Some Background

This will be the first year I have been actively pursuing Financial Independence (FI).  This makes setting goals for this year a bit challenging.  I setup Personal Capital (and Mint) back in September so it only has data going back to June.  However, Lady Kit and I put the maximum amount of our spending on credit cards as possible.  This makes it a little bit easier to track some of our spending and then adding in the rest for things like rent, utilities that don’t accept credit cards, and gifts to family and friends.  Last year was I am sure without a doubt the most expensive year we had to date.

In 2017 we were in a unique situation where we were paying for housing in three locations.  We had our primary residence which was left vacant, an apartment where I was on temporary assignment for work, and another apartment where Lady Kit was living while doing her internship.  The good news for this situation was my living expenses at my temporary assignment were covered.  In fact, not only were they covered, but I was able to find a lease that was below the reimbursement rate and was allowed to keep the difference.  This was one of the biggest factors that allowed us to pay off Lady Kit’s veterinary student loans ($80,000 in 18 months).

What were our estimated expenses in 2017?

• Credit Cards (food, gas, clothing, some utilities, amazon, travel, etc.) – $60,000
• Mortgage (PITI) – $25,000
• Rent for Kit – $20,000
• Rent of Lady Kit – $18,000
• Student Loans – $60,000
• Miscellaneous – $5,000
• Total – $188,000

That’s right, we spent about $188,000 last year!  This number just seems absurd to me.  The good news is that 2017 was an incredible outlier and something not expected to be repeated.

Goal Setting

Our 2017 numbers make it really tough to set goals for 2018 since our expenses were so different than what we expect our life to look like this year (and next year we expect to be pretty different from this year).  We no longer have any debt, Lady Kit’s student loans are paid off, we sold the house, both cars are paid off, we are on the express train to FI!  But we expect to hit some roadblocks along the way.

Right now we are supporting 9 creatures (2 humans, 2 cats, 4 birds, and our newest addition a puppy).  I fully expect this number to increase over the next couple of years either by additional non-humans or possible an additional human or two (or both).  Because I have this in mind, I want frontload as much savings as we can.

 

Not only will our household size increase, I expect our house size to increase as well.  As I mentioned above we sold our home.  I took a new job closer to where Lady Kit is working (and now all of us are in the tiny studio apartment were renting).

Goal #1 (The Opposite of FI)

Our first goal for 2018 is kind of the opposite of FI.  We’re looking to purchase a new home one that will meet our current needs and offer some flexibility to expand some and get us out of the city somewhat.  My current commute is 1.5 hours each way and Lady Kit will be changing jobs this summer to one that will have a similar commute.  So on the FI side of things, our new home will be closer to our places of employment and we should be able to commute together thus allowing us to save on fuel and car maintenance.  While the shorter commute is great in and of itself, even better is that we’ll be able to spend that time together as well.

The down side of purchasing a home is our work location is a high cost of living area (very high cost).

Goal #2 (Travel Rewards)

The last 5-6 years have been difficult for us.  Not that there were any worries of our relationship falling apart, but still tough because we had pretty much been living in two different locations.  Lady Kit’s veterinary school was about 100 miles away so we rented a room for her close to school and I would on weekends when I wasn’t traveling for work.  Then after vet school she had an opportunity for an internship 5 hours away from home and this lined up with a one year temporary assignment in Washington, D.C. for me.

We took our first vacation in about 5 years in August (my travel rewardsfu was pretty weak) and I realized we could start doing some traveling together once we were living together again.  Last month was our first attempt at really trying the travel hacking idea.

Back in January I double-dipped for the Southwest Chase cards (Southwest Rapid Rewards Plus and Southwest Rapid Rewards Premier).

We received our companion pass last week and we planned a week-long trip to Costa Rica taking full advantage of the companion pass, utilizing my flexible work schedule to get the most of my vacation time, and using Lady Kit’s earned vacation time before she changes jobs.

The part of travel hacking I haven’t really gotten down yet is the hotels.  We pretty much just looked for the best deals we could find online.

I’ll have a follow-up post on how this trip goes once I tally up all the expenses and the benefits we got.

Goal #3 (Tax Advantaged Accounts)

Finally, a money related goal.  This one I expect us to hit easily so I wasn’t even sure it was worth putting as a goal, but it is the first year we’ll hit this mark so I’m doing it!  We’re going to max all the tax advantaged accounts available to us.

Last year I maxed out my Thrift Savings Plan (Federal Government 401k) and we maxed out Lady Kit’s Roth IRA.   I didn’t max out mine as I transferred an old Franklin-Templeton account with massive fees over to Vanguard and in the process I didn’t keep track of all the numbers perfectly so I wanted to make sure I didn’t over contribute.

This year we have already maxed out IRAs (backdoor Roth since we expect to be above the AGI limit) thanks to the sale of our home.  This is the first year we have had a HDHP plan and its corresponding HSA and we are on track to max our contributions at the beginning of May (the insurance company contributes a portion of our premiums each month to the account which will make up the rest).  We are maxing out Lady Kit’s 401k before she switches jobs (this was done consciously because her new employer doesn’t allow employees to enroll until they have been with the company for at least one year).  My TSP contributions will continue through the rest of the year as required to receiving the matching.

Goal #4 (Net Worth)

Here I have two goals which I will call a threshold and an objective.

• Threshold – $400,000
• Objective – $500,000

As of this writing we are at a net worth of $320,000.  Since Lady Kit and I are finally living together again we’ll be saving a bunch of money throughout the year by cutting our duplicated expenses (rent/mortgage, internet, utilities) and then we get economies of scale for things like groceries.

I think the threshold should be easily achievable based on our incomes.  The objective really depends on market performance.  I don’t see any way we could save approximately $180,000 in 7 months.

Goal #5 (One Full Year of Tracking Expenses)

This one is pretty easy, but I think it is necessary for us to make realistic goals for 2019.  A lot of our budgeting and goal setting is just guessing right now since we don’t have a lot of data (or at least not an easy way to see it all).  I setup both Personal Capital and Mint last year to start tracking things and try at making a budget.

Since then, I found that until you have expense data for a significant period of time (I think 12 months is the minimum) it is just guess work and I am really bad at it. This has caused me to underestimate on my budget and forget a lot of one off expenses.  It seems like every month there is a different one off expense (6 months of auto insurance, cell phone died and we need a new one, adopting a new puppy, donations to charity, etc.).

A Few Last Words

My goals for this year all have some link to FI even if they don’t directly push the date of FI closer.  I also have some other life perspective things to work on:

• Read more – 1 book a month (I know I am terrible at reading, I read a lot of things on-line just not actual books)
• Lose weight – Get back to 160 pounds (currently about 190)
• Run 500 miles this year
• Take time to reflect each week (if not every day)
• Focus on a positive attitude