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My Written Financial Plan Update: New Financial Goals and Priorities

Continually, one of my most popular posts on the blog is my actual written financial plan. It was actually one of the easier posts to write. I just copy and pasted my actual written financial plan and explained why Selenid and I decided on the plan that we did. Now, it’s time to share my financial plan update!

My ultimate hope is that, by having my actual plan, you can have a guide to developing your own plan. Having this written financial plan is hands-down that one thing that has accelerated our wealth building the most. It is also the thing that has brought us the greatest financial peace of mind.

Our plan is our treasure map to financial freedom. We follow it and we get to our goals. What can be most simultaneously comforting and exciting!?

Related Post:
Still Need a Written Personal Financial Plan? Here…Use Mine!

But, the only constant in life is change

Ain’t it the truth?

And Selenid and I recognized this. That’s why, in our initial financial plan, we acknowledge that changes will happen. We also state clearly that a 3 month waiting period is necessary before any changes are made. All changes must also be agreed upon by both of us. We each have absolute veto power.

And changes have been made.

Beyond this, there are also financial goals and priorities that we have already reached. This inherently alters our plan as we move forward.

Therefore, I feel that the time is right to share our updated written financial plan!

I will first note that, as with my initial post, this is our actual, genuine word-for-word written financial plan. Nothing is omitted or missed or conveniently forgotten. I’ll always be 100% authentic with you or else what is the point?

To present our plan, I’ll list each section separately. Any items that we have completed will be crossed off. I’ll also highlight any changes to make them obvious. Lastly, I’ll discuss why changes were or were not made after each section.

Enjoy!

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Selenid and Jordan’s Financial Plan

Financial Priority List

  1. Pay down high interest loans/debt (>8%) Done! (as of 10/2020)
  2. Establish emergency fund (3-6 month’s expenses) Done! (as of 12/2020)
  3. Maximize Voluntary Defined Contribution (VDC) retirement account
  4. Pay down medium interest loans (6-8%)
  5. Invest in vetted real estate (cash flowing rentals w/ cash-on-cash ratio >10%)
  6. Contribute to 529 college savings account
  7. Maximize 457(b) retirement account
  8. Pay extra to mortgage
  9. Pay down low interest loans (<3%)
  10. Contribute to back door/spousal Roth IRA (every January if contributing – 2 steps)
  11. Contribute to retirement taxable account
  12. Donate to charity with equity dividends

As you know from my first iteration, this first section is a priority list of where we want our saved money to go.

Each item is like a bucket. We fill the bucket until it is full. Then the money spills into the next bucket. And on and on down the list.

Currently, we reach until item #6. Then our money runs out. As we will those buckets more, more money will spill into the more downstream items.

The main changes that you can see highlighted here are the order of some items. No items were added or removed.

First, I had paying off medium interest debt WAYYYYY too far down on the original list. Previously it was priority #7. I think we did this because we got tied up in interest arbitrage. Basically the idea that we could invest and make a return greater than the interest on our (see: my) loans.

Now, we are much more interested in aggressively paying off the loans and our priorities reflect that here. Along the same lines, paying off low interest debt including our mortgage has moved up.

I’ll go into my philosophy with regards to paying off debt versus investing in another post, but this is how we split that up.

Again, you’ll notice that investing in cash flowing real estate is very high on our list, holding strong at #5 from #4. That means it is basically the third bucket that our money goes into after maximizing my main employer retirement accounts and paying down debt.

If you want to learn more about why I love real estate and how it has accelerated our net worth build-up, check out the posts below.

Related Posts:
How To Actually Buy A Real Estate Investment Property
How To Get That First Investment Property Under Your Belt
Insider Real Estate Update: Ups and Downs But 22% CoC!
A Physician’s Guide to Real Estate Investing

General Financial Guidelines

  • Save at least 30% of income every year (includes debt payments)
  • Review and square budget on the first of every month beginning 7/1/2020
  • We will calculate our net worth every 2-4 months
  • We will calculate our savings rate and our total return and real return each year (1/1)
  • We’ll use our credit card only once balance is at $0. At that point, we will use it for everyday purchases and will pay it off in full every month
  • We will not use credit to purchase automobiles, appliances, or vacations
  • We will use credit only for mortgages, and perhaps for safe, fixed-income investments starting in 2030

This next section lists the general “rules” of our financial plan

These are things that we basically agree that we “have to” do. There is no argument when it comes to these items. We do them without thinking.

Not a ton of change here. Our goal savings rate is still at least 30% although it currently is greater than 43%.

Instead of steadfastly saying that we check out net worth every 2 months, we went more lenient and said every 2-4 months.

We also eliminated the possibility of safe, fixed income investments from our account. We have better places to put our money when we reach closer to financial independence (see priority list above).

