My 401K at work does not report dividends separately, so this number may be higher.  Grade C – $27,336
  • Passive income covers 38% of base living expenses in retirement, estimated at $78K per year: My long-term goal is to get my dividend/passive income up to where it covers over 100% of my expected retirement living expenses, so my investments can continue to grow. Grade C-  35.0%
  • Beat net worth growth rate of 7% (it was +14.6% in 2020 with the stock market run up). This is my historical growth rate for the last 10+ years, so I want to beat my average. I expected the market to be flat, but instead, we grew our net worth dramatically. Grade A: +21.8%

Business:

  • Attend 12 SJREIA meetings. They hold a regular monthly meeting, a monthly meeting for new investors, and a monthly meeting for my specific county. All three could be interesting. Grade A: Attended 13
  • Double the number of blog visitors in 2021. Last year it was a little over 6,000. I want to get at least 12,000 this year, so I need to put myself out there more (i.e. comment) and write interesting topics. My thanks to everyone who stopped by, and I try to return the favor, and comment as well. Grade F – only had 5,354 visitors in 2021
  • Sell $1,000 for TKD Woodworking. Grade A – $1,300 in revenue
  • Setup Funding for TKD Homes Grade A – Account setup and funded with a significant amount to begin investing in real estate
  • Write/publish a book on finance.  I wrote one for new graduates in 2017, but I have identified an area of the community which hasn’t been served as well in the past. Hopefully I can assist with something here.  I’ve got the first five chapters outlined/partially done, but still have a ways to go. Grade F – did not work on

Personal:

  • Begin regular workouts with Gymnastic Bodies Incomplete. Continues in early 2021, but a shoulder injury kept me from continuing in the 2nd half of 2021
  • Average 2 hours of cardio per week, which is about what I’m doing now.  Grade A: Regular do 3+ hours
  • Backpack over 100 miles on AT (did around 58 miles in 2020). Did better this year, with longer trips (3- and 4-day trips) Grade B: 78 miles
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this. Incomplete. Site shutdown due to Virus
  • Reduce weight by 15 lbs. from Jan 2021 Grade F. Gained 3 lbs in 2021, mostly in Nov/Dec. Need to knuckle down and get back to where I was in 1st qtr.
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading.  Grade A. 23 books

Travel:

  • Visit one national parks (that is the plan, right now); Incomplete due to virus
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often. Need to get up to see my brother in Vermont. Grade C – Visited Vermont and Tennessee, but didn’t get up to NY
  • Take a week at the shore and just relax with family. Currently planned for July, but we’ll see how many family members can come. Grade A – Did week on the Maryland shore with Mrs. 39 Months
  • Visit Ellis Island. Still want to do this – its so close. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it Incomplete due to virus

So that’s how I did. How did you do in 2020?

Read more

Mr. 39 Months

You Are Welcome…

Well, I wrote about the potential for me to be let go due to vaccination status, and my need to potentially “time the market” with my deferred income account. At the beginning of October, I noted that October was typically a bad time for stocks, and with the potential of the account being paid out in cash if I was let go meant that I might or might not get the stocks liquidated at an opportune time. Because of that, I chose to, at the beginning of October, to move it all out of mutual funds (S&P500, International, Small Cap, Bonds) and into pure cash.

As everyone knows, my previous attempts to “time the market” have been dismal failures. Well, October 2021 was no exception. I had left my IRAs and 401Ks invested for October, and instead of going down they went up +4.7% in one month. So my decision ended up meaning I missed out on an estimated $11K of gains if I had just left everything in place.

I’m sure everyone else pretty much left their investments in place, and gained the benefit of this increase. All I can say to that is – You are Welcome.

Hopefully I’ve learned my “time the market” lesson again, and this time it might stick. As of Nov 1, I put my deferred money back into the market.

Anyway, congratulations, and I hope you all have a profitable final two months of the year.

Read more

Mr. 39 Months

Quarterly Update – Oct 2021

Well, it’s now mid-October, and I’ve had the opportunity to review performance for the 3rd qtr of 2021. With the September drop off in the market, the 3rd quarter ended up with fairly limited gains for my portfolio, but the other goals that I had for the year went better. Still not sure where the market is going to go in the near future, but since I don’t really attempt to market time all that much, it shouldn’t be too much of an issue.

