Our 2020 Goals: A Change In Income

We are now at the start of a new year, 2020.  It feels weird to even say that number.  The 20’s were always this concept of a depression in the distant past.  And yet here we are, in the 20’s again.  So let’s get right into my 2020 Goals.

Is It A New Decade or Only a New Year

I struggled to decide if I wanted to entitle this post the start of a new decade of goals.   There is a lot of contention as to when a new decade begins.  In some respects it’s all a bit pedantic as a decade can theoretically start any day and go ten years forward.  The key is when you institute a major change.

Well, in that respect I suspect 2020 will be a significant financial change for us.  2019 represented the third year in a row of consistent goals.  It also marked the 3rd year in a row of consistent performance to those goals.  I fully intend for the goal performance to continue, but the goals themselves are changing drastically this time around.

Income Expectations in 2020

The first major change in 2020 is income.  2019 was largely a continuation of 2018’s income.  The form of income changed slightly, shifting more from contractor to W-2, but the amount did not.    That shift in income form I see continuing into 2020.

That change starts in 2020 with my W-2 income.  For much of the last decade I have had a low base salary but a high cash bonus/restricted stock units (RSUs) for my position.  How high?  In 2019 over 50% of my income came from the variable RSUs and cash bonus.  Overall my combined salary has increased a significant amount from year to year.

Over the last three years my base salary has slowly corrected up towards a more normal number.  It’s arguable that my base salary finally achieved that point in December of 2019.  Subsequently, a large traunch of restricted stock units also were retired.  Meanwhile, my employer is also predicting tougher times ahead.  IE I suspect the variable portion of my salary to be significantly less in 2020 both in absolute and percentage terms.  

My W2 Income May Actually Decline Slightly Overall

There is actually a high probability my W2 salary will decline in 2020 for the first time in my career.   However, the risk I long feared with a 50% variable pay portion has been mitigated.  IE I suspect a pay decline if business performance should hit a hurdle, but it should be somewhere between 1 and 10 percent.  Much improved from the 50% at risk previous position.

In terms of contractor income, my wife’s business continues to chug along. Her business revenue decreased in 2019 as her focus shifted to Foster Care.  That being said I do not foresee any further decline.  She has found her new balance.  It’s even somewhat possible there will be a slight uptick in business revenue in 2020. However, I do not expect that uptick to be large enough to offset any potential W2 decline if a down economy occurs.   

The Foster Care Wild Card

Then we have a final wild card, which is foster care.  If you recall from my other posts on the subject I talked about how most expenses for foster care adoption are covered.  If adoption were to occur we would most likely see a small amount of extra income in the form of employer adoption assistance/tax breaks. 

Assuming No Change In Income

It’s hard to predict an exact number for income for the year given all of the above. I’d guess +-5% change from our 2019 number is possible.  For purposes of goals I am going to assume no change in overall income 2019 to 2020.

Expenses and Cash Flow

The other major set of changes in 2020 is on the expense side.  For years I’ve had this big goal of paying down our mortgage at our safe investment rate.  In 2019 we paid the mortgage off (Wohoo!), so there is no mortgage payoff goal.  That also means there is no more giant monthly mortgage payment check to write.   Along with that goes no interest expenses.  

In essence, 2020 will be the year of a major increase in free cash flow.    Trying to determine how to reassign that cash flow in an optimal manner, IE not just spend it, will be the real challenge. 

Beyond cash flow and interest expense changes I do not expect any major expense changes in 2020.   Our desire to buy a travel trailer is still there, but it is still rendered a wait and see  while we are foster parents.  I have our normal run rate planned of home improvements/repairs.  Our middle child will transition to kindergarten mid-year, which may or may not lead to decreased preschool costs (see my note about Foster care above and realize we may end up paying for preschool).  So really no change in expenses.

Saving 2020 Goals

So savings 2020 goals will stay the same as 2019.  Still a nice 1.8x expenses saved.  But how we save will change dramatically because of the aforementioned free cash flow.  This is even more apparent as we look at the change in interest rates across the market.

