My Personal Finance Charter allows me to stay the course on my financial journey because it defines my goals and the rules / philosophy I will follow in making financial decisions and managing my finances. It also includes Investment Policy Statements (IPS) for my two Income and Retirement portfolios.

This Charter categorizes all money, investments and assets into one of the following classes.

  • Cash
    Money used for daily living expenses
  • Debt
    All money owed from credit cards, personal loans and mortgages
  • Savings
    Money reserved for larger future purchases that are outside the scope of daily living amounts
  • Emergency Fund
    Money to be used in the case of loss of employment
  • Income Fund
    Investments with surplus money for current income and financial independence
  • Retirement
    Investments to be used during retirement
  • Assets
    Fixed assets such as house, car and appliances

Goals and metrics

Wet Worth

Wet-Worth is defined as the total of all accessible (liquid) money classes, i.e.
Wet-Worth = Cash + Savings + Emergency Fund + Income Fund – Debt

A positive Wet-Worth implies that I could pay off all Debt without affecting my Retirement accounts, providing the comfort of being “debt-free” but with the additional leverage that (good) debt provides.

The more traditional term “Net Worth: is defined as the total of all money classes, i.e.
Net Worth = Wet-Worth + Retirement + Assets

However, I do not find Net Worth a very meaningful metric and it shall not be used in any financial decisions. It is included here to distinguish it from Wet-Worth.

General Rules

Allocation of income shall be prioritized in the following order (highest priority first)

  1. Satisfy Retirement IPS
  2. Satisfy debt payment plan
  3. Satisfy current spending plan
  4. Satisfy Emergency Fund plan
  5. Satisfy Savings plan
  6. Any excess money after the above shall be allocated to the Income Fund IPS

Whenever my Wet-Worth is positive, any financial decision which would lead to a negative Wet-Worth must be carefully scrutinized and justified in an amendment to this Charter.

Opening new accounts or closing existing accounts requires justification in an amendment to this Charter. Account changes may impact credit scores and also require additional maintenance to link to existing accounts.

Taking on any new Debt requires justification in an amendment to this Charter, including interest rates, payment plans and proof that the loan amount is covered by existing accounts.


Account Structure

Three checking accounts (and one saving account) are assigned to the Cash money class as follows

Name Usage Mandatory characteristics Size
Income Receives income payments and distributes money to other money classes. – No monthly fees
– Physical bank
Bill Payment Contains the monthly budget and pays all living expenses & bills. – No monthly fees
– High interest
– Free payment of bills via bank checks
Bill Payment (overflow) Used to earn extra interest. – No monthly fees
– Instant transfers to Bill Payment
– High interest
Cash Spending Used for cash withdrawals. – No monthly fees
– ATM card with no transaction fees worldwide

Living Expenses & Budget

A defined Budget shall be followed to track, monitor and optimize monthly and yearly expenses.

An amount equal to the monthly Budget shall be automatically deposited into the Bill Payment Account each month from the Income Account.

The Budget shall be reviewed twice yearly and adjusted if necessary.

The Budget shall accommodate the total amount of all expenses during a calendar year from January through December.

The Budget shall consist of spending categories where underspending or overspending is carried over to the next month.

The Bill Payment Account shall target to hold a total value of about one and a half times the monthly Budget amount.

Spending for items outside of the planned budget shall be paid for from Savings.

Budget Amounts

Monthly budget amounts (past and future) can be found on my Goals page.


Good debt may be used to preserve cash on large purchases as long as the loan amounts are covered by existing accounts.

Good debt is debt with fixed low (or zero) interest or offers additional benefits such as tax deductions.

Credit Card Accounts

Credit Cards providing useful loyalty programs or benefits shall be used.

All credit card accounts must be linked to the Living Expense account with automatic payment of the entire monthly amount.

All credit card charges shall be categorized into spending categories and considered part of the monthly Budget.

Credit Card Usage Mandatory characteristics
Primary Card Used for all living expense payments Air-mile travel rewards
Secondary Card Used where Primary Card is not accepted Hotel travel rewards
Supplemental Card Held to improve credit score only No monthly fees

Provides free credit score

Current Loans

The following table shows active loans and their estimated end date.

Debt Interest Start date End date Covered by
Mortgage 4.375% 2013 2043 Income Fund


Savings is used for planned (larger) purchases outside the living expense Budget which have a timeframe of one or more years.

