Financial Independence March 2017 Update
Welcome to our March 2017 update on our financial independence progress, aka “The Plan”. We raced right through January and February with a ton of work hours for both of us and persistent illness dragging Jeff down! We skipped the February update as a result, so we’ve got lots to cover for March. Jeff is finally feeling much better and able to do more than work, cough, and have a fever. Illness sucks!
The Stock Market Continues Its Run-up
Unless you’ve had your head in a hole, you haven’t missed the fact that equities continue to put on valuation. Week after week, the Dow and S&P 500 are setting new records. International stocks are doing okay, too. Bonds are suffering a little bit from interest rate increases. Recent signals from the Fed indicate another Fed rate increase is likely this month, so that will put more pressure on bonds, particularly 10 year and greater maturities.
So what’s a couple looking ahead to financial independence and early retirement to make of all this market activity? For the time being, we’re taking it as it comes and sticking with our plan. That involves staying with our aggressive portfolio allocation and our spending/saving strategy. All of the increased equity valuation is doing wonders for achieving our net worth goal for financial independence. But, we’re not letting it go to our heads by reducing our saving or increasing our spending. At the risk of sounding pessimistic, a big correction could be right around the corner! (If you think I’m crazy, go look at corporate earnings – doing okay, but far below the run-up in prices. That train will only run down the track without earnings increases for so long. Let’s hope March earnings results look good!) But, I’m not trying to predict the future. We all know: Future returns cannot be predicted.
January/February Saving and Expenses
As you might recall from our January update, we were spend happy in December and blew through our entertainment and clothing budget by about $500. I was hoping to make that up in January, and boy did we. Jenny and I tightened up our spending considerably. We cut waaaay back on our dining out and entertainment expenses. To be honest, what made that easier was me being sick (off and on) for the better part of six weeks. When sick, I didn’t feel much like eating out, or meeting friends for drinks.
The result? For January and February, not only did we make up the $500 from December, we actually spent a tiny fraction of our eating out and entertainment budget, cut our clothing budget to nearly zero, and ended up banking an extra $1000 into our cash account! Woot, woot!! I can’t say it was much of a burden for me since I was sick much of the time. When I wasn’t working, I was usually in bed. Jenny, on the other hand, has been getting cabin fever. We splurged a little last weekend and had a nice evening out downtown to celebrate my birthday and Valentines day (since I was sick the week of V-day). It was guilt free spending since we had saved so well over two months.
For our other saving and expenses, everything was according to our financial independence plan. The saving into our tax-deferred accounts (401k’s and HSA) is via salary deduction, so that’s on autopilot. Contributions to our sons’ college plans are also automatic from our bank account, so that happened as usual. I received an award at work in January and I put most of the award into the college savings funds. This will help my oldest son defer some costs associated with his study abroad program later this Spring.
Looking Ahead to March and Beyond
We have a large notable expense potentially arriving in March. We maintain a third car for our oldest son’s use when he’s home for college. That car has served us well, but it is becoming unreliable and needs replaced. I value good used cars with plenty of life left in them and I’m looking at needing to spend $8-10k to get a car that meets my requirements. I’m not excited about spending that money, though. As an alternative, I’m actually exploring the possibility of a rental car when my son is home. Jenny or I would drive the rental, and our son would drive one of the family cars. The rental expense could approach $2k over the year and at the end we’d have nothing to show for it. BUT, we’d also not have ongoing maintenance, no insurance costs, etc. I’m seriously considering it. I’ll let you know later this Spring what I decide to do. If you’ve got an opinion on this, I’d love to hear it.
I think our March saving and expenses will be on track. Of course, we’ve got our cash reserve if something outside our budget comes up. The balance on that account is still growing, but is healthy enough to provide a shock absorber if needed.
Beyond March, some changes to our portfolio strategy are likely coming. Or, perhaps I should say the strategy is continuing to develop. I’ve always been uncertain (and uncomfortable) with how we would transition in an orderly fashion from the accumulation stage to retirement. I’ve been researching the heck out of various approaches and I expect we’ll make a decision on a strategy this month. Changes to our portfolio will probably start in April. I plan to author a blog post about the changes in the future, so stay tuned.
Financial Independence Summary
Okay, so after two months of blistering portfolio growth, where’s that put our wealth accumulation goal for financial independence? If you take a quick look at “The Big Graph”, you’ll see that linear trend line moving more towards the vertical. Of course, I don’t expect that to continue indefinitely, but with half our goal met in less than a year of a saving, I’m starting to think the money goal may not be the limiting factor in deciding when to quit full-time work. And you know what? That’s more than okay. We’ll just save more and reduce our financial risk in retirement.
How are things looking for your financial independence plan as we head into Spring?
Posted by Jeff