It’s that time of year again, time to review the outcomes from our 2018 goals. It’s been an interesting year what with stock market gyrations and my own job changes. What has that meant for my performance against goals?
A Reminder to Monitor Goals Year Round
Before we start a little reminder. As I always note when starting this discussion, year-end is not the only time we review these goals. Proper goal management requires consistent and frequent monitoring of progress. In the words of Peter Drucker, “You can’t manage what you can’t measure”.
My Goal Monitoring is Monthly
I manage our goals on a regular basis with the duration of each constrained by the period that would allow for change. So for example, I would manage most metrics at a
I do monthly instead of 2x a month more for convenience. That sounds like a cop-out when I write it, but I if you think deeper it is not. One of the main goals of setting goals in the first place is to motivate oneself. More convenient goal management can contribute to a positive view of our goals. As such when you
Our 2018 Goals in Review
Anyway, on with the goals. For those who do not recall our 2018 goals were:
- Save 1.5x Yearly Expenses, revised upwards mid-year to 1.75x
- Reduce my Mortgage by 33%
- Return to exceed 3%
- Travel Costs at $0 after travel hacking
- Donate 5% to Charity
So Where did I end for the year on 2018 Goals?
- Save 1.5x Yearly Expenses, revised upwards mid-year to 1.75x – Exceeded. Mid-year I revised our savings goals up to 1.75x expenses from 1.5x. This was because my wife business continued to flourish. Actual business receipts for 2018 were a few grand over 2017. When I set my goals in December of 2017 we only had a commitment for Q1 business, that obviously changed. Our end result was a savings of 1.8x expenses.
- Reduce my Mortgage by 33%- Exceeded. If you view the lump sum total of our mortgage contributions in 2018 we blew this one out of the water. Our mortgage was reduced by 71%! But I would be remiss if I didn’t point out that number is inflated. We had some old pre-mortgage muni bonds be called mid-year. I redirected this set of assets into our mortgage to the effect of a 35% reduction in our mortgage. If you recall I view bonds and mortgage as equivalent, so this makes sense. Anyway, that means our income reduced our mortgage by 35% for the year. So regardless of measure this was a success. Look for our next post to highlight what this means for our mortgage going forward, especially in light of the recent stock market gyrations.
- Return to exceed 3%- Fail for Items out of our control, Pass for those in our control. We continue to only purchase investments that on average return greater than 3%. This includes bonds, our mortgage contributions, etc. This aspect continues to be a pass. Unfortunately, due to the gyrations of the stock market, our actual market return was negative. Everyone and their mother is upset about the stock market pull-back, honestly I don’t get it. That being said my real goal here is the items I control. As noted in past posts you should not set goals for things you do not control.
- Travel Costs at $0 after travel hacking – Fail. This one stings a bit. We took 2 major trips this year, a 7-day cruise to the Western Caribbean and a couples 10-day road trip tour of Iceland. We also took our annual one week visit to a cabin in Maine with my In-laws. In total after year to date travel hacking our cruise left us with $1940 in travel charges. Our Iceland trip added $3200 to that. If you recall our Iceland trip was more then expected. This ultimately is why we were over for the year. It stings a bit since unlike last year where we missed due to a surprise additional trip, this did not happen this year. Our Maine trip this year was a wash in terms of costs, netting out to $0 when you consider we utilized a cabin our in-laws rented. So where did we end? After the first 2
trips you may recall we still needed to travel hack $5100. Well, let’s see. Since thattrip we had the Capital One Venture Card, which added 700 dollars in bonus and spending. We had the Citibank Prestige which added another $700 dollars in bonus and spending. Finally, we added the Chase Ink Plus for $900 dollars in bonus and spending. This subtracted $2300 leaving us with a total travel bill for the year of $2800. Ironically approximately what we missed by last year with one less trip. Still not a bad total for 2 international and 1 domestic trip. Total travel hacking credits for 2018 were approximately $4300. - Donate 5% to Charity – Pass. I’ll admit this one was more varied than in past years. With the change of the standard deduction straight cash donations were less advantageous to us. We were a bit more choosy with our cash donations in 2018. In addition we had less turn over in used stuff to donate. As such our donations took varied forms through the year, including cash, time, physical goods, etc. That being said we still achieved our 5% goal.
Our 2018 blog goals results were also a mixed bag:
- Cost Neutral Blogging – Pass. This site actually made money in 2018. Now we’re talking beer money here, but it’s still cool to say I have a revenue-producing hobby.
