Then January Happened // The Joy of Fluid Goals

hiya friends! the last time we talked finances, we were riding the crest of a high and beautiful wave at the end of 2015, back when it appeared that we were ahead of schedule on our early retirement goals. but just like the nixon hangover that followed the 60s, what hunter s. thompson was talking about in that glorious passage that i love quoting, we are now experiencing the financial hangover, the realization that actual reality may shake out differently than we’d hoped. and we don’t have to go up a steep hill in vegas to see our high water mark — it’s right there on the spreadsheets. okay, no more quotes for today — i promise!

though the time we’re talking about was only six weeks ago, in some ways it feels like it’s been much longer. it was before the market correction/fluctuation/beginning of the recession/whatever the heck this is (mr. onl thinks we should just call it a nosedive). and while we’re not panicking, and we’re certainly not selling any shares (keep buying! shares are on sale!), we are taking a sober assessment of where we are now. and where we are is: back on pace for retirement at the end of 2017, not the end of this year. 

where the wave crested

in our usual tradition of not sharing actual numbers, here is a general sense of where we are, starting with the broadest measure, our net worth:

as you can see, we set a high water mark right at the end of 2015, and though we’ve been saving even more per month in the first few months of 2016 than we did on average last year, our savings can’t keep pace with the market declines. so we’re currently ebbing. it’s only february, of course, so we know we’ll get 2016 back to net positive even without the markets’ help. but the dip still ain’t nothing. here’s a different view of the net worth fluctuations:

the scale on this is super zoomed in (we did not start with nearly zero last february!), but you can see that the last six weeks have wiped out most of our year-end deferred compensation/bonuses, and erased the lead we had on our imaginary early retirement pace setter. (note for newer readers: we get a biiiiig percentage of our income at the end of the year, so while it looks like we’ve only lost a few months of progress, december is a crazy important month for us. losing december’s progress hurts in a big way.)

not every number matters

so we’ve lost some net worth on paper, and we could freak out about that if we wanted to. but “net worth” is comprised of different components, some of which matter to our timeline, and some of which don’t  matter at all. like our 401(k)s — they’ve taken a big hit, but we don’t need those for 20 years, so we don’t really care. but those numbers are factored into our net worth all the same. and according to usaa and zillow, the value of both our home and our rental property have gone up significantly, but we haven’t adjusted our net worth calculations to account for that, since we can’t pay the bills with home equity (or at least not without taking out a heloc, which is not our cup of tea).

here’s how the three important components of our net worth — mortgage balance, taxable savings (the nest egg for our first ~20 years of retirement), and 401(k)s — have fared recently:

again, the scale is super zoomed in, so our 401(k)s aren’t actually three times as big as our taxable savings, as they look here. only our mortgage balance, comprising both our home and our rental, have consistently moved in the right direction (downward = good when we’re talking debt), and you can see the big drop that we got in december from making a seriously large principle payment out of our year-end cash. the 401(k) balance has had the most volatility, but we can live with that since we don’t plan to touch that money for a long time, and can leave it to grow in the usual two-steps-forward, one-step-back style of the markets. the orange line — our taxable savings — is what really matters in terms of our timeline, and it’s currently trending in the wrong direction.

taxable savings: the only number that really matters

here’s the taxable savings data solo, in an unskewed scale:

the taxable funds, comprised mostly of vanguard index funds and cash, haven’t taken nearly as bad a hit as our 401(k)s, so we’re not in bad shape on this front, though we don’t love to see the numbers going down when we’re sinking more cash into those funds every month. but here’s a projection, to show what we need to have saved each year, and where we actually are:

we hit our goals exactly 2011-2014, but in 2015, we exceeded our projection by a good margin — enough for that dark blue bar to overhang the orange bar beneath it a bit. and given that we expect to be able to save more this year, we though it might just be possible to get all the way to the amount represented by the 2017 orange bar this year. but, without some legit help from the markets, it’s not going to happen. hitting the projections for 2016 and 2017, though, should be no problem at all, barring some massive, worldwide financial cataclysm. (knock on wood.)

the virtues of fluid goals

we did what the internets tell us to do: we set a big goal (moving up our retirement a year) and we put it out there. and while it’s too soon to tell for sure, it’s definitely looking like we’ll fall short. it would be easy to feel crushed, or at least sad. but instead, we’re doing fine. we credit that to keeping our goals fluid in our minds.

the only hard and fast goal we’ve set for ourselves is to quit at the end of 2017, but we’re even fluid on what “quit” means. if we fall short big time on our numbers, it could mean dropping to part time with our current jobs, though we sure hope it doesn’t end up meaning that. it could mean continuing to freelance, or taking other part-time jobs. our projected retirement budget has plenty of wiggle room in it, so if we need to adjust and live more frugally to quit at the end of 2017, we’ll do that. and maybe, just maybe, the markets will give us a tailwind this year after all, and let us zoom up our schedule.

even the big goal of maybe retiring this year was always a reach, and in some ways, it’s good that we had that silly notion smacked right out of our heads in a hurry, before we got too attached to the idea. (thanks markets, for correcting in january, and not waiting til july!) to us, it’s a good reminder that we’re always better off riding the wave than fighting against the current. so that’s the lesson we’re taking from all of this: go with the flow, go with the flow, go with the flow.

how are you handling the recent market misbehavior? anyone else rethinking your timelines? please share in the comments!