My Goals for 2021 (some financial, some not):

Finance:

  • Save $29K in tax-advantaged accounts – 401K, and Roth IRA.  Grade B. Saved $4.1K in our 401Ks for the 1st qtr. Due to the size of my bonus, I’m not going to be eligible to do a Roth IRA contribution in 2021, so I’m just putting that money into my regular account.  
  • Save $41K in regular accounts.  Grade A. Put $9K into my savings, because I was going to do a Roth conversion of money for 2021, so I’d use this to pay the taxes. After doing the analysis, however, if I start pulling money out of my 401K/IRAs in advance of age 72, I end up with more money if I don’t do the Roth conversion. After October, I’ll be putting money back into the market.
  • Increase dividend income from all accounts to $27K/year (compared to 29K in 2019). Grade B. Dividends went back up a bit compared to to 2020, so it looks like we might hit our Dividend goal for 2021. Received $5,9K of dividends for 3rd qtr. Still need 4th Qtr to be bigger than last year.
  • Passive income covers 30.5% of base living expenses in retirement, estimated at $78K per year. Grade C, covered 28.8% for the first nine months of the year. However, my 401K and Deferred don’t report dividends separately, so I may not be getting the full amount. We will see.
  • Beat net worth growth rate of 7%. Grade A. Due to market and real estate value, the new worth is up 10.4% for the first nine months of 2021. Very hard to believe.  

Business:

  • Attend twelve SJREIA meetings. Grade A; I’ve attended twelve in the first nine months of 2021. My local market is pretty heated (like so many others). Still, its good to get the information.
  • Double the number of blog visitors in 2020. Grade F. Still not a large number of folks reading – maybe a little bump from last year.  Only 4,347 “hits” for 2021.
  • Sell $1,000 on TKD Woodworking (my side-hustle name). Grade: A. Sold $960 as of Sep 30th. Still have two more farmer’s markets to sell at, and these are typically the highest selling ones.
  • Setup funding for TKD homes. Grade A; I’ve got a significant amount of funds available now. Its invested in the market, but available for use to purchase houses with cash. While I’ve got a significant amount of money set aside to start this, I also need to explore additional funding methods.
  • Write/publish a book on finance.  Grade F: Haven’t done anything on this for a whole year. Not sure how to reboot this – need to try.

Personal:

  • Regular Workouts with Gymanstic Bodies internet system: Grade F: Was still doing this at the beginning of the quarter, but then got a shoulder injury and have been going through physical therapy for it. I am doing my PT religiously though – not sure if this counts.
  • Average 2 hours of cardio per week, which is about what I’m doing now. Grade A. Walking daily, so actually doing at least 3+ hours.
  • Backpack over 100 miles on AT (did around 50 miles in 2020). Grade: C: I had to cut my August trip short (The White Mountains in New Hampshire were brutal) so I’m at 55 miles. May end up around 90 miles for 2021.
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this. Incomplete. Site is still closed down
  • Reduce weight by 15 lbs. from Jan 2020 Again, I want to get in better shape as I get closer to financial independence. Grade C. I was down 3 lbs in 1st qtr, but only 1 lbs for 2nd quarter. Down 2 lbs in 3rd qtr. Still have a long way to go, and the virus is keeping me from eating as healthy as I’d like.
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading. Grade A. Six more books in third quarter and I really enjoy it.

Travel:

  • Visit one national parks (that is the plan, right now). Grade: Incomplete
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often. Visited brother in VT. I would like to go to NY for my wife’s family, but she’s reticent due to the Covid. Grade: Incomplete
  • A week with Mrs. 39 Months for our 35th anniversary. Grade: B. We didn’t do a full week, but we did do a long 4-day weekend on the western shore of Maryland. Very nice.
  • Visit Ellis Island. Still want to do this – its so close. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it. Grade F. Cancelled.

How did your third quarter go this year?

Read more

Mr. 39  Months.

Investment Update Oct 2021

Like most folks investing, September was not “nice” to me. The S&P was down about -4.7% for the month, and just about every other mutual fund that I was investing in was also down, including my bond funds. If you remember, at the beginning of September, I changed my allocation somewhat you shift some money to dividend stocks and out of my bonds and S&P 500. Well, my dividend stock funds were down -4.5%, fairly close to the S&P. You just can’t win.

Still, I’m up over 10% for the year, and that is with primarily only 60% in stocks for the first 8 months, so its been a good year overall.

So my allocation, after my change in September is:

  • 10% bonds
  • 15% dividend Stocks
  • 15% S&P 500
  • 20% Small Cap stocks
  • 20% International stocks
  • 20% REITS

For investment performance in September, it came out to be:

  • S&P500: -4.7%
  • Bonds: -1.2%
  • REITs: -5.7%
  • Small Cap: -3.1%
  • International: -3.4%
  • Dividend stocks: -4.5%

I also have a Vanguard value fund (VVIAX) where I put in my after-tax investment money. That was down -4.0% for the month. I’ve been seeing a lot of articles of Value funds and ETFs doing better than the S&P500 – I guess we’ll see. I may do some additional research and write about this in the future.

My dividend account new allocation (as of Jan 2020) was:

  • 50% Dividend Stocks
  • 50% REITs

The dividend paying stocks & REITS were down an average of -4.1%. Still up for the year, with significant dividends. I’ll report out on 3rd qtr dividends in a later post.