Current Saving Goals

Goal Target date Target Amount ($)
Mortgage repayment 2034 88,000
New car down payment 2018 8,000

Account Structure

Name Usage Mandatory characteristics
Cash Savings Used for short-term savings with purchases expected with 1-2 years, or for planned purchases on a specific deadline. High-interest online savings account
Savings Fund Used for long-term savings with purchases expected 2+ years in the future that have an arbitrary purchase date. Low-cost investment funds

Savings Fund Components

The Savings Fund shall consist of the following low-cost funds.

Name Allocation ER (%) Type
Vanguard Wellington Fund Investor (VWELX) 100% 0.26 2/3 stocks; 1/3 bonds

Emergency Fund

I no longer hold separate investments or cash for an Emergency Fund. My Savings can be considered an Emergency Fund and failing that, the assets in my Income Fund.

Income Fund


The goal of my Income Fund is to reach Financial Independence by providing monthly income equal to my monthly budget.

All dividends from the Income Fund shall be manually reinvested.

Changes to the Income Fund philosophy, target allocation or structure shall be justified in an amendment to this Charter.

Funds and Accounts

Name Type Notes
Vanguard Brokerage Taxable Vanguard funds, ETFs and stocks

The majority of investments will be held at Vanguard.

Target Asset Allocation

Name Account Allocation ER (%) Type
Total US Stock Market (VTSAX) /
High Dividend Yield Index (VHDYX)
Vanguard 65 0.04 / 0.16 US Stocks
Total International Stock Market (VTIAX) / Vanguard International High Dividend Yield Index (VIHAX) Vanguard 25 0.11 / 0.30 Int. Stocks
Individual Stock and ETF Portfolio Vanguard 10 Stocks

I started adding VTSAX in September last year. I’ve since consolidated the targets for both US funds as well as for International funds. I have no specific target allocation between the US funds and put new money towards the total market funds.

Individual Stock and ETF Portfolio

Portfolio Weighting

RULE 1: No single position in the Portfolio should pay more than 5% of total projected dividends.

What to Buy

RULE 2: If adding to an existing position, buy more of the holding with the lowest projected dividend income.

RULE 3: If adding a new holding to the Portfolio, it must meet the following

  1. Market Cap > $250 Million
  2. Dividend between 1% and 6%
  3. Sector: Any except Real Estate and Basic Materials
  4. Company has strong brand or market advantage

When to sell

RULE 4: Consider to sell a holding only if there’s a significant change to the business operation such as cancellation of dividend or merger and acquisition.

Retirement IPS


I will follow the Bogleheads investment philosophy for my Retirement investments:

      1. Develop a workable plan – live below your means
        Satisfied via my personal finance charter.
      2. Invest early and often
        I will make automatic 401k contributions to achieve maximum contributions.
      3. Determine a suitable amount of risk
        I will target an 80% stocks / 20% bonds asset allocation.
      4. Diversify
        I will invest in US Stocks, US Bonds and International Stocks.
      5. Never try to time the market
        401k contributions are automatic based on paycheck. Fund distributions are set to re-invest automatically.
      6. Use index funds where possible
      7. Keep costs low
        Low-cost index funds will be used with expense ratios of < 0.4%
      8. Minimize taxes
        My retirement portfolio will use Tax-Free (Roth IRA) and Tax-Deferred (401k, Traditional IRA) following these general guidelines.
      9. Invest with simplicity
        The overall asset allocation is a Three-Fund Portfolio.

        • US Stocks             60%
        • International Stocks  20%
        • US Bonds              20%
      10. Stay the course
        Changes to my retirement portfolio and strategy require a written amendment and justification.

Retirement Goals

My target retirement amount is $1,400,000 in 2036 dollars which would provide a monthly income of $4,800 assuming a 4% SWR against a projected budget of $5,670.

Retirement Income Amount
Retirement Accounts 4,800
Social Security 2,500
Income Fund 5,670
Expenses -5,670
Total 7,300 above budget

Funds and Accounts

Name Type Notes
Vanguard Roth IRA Tax-Free Income limit exceeded for contributions.
Vanguard Traditional IRA Tax Deferred Contains pre-tax investments. Only post-tax contributions allowed.
Fidelity 401k Tax Deferred Allows both pre and post-tax contributions
Vanguard Taxable Taxable Contains Income Fund assets

Asset Allocation

The table below shows target allocation per account and fund.

