Our 2018 plan: how we’ll go from rich to RICHER

2017 was an absolutely incredible year for us.  From the birth of our son, paying off our mortgage, celebrating in Jamaica, deciding to share our story here with all of you and getting featured in NBC News, this year has been filled with way more ups than downs.  For that, we are grateful.  But let’s be clear, this was all planned out.  These events and accomplishments didn’t just fall in our laps one day.  Rather, they were set far in advance and managed along the way to ensure there is little difference between what we say we’re going to do and what really gets done.

Taking it a step further, aside from having monthly formal conversations about our budget and tracking our net worth, we also throw in an annual planning day.  This allows us to go deeper, make commitments, mark calendars and set milestones throughout the year so they don’t get lost in the shuffle of work, family and parenthood.  By doing this, we force everything else [aka less important $hit] to work around our commitments.  In other words,

we put us first—everything else be damned.

We’ve been awaiting years like we anticipate 2018 will be for a while now because so many things will be on auto-pilot mode.  This is a huge relief and shift from our debt payoff days which required a daily full court press of energy, thinking and trade-offs.  Instead, in these wealth-building days, we are looking further outward and enjoying the now just a little bit more than we used to.  With that said, our 7 goals for 2018 are as follows-

1. Max out our tax-advantaged and retirement accounts
2. Payoff the rental property
3. Consolidate insurance plans
4. Legacy planning
5. Identify a short list of neighborhoods to move into
6. Take at least 3 vacations
7. Invest in ourselves

Obviously, having a financial plan plays a huge role in making this happen so here’s what our money should look like to help us get this done.

In summary, we will [auto] contribute at least $62,850 in tax advantaged accounts  by years end by maxing out our respective 401(k) accounts, IRAs and HSAs.  By doing this we optimize our nest egg growth potential and tax exposure.  More importantly, by having each of these vehicles on auto-pilot, we don’t have to ‘think‘ about it.  The funds come directly out of our accounts and go to work. If we did just this for 10 years, assuming a reasonable 7% growth rate compounded annually, starting at $0, these contributions of $628K would grow to approximately $929K.  THAT is the magic of compounding interest.  It is also the result of living well below our means, having dual incomes, paying off a mortgage and other micro-decisions over the years.  But wait there’s more…

We also have a rental property.  On average, it’s been occupied 10 1/2 months annually and generates a humble $350 profit per month.  However, once we pay off that mortgage, the monthly profit that we can pull from that account would blossom to about $700 a month.  That $700 combined with the money that would’ve went to paying down that mortgage needs to go to work too.  Since we’ve already maxed out our tax-deferred accounts, we’ll have to put those funds into a non-tax advantaged brokerage account.  So, here’s what the fuller 2018 picture might look like-

Now, if we did THIS for 10 years, [using the same assumptions above] our auto-contributions of $670K would grow to approximately $991K.  Note, this is conservative for the following reasons-

• The brokerage account annual contribution would double in years 2019 and beyond since the first half of 2018 was used for the mortgage payoff
• Years 2019 and beyond would include full years where we have two paid-off properties rented out thus boosting the brokerage account auto-contribution approximately 2X
• Additional windfalls such as a bonus, pay raises, merit increases or other sources of income are not included here.
• We’re not starting at $0

Will there be other expenses, inflation, unexpected downturns, new bills, down payments etc?  Sure, but that doesn’t deter us from our journey to financial freedom.  Furthermore, unless we go HAM and abandon all principles on spending, I don’t see those things getting in the way.  Either way,  all we can do is prepare for them and move forward.  Assumptions and calculations aside, we hope you can begin to see how opting-out and early retirement becomes a reality sooner rather than later by choosing

a ten year uphill sprint instead of the thirty-five year marathon and obstacle course!

---

So how about number 3 and 4?

• Consolidate insurance plans
• Legacy planning

These are pretty simple.  With other debts gone, insurance has become one of our most expensive bills so it’s our job to find ways to reduce those costs and find an insurer that can offer savings and benefits across all of our short and long terms needs.  This includes, auto, houses, life etc.  It’s also important for us to factor in legacy planning so we’ll be looking to ensure our assets are properly managed in the event of our deaths.  Definitely not a fun subject to talk about but it’s necessary.  We encourage you to do the same.

---

Number 5 is pretty simple.

• Identify a short list of neighborhoods to move into

While we’re likely not moving in 2018, we do think it’s important to have an idea of where we want to be, identifying what our must-have’s are and any other considerations before buying a new home.  To say the least, Mrs. r & R is very excited about this.

---

Number 6 and 7

• Take at least 3 vacations
• Invest in ourselves

We’re committed to AT LEAST 3 getaways in 2018.  They will all be partially funded out of a separate [auto-pilot]  travel fund so that our plan above isn’t disrupted. We’re also committed to exploring our personal interests more.  Blogging has opened up a world of possibilities to express ourselves but it doesn’t scratch all itches.  With that said, we may explore video, podcasting and other ways to tell stories next year.  So there you have it.  We’ve not climbed a mountain like this before but we feel pretty good about our chances of reaching the apex.  We may even enlist you [our readers] as accountability partners. Cheers to 2018!  May you experience good health, prosperity and a little bit of luck!

Mr. and Mrs. r&R