Happy New Year! It’s Money Time.

Happy 2018 everyone! It’s a whole new year now. Whatever successes – and mistakes – we’ve made in 2017 are done now. Can’t change the past, but we can take stock of where we are now, where we want to be, and what we’re going to do this year to get there.

I wrote a few weeks ago about how sometimes achieving your goals can leave you feeling empty, and challenged you to develop your own big, hairy audacious goals for yourself. Whether they’re for this year, or a few years in the future, having concrete measurable goals you’re striving for is key to both achieving what you really want out of life. After all, if you don’t know where you’re going, any road will take you there-but if you know where you want to go, you can measure where exactly you are in relation to where you want to be.

So today, in honor of a new year and a fresh start, I’m going to talk all about money. One of my favorite topics, as you know. Be sure to leave me a comment letting me know about your big money goals for the new year too.

Quarterly and Annual Net Worth Calculation

I’ve talked before about my quarterly net worth process and this quarter was no different than usual. Since I’ve been tracking my net worth on a spreadsheet since at least 2000 (although my current spreadsheet goes back to 2007, and I can’t find my old one) this is a pretty easy process that takes under an hour. I just update all the account values, leaving my house value as it was when I bought the home in January of 2006.

I currently have three separate categories to my net worth. I went into a bit more detail back in my “Behind The Curtain” post, but to recap, they are:

• Retirement funds
• Investment funds
• Cash and Cash Equivalents
• College savings
• Home equity

Each of these buckets has a different purpose, and different investment timeframes, so I monitor them separately. That’s one of the reasons why having a specific net worth as a goal isn’t usually something I set for the year. Net worth, and overall account value, often would depend on movements of the market-something outside of my control. Instead I focus on goals inside my control, which is usually how much I can put aside.

When looking at my personal annual report, there are a few things that stand out to me:

• My net worth this year went up by more than my gross income.
  • Yes, gross. Not net. GROSS.
  • More than half is thanks to that thing outside my control – movements of the market. The years and years of early saving in my 20’s and 30’s is paying off, and compound interest is working its magic
  • However, the total amount we put into savings, investments, and principal payoff (of the mortgage) was around half my gross income. I don’t talk about savings rates, because there are too many ways to calculate it, and instead look at total amounts.
• I still love the 15 year mortgage.
  • In 2018 I enter my fifth year of holding the 15 year mortgage, meaning that it’s approaching one third the way through the term. My target is to have this fully paid before I hit 40, which would put us at totally debt free before my oldest son heads off to college. This will let me use the freed up cash flow for college expenses, or to save more aggressively for the younger boys if my oldest is all set by that time
  • At the time I refinanced into the 2.75% 15 year mortgage, I almost took a 3.5% 30 year mortgage instead. Had I done that, today the balance would be about $231k instead of the sub-190k it is. That’s a forty thousand dollar difference. Of course my payments would also be lower, but because of the higher rate, “getting a 30 and paying it like a 15” doesn’t work. Because math.
  • This year my balance went down over $15k, solely from the regular payments. Remember that in my goal to pay off the mortgage I have the extra saved in a separate fund, which doubles as emergency savings. Should a significant emergency occur prior to payoff, I would simply use that fund to pay the mortgage payment. Having it locked up in the house prior to payoff would not be wise in my situation, since I’ve experienced a real, life changing emergency before.
  • Note – this is my only debt. There are no student loans, personal loans, credit cards, car loans, furniture loans, or other loans. All debt was wiped out after my husband almost died, because I experienced what a chain debt is when you have an emergency. If you haven’t heard that story before, you can check out part 1 and part 2 here. Total, complete and utter debt freedom is my goal.
• College funding is doing well
  • Sometimes it’s hard having big, long-term goals subject to significant change depending on many unknown factors. College is one of those kinds of goals, but with my oldest son entering high school this year, it’s become much more short-term than it used to be. If you have kids, don’t wait to start saving for college (if that’s something you’re going to assist with) – do it now. It seems like a short time ago my son was a baby, and now he’s a high school freshman. We only have three and a half years left before he starts college
  • I’ll write about this in more detail on Friday-I’ve got a special post planned.

So all in all, on the money front things are going well, although I’m always looking to optimize. I’d really love to accelerate the mortgage payoff goal, but I’m trying to balance it with college and retirement funding. I also want to make sure we have fun along the way, but fun doesn’t need to equal spending money.

What’s In Store for 2018

So on the money front, I’m planning to continue to work toward my two biggest short-term goals: mortgage payoff before I’m 40, and college funding. This is how those two will break down, plus a bit about retirement:

• Mortgage paydown
  • Another approximately $15k will come off the mortgage just from continuing to pay off the 15 year mortgage as scheduled. This will bring my balance at the end of next year to just under $174k
  • I’ll save a significant amount of money in the payoff fund. In 2018 I’ll turn 38, so I will have less than two years left to achieve my goal.
• College funding
  • Goal by the end of 2018 is to be 80% funded for my oldest sons college goal, which by that point will be only two and a half years away. Middle son at 60% (six and a half years left), and youngest at 20% (15 and a half years left).
  • With all three of them, my goal is to be able to fund four years at our in-state flagship university. Barring, of course, any life events that would cause a change in this plan. The exact dollar amount I’ll need is going to shift over time, especially for my youngest son. It’s much easier to project a shorter-term goal than a very long-term one, so my goal includes setting aside as much as possible so the increase in funds (hopefully) can cover the increase in college costs. I re-assess this goal annually to true up the increase in cost with my target.
  • Of course, this goal doesn’t mean they need to go to this college. Instead it means that’s what I’m willing to pay for, and we’ll work together on how to cover the rest. I worked full time and went to school full time to pay for undergrad, and I have no issue with my kids working to help pay, but I do want them to graduate debt-free.
• Retirement
  • Maxing out my 401k at $18,500, plus company match, is the goal for this year. This will be my third or fourth year of being able to max out the account. Interestingly, though, my IRA from the job I left when I was 30 is still worth significantly more than my 401k. It represents everything I saved and invested for retirement in my twenties, and although I put in significantly less than I have into my 401k, compound interest is working its magic.iij
  • I think it’s important to not neglect retirement while pursuing the other two goals. I’ve read before about people who stop saving for retirement to accelerate paying the mortgage, and while I respect that decision, I want to make sure we have a comfortable retirement. After the mortgage and college funding are set, I’ll invest any excess in after-tax accounts for early retirement (pre-59.5) funding.

What Are You Doing?

I’d love to hear what your big money goals are for 2018. Let me know in the comments, or drop me a note!

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