Quarterly Update – Apr 2019

Well, it’s early April, and spring is in the air! I’ve gotten a start on the goals for 2019, but many of them won’t really start manifesting till 2nd quarter (or later).

My Goals for 2019 (some financial, some not):

Finance:

  • Save $75K in tax-advantaged accounts (saved almost $81K in 2018). 401K, Roth IRA, etc. Dropped this down a bit, due to a need to plus up my savings/emergency fund. Key part of this is using my company’s deferred savings account to push money out till I hit FI. Since the deferred account money will have to be withdrawn (and taxed) when I leave, it actually is a pretty cool FIRE solution for saving. Grade A. Saved $12,875 already and on track to hit goal.
  • Save $5K in regular accounts (compared to $9K in 2017). This will go into my brokerage account. I withdrew a hunk of this to do my ROTH rollover (part of the “power of zero” philosophy). But I still have some bucks here. I have to take about $5K from my father’s IRA every year, so I just move it from there to my brokerage account instead f spending it). Grade A. Made the deposit in January
  • Increase dividend income from all accounts to $27K/year (compared to 26K in 2018). Grade B: 1st qtr was $5,752 compared to $4,868 for 1st Qtr 2018.  This appears to put me on track to hit my number.
  • Passive income covers 40% of base living expenses in retirement (it was38% in 2018). 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 D: It was 32.0% of my expected $18K/quarter (or $72K per year)
  • Beat net worth growth rate of 6% (it was -1.9% in 2018). This is my historical growth rate for the last 10+ years, so I want to beat my average. Grade A; With the stock market rally and my investments, I’m up 8.3% already.

Business:

  • Continue attending regular meetings of my local real estate investors association. 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, and it’s free for a paid member. Last year I attended, but it was spotty. Grade F: Did a cost/benefit analysis and deep look on my intentions to do real estate in the near future. Decided to drop out of REIA.
  • Double the number of blog visitors in 2019. 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 D. Only have around 2,000 visitors in 1st qtr, so just a little up from 2018. Probably need to spend more time on other blogs, commenting, etc.
  • 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 D. Made some additional progress on outline, but still a long way from completing.

Personal:

  • Increase weight lifted by 10% from 2018. Due to my illness, I didn’t make much progress beyond that, but I’m back to full strength now, and lifting what I was in September 2018.  I want to continue to improve my strength as I get older, instead of just wasting away. Grade A. Weight increase of 10% already, but having some struggles getting it higher. We will see.
  • Average 2 hours of cardio per week (currently averaging about an hour). Again, want to improve my fitness. Based on my lifestyle, I don’t think I can push it past 2 hours per week. Grade D. Still averaging a little more than an hour. Need to work on it.
  • Take part in at least one long bike ride, like MS bike-a-thon (80 miles). Didn’t do this last year, but really want to try. Incomplete. Long bike ride scheduled for Sep 2019
  • Backpack over 100 miles on AT (did around 80 miles in 2018). Other aspects of life interfered with my ability to get on the trail. Really want to push it this year. Incomplete. Starting to backpack in late April
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this. Grade A: Continuing to volunteer at least once a month. This Sunday is next one
  • Reduce weight by 20 lbs. from Jan 2019 (lost 2 lbs. in 2018). Again, I want to get in better shape as I get closer to financial independence
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading. Grade A. I have five books under my belt for 1st qtr, and I already have six lined up fr reading

Travel:

  • Visit a national park (visited two in 2018) Incomplete. Need to plan this
  • 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 B: Visited family in Tennessee in March. Plan to do NY in April, and VT in August., with another TN visit in October
  • Take a week at the shore and just relax. Too many of our vacations are spent running around. I want to see if I can go somewhere (in this case the beach) and just sit and relax. Incomplete. Still on track for July
  • Visit Ellis Island. Wanted to do this in 2018, but didn’t make it. 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. Its only 90 min north of us, but we haven’t gone yet.
  • Go on an international trip. Not sure which one (Canada, Caribbean, etc.) but I’d like to get out this year. Incomplete.
  • 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). Incomplete. Still on track to go in October

Overall, I’d give myself a B. Got a lot done, but still have a lot to make progress on.  

How are you going on your goals for 2019?

