With 2016 underway and our Financial Independence project officially started we have set some pretty ambitious goals for the year as it relates to our FI project. Here is an overview of some of the goals we have set for this year:
We have set a savings goal this year of $60,000 across all of our tax-advantaged and after-tax accounts. In terms of savings rate, I think this will be around a 60%-65% savings rate on gross income, but at this point it is a little challenging to determine an exact number since most of the income from my wife’s business could fluctuate greatly. If she has a really good year, we may be able to save more, but if our projections are accurate I think this is the number we should be able to hit.
I’ll admit it, we are guilty of a lot of spending over the last few years. Not the type of spending that puts you into debt, but the kind where you spend all of your take home pay (after retirement, and HSA deductions). On one hand we did fairly well with our tax-advantaged pre-tax savings, but very poorly on saving any additional money. This is the year we will not only get our spending under control, but spend on things that are meaningful and worthwhile that aligns with our goals both for financial independence, and for living a purposeful life. While we do not quite have a specific number in mind, we have set a cap of no more than $5,000 total per month in spending. I realize for many that this number seems really high, but for us this represents a significant decrease and part of a step down process to get our spending under control. About $2,000 of the monthly spending is our housing expenses which includes mortgage, utilities, and taxes. We are also anticipating an additional member of our family arriving in the middle of the year, and this amount includes budgeting for costs associated with the birth and upstart costs of the new baby. A lot of these costs could be mitigated by using our HSA accounts which have more than enough to cover all the medical expenses, but would not be an effective use of our tax advantaged savings. So we set the goal at $5,000 a month with the hope of reducing it further as we continue. This is also the spending number we are currently using to estimate and calculate our project completion date.
We love to travel, and during our time together have taken some great trips to places we love to go including Europe, Hawai’i (about once per year), among other locations and activities (cruises). Most of these trips have been taken with minimal expenses thanks to airline miles and hotel points accumulated from work travel and a little bit of reward point hacking. This year our expected travel will be significantly reduced as we focus on our new baby. Knowing this ahead of time we front loaded our travel in 2015 going on two Disney cruises, a trip to Hawai’i and several business related trips that included Canada for my wife and a few academic conferences for myself. With the exception of some spending on the cruises we paid almost zero for all of our other trips. Aside from business related trips in 2016 we don’t anticipate spending much, if anything, on travel related expenses in 2016.
Over the years we have accumulated a lot of stuff that either no longer serves a purpose, or never did in the first place. Some of this is simply things acquired from parents and family that we never asked for but was sent to us anyway. Other stuff is simply things that came with each of us when we combined households, but no longer serves a purpose. Our goal is to cut down our belongings to those things we actually need and enjoy. I was actually inspired by the book “The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing”. While I don’t necessarily agree with all the premises in the book, it was refreshing to look at your belongings in a different way. I also enjoyed reading about decluttering that doesn’t use time-based rules associated with an items use and instead look at an item based either on it’s personal value or purpose. Another inspiration for decluttering was watching an independent film called Tiny House. I don’t think our family is quite ready to downsize to that level, but listening to the personal stories of people who have made the move was inspiring. It certainly helps someone to focus on what is truly important. So with that we plan to very early in the year do an extensive amount of decluttering and purging of unused or unnecessary belongings, this includes things that might distract us from what is important in life.
Most of the significant changes in our work situation happened at the end of 2015 with my wife leaving her job and starting her own business. The goal this year is to make more money than she did when she employed for someone else full time, while at the same time spending more time with family. We also are using her business to allow more efficient tax and retirement savings planning.
I will continue my job as a university professor this year, but I plan to significantly increase the amount of time I spend on side projects that earn additional income. This includes consulting work as well as other projects I am working on with my wife through her company. I have even considered an additional part-time job at the public university in the same city to have access to the state provided 457b plan. One of the things that is allowing me to take on additional work is that I have completed the tenure and promotion process at my current university and I am no longer serving in an administrator role. Combine that with all of my teaching responsibilities are in the evening, and I certainly have the capacity to bring in additional income.
One of the last goals I have for this year is to really focus on this blog to tell our story as well as try to help others think about their finances in a different way. In the past I have blogged briefly about my academic career and certain topics in my field of expertise, but I never kept up with them past a few months. Most of this was either due to losing interest and trying to keep up with both a blog and my academic writing at the same time. This blog however will be different because I am passionate about this topic, and at least right now this does not seem like work or needless self-promotion in my field. My goal is to try and post 2-4 times per week over the next year.
My wife is also running a separate blog keeping track of what is is like to completely leave your job and run your own small business from her perspective and experience.
So that is a rundown of the goals we have come up with so far for 2016 related to our FI project, and we certainly welcome additional suggestions or feedback in our comments.