Expectations of Return

For years I have set an expectation that any fixed-income investment should achieve 3-4% return.  If I couldn’t achieve that rate I just paid off my mortgage.   The thing is, 4% with current rates is no longer possible.  Even 3% is likely a stretch.  At the end of 2019 I forced this goal by capturing a savings account signup bonus.  I do not intend to extend the effort to do so in 2020.  Between the excess cash flow, higher stock market performance, and several upcoming calls on existing bonds it is just too complicated to try and goose returns at scale.

I’ll be honest I am still exploring how I will invest the safer investment portion for 2020.  Part of me is flirting with real estate.   While not as safe as bonds, with low leverage vehicles the volatility is historically lower than stocks.   I am also considering cds with low redemption penalties in an effort to take a wait and see approach.   I know I will continue to purchase stocks, albeit in a reduced manner to rebalance.  If you recall I primarily rebalance through contributions.    But beyond that the future is murky.  How do you plan to invest in 2020?

Donate at Minimum the Equivalent of 5% to Charity

Now we step beyond our financial performance goals to our action goals.  To begin, I still want to invest 5% of our income in charity via various forms and organizations.  My values have not changed.  Helping others still remains a key tenant of our lives.

Fostering a Child, Our Non-Financial 2020 Goals

We also plan to continue to foster.  It looks likely our current placement will be with us for quite some time.  Note, this is not the same as saying she will be adopted.  This just means based on the current situation most of 2020 will probably see her in our care. 

We have come to a decision however.  If/when this girl leaves we will probably take a break or stop being foster parents.  It has been a great ride, but I also understand if this girl leaves after a year it will be a great burden for my family to cope with.  Ultimately keeping your existing family happy and healthy is still your number one priority when fostering.   

 The pain of someone leaving after a year of living with you, potentially to never be seen again, is a huge cost of foster care.  Up until now it’s been manageable  for our family due to the shorter stays of the children.  But our current visitor has been here so long we sometimes forget it’s a temporary situation.  That is when you know it will be painful if it someday ends. 

Credit Card Hacking 2020 Goals

What about credit card hacking?  Well, every year I set a target to break even on travel expenditures.  And every year we miss due to extra unforeseen travel expenses.  Yet we still routinely rake in $3-4k in travel hacking credit.  

2020 is going to be a lower than normal hacking year for our household.  It feels weird to type that.  The reality is, I’ve been credit card churning for 7 years now.  At a rate of 4-5 cards a year other then a few of the newer cards we are essentially out of options.   

For years I have not bothered with any card without at least a $500 return.  At the end of 2019 I was unable to find a card that fit that criteria for which I qualified.  My wife continues to qualify for a few offers which will trickle in throughout the year.  Also we have a Discover IT still in the doubling period where we will rack up category spend.  But otherwise, I am going to let my credit sit for much of 2020.  

A 2020 Goal to Get The Chase Sapphire Card Again

This has an added benefit.  Late year I will qualify again for Chase cards.  For those who don’t know Chase has a rule where you can’t get a new card if you have more than 5 new cards in the last 24 months.  Waiting a year will push me under that limit.

This will also be just in time for the 4-year signup bonus lockout for the Reserve cards to expire.    Basically you can only get a Chase Sapphire bonus once every 4 years.  It will be 4 years since our last bonus on this card, which is one of the best travel hacking options out there.  So look for 2021 to be a big year in credit card cash back.  For 2020 I’ll set a goal at $1.5K in travel hacking credit.  

What about the Blog 2020 Goals?

Which brings us to this site.    In late 2019 I cut back our posts to 1 day a week due to burn out.  This helped immensely to relieve some of my stress.   I do not intend to cut back any further.

However, honestly I don’t know where we go from here.  I am content with our site size.  Money continues to equal the cost of site operations.  Really that is all I require from Full Time Finance.  So I guess what I am saying is for now it will be more of the same.    No specific 2020 goals, other than to continue to post 1x a week until I run out of ideas.

On that note, with 374 posts it is becoming harder to come up with new topics for content.  I am open to requests for additional topics.  Feel free to leave any request in the comments.  Anything in the world of finance is fair game.

Thanks again for your readership and support.