Mr. 39 Months

Investment update for Feb 2019

Realized that I hadn’t done an investment update for February this year. I guess when you hit a certain point on your FI journey, where everything is on “autopilot” you just don’t notice. It’s a shame, really, because February was another good month, coming off a really good January. There are reports of the economy slowing down in 2019, but the reporting of profits in 2018 has provided some positive surprises for companies, and the result has been a continued strong market. Also, the US Fed has backed off its aggressive stance on interest rates (see my previous post on that effect) so the market will hopefully do well in early 2019.

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

Another positive month, with small caps, International and S&P 500 leading the way. These were the investment areas that underperformed in 2018, so they are making up for lost ground. A perfect example of the need to rebalance your portfolio. I rebalanced at the beginning of 2019, selling off my “winners” (bonds, REITs) and buying some more “losers’ (S&P500, small cap, international) and now I’m being rewarded by those stocks shooting up. Overall, I’m up around 2.4% for the month, a gain of around $22K, and I’ve made around $90K in the first two months of 2019. Very pleasing!

  • S&P500: +3.5%
  • Small Cap: -+5.4%
  • International: +2.4%
  • Bonds: -0.1%
  • REITs: +0.8%

My 401K/Deferred account at work is up a similar amount

Dividend Income Account: Allocation:

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

This is up only 0.9% for the month, so  gain, but not a significant one. Again, if you look at the allocation above, the 50% bond allocation is driving down returns. My dividend stocks were up a little over 4% (in addition to the dividends they are paying. I’m satisfied.

Value Investing Account: My value investing portfolio is up around 4.3% for the month. It got hit in 2018, and is making a comeback, as value stocks are doing better. The allocation is about 50/50 between a total market fund and a value index fund.

Allocation now:

  • 51% USAA Market Index (my brokerage is USAA)
  • 49% in Vanguard Value Index fund

So for the year so far, I’m up 9.4%, in addition to having dumped almost $9K into the savings, which is close to 50% of my gross salary. I hope the success continues in the months ahead, both for me and for you!

Mr. 39 Months

Well that took a long time, but it was worth it

As many folks know, you tend to marry/get involved with people who are your opposite (outgoing folks with reclusive folks, spenders with savers, etc.) That is how it was with Mrs. 39 Months and I. I tended to “pay myself first” and then spend the remainder, up to the point where the checking account was close to zeroing out. Mrs. 39 Months was a saver from the word go – and I mean “saver”.

For our entire relationship, she has dumped any extra money she had (leftover at end of year, gifts of money, bonuses etc.) into a savings account. Period. When her company had a 401K, she pretty much put it in guaranteed income (savings, CDs & bonds). Ouch!

While I redlined it, I made sure my 401K had a large amount of stocks, especially when I was younger. When we finally had enough surplus cash to invest in an IRA on the side (and a Roth IRA shortly afterward) it ended up being my money which got put into it. Thus I could control the investments, and it was 70% -80% stocks.

Eventually her savings account has reached six-figures. All earning 0.25% in a basic savings account. Needless to say, this has caused a minor amount of stress/strain in our relationship. No matter what I said or how I reasoned, she wouldn’t budge.

Well, I finally got a small victory this week. I got her to take $10,000 and invest in two $5,000 CDs (a 2 year and a 4 year) offered by her local bank. The plan is to create a 5-year “ladder” of CDs earning more than a regular savings account. These are both earning around 2.5%, which is 5X higher than her regular savings account. We will see if this convinces her to try a little more with her savings. At least I can say that we have a healthy emergency fund, right?

I hope you are all moving forward towards your FI goals as well!

Mr. 39 Months

Well, that’s progress…..

As some of your recall, I have been working back through some health issues in 2018, and only recently got back to the level of lifting that I was at prior to those issues (huzzah!).

Well, this week I was able to finally jump to the next level on my lifting, going up in all of my exercises and increasing my weight lifted overall by about 10%! I’m now lifting more than I was when I started tracking this over 5 years ago, which is a tremendous boost for me, certainly a cause for celebration.

Health has been on the minds of many bloggers over the years, as everyone sees the benefits of FI (reduced stress, time to do the things we need to in order to improve our fitness, etc.). I typically read 1-2 posts a week from FI people that has some sort of “health focus” in it.

For Mrs. 39 Months and I, we try to eat a lower-carb diet, get plenty of vegetables and some fruit, and eat a decent amount of protein. I work out almost every day (lifting, biking, swimming) in an attempt to stay as healthy as possible. Mrs. 39 Months has some hip/leg issues (she’s had them since she was a kid) which preclude her from running, and make long-distance bike riding an issue. Still, we try and get out an move around as we move through our 50s and head towards our 60s.