Specific Financial Goals

  • Pay off consumer debt in 2 years (2022) (Woohoo! Done!)
  • Pay off student debt in 5 years (2025)
  • We will be worth $1 million in 12 years (2033)
  • Save $40,000 to buy car 1 in 3 years (2023), save $40,000 to buy car 2 in 6 years (2026)
  • Save enough to cash flow at least $250,000 in retirement (goal retirement at least 2045)
    • This will be via hybrid approach using equity and real estate investing
    • Save $1-2 million in equities for 4% yearly withdrawal of ~$71,000
    • Cash flow >$200,000 from real estate investments in 5 years (2025)
  • Save $400,000 for Samuel/Emery college
  • Save $250,000 for renovation/down payment new home
  • The mortgage on the home we are living in will be paid off when we retire

This section delineates our specific financial goals

I am a huge believer in goal-setting. Goals should be specific and should be BIG. Once you have a goal, all that is left to do is plot the course. Without a goal, you’ll never arrive at one.

Nothing has changed here other than the fact that we paid off all of our consumer debt 2 years earlier than we planned. In fact, we did this within 2 months of becoming an attending. And man, let me tell you, it felt great!

Our other goals include our cash flow plan for retirement has not changed. A lot of people ask me how we came up with this number.

And I don’t have a good answer. It’s arbitrary. We estimated out our expenses in retirement knowing that we will not have to save for retirement, not need life insurance etc., not be paying for our kids’ daycare/school. But really, how can we forecast that far into the future? We can’t. So, we just picked a way bigger number than we estimated we would actually need. I’d much rather overshoot.

I would like to believe that we will reach these goals ahead of schedule if we stay on course. However, we are keeping them the same for now.

written financial plan

General Investment Plans

Here are some general guidelines for our investment strategies

No changes here.

We still use a hybrid approach with both equity and real estate investing.

For equity investing, we use only broadly diversified low-cost index funds. For real estate investing, cash flowing rental properties with >10% cash-on-cash returns remain our primary vehicle. We have 1 such property that cash flows over 22% and are closing on 2 more currently.

Related post:
Insider Real Estate Update: Ups and Downs But 22% CoC!

Note our instructions for what to do when a bear market hits…basically, do nothing. Seems simple enough before you have a lot of skin in the game but can definitely be harder when you’re losing your actual money. But remember, we’re long term investors, not speculators. Long-term, the overall stock market is a safe investment. No need to fret over the short term.

Equity Asset Allocations

  • Maintain an 80/20 stock/bond allocation, decreasing progressively to at least 60/40 by retirement
  • Our primary asset classes will be domestic stock mutual funds, international stock mutual funds, and US Government bond mutual funds
  • Our equity allocation will include domestic, international, and emerging market stocks and large-cap, mid-cap, and small/micro-cap stocks.
    • We will also allocate a percentage to REITs and other alternative asset classes if they promise diversification benefits and solid long-term returns
    • For the most part, these will be broad total market index funds, but they may be supplemented by small amounts of value index funds as needed to maintain a slight value tilt.
  • Our bond allocation will be split 50/50 between nominal bonds and inflation-indexed bonds in tax-sheltered accounts as much as possible.
    • We will use the G fund as much as possible
  • Our pre-2020 Roth IRAs and 457 will remain target retirement funds and NOT count towards overall asset allocation
  • Our emergency fund will be 20/80 stock/bond after accumulating in savings account for 1 year (July 2021) and will not count towards our overall asset allocation
  • Rebalance 1x each year (July) by buying more stocks/bonds as dictated to maintain goal allocation

Initial Asset Allocation:

  • 40% US Stocks
  • 35% International Stocks
  • 5% REITs
  • 10% US Bonds
  • 10% TIPS (Inflation indexed bonds)

No changes here either

Remember, we are long term investors. It would be silly for us to have changed this so quickly. I’ll be surprised if we change this in the next 10 years. Who knows? But I doubt it.

Future Changes

  • Any change to our financial goals must be agreed upon by both Jordan and Selenid after careful consideration of short and long term benefits and risks
  • Any change to these investment percentages or change in funds used will require a 3 month waiting period
  • Development of any new asset class or new funds allowing us to invest in an asset class such as international small or international value stocks will require a 3 month waiting period prior to transferring funds
prudent plastic surgeon
Feed ’em some green!

This section is evergreen.

So there you have it. That is my updated written financial plan.

I would expect that any changes in the coming years are somewhat minimal as we feel pretty sturdy and confident in this plan. But as always, time will tell and then I will be the first to tell all of you right after anything happens, as always!

I hope that this helps you as you work your way towards financial freedom just as I am!

