Progress and Uncertainty on the Road to Early Retirement // Mid-Year Check-In

happy wednesday, friends. we’d like to take a moment before diving into today’s post to tell you how much we appreciate you. we love all the thoughtful comments folks have been leaving lately (please join in if you haven’t!), and it motivates us big time to keep writing content. work is crazy for both of us right now (don’t clients know it’s summer?!), and it would be easy to let the stress get us down. but having you here reading and commenting brings major joy to us that makes the stress easier to bear. thank you. :-)

and one more aside. after writing this post, and the paragraph above, this happened:

we had to re-read it about ten times before it sunk in. “is that us??? is there another ‘our next life’?” what an incredible surprise. the list of finalists is a who’s who of finance bloggers, and we can’t believe we get to be in that company. wow. sincere thanks if you nominated us!

now onto a topic that has had a lot of us freaked out lately — the state of our investments. or, rather, how we’re doing on our early retirement savings journey, which those investments are a reflection of. we monitor things almost daily, but since we don’t share numbers here, there’s not always a lot to say about it. but the recent (ongoing?) market correction has given us plenty to say!

the back story

we have had a vague notion for quite a while now that we didn’t want to “work forever.” and we generally had an attitude toward saving money (at least after we got out of debt about a decade ago), which we put to good use buying our first condo, our current “retirement home,” and our rental property. but beyond buying property, we didn’t have a lot of direction to our savings. we certainly didn’t have a strategy. when we moved to the mountains almost four years ago, we started calling what we were doing the “ten year plan,” even though “plan” is way overstating things. it was more like a ten year notion. but we did do some things that set us up well, namely buying way less house than the banks would say we could “afford.” we still ended up in a house that’s bigger than we need, though in a very normal neighborhood. mountain towns near ski resorts are full of fancy neighborhoods with expensive hoa’s, very few full-time residents, and a snooty vibe that we wanted no part of. we wanted to know our neighbors and not pay the $100K+ premium just for living by a golf course. but mainly, as we were both telecommuting to jobs on the opposite side of the country, and felt a bit expendable, we wanted to make sure that we could comfortably cover the mortgage and all of our other expenses on one income if one of us should get laid off. we saw this as an entirely practical decision, and weren’t even thinking of early retirement when we set our house budget.

but not long after we moved in, things started to click for us. we quickly figured out that we could pay off the house well ahead of the 15-year mortgage schedule, and set a goal of 10 years. then we gradually started to come across more detailed information on early retirement, including our favorite book on the subject and of course the ubiquitously “badass” mr. money mustache. almost two years ago, we formulated an actual plan to reach early retirement, and like so many others before us, realized we could get there faster than we’d thought. instead of eight years remaining in the ten year plan, we realized it was more like five or six. and that would include having the house paid off, and having enough savings in taxable investments and 401(k)s to sustain us, based loosely on the four percent rule (though not exactly, given how out of balance our investments are, in favor of tax-deferred accounts). at this point, we think our ten year plan will really only have taken six years to achieve, with the house paid off in just over six years. that is, if things go to plan.

big picture progress

looking at things big picture, we’re astonished at how far we’ve come in a short time, aided in large part by jobs that overpay us (though when we’re stressed out like now, we feel like we earn every penny). though we think early retirement is achievable for a lot of folks, we’d never say that having a high salary doesn’t help. for sure it does. we feel lucky every day to be in this position. since we bought the house four years ago, our net worth has tripled, and the year-over-year gains are pretty big, owing to us getting serious about saving and about paying off the house quickly (we include home equity in these calculations, to show progress), as well as growth in the markets since 2009.

we talked in this post about how a large percentage of our income comes at the end of the year, making it impossible to do precise planning or projections on what we’ll be able to save in a year’s time. we make the best of it by planning for what we’ll put away each month, and then agree that we’ll determine at year’s end how to divide our bonuses among taxable investments and mortgage payoff. while the uncertainty of not being able to project out our savings for the year is frustrating, it’s more than offset by the awesomeness of high percentage bonuses. if you can train yourself not to budget for them, they are an incredible way to save quickly and avoid lifestyle inflation, because you get used to living on just what you earn in your regular paychecks, not your total income. of course, over time, we’ve gotten used to living on way less than that, even.

even without that sense of certainty, we still map out targets each year for where we want our taxable investments to be by year’s end, and where we want the mortgage balance to be. and we’ve hit our targets every year. we even got within a few thousand dollars of our targets last year, despite putting a large down payment on our rental property, which took a bite out of our taxable accounts. we came into 2015 feeling good.

where we are now

watching our balances over the past few years, we’ve been chugging along, seeing our numbers generally get bigger, and liking our progress toward the big goal. at the start of this year, we set december 2017 as our official fire date, for reasons not having to do with money, and decided to just make the finances work to meet that date. that meant getting even more aggressive with our year-end goals for the next three years, to levels that we knew would require real belt-tightening.

and the good news is we’ve been hitting all of our milestones this year — paying ourselves first from every paycheck, and prepaying the mortgage on schedule. between our 401(k)s, our mortgage principle payments on our home and rental, and our taxable investments, we save more each quarter than i earned annually in my first job out of college. it’s crazy to think about. (and it feels more than a little awesome. not gonna lie. no #humblebrag here.) of course we’re still in the dark about what our year-end bonuses will be like (they are hugely variable), but we were feeling like we could at least get within a stone’s throw of our aggressive targets, and make up any deficit next year.

and then the market correction happened. of course we know, rationally, that a correction isn’t a bad thing for us, and that it means we now have the opportunity to buy more index fund shares at a reduced price. but there’s no sugarcoating the feeling of losing a huge chunk of our progress. at one point last week, we were down almost as much as we’d invested in all of 2015. as of yesterday morning, before the latest plunge, we’d basically lost all of our progress since mid-may, about three-and-a-half months’ worth, almost enough to fund a full year of retirement, and it’s certainly much worse now. (i haven’t had the stomach to look today, not like it would do any good.) if you’d told me, right out of college, that i could lose an amount equal to my entire annual salary at that point, or more, in the blink of an eye, i’d have run away crying, and shunned the markets forever. yes, we know we haven’t actually “lost” any money, since we’ve sold exactly nothing, and placed our regular purchases right on schedule. but still. losing ground on something you want so badly and are working so hard for feels lousy. no way around that.

so what now?

we have no idea what the markets are going to do, and we have no idea what our bonuses will look like. all we can do is keep on keeping on. we’ll keep buying our vanguard shares twice each month, putting a little into cash accounts with every paycheck, letting our invisible 401(k) investments happen as scheduled, and prepaying our home’s mortgage. and we’ll practice as much zen detachment as we can muster, knowing that we’re doing what we need to be doing, and can’t control the rest. there’s a seriously good chance at this point that we won’t hit our targets for this year, and we just have to be okay with that. we’re committed to quitting at the end of 2017, no matter what, and if that means that our accounts are underfunded, and we have to freelance for a few years, then we’ll do that. and we’ll still feel incredibly fortunate every day to have that opportunity.

how are you handling the recent market rollercoaster? are you re-evaluating any of your goals or timelines? or are you practicing the most incredible discipline and not checking your balances? (you’re our hero if that last one applies!) please share!