It’s a good life, especially as we approach FI and can take even more time to concentrate on our health and on being together. Hopefully, you are taking care of yourself as well.

Mr. 39 Months

Investment update for Jan 2019

Yeah, baby! Just 17 Months to go till FI! Markets are up, my investments are up, and my financial situation looks a lot better than it did at Christmas. I believed the economy was doing well, and the only thing holding the markets back was issues with the Fed (see my post from December).

Well, it appears the “fear of the Fed” has ebbed somewhat, and the good economic results (for many companies, record profits) have helped to push stock prices up. The market is up over 10% from Christmas, and continues to push upwards. If you panicked and fled the market at Christmas, you lost out big time! I’m hoping we have a good year in 2019.

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

Remember that I rebalanced at the start of the year, selling off mostly bonds and some REITs, and pumping the money into the losers for 20118, which was small cap and International. For the month of January, I’m up about 7%. The big winners have been small caps, REITs and the S&P500, while International was only coming in around +5% overall, and bonds only up 1%. So my rebalancing paid off going into small caps, but not as much as going into International. For the most part though, I sold winners and bought losers, which turned into winners in January. Very pleasing!

  • S&P500: +8.1%
  • Small Cap: -+11.4%
  • International: +5.1%
  • Bonds: +1.0%
  • REITs: +11.7%

My 401K/Deferred account at work is up a similar amount

Dividend Income Account: Allocation:

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

This is up about 7.7%, driven more by the REITs, though everyone was a winner. My bond funds were up around 6% (counting dividends), my stocks around 5.6%, and the REITs ranged from 9% to 18.5% (averaged around 13.4%).  Very good for dividend portfolio.

Value Investing Account: If you remember, I have to take money out every year from my Dividend income account (it’s a rollover IRA from my father) so I took the dividends for the last 3 months, and sold off about $3600 in bonds (my “winders” in 2018) to get to $5K. I then took that and folded it straight into my Value investing account. I used that to try and balance the two mutual funds to 50% each.

Allocation now:

  • 50.5% USAA Market Index (my brokerage is USAA)
  • 49.5% in Vanguard Value Index fund

Both of these were up in January, and if you add into the dividends paid out in Jan, they are up 10.5% for the month!

Starting off for the year, I’m up 7.09%. What is interesting is that, with the gains in price, my portfolio returned $69,198.98 for January. One month, and $69K of capital gains & dividends! Nice return. That is close to the FI number we are budgeting for our lifestyle ($72K/year). One more month of this sort of thing, and we’ll be close to the high of 2018. Let’s hope!

How did you do in January?

Mr. 39 Months

I’m back baby!

Well last week was a real cause for celebration for me. As a lot of you know, I went through some health issues with kidney stones (medicine, catheter, operation, etc.) in late summer/fall. While everything worked out OK (so far) it put a crimp in my fitness training. I wasn’t really able to do much of anything (lifting, biking, swimming, etc.) and the result was degradation in my fitness level.

Well, starting in Nov/Dec, I was able to get back to the gym/home fitness area, and got started building back up. I had fallen out of the “habit” of doing morning fitness, so it took me a while get back into the swing of things, but by late December I was “in the groove” and starting to work my way back up.

Well, last week I finally reached the lifting level of where I was before all the health issues hit, and I am getting ready this week to push beyond that. In addition, I’m continuing to swim, bike and walk (can’t run due to knee injury) and I’m planning to push that as well.

Like most folks, health is a big factor in our plans for FI and both Mrs. 39 Months and I want to do a lot even as we age. I urge all of you to keep fitness as one of the forefront items in your life. It’s a lot easier to maintain fitness than to try to get back to a level you used to be at.

Mr. 39 Months

Goals/Objectives for 2019

I’ve done the goal setting posts before and gone over my 2017 and 2018 goals in previous posts. For 2018 it was a mix, but overall I believe I made real progress on a number of financial and non-financial goals. I learned a lot last year, most especially that the non-financial goals were actually the ones that became the most important to me. I guess as the FIRE gets you, you end up with a lot of the finances on auto-pilot, and then you really start to concentrate on what really matters.

For 2019, I kept my finance and business goals fairly similar (just bumping up some of the numbers) and kept many similar personal goals (just added a few). Since I’m under 18 months till I hit my FI date, I need to keep the process moving and keep improving, so that I’ll be ready when I hit the magic number!