October can sometimes be an excellent investment month, and sometimes (1929, 1987, 2008) it can be savage. I’m hoping it will be a good month. I’m up for the year, and the market has been on a tear since 2010, so overall I can’t complain.

Hope everyone is healthy and your market returns for the rest of the year go up!

Read more

Mr. 39 Months

Change to Allocation

I continue to be stunned and surprised at the increase value of the market as the year continues. From its March 2020 low point of 2,237.4, the S&P500 has now hit $4,524.09, basically doubling in value in 17 months. It seems like the market will just keep going up & up!

We all know this isn’t possible, but folks have been betting against the market (including me) for months now, and we continue to get it wrong. That’s why its always important to stay in the market, no matter what. Don’t pull your money out, because by the time you figure out the market has turned back up, you’ve already missed a significant amount of gains.

That being said, I have had two major concerns at this moment:

  1. The presence of high inflation may continue and force the fed to raise interest rates. If so, that will do some damage to the returns of my bond funds (which haven’t performed very well comparatively for the last several years).
  2. The S&P 500 continues to be way overvalued, with P/E ratios more than 2X historical values.

So I made the decision to make some changes to my investment allocation.

  • Change Bond allocation from 20% to 10%, reducing my exposure to the Fed raising interest rates
  • Change S&P500 allocation from 20% to 15%, reducing my exposure to the “overvalued” S&P
  • Add 15% allocation to dividend stocks – typically those steady stocks that continue to throw off income, even when the market sinks somewhat

While you could say that this might reduce my returns by reducing my exposure to the S&P 500, I actually have increased my stock allocation from 60% to 70%. I’ve just changed some of the stock investments to dividend stocks, which may not grow as fast, but should grow and throw income off better than bonds in the current environment.

So, my new allocation for my IRAs is:

  • 10% bonds
  • 15% dividend Stocks
  • 15% S&P 500
  • 20% Small Cap stocks
  • 20% International stocks
  • 20% REITS

We will have to see how that goes in the near future.

Read more

Mr. 39 Months

Blogroll Purge IV – Aug 2021

I have written several times before about the need to clean up/purge the blogroll to the right, so that viewers can get recent, up-to-date commentary on FIRE related topics (and other areas that I’m interested in).

People stop writing in their blogs for a variety of reasons. Some folks like Cracking Retirement, just exhaust what they want to say, and decide to step away – and take the opportunity to announce it on their blogs.

Others do a “slow fade” and stop posting regularly. What I always try to do is leave them up for several months, in the hopes they will get “re-inspired” and start posting again. After 3+ months, my thought is that they will probably not be returning – so I drop them.

This gives me the space and opportunity to put up new bloggers and commenters on the blogroll, and introduce people to other ideas. Hopefully its of service to you.

Enjoy!

Mr. 39 Months

Read more

Quarterly Update – July 2021

Well, it’s now August, so I’d better report out on how the first half of the year went. The Chinese Flu continues to cause concern and create issues throughout the country, and it looks like we may be heading back in for lockdowns. Not sure what effect that is going to have for the economy in the 2nd half of the year, so we’ll see. I’m not sure the American

My Goals for 2021 (some financial, some not):

Finance:

  • Save $29K in tax-advantaged accounts – 401K, and Roth IRA.  Grade A. Saved $4.8K in our 401Ks for the 1st qtr. Due to the size of my bonus, I’m not going to be eligible to do a Roth IRA contribution in 2021, so I’m just putting that money into my regular account.  
  • Save $41K in regular accounts.  Grade A. Put my bonus and additional funds in, so that’s $35.5K for the first half of the year. Great start.
  • Increase dividend income from all accounts to $27K/year (compared to 29K in 2019). Grade C. Dividends are still down for the year in the major accounts/mutual funds. Was only able to put $6.1K in for 2nd qtr, which leaves me at almost $11K for the year. Need 3rd and 4th Qtrs to be bigger than last year.
  • Passive income covers 38% of base living expenses in retirement, estimated at $78K per year. Grade C, covered 30% for the first half of the year. However, my 401K and Deferred don’t report dividends separately, so I may not be getting the full amount. We will see.
  • Beat net worth growth rate of 7%. Grade A. Due to market and real estate value, the new worth is up 12.2% for the first half of 2021. Very hard to believe.  

Business:

  • Attend twelve SJREIA meetings. Grade A; I’ve attended ten in the first half of 2021. My local market is pretty heated (like so many others). Still, its good to get the information.
  • Double the number of blog visitors in 2020. Grade F. Still not a large number of folks reading – maybe a little bump from last year.  Only 3,000 “hits” for 2021.
  • Sell $1,000 on TKD Woodworking (my side-hustle name). Grade: Incomplete. Made my first sale at the end of June – $71! Had some additional sales in July, as well as a commission sale, so we’re off and running!
  • Setup funding for TKD homes. Plan to get into real estate means setting up funding. While I’ve got a significant amount of money set aside to start this, I also need to explore additional funding methods.
  • Write/publish a book on finance.  Grade F: Haven’t done anything on this for a whole year. Not sure how to reboot this – need to try.

