2020 Financial Goals?

[kork13]

Well, I now have a clearer picture of what we need to do for 2020: live within our budget! I totaled up all of our spending for 2019 and it revealed we spent like drunk monkeys. We met our goal of $1M in retirement savings and a paid off house, but we spent a LOT more than I had budgeted. Definitely need to get this under control or I will never be able to retire.

Wow. Making that much, I'm impressed that you track your expenses so carefully! I mostly gave up on the detailed tracking when we had kids a few years ago (too much detail, too little time), and settled for a good budget with sufficient wiggle room (3-5%) to absorb all the random day-to-day expenses. Definitely helps for planning your retirement spending though.

And whatever all you did to spend $85k on travel.... I'm sure it was alot of fun! I'd love to be able to spend that much on traveling the world someday.

[disneysteve]

Making that much, I'm impressed that you track your expenses so carefully!

It is VERY easy to get sloppy when your income is high. It may be much more important to track everything when income is lower and you're playing closer to the edge because it's easy to get in trouble. But with a large income, it's easy to have your spending be stupid high without getting into trouble because you're out-earning your bad habits. If you want to make the most progress toward retirement or other financial goals, tracking the spending is super important.

I know that the past couple of years our spending has definitely gotten loose because my income doubled. We are saving more than ever but that doesn't mean we couldn't be doing even better. I think the novelty of the higher income has mostly worn off and our spending has been starting to drift back down.

[msomnipotent]

This year is iffy for us. My husband's employer has been bought out by another company and they haven't been very upfront with details ( or more likely, my husband just isn't paying attention). I nearly had a heart attack when I logged into our retirement account last night and all the money was gone. They didn't even send an email to say they were transferring everything to Vanguard. My only goals are to max out the 401k and pay off the car so far. I will get more detailed plans once I know how much he will be bringing home and that his job is secure.

[kork13]

It is VERY easy to get sloppy when your income is high. ..... with a large income, it's easy to have your spending be stupid high without getting into trouble because you're out-earning your bad habits.

Totally agreed. I'm trying to control it, but I know we've gotten sloppy/lazy with our spending as well. In the last 6 years, my income has gone from $85k up to as high as $280k back in 2018. In that time, I've gotten married, we've both gotten significant promotions, moved to Alaska (earned more to compensate for the high COLA), added a rental house, and so on. It's frighteningly easy for all of that income to get used up on anything and everything without paying attention to it. The only way I've managed to keep things under control is by pulling out for our savings goals first, then focusing on using only what remains.

[disneysteve]

The only way I've managed to keep things under control is by pulling out for our savings goals first, then focusing on using only what remains.

Exactly. I actually just upped our monthly savings by $200 because I knew that we should have more left over but it was getting sucked up just because it was there. In a few months, I may up it again depending on how things are going.

[scfr]

Well, I now have a clearer picture of what we need to do for 2020: live within our budget! I totaled up all of our spending for 2019 and it revealed we spent like drunk monkeys. We met our goal of $1M in retirement savings and a paid off house, but we spent a LOT more than I had budgeted. Definitely need to get this under control or I will never be able to retire.

When you say "I budgeted" does that mean you came up with the budget on your own, without input from your wife?
Why not let her make the budget and track the spending? Or at the very least make the budget together?

[Jluke]

For my budget I track savings closer than I do expenses.

I still record most of the recurring expenses (utilities, mortgage, car payments, etc) and plan ahead for the one-time payments (Insurance, taxes, etc) but I am constantly focused on ensuring I know what has been saved.

last year I invested 30k and saved 12k cash. At that savings rate (40%) I feel justified with any miscellaneous expenses since we are good on the savings side. Got to live a little too.

[corn18]

When you say "I budgeted" does that mean you came up with the budget on your own, without input from your wife?
Why not let her make the budget and track the spending? Or at the very least make the budget together?

We came up with the budget. I have asked her to take over the budget and she has no interest. I keep her updated on our progress but when you have a year where you make $1.5M, it's real easy to let the overspends slide even as they are happening.

[Jluke]

Excluding mortgage, home projects/upgrades and new car (i.e. big ticket purchases) it would probably be like Brewsters Millions for me to find a way to spend that kind of money in a year.

I’d just like to have that salary for one year

[disneysteve]

For my budget I track savings closer than I do expenses.

At that savings rate (40%) I feel justified with any miscellaneous expenses since we are good on the savings side. Got to live a little too.

I can appreciate that for sure. There is a potential downside, though. In order to retire, we need to have sufficient savings that will generate enough income to cover our spending. The higher our spending, the more we need to have saved.

Using the 4% rule, if our annual spending is $60,000, we need to have $1.5 million. If, however, our annual spending is $75,000, then we need to have $1.875 million.

So I want us to be careful not to let spending creep up too much because then we get used to living that way and want to keep living that way meaning we need to save even more to be able to maintain that in retirement.

[corn18]

I can appreciate that for sure. There is a potential downside, though. In order to retire, we need to have sufficient savings that will generate enough income to cover our spending. The higher our spending, the more we need to have saved.