Finance:

  • Save $75K in tax-advantaged accounts (saved almost $81K in 2018). 401K, Roth IRA, etc. Dropped this down a bit, due to a need to plus up my savings/emergency fund. Key part of this is using my company’s deferred savings account to push money out till I hit FI. Since the deferred account money will have to be withdrawn (and taxed) when I leave, it actually is a pretty cool FIRE solution for saving.
  • Save $5K in regular accounts (compared to $9K in 2017). This will go into my brokerage account. I withdrew a hunk of this to do my ROTH rollover (part of the “power of zero” philosophy). But I still have some bucks here. I have to take about $5K from my father’s IRA every year, so I just move it from there to my brokerage account instead f spending it).
  • Increase dividend income from all accounts to $27K/year (compared to 26K in 2018).
  • Passive income covers 40% of base living expenses in retirement (it was38% in 2018). 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.
  • Beat net worth growth rate of 6% (it was -1.9% in 2018). This is my historical growth rate for the last 10+ years, so I want to beat my average.

Business:

  • Continue attending regular meetings of my local real estate investors association. 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, and it’s free for a paid member. Last year I attended, but it was spotty.
  • Double the number of blog visitors in 2019. 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.
  • 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 togo.

Personal:

  • Increase weight lifted by 10% from 2018. Due to my illness, I didn’t make much progress beyond that, but I’m back to full strength now, and lifting what I was in September 2018.  I want to continue to improve my strength as I get older, instead of just wasting away
  • Average 2 hours of cardio per week (currently averaging about an hour). Again, want to improve my fitness. Based on my lifestyle, I don’t think I can push it past 2 hours per week
  • Take part in at least one long bike ride, like MS bike-a-thon (80 miles). Didn’t do this last year, but really want to try.
  • Backpack over 100 miles on AT (did around 80 miles in 2018). Other aspects of life interfered with my ability to get on the trail. Really want to push it this year.
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this.
  • Reduce weight by 20 lbs. from Jan 2019 (lost 2 lbs. in 2018). Again, I want to get in better shape as I get closer to financial independence
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading.

Travel:

  • Visit a national park (visited two in 2018)
  • 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.
  • Take a week at the shore and just relax. Too many of our vacations are spent running around. I want to see if I can go somewhere (in this case the beach) and just sit and relax.
  • Visit Ellis Island. Wanted to do this in 2018, but didn’t make it. 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
  • Go on an international trip. Not sure which one (Canada, Caribbean, etc.) but I’d like to get out this year.
  • 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).

So those are my somewhat ambitious goals for 2019. I am going to do my best to hit them, so wish me luck.

What are your goals for 2019?

Other Bloggers on their 2019 Goals

Mr. 39 Months

Net Worth Jan 1, 2019

OK, a lot of folks have done postings on their net worth (and how much it took a hit in 2018). I figure I’d join the crew and open up the windows to the folks outside. I know this is a topic of some controversy within the FI community, as some folk’s post their net worth, and some folks are loathe to do it. I believe that the more information folks have, the better they can judge my writings and decisions versus their own.

Like many others, I’ve posted my net worth on Rockstar Finance. So here goes.

Real Assets Value Jan 1, 2018 Value
House $279,809 $289,171
Mrs. 39 Months Car $3,650 $3,981
Mr.39 Months Car $5,251 $4,353
Sub-Total $294,781 $297,505
Liquid Assets Value Value
Family Checking $8,428 $4,014
Family Savings $11,963 $3,673
Mr. 39 Month’s Roth IRA $135,025 $178,199
Mr. 39 Month’s IRA $298,748 $234,647
Mr. 39 Month’s 401K $55,467 $61,732
Mr. 39 Month’s Deferred Savings $56,566 $105,889
Mr. 39 Month’s Checking/Savings $9,249 $8,925
USAA Brokerage Account $53,481 $22,526
Pop’s stretch IRA $135,205 $127,882
Mrs. 39 Month’s Checking/Savings $119,658 $119,658
Mrs. 39 Month’s IRA $162,001 $104,627
Mrs. 39 Month’s Roth IRA $89,448 $135,481
Sub-Total $1,135,238 $1,107,253
Debits Value Value
Home Loan $0 $0
Credit Card bill -$1,288 -$3,240
Auto Loan $0 $0
Sub-Total -$1,288 -$3,240
Net Worth $1,428,730 $1,401,518

Overall, net worth dipped about 1.9% for 2018, and this after pumping in around $87K of money during the year. Needless to say, it wasn’t a “banner year.” However, it’s the first dip in my Net Worth since the 2008 crash, so a good ten year run. Since my growth plans are based on my long term growth rate of 6% (what I’ve averaged over the last 22 years, including the 2000 and 2008 stock dips), I’m still in the ballpark.