Name Account ER (%) Type
Vanguard 500 Index Fund (VFIAX) T-IRA 0.04 US Stocks
Vanguard Extended Market Index Fund (VEXAX) T-IRA 0.08 US Stocks
Vanguard Total International Index (VTIAX) T-IRA 0.18 Int. Stocks
Vanguard Total Bond Market Index (VBTLX) T-IRA 0.07 US Bonds
SSGA Large Cap S&P 500 Index 401k 0.01 US Stocks
SSGA Small/Mid Cap Index 401k 0.04 US Stocks
SSGA International Index 401k 0.081 Int. Stocks
SSGA Emerging Markets 401k 0.127 Int. Stocks
Pimco Core Plus Bond 401k 0.37 US Bonds
Vanguard 500 Index Fund (VFIAX) Roth IRA 0.04 US Stocks
Vanguard Extended Market Index Fund (VEXAX) Roth IRA 0.08 US Stocks


VFIAX (~75%) and VEXAX (25%) are used as a surrogate for US Total Stock Market (VTSAX). See this link for the correlation.

SSGA International (65%) and SSGA Emerging Markets (35%) are used as a surrogate for Total International.

The tax-advantaged asset allocation is not considered as important as the combined asset allocation of both tax-advantaged and Income Fund accounts.


The following guidelines should be used to value assets and track any depreciation.

Asset Valuation Notes
House Zillow’s ‘ZEstimate’ less 6% sales fee
Car Kelly Blue Book Appropriate KBB value for dealer trade-in

Changes & Amendments

Individual Stocks (March-2019)

Updated my individual stock rules to simplify things.

2018 Lessons (January-2019)

  • Updated Cash targets and added additional Savings Account to hold some cash reserves.
  • Removed Target Income Allocation section.
  •  Spending on unplanned items from Living Expense accounts will be paid by Savings.

Transferred out of Capital One (May-2018)

I closed my Capital One account to simplify the accounts. Individual stocks are now held entirely at Vanguard.

Adjusted Income Fund Allocation (January-2018)

I consolidated the fund allocations into 25% International and 65% US Stocks. This leaves 10% for individual stocks. The change adds 5% to International and reduces US from 70% to 65%.
In viewing my Retirement and Income Fund as one portfolio, I reduced the US Bond allocation by 10%. The new allocation is now US Stocks (60%), International Stocks (20%) and US Bonds (20%).

Adjusted Income Fund Allocation (September-17)

I started added Total Stock Market funds to the Income Fund and removed all US Bonds to make the portfolio more tax efficient. The allocation is now US Stocks 70%, International 20% and Individual stocks 10%.

Split VTSAX into VFIAX / VEXAX (September-17)

I want to buy VTSAX in my taxable account and potentially use it for Tax Loss Harvesting, so I’m converting former IRA holdings in VTSAX into 75% VFIAX and 25% VEXAX. This is essentially the same allocation.

Adjusted Income Fund Allocation (04-Jan-17)

I removed the 5% REIT allocation and put it into International stocks for a new allocation of 50% US Stocks, 30% US Bonds and 20% International. This is simpler and 5% in the REIT sector which overlaps with Total Stock anyway, isn’t going to affect much over the long-term.

Adjusted Retirement Asset Allocation (04-Jan-17)

I removed the 5% REIT allocation and put it into International stocks for a new allocation of 50% US Stocks, 30% US Bonds and 20% International. This is simpler and 5% in the REIT sector which overlaps with Total Stock anyway, isn’t going to affect much over the long-term.

Adjusted Income Fund Allocation (22-Dec-16)

I improved the quality of some bond holdings to accommodate Emergency Fund reserves and reduced the international allocation by 5%.

Updated Emergency Fund (18-Dec-16)

The end of my Emergency Fund? Well not really, it’s now being consolidated in my Income Fund.

Moved projections to Goals page (03-Mar-16)

Moved projections of Income Fund totals to the Goals page.
Exchanged Total International for International High Yield Dividend for income focus as described here.

Updated Income Fund Allocation (17-Jan-16)

Reduced allocation to individual stocks from 35% to 10% and increased US Stock (Fund) from 35% to 50%; International Stock from 15% to 25%. See Stock Portfolio Review 2011 to 2015

Initial Draft (02-Jan-16)

Rewrote charter to its new format and added more content.

6 thoughts on “Charter”

  1. This has got to be one of the most well planned personal wealth building strategies I’ve ever seen. Wow!
    It actually inspired me to grab pen and paper and have a greater think about my own comparatively half baked strategy. I’ll be doing a deeper look over the weekend. Cheers!

    1. Hi wealthfromthirty,
      I am pretty OCD about some things and my charter demonstrates that. But regardless of how long / short / detailed / concise the financial plan is, I think it’s important just to write it down and have something to follow. Wishing you all the best in creating and following your plan! 🙂
      Best wishes,

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