Using the 4% rule, if our annual spending is $60,000, we need to have $1.5 million. If, however, our annual spending is $75,000, then we need to have $1.875 million.

So I want us to be careful not to let spending creep up too much because then we get used to living that way and want to keep living that way meaning we need to save even more to be able to maintain that in retirement.

Exactly! While we make a boatload of money, we don't have enough savings to support a $360k / year spend plan. That's why our goal for 2020 is to live within our retirement budget. If we can do that, I can retire in 2 years. I did a deeper dive on our 2019 spend and it looks like we are doing ok in the base budget except for food and clothing. We will focus on that for 2020. The one offs in travel and blow that dough are just that, and can also be controlled.

And yes, $85k of travel was ludicrous. $68k was for a 3 week trip to Africa. That was silly, but budgeted. What wasn't budgeted was an additional $13k of travel back to OH. Just short trips to see kids, Thanksgiving, Xmas and see parents. We are moving back to OH in June, so that should go away and our $25k travel budget will be for leisure travel. At least that is the plan.

[Singuy]

Exactly! While we make a boatload of money, we don't have enough savings to support a $360k / year spend plan. That's why our goal for 2020 is to live within our retirement budget. If we can do that, I can retire in 2 years. I did a deeper dive on our 2019 spend and it looks like we are doing ok in the base budget except for food and clothing. We will focus on that for 2020. The one offs in travel and blow that dough are just that, and can also be controlled.

And yes, $85k of travel was ludicrous. $68k was for a 3 week trip to Africa. That was silly, but budgeted. What wasn't budgeted was an additional $13k of travel back to OH. Just short trips to see kids, Thanksgiving, Xmas and see parents. We are moving back to OH in June, so that should go away and our $25k travel budget will be for leisure travel. At least that is the plan.

Wow that must have been one amazing trip! My friends did this post marriage bachelor thing in Prague and I ended up spending $1200 7 days in Eastern Europe because these friends still travel like a college student. Def going to up this travel spending this year to 10k or so.

Did you get a new house? I thought your total mortgage was way less.

[LivingAlmostLarge]

Totally agreed. I'm trying to control it, but I know we've gotten sloppy/lazy with our spending as well. In the last 6 years, my income has gone from $85k up to as high as $280k back in 2018. In that time, I've gotten married, we've both gotten significant promotions, moved to Alaska (earned more to compensate for the high COLA), added a rental house, and so on. It's frighteningly easy for all of that income to get used up on anything and everything without paying attention to it. The only way I've managed to keep things under control is by pulling out for our savings goals first, then focusing on using only what remains.

I gave up around 15 years ago budgeting. I am terrible at it.I can't seem to get mint to work. The CC statements are all inputted but then when I try to reconcile it never works with the payments from checking for CC. Then I lose track of cash like and DH gets cash and has on idea what he spends it on. So it becomes a terribly messy thing. So instead i draw up an annual spend gross because I work annually on taxes. Then I put in all our savings

401k, IRA, College Funds, home maintenance, everything I know like property taxes insurance home,car, life, etc. There are a lot of things in our life that is part of the lifestyle. When we made less there was less fixed expenses. There were lower fixed expenses like eating out, etc. But our income has grown and right now our retirement fund increased ~$250k this year. That's not counting our taxable account as well. Which has gone up but the bigger thing is that we live off our salary and save the rest. And when I say live off our salary, we don't entirely cover our savings from salary but the basics we do. We can do a Max 401k, 2 IRA, college, and 10% savings. I consider this baseline. We can handle all of this and our mortgage and live pretty well. DH's bonuses and stuff some gets spent mostly taxes, then we just save the rest. And our big spend from it is traveling.

Financial goals? Save more. I guess my thing that has been on my mind is how much to save for my DK's college. We around $2m NW and we are likely on the cusp of having enough to fund our expenses. My DH wants to work another 15 years. So we are looking at I guess the $5-6m we'll "need" to retire around 55. Our spending substantially lower than that. We spend around $120k/year and $200k with taxes. But that will change because of medical and lower tax rate. I'm struggling with a budget for retirement because I am worried about medical costs at age 55-65 mostly. At 65 there is a more "set" premium with medicare. But the most expensive uncovered years we won't be on an employer provided plan.

[disneysteve]

I gave up around 15 years ago budgeting. I am terrible at it.

We don't do a prospective budget; we do a retrospective one and use that to sort of guide things going forward.

What I mean by that is that I track our spending each month. If I notice one area trending up, I'll try and have us rein it in a bit to get it back down to the average. But I don't start on the first of the month and say, "We can only spend $300 dining out this month" or anything like that. Some months are just naturally more expensive in certain areas than others so I focus on the averages.

[LivingAlmostLarge]

We don't do a prospective budget; we do a retrospective one and use that to sort of guide things going forward.

What I mean by that is that I track our spending each month. If I notice one area trending up, I'll try and have us rein it in a bit to get it back down to the average. But I don't start on the first of the month and say, "We can only spend $300 dining out this month" or anything like that. Some months are just naturally more expensive in certain areas than others so I focus on the averages.

That makes sense. I know my budget is more loosely based on my fixed expenditures I plan for.