Key lessons learned for Net Worth in 2018?

  • Real estate not really jumping up in my area (Southern NJ). My value hasn’t moved much since 2009.
  • Cars have depreciated a lot – but they continue to run well (regular maintenance) so no need to replace anytime soon. Slowly saving up for new ones at some point of time in the future.
  • Roth IRA conversions altered the makeup of my retirement accounts. Will probably due one more $50K conversion, and then let it ride from there. Used money from investment account to pay taxes, so it dipped a lot there.
  • Put aside 25% of paycheck and 100% of bonus to deferred account, so that jumped up significantly over Jan 1, 2018. No taxes paid until I leave work (when it gets paid out as a lump sum). This will end up being a good portion of my year 1 & 2 of FIRE money
  • Credit card bill was from one of our Pet’s emergency medical costs (ouch!). We have the money to pay it off, so no big thing

Overall, while our Net Worth took a slight dip, we will continue with the plan. I believe we are still on track to retire in 18 Months (if we want), or we could retire now if we felt confident in US Social Security.

How did your Net Worth go in 2018?

Other FI Bloggers and their net worth

Mr. 39 Months

Final End of year work: Year in Review 2018

I can’t claim to own this process, I borrowed it from Tim Ferris (author and podcast interviewer) and have been doing it for a couple of years. I use it to review things that worked in the previous year, what didn’t work, what do I want to add, and what do I want to get rid of.  Tim’s recommendation is to sit down with your journals and notes from the previous year, and spend an hour or two really thinking this through. Based on the answers, you should be able to formulate your plans for the new year.

The Steps

  • 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?
  • Go through 5 minute journal (daily 3 min in morning, 2 min in evening)

So what have I come up with for answers to the questions?

  1. Identify 20% of people, projects or ideas which provided 80% of enjoyment/powerful emotions for 2018
    • Travel with Mrs. 39 Months
    • Tracking Finance/heading towards FI
    • Blogging about finances
    • Exercise/Stretching
    • Reading
    • Gaming
    • Woodworking
    • Family
    • Backpacking
  2. Identify 20% of people, projects or ideas which provided 80% of stress/pain/powerful emotions for 2018
    • Working with boss (expectations, changes, etc.)
    • Dealing with employees who work for me
    • Standing up for myself when I’m right
    • Feeling being left out
    • Yardwork
    • Finances – reaching FI when market is volatile
    • Illness
  3. Try and spot patterns from #1 and #2; Determine action steps to increase #1 and reduce #2:
    • Pattern of being the boss of other workers, and stressing in getting them to perform when my boss questions them
    • Being fit/not ill means a happier life
    • Spending time with Mrs. 39 Months/hobbies
    • Reading about/studying/applying aspects of personal finance
  4. Identify Three things to add to my life
    • More time with Mrs 39 Months
    • More time on hobbies
    • More exercise/stretching and better health
  5. Identify Three things to remove from my life
    • Being the boss (just do my own work)
    • Illness
    • Lack of Control over finances
  6. Ask folks close to you, what you should do more of and what should you do less of?
    • TBD
  7. Start putting stuff into the calendar. If it is on the calendar, we will do it
    • Week at the shore with Mrs. 39 Months
    • Backpacking trips (at least five in 2019, including a full week)
    • Dulcimer festivals with Mrs. 39 Months (3 on calendar)
    • Woodworking (class in June, working at Pennsbury manor all year)
    • Travel to family in Vermont & Tennessee
  8. 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? A few more books to read
  • $500 to increase happiness? Another woodworking class
  • $1000 to increase happiness? Gymnastic Fitness class
  • Take 20% of liquid cash, how would you apply it to increase your quality of life? More vacation travel

9. Go through 5 minute journal (daily 3 min in morning, 2 min in evening). Key points:

  • A lot of time, I am grateful for my loving wife, Mrs. 39 Months
  • Family also mentioned a lot
  • Friends also mentioned frequently
  • Hobbies emphasized
  • Things to shy away from: Anger, depression, envy

So this helps me build my goals for 2019.

