Personal Finance Mission Statement

[Milly]

We will proactively insure our family against financial subservience by: reducing financial costs and obligations, putting away for a "rainy day", and by acquiring net positive assets. Hello friends. This week I've been listening to Dave Ramsey's EntreLeadership. When he got to the part about personal mission statements, I paused and took a moment to figure out my personal financial mission statement. We're making some big financial decisions right now (first investment property!!) and I needed to refocus and make sure we are working towards our actual goal. Above is what I came up with. Anyone else have a personal mission statement, financial or otherwise? Would you change anything on mine?

[Jluke]

Bogleheads push something called IPS: Investment Policy Statement

[kork13]

Sounds great! Often, just getting to the point of being intentional is the hardest part. The next hardest thing: applying that intentionality -- actually follow through with the plan!

[corn18]

Your vision is good. Now you need some clarity on how you will execute that vision. This is our Investment Policy Statement (IPS). This has saved us many times from doing something emotional. And has kept us on track to retire in 2 years. Maybe you could do something like this to expand on your vision. Objective: $XXM in retirement savings by age 56 (2022). Asset Allocation (AA): 60% stocks / 40% bonds with 25% of stocks international Rebalance when AA gets outside of 5% or annually Invest in very low cost index funds Do backdoor Roth for myself and wife annually ($7000 me, $7000 wife). Leave in cash in traditional IRA while waiting to roll over to Roth. Wait one week to do roll over to Roth to allow funds to clear. Once in Roth, lump sum investment into total stock market index fund. Funds for backdoor Roths will come from RSU sale, bonus or pension. Invest maximum allowed in 401k ($24,500) at a rate that maximizes company match. Use 401k to manage 60/40 AA. Invest only in low cost index funds where possible in 401k. Invest maximum allowed in 401k after tax and do a mega backdoor Roth annually. Lump sum investment into total stock market index fund. Invest a minimum of $75k annually in taxable account. Lump sum investment into total market, total international market or tax free muni's to manage AA. This can be met by RSU, bonus or pension. Minimize current taxes by investing only in total stock and international stock index funds in taxable account. Tax free muni bonds up to $50k is also allowed in the taxable account. Minimize taxes by concentrating bonds in 401k. Maximize growth in Roth accounts by investing in total stock market index funds. Restricted Stock Units (RSU): When RSU's vest, sell immediately and invest the money in a lump sum in accordance with my Asset Allocation (AA) in my taxable retirement account. Bonus: Invest entire bonus each year in a lump sum in accordance with my Asset Allocation (AA) in my taxable retirement account. Military Pension: Invest 100% of pension in taxable account. Life Ins: Maintain multiple term life policies laddered until age 78. As savings becomes sufficient to maintain DW current lifestyle with low risk, policies will be allowed to end without renewal. Inheritance: let my wife decide what to do after waiting three months.

[Milly]

Thanks, I hadn't seen an IPS before you pointing me to that section of Bogleheads. The difference I see is my Mission statement is something I hope to hold onto my entire life. The only thing I see in my financial mission statement that would change is if I eventually had my fill of net positive assets (the dream right?), then I will probably drop that section and shift the focus to eliminating obligations (risk) on those assets. An IPS is much better for determining shorter time horizons (5-10 years) and is what will keep you on track of your mission statement. My IPS would include things like: Always invest, at minimum, the maximum contribution amount for IRA (but not necessarily in IRA, we will be $6,000 short as we intentionally put $500/month less and put it on a loan). Always claim the full company match. Never make minimum payments (example: even when in "cash hungry" mode in prep for a down payment, we pay $100 extra on our mortgage). Diversify not just in stocks, but in asset types, and currency denominations (I haven't developed a specific allocation yet, just trying to get out of my nearly 100% US dollar allocation). Live off 50% of the take home dollars (does not include investments or charitable donations). Have at least half our living expenses paid passively by the time our kids start graduating high school (12 years). After writing some specific IPS stuff, I see that I'm missing lowering risk (protecting the assets, defending against financial obligations, etc) in my MS despite that being the basic point of my MS.

[bjl584]

Broad, but good.

I would revisit it on a regular basis to maintain focus and to make sure that it still aligns with your life and circumstances.