Personal:

  • Regular Workouts with Gymanstic Bodies internet system: Grade C: Was still doing this at the beginning of the quarter, but then got a shoulder injury and have been going through physical therapy for it. I am doing my PT religiously though – not sure if this counts.
  • Average 2 hours of cardio per week, which is about what I’m doing now. Grade A. Walking daily, so actually doing at least 3+ hours.
  • Backpack over 100 miles on AT (did around 50 miles in 2020). Grade: Incomplete. Did 29.8 miles in April. Plan to do 60 miles in August, and another 30 miles in September, so it looks like I’ll hit this goal.
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this. Incomplete. Site is still closed down
  • Reduce weight by 15 lbs. from Jan 2020 Again, I want to get in better shape as I get closer to financial independence. Grade C. I was down 3 lbs in 1st qtr, but only 1 lbs for 2nd quarter. Still have a long way to go, and the virus is keeping me from eating as healthy as I’d like.
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading. Grade A. Six more books in second quarter and I really enjoy it.

Travel:

  • Visit one national parks (that is the plan, right now). Grade: Incomplete
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often. Visited brother in VT. I would like to go to NY for my wife’s family, but she’s reticent due to the Covid. Grade: Incomplete
  • A week with Mrs. 39 Months for our 35th anniversary. Grade: Incomplete. We spent our 25th in Vermont with my brother, but it was only a 4-day weekend. Still, it was nice to get away.
  • Visit Ellis Island. Still want to do this – its so close. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it. Grade F. Cancelled.

How did your second quarter go this year?

Read more

Mr. 39  Months.

Rebalancing – July 2021

I’ve written before about performing regular rebalancing of your investments. This makes you sell off your items which have become too much of your allocation due to increase, and purchase of items that are low in your allocation, due to decrease in value – basically buying low and selling high. I usually do this fairly regularly, every six months.

African elephant female and her baby elephant balancing on a blue balls.

Since rebalancing does incur some costs, you don’t want to rebalance too frequently – but you do want to do it. Recently, I’ve read several articles on the subject (including this one from thebalance). The suggestion from many of them is not to do it on a specific, regular date, but when your portfolio shifts in a significant amount – usually 20% above your allocation or more (i.e. if you have your S&P allocation of your portfolio be 25%, when it is either goes up to 30% or down to  20% of your allocation, then it would be time to rebalance).

I’ve rebalanced fairly regularly every six months, but I thought I’d give it a try for 2021 and 2022. At this point, my allocation hasn’t shifted enough to be 20% off for any of my asset classes. 

I’ll let folks know when it does.

Read more

Mr. 39 Months

Investment Update June 2021

Well the market and our investments continue to move up overall, with the typical ups & downs by investment class. We continue to be on track with what we are looking to add in 2021, and our allocation plan has not really changed. Like a lot of folks in the FIRE community, once you get everything set up, automated and regular, it gets a little boring. Kinda “Steady as she goes.”

Our allocation remains pretty much the same as when I set it back at the beginning of the year, and back in 2020:

  • 20% Bond Index Fund
  • 20% S&P500 Index Fund
  • 20% International Index Fund
  • 20% Small Cap Index Fund
  • 20% REIT Index Fund

My 401K doesn’t have REIT option, so it’s just 25% for each.

Overall, our investment classes performed as follows:

  • Bonds were up about 0.7%
  • S&P was up 0.7%%
  • International was ups 3.2%%
  • Small Cap up 0.1%
  • REIT Index up 0.8%

I also have a Vanguard value fund (VVIAX) where I put in my after-tax investment money. That was up 2.9% for the month. I’ve been seeing a lot of articles of Value funds and ETFs doing better than the S&P500 – I guess we’ll see. I may do some additional research and write about this in the future.

My dividend account new allocation (as of Jan 2020) was:

  • 50% Dividend Stocks
  • 50% REITs

The dividend paying stocks were up an average of 1.8%, and the REITS were down an average of -1.6%, so we’re roughly even for the month of May.

One of the things I did this month was shift my automatic investment amount from my Vanguard Value fund to savings. Its my intention to do a Roth conversion of some funds from my regular IRA to my Roth by the end of the year – because I believe taxes are going up in 2022. I want to try to shift as much as possible into the ROTH, and I’ll be using the money I normally put into investments to pay the taxes on the conversion.

Hope everyone is healthy and your market returns for the rest of the year go up!

Read more

Mr. 39 Months