I hope this was helpful!

Mr. 39 Months

Update on ratios

If you remember, I wrote back in the middle of the year about using financial ratios to analyze your performance over a period of time. I thought it would be good to revisit my ratios, see how I’m doing, and give everyone a chance to see if this sort of tracking would suit them.

Liquidity

 Liquidity is a measure of the speed at which an asset can be converted into cash without loss of value. Cash, savings, checking and money markets can be quickly turned into cash. Stocks and Bonds (and real assets like gold, real estate, etc.) are more difficult to turn into cash at short notice.

Most people require a little bit of liquidity in order to survive (purchase food, pay bills, etc.). The key is to keep your liquidity in line with your other financial goals, and to keep your liquid assets as low as possible (while still being able to sleep at night).

The basic liquidity ratio is:

Liquidity Ratio = liquid monetary assets (from balance sheet) / average monthly expenses (from cash flow statement)

Liquid assets: Cash, checking, money market accounts, and savings

Two months recommended

From our previous post, the individual has a liquidity ratio of $22,200 (from Net worth) / $6,414.58 (annual expenses divided by 12) = 3.46 months for liquidity.

Our Liquidity ratio has been over 2 years for some time (thanks Mrs. 39 Months!), but it dipped in 2018 – not so much because of lack of cash, but an increase in the average monthly expenses due to some medical bills. Not a trend I want to continue.

Debt Ratios

The purpose of debt ratios is to determine the amount of financial leverage you currently use, and to track as you (hopefully) improve. The objective is obviously to become debt-free, especially if you want to be financially independent. The debt-to-asset ratio is very useful for tracking progress.

The data source is entirely the balance sheet. Debt-to-asset ratio = total debt / total assets.

From our example last post, $96,500 Debt / 335,300 Assets = 0.288

Another Debt ratio that is good to track is the Debt-to-Gross income ratio, which is the total debt payments / annual take home pay (pay after taxes, medical, etc.). It is used to help determine your ability to pay the debts off.

The source of the data is the cash flow statement.

From our example last post, $$11,400 (mortgage & debt payments) / $45,925 (total take home pay) = 0.248 or 24.8%. This is pretty good, as you should never take on debt payments (including student loans) of over 36% of salary.  Another recommendation is not to take on housing costs (mortgage or rent) of more than 28% of salary.

Our debt ratio continues to be 0, as we are debt free (and I intend to stay that way!)

Savings Ratios

You can use current income to pay for current consumption or to pay off past debts . The other option is to purchase assets that grow and create wealth – wealth that will provide financial security. This wealth is acquired by deferring current consumption and diverting income into long-term investments. The savings ratios measure the amount being saved and invested.

The savings ratio that I track is the savings-to-income ratio. It is a simple one, and its purpose is to determine the percentage of your income you save each year. You gain the data from your cash flow statement.

Based on the previous statements, the ratio for the previous documents would be $13,500 / $79,100 = 17% of their income, which is good for normal folks. However, for FIRE people, the percentage is a little low – most FIRE folks shoot for 30% – 50% or more. The ratio of savings you need to perform is based on your overall financial goals.

For the first time in our lives, our savings ratio bumped above 50% vs.Gross Income (i.e. income before taxes). Once we got the “Fire” and paid off the mortgage, it really got us pumped.

Real Growth Ratios

Inflation is the killer of savings, slowly bleeding your savings down until you have nothing left. If inflation is 3%, the price of a product will double in 24 years. How do you deal with this?

You save enough and invest correctly, so your money grows faster than the rate of inflation. You should use the growth of Net worth ratio to make sure you are keeping up with inflation.

Growth of Net Worth Ratio =[(Net worth this year – New worth last year) / Net Worth last year] – inflation rate

Example: [( 298,700 – 275,000) / 275,000] – .03 (inflation rate) = 0.056 or 5.6% Net Worth growth.

Then once you retire, you follow the 4% rule, adjust for inflation, and enjoy the good times!

Like just about everyone, our Net Worth took a hit this year (down 3.5%) due to the market. While we were diversified, and thus didn’t suffer as much as being 100% in stocks, the combination of the market and rising interest rates on our bond portfolio really gave us a hit.

Very Hope this was helpful!

Mr 39 Months