- 15K Page Views a month – Fail. We still hover between 8K and 10K page views a month. Honestly, I’ve stopped worrying about it. There comes a point where you either accept what happens with your blog or you pull the plug. I enjoy this too much to stop, so instead I just decreased the frequency of checking google analytics. I haven’t yet been able to convince myself it would be a good idea to uninstall google analytics, but that might be where we are heading.
- Release a Logo – Our new logo came out in September with much thanks to my talented brother and sister-in-law. I really believe the new logo fits the site well.
- Experiment with Email Newsletters – We started a Newsletter mid-year. After about six months I have a moderate number of subscribers. You can find the link on the right-hand menu of your screen, or for those on a mobile at the bottom of the page. We have double opt-in which means you will receive an email confirming your request to be added to our email list. Should you confirm from that email only then will you receive our newsletter. I suspect we would have way more Newsletter subscribers without the double opt-in, but with today’s GDPR laws I feel more comfortable with this turned on.
Anyway, as you can see 2018 was a fairly productive year. How did 2018 end for you?
Happy new year FTF! Looks like you had a pretty great year. I’m reaching the point of my mortgage where I’m tempted to just pull out savings bonds and be done with it. But the risk free return is getting close to exceeding my mortgage (2.75%). When do you think you might get rid of yours?
Ours should be gone in 2019, or 2020 if the market drops and we redirect funds. My rate is 3.12%, I’m definitely watching to see if the risk-free rate goes above that point or if the market declines drive me to rebalance more towards stocks.
“Return to exceed 3%- Fail for Items out of our control, Pass for those in our control. We continue to only purchase investments that on average return greater than 3%. This includes bonds, our mortgage contributions, etc.”
How do you control bond yields?
I don’t, but I control what I purchase based on Yield to Worst. If the yield to worst of all bond offerings was below the target I’d find a different asset class. In effect, In 2018 I had a floor on my risk-free return equal to my mortgage rate, or 3.12% (taxes ignored for simplicity). By this goal, I am essentially saying I won’t invest risk-free below my mortgage. This is important as it implies maturing bonds are sold and moved into either my mortgage or stocks.
You’ll see in 19 I raised the amount to 4%. In this case, my mortgage will be gone mid-year. I’m signaling that I would forgo additional risk-free return and tilt myself towards stocks or real estate if the risk-free rate stays below 4% and I pay off my mortgage.
If your mortgage is 3.12%, that means your risk free rate is 3.12%. Once you pay that off, shouldn’t you switch to the next best available risk-free rate? Which may or many not be above 3.12%? Presumably Treasury bills but I guess you could choose any FDIC insured instrument you qualify for. If you can get a FDIC insured savings account paying X%, that should be your target. 4% seems arbitrary. You don’t really explain how you chose than number. Essentially you are predicting some Fed rate will be 4%.
The risk-free rate from my mortgage is technically higher than 3.12% since I don’t pay taxes on that return whereas other investments I do. After tax adjustments my mortgage returns the same as a bond slightly above 4%.
In a way I am also predicting the potential availability of FDIC Insured CDs returning 4% later in the year. Not a major stretch as some teaser rates are currently mid 3s. One 6 year CD had a teaser rate of 4% the week of Christmas.
If it is a fixed rate, your mortgage rate is arbitrary w.r.t. to the current Fed Rate. Say you had purchased your home a few years earlier, your rate would be 5% for example which comes out to say 6 or 6.5% after taxes. Just because you have that mortgage ,you are not guaranteed to find a risk-free instrument that pays 6% today.
You make it seems as though the 4% is a continuation of paying down your mortgage but that is purely arbitrary. If recessionary figures are reported, you’ll see interest rates stay the same or decrease w.r.t. today.
I’ve determined I’d rather take on increased risky assets at this time if I can’t match my mortgage return which happens to be the same as today’s risk free based on some teaser rates. As noted it’s part of my tilting strategy based on my expectations of markets. I believe I can receive superior return in the long run compared to my mortgage. The value of security provided by risk free assets in my case is the difference between expected returns to my mortgage and expected long term risky returns. This is essentially based on observing my own risk tolerance. Risk tolerance is kind of arbitrary in itself.
Happy new year and congrats on getting a lot of your goals complete. I made sure I added your link to my “end of year” posting, so folks can come here as well.
Thanks, Happy New Year.