November was another great month in the DIY$ household for net worth growth. We finished the month up $28k to $1,030,781. It was only last month that we passed the threshold into millionaire status and it has lead me to reflect on what we've done to reach this milestone.
I've also turned my thoughts to 'what's next'? The next obvious goalpost is to have a paid off house, but we'll be checking that off in just a couple of months so we'll need something else to work towards pretty soon.
First - here's what happened in November:
In November, the majority of our net worth gains came from our investment balances, since we continue to stay invested primarily in index funds and the S&P 500 returned 3.4% in November. We also got a nice bump from home price appreciation and an extra large mortgage payment. As expected, our cash balance went down since we paid our annual property tax bill, but we're still above our self-imposed $20k minimum, so nothing to be concerned about.
LOOKING FORWARD (2020)
With our house payoff in sight, we've set up to do a few things differently in 2020.
- Switching 401k contributions back to Roth. For the past two years or so, my 401k contributions have been pre-tax to maximize my take home pay and put the difference towards the mortgage. Starting in 2020, we'll go back to contributions being Roth.
- Resuming 529 contributions. We paused contributions a while back to accelerate mortgage payoff and now will go back to adding a few hundred dollars each month. We also now have a separate account set up for each kid (previously we just had one that we were planning on changing beneficiaries between the kids) and will be adding only to the new accounts for now. We still haven't settled on how much support to give each child in college, but want to have a decent amount earmarked for each.
- Adding to non-retirement investments. The majority of our investments are currently within retirement accounts that aren't accessible until 59 1/2 years old. We are planning to retire prior to age 59 1/2 so will need some non-retirement assets to bridge us until then, and there are other investments we'd like to do in the next few years that can't be done in retirement accounts. We won't be increasing our 401k contribution since we're already getting the full employer match. We're starting with $1k/month and will re-evaluate after a few months.
- Making some large purchases that have been on hold. We have around $20k worth of things we'd like to purchase, but have been waiting to pay off the house first. We won't buy them all right away, but will start actively shopping for them and buy when the price is right.
- Start large home renovations. For the past few years, our home projects have been relatively small and inexpensive. Early next year, we'll be taking our master bathroom down to the studs and transforming it to what we've always wanted. We'll be doing most of the work ourselves, but still will probably spend >$10k.
- Taking the kids on a big trip. We travel a lot with the kids, but it's usually just to visit family. It's been a few years since we've taken the kids on a big international trip, so they'll be joining us for a European cruise next year as a celebration for paying off the house.
NEXT FINANCIAL GOALS (2021+)
Reaching two major goals at roughly the same time ($1M net worth and paid off house), I'm trying to find the next thing to set my sights on for motivations. Here is what I've come up with for new longer-term goals:
- $1M Net worth excluding primary residence/cars/529s. This should be achievable in ~3 years barring any major market corrections.
- 25x non-discretionary expenses saved in liquid assets. Our investments are currently just under 8 times our annual non-discretionary expenses. This will increase automatically when our largest fixed expense goes away, but this is really the metric that determines our level of financial freedom and ability to retire. I'll be tracking this more closely in the future. At our current level of spending, we would need ~$1.6M.
- Liquid net worth of $3M. If you ask me today, this is the amount at which we'd feel comfortable considering retirement. My job keeps getting better in terms of pay and perks, so my desire to retire as soon as possible has waned.