With each new year, many people create goals from themselves to achieve throughout the year. And traditionally most of them are related to health: going to the gym more, eating healthier, running a 10K or half marathon, cooking at home more or eating out less. However, as the year progresses, many of those goals fall by the wayside. I have never really been one to make goal starting with the new year. I tend to fixate on things for a max of 3 months at a time. I can do things really well for that period of time and then for whatever reason I quit. Three months seems like it should be a long enough time to create a habit, but for me that seems to be the max amount of time I can focus on achieving some sort of goal.
There has bene one constant goal that has been on my mind throughout the past year that I haven’t waivered: financial independence. My idea of financial independence has looked very different this past year. The different avenues available to me all seem like viable options to get me to my end goal. With every new podcast, blog, or conversation with someone in the financial independence community, there are new ways of pursuing financial independence. I have changed my plan pretty much every week, and when I hear a story of someone pursuing financial independence, I feel like I can replicate their story.
But that’s the thing…it’s their story. It’s not mine. I have had to take an introspective look at myself to determine what path I want to follow to ultimately achieve my goal. As I have been thinking about how 2020 will get me closer to achieving financial independence, here are some of the ideas that have been floating around in my head. One path that comes to mind is trying to pay off my car loan, and aggressively pay down my mortgage. I have entertained both ideas for 2020 but have decided to keep paying the scheduled payments as they come. The interest rate on both loans I have are competitive rates: 2.9% on my car, and 3.85% on my house. Since the rates are so low, I don’t find the need to pay them off as aggressively as some people may suggest. I believe I can get a greater rate of return on my money by investing it in the market. The argument to paying it off more aggressively is to get out of debt as quickly as possible. While yes, that is a very valid argument that I have had with myself many times, I have come to the decision, at least for this year, that I am comfortable with the amount of debt I am carrying and will reassess next year.
Ultimately, my financial goals for 2020 are to let automation do its work in the background. Throughout 2019, I had opened several new accounts to bolster my way to financial independence based on the recommendations of different articles I had read or podcast episodes I had listened to. Now in 2020, it is time to maximize the benefit of all my accounts. When I started my pharmacist job in 2018, I was contributing 10% of my paycheck to my 403b. as great as that was, I still wasn’t maxing out my 403b. Now in 2020, I have set up my contribution to max out my 403b which is set at $19,500.
Also, through my employer, I have access to an HAS and for the past two years, I had only been contributing the minimum amount necessary to receive my company match. With my benefit selection, this year I will be maxing out my HSA at $3550 with pre-tax money to build that over the next several years.
The next account I want to make sure to max out throughout the year is my Roth IRA. I opened this account last year and contributed the max allowable at $6000 and plan to do that again this year. The downside to the Roth IRA in my mind is that it takes a bit more planning to max out because it uses post tax dollars to fund. With my 403b and HSA, my contributions get taken right from my paycheck so I essentially never see that money. That is great for me because I am paying myself first and not even allowing that money to be spent. The Roth IRA on the other hand uses post tax money so it has to be factored into my budget. There are many people in the finance community who fund their Roth IRA’s on January 1 to maximize the amount of time in the market. If I were a better planner at the start of 2020 I would have done the same, but alas, I wasn’t so I have to find other ways to fund my Roth IRA for 2020.
Finally, the last place I will be investing is through my brokerage account. This account uses post tax dollars and is extra money I have left over to save that can’t go into any sort of retirement vehicle. To fund this account, I have my checking account set at a certain dollar value, and then two times a month I make withdrawals from my checking account into my brokerage account. Currently, this account is completely invested in VTSAX, which is Vanguard’s Total Stock Market Index Fund. It is an index fund with very low fees and replicates market returns. At this point in my life I can deal with the volatility that comes with being fully invested in stock. It also helps that there has been an amazing bull market this past year. Talk to me again when the next bear market comes. Even when that comes, I know that the market will eventually correct itself and to just keeping on the path I have created for myself is the best way forward.
Now that I have all my systems in place for maxing out retirement accounts and funneling money into my brokerage account, I have made my lofty goal of 2020 to have $100,000 spread throughout those accounts. That will be my first $100,000 saved and I plan to share my progress throughout the year. Many people say that getting to the first $100,000 is the hardest because compounding isn’t your best friend yet. Once I hit that mark, I hope to see greater returns as long as the market continues to go on a tear. However, even if the market does slow down, I have my systems set up to continue investing because I am still so new to my journey and am just trying to accumulate as much wealth I can to set up my future self for success. I hope everyone continues to follow me on my journey and stays tuned to follow my progress throughout 2020!
Steven | Rx for FIRE