sorry to those of you who got an early email about this post, before it actually posted. we’re struggling to adapt to the new (in our opinion worse) wordpress interface. but let’s press on!
this week and next are anxious weeks for us. these are the weeks when we’ll find out whether we’ll be doing a happy dance that we hit our year-end goals, or making sad puppy faces at each other for the next few weeks because we missed the mark. yep, it’s bonus time.
a little rewind for newer readers, or those who read a thousand blogs and can’t keep everyone’s story straight — no judgment. we’re planning to retire at the end of 2017, pretty much no matter what (within reason, or even not within reason — we’ll definitely retire if the zombie apocalypse comes). we’ll explain why that date is significant once we’ve finally pulled the plug, but we’re highly motivated to make our finances work by that time, or to reverse engineer our budget once we know what we have as of our quit date. that has meant adjusting our original targets, which would have let us retire closer to 2020, to more aggressive numbers, which require a combination of laser-focused saving and major cooperation from the markets. and, well, the markets haven’t held up their end of the bargain this year, with their mostly flat performance so far (not to mention that little roller coaster ride in late summer, though thankfully that has mostly evened out).
we’re both in senior positions, and at the end of each year, we get bonuses that are partially a reflection of our performance, but are by and large a form of profit-sharing with our respective companies. this is great in good years, because we benefit even if we didn’t have all-star years ourselves, but it’s a bummer in the down years, because we get small bonuses even if we rocked it individually. the writing is on the wall this year — not a great year for one of our companies, and a medium year for the other. meaning: we’re going into our year-end reviews with low expectations, and are anticipating that we won’t hit the targets we set for the year. :::sad trombone sound:::
getting started in investing is tons of fun, because you watch your balances go generally up as you save more and more. for new investors, most of the changes in balance are from investing more cash, not from market swings (and hopefully not from taking money out!). it’s wonderfully motivating, because you see a direct result: put money in, balance goes up, high fives all around. but then this funny thing happens after you’ve been at it a while, and saved a nice sized chunk: suddenly, the direction that the little graph goes isn’t up to you anymore, and even if you’re investing like gangbusters, the line has a mind of its own. it might go up, it might go down. before you know it, you might start seeing big swings, like seeing a decline over a month of more than you plan to spend in a whole year of retirement. (yes, this happened to us in august, but it didn’t mean anything since we didn’t sell any shares, and things bounced back in october.)
this same thing happened with our bonuses, too. when we were young cubs in our industries, we got our little bonuses reliably, as a pat on our eager heads for working hard and showing promise. but as we stayed at it longer and got to be more senior, and the potential for much larger bonuses increased, we started to have a lot less control over these as well. just like with our market investments, our bonuses started to rise and fall with the health of our companies, and had much less to do with our own inputs.
how’s that for irony? you work hard to get your finances in order, and to put yourself in control of them, only to be rewarded with… losing that control? that’s an exaggeration, of course, since we still decide where and how to invest our assets, and we decide what companies to work for. we’re far from powerless. but there’s a pretty big dose of mandatory surrender that happens in personal finance, ironically, when you’re doing it right.
we view all of this as a reminder that it’s okay not to be in control of everything, and in fact, that we’re never fully in control even if we think we are. not to get all yogariffic on you guys, but letting yourself surf the flow instead of fighting against the current is a far better way to be. that attitude is required if you’re going to be a happy investor.
what we’ll do with our bonuses
no matter what our bonus amounts end up being, we’ll sock 100 percent of both bonuses away into some combo of our index fund account at vanguard and our primary residence mortgage (as opposed to our rental property mortgage), since our goal is to have the house paid off before we retire, and we need enough in our vanguard account to sustain us for the first ~20 years of retirement, until we go into 401(k)/ira mode. we’re considering making a personal loan to a family member, which could also play into this as well — perhaps we’ll talk about that in a future post. (it’s not something we would have chosen or offered, since mixing family and money is dicey business, but we’ve been asked, and want to give it our full consideration.)
i find out later this week what my bonus is (thursday, to be exact), and mr. onl finds out next week. we’ll take any happy bonus-y vibes you care to send our way! :-)
anybody else who has crossed the point when the markets have a bigger impact on your balances than your savings rate struggle with this fact? anyone have some pro tips on learning to surf the wave instead of fighting the current? anyone else waiting to learn about your bonus and want to vent about it? we’re all ears!
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Categories: we've learned