Looking to get started?!

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  4. Let me show you why real estate investing is a wealth accelerant

What do you think? Do you agree with the updates to my written financial plan? What would you change? Do you have a written personal financial plan? What does yours say? Leave a comment below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected]

    15 thoughts on “My Written Financial Plan Update: New Financial Goals and Priorities”

    1. Thanks! This is excellent and incredibly useful! I used this as my template and the only thing I strayed from is I thought the asset allocation should be defined as bands. In order to minimize expense and taxes from rebalancing.

      In substance my goals are also less narrowly defined and more modest.

      Also, could you include a version of your financial plan also that omits the annotation? I started mine by using yours as a template so I first removed the annotation. The annotation of course was great for understanding. But sometimes was hard to know what was part of the financial plan and what was explanation for your blog readers. Thanks so much!

      Reply
    2. dude awesome, simply awesome. You’ve got a great plan, although do you think that Roth is a little too low on the list? The mid level debt and the real estate makes sense, but not sure I would put the 529 above the Roth as the kiddies can take loans for the education, but you can’t take a loan on your retirement. And with your high savings rate and income from properties in retirement, you’re setting yourself up for huge RMD’s and a high tax bracket in retirement, and that Roth space will come very handy. also your mortgage and low interest debt, although I know you hate debt, would kill me to be giving up that Roth space to pay off such low rate debt. Have you thought about the true cost of putting low interest debt first, getting that psychological win, and missing out on some Roth space? Heard it was originally gonna be called the “American Dream IRA!” But then Senator Roth really wanted to leave his name on it.

      Also, why don’t you count your existing roths as part of your AA? Seems like something I wouldn’t ignore.

      Keep pumping out the posts man I’m lovin it!

      Reply
      • Thanks Rikki!

        For the Roth, for now it’s something I’m comfortable having a bit lower. The main reasons are that real estate is a bigger priority for us know. Regarding RMDs, I plan do make Roth conversions in the future to mitigate that issue. But, with all that said, we likely will have enough spillover to start investing in our Backdoor Roth next year.

        And I just don’t count my existing Roth towards our AA because they are in a target date fund currently!

        Reply
      • Rikki,

        I was wondering that as well about the American Dream IRA versus the 529 ordering. For my financial plan I went pretty rotely off the ordering I got from these great pages …

        https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

        https://www.bogleheads.org/wiki/Prioritizing_investments

        The 529 versus Roth order was one of the very few areas where my wife and I decided to stray from Jordan and Selenid’s plan when drafting our own plan.

        Reply
        • yeah man, I stray from Jordan as well in this regard as well. But personal finance is personal, and doesn’t really have to be optimized to accomplish your goals 🙂 Still though Jordan, consider for the next 3 months pushing that Roth up! American Dream IRA man, American Dream IRA!

          also Jordan, have you thought of putting the TDF out of the Roth and putting in 401k? As you know b/c u da man, usually with asset location want to put your highest potential assets in Roth and not have any bonds such as the small sliver that is in the TDF, and that sliver will keep getting bigger.

          Reply
    3. When I was going through various sample financial plans to form a template for mine something I think that was excellent on yours that others missed was the financial priority list at the top. I copied the format of yours almost exactly for mine.

      I liked that 1. you retain items that you’ve already accomplished … gives a sense of accomplishment and builds momentum to see reminder of what you’ve already done. 2. gives reminder of what’s ahead … for mine, i organized as my short/medium/long-term focuses

      Fwiw, these were the others I looked at …

      https://www.bogleheads.org/wiki/Investment_policy_statement

      https://socialize.morningstar.com/NewSocialize/asp/FullConv.asp?forumId=F100000015&convId=183427

      https://www.bogleheads.org/forum/viewtopic.php?p=852539#p852539

      Overall my financial plan / IPS is about 80% adopted off yours / 10% incorporating elements from those others / 10% inserting things of my own.

      I did go with a lower level of detail than is generally found in these. I might modify over time, but I don’t yet have a handle on what are realistic anchors and targets for my specific savings and budgeting to be too specific on those. So I omitted exact #s on things like that I will fill over time (in fact, I have that as financial priorities.)

      Reply
      • I love it! I really found the financial priorities super helpful as well. I’m very goal oriented as most of us are and this system is a really good way to keep track of that!

        Reply
    4. After we we finalized our financial plan my wife wanted to see some of the sample ones I had used for a template.

      And she could see why I based ours on yours the most. She thought yours most reflected a real person’s financial plan whereas some of the others had more of the optics of a financial plan in that they were glossy and looked good. But wouldn’t be as practically useful or stress or battle test as well. Which is totally what I was thinking as well when I wound up pulling most of the elements for ours from yours.

      Reply

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