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Posted in Uncategorized on April 7, 2013
I’m a perfectionist. I like to fidget with things. Some times, this can be good, but other times, it can be detrimental. So I’ve declared that April is the month of no manual money moves. Why is this possible?
- My cable, cell phone, and electricity bills are all on auto-pay, as are my HOA dues and my property taxes. (I set my property taxes up to pay in the online bill pay once I get the bill.)
- My credit card bills are on auto pay.
- I have no pressing concern to open a new checking, savings, or credit card account.
- I’ve already made my 2012 Roth IRA contributions and I don’t know if I can make any for 2013 yet.
- I’ve already made my April mortgage payment and I will make my May one on May 1st instead of earlier this time. (I usually schedule it once I know the exact amount of my paycheck.)
- I’m expecting no bonuses or other windfalls in April.
- I only get paid once a month, on the last business day of the month.
- My 401(k) contributions and allocations are set up for the year.
Forcing myself to not fidget with things is good. This is sort of like my rule of no selling to re-balance my investments.
I’ve been eyeing another credit card lately. The American Express Blue Cash Preferred looks pretty intriguing. It has a $75 fee, but you get 6% cashback on groceries, up to $6,000/year. I will most likely spend about $2,500/year on groceries, which is the tipping point at which the Preferred card makes sense over the Everyday one that only gets you 3% cashback on groceries. With the Preferred, you also get 3% cashback at gas stations and department stores, versus 2% with the Everyday. The tipping point is that I can buy Amazon.com gift cards at my local grocery store and then use those for my Amazon.com purchases, netting me 6% cashback on Amazon.com purchases instead of the 3% that my current system gets me. The catch on that is that I’m spending a lot less on Amazon.com these days than I was. If you’re just looking at flat-out grocery spending, you need to spend $75 /(6% – 3%) > $2,500/year on groceries for it to make sense to pay the annual fee.
Both cards have sign-up bonuses, $150 for the Preferred card and $100 for the Everyday, if you spend $1,000 on the card in the first 3 months. That makes the cost of the Preferred card in the first year -$75 versus the cost of the Everyday card -$100 in the first year and then $0 thereafter. So you would net $25 more with the Everyday card upfront, but with $25 / (6% – 3%) > $833.33 in grocery spending over the course of that year, the Preferred card would make more sense and then you can always switch to the Everyday one after a year to avoid the fee if you don’t think it’ll make sense going forward. I’m pretty confident that I will spend more than $69/month at the grocery store, lol! I’m not so confident that I would spend more than $208/month consistently though.
Another cool feature is that both cards come with Roadside Assistance. My car offered that for the first 3 years, which will be up by the end of this year. I did resolve though that I would wait 6 months from early January to apply for another credit card and it’s only been three, so I guess that means I need to wait until early July.
BUT I am not making any manual money moves in April. I’m tracking my spending, as per usual. My (bimonthly) electricity bill went down $50 from the last one, which is a good improvement! I’m hopeful that the next one will go down another $50 since I hopefully won’t need to run the heaters for much longer.
The last six months have shown me that life is still changing constantly. In the last year, I have made many life decisions: bought a condo, moved into said condo, started a relationship, changed jobs, and ended said relationship. I’m so thankful that as I navigate my twenties, I now have a stable home environment in my condo and I do have a pretty stable job that lets me not worry about money. With > $2,000 in spare cash flow each month and enough in savings to live off of for 12 months, I don’t really worry about money any more, which is a really nice feeling as I figure other things out.
I’m also trying to stop relating everything back to money. This is especially important as I adjust back to a single person’s social life, in terms of spending habits. I think I should still be able to keep my social spending under control though since my ex and I had somewhat different priorities on how much to spend on various things.
Readers, are you doing any challenges with your money lately?
Posted in Uncategorized on April 2, 2013
|assets – debts
At a normal rate of $5,000 increase/month, I would hit a net worth of $300,000 in about 11-12 months with no bonuses! So I wasn’t really expecting a $7,000 increase month-over-month despite my income tax refund (unfortunately) being a bit over $1,000. The stock market and my savings rate sure do make expenses not seem to matter so much, which is exactly why I’m focusing on expenses this year. I will probably surpass $250,000 sometime in May since April will have some big expenses.
Expenses: I spent $2,800 in March ignoring work reimbursable expenses, which is a bit above my spending goal for the year (under
$30,000 $24,000 in non-mortgage expenses). That puts 2013 so far at $6,620 or an average of $2,200/month. This would project forward to $26,480.
Some of my controllable expenses broke down as follows:
- $41 Clothing (hoodie, athletic socks)
- $140 Entertainment/Social ($125 last month, $216 average last year)
- $8 Eating out by myself ($3 last month, $51 average last year)
- $211 Groceries ($146 last month, $126 average last year)
- $99 Work lunches ($48 last month, $171 average last year)
- Charitable donations – increased! I’m working on this one.
- $63 Cell phone (paid my Sprint early termination fee, still working through Ting credits)
- $65 Internet (both the February and March bills, oops)
- $42 Household goods (dishwasher detergent, paper towels, batteries for the garage door opener, rubber gloves, hand soap)
- $43 Health (last month of being past the deductible…)
- $20 Eyebrows
- $XXX Furnishings (a plant, a gardening trowel, various cleaning supplies, and furniture for my balcony, yay spring!)
- $28 Fuel
- $518 Flights (wedding season is coming up!)
I know I said I was going to give up my paid Pandora subscription. I tried it out and gave up after a couple days of getting ads every ten minutes at work. I’m not going to set aside $3/month like I was before – I’m just going to let it come out of my Entertainment budget like it did this month. Another $58 of my Entertainment/Social spending was eating out with friends and I bought one book for $11, one Redbox movie rental at $1, and about $31 in withdrawn unaccounted for cash (although there is still about $26 sitting in my wallet, so that’s really only $5). (I mostly don’t track my cash spending, so I just count it as spent when it comes out of the ATM.)
I was doing so well with work lunches in January and February, but after my relationship ended, I gave myself a bit of a break on meal planning. $99 is still about half of my average from last year, so somewhat of an improvement? I picked up fixings on Sunday for work lunches this week, so I think I will be able to go back to bringing my lunch. If I don’t have many options to eat out for lunch, I’d rather bring my own.
I’ve set up quite a few automatic payments now. All of my credit cards are on auto-pay. My mortgage is set to auto pay on the last day of the grace period, in case I forget to make a manual payment with extra principal. My cell phone bill with Ting is on auto-pay, as are the electricity and internet bills. I’m still checking them, but it definitely makes things a bit simpler and less time-consuming!
The cell phone switch has been good so far. I was “charged” $48 so far in two months. (I say “charged” because I have a bunch of credits.) That’s pretty awesome because with Sprint, I was paying $83/month. This is pretty awesome for not modifying my usage at all.
Savings: $25,400 (down $10,900)
2012 Roth IRA contribution $5,000 in rewards checking account
- $22,000 in an online savings account
- $600 in a checking account that gets free ATM fees anywhere in the world (for a just in case backup)
- $1,500 in a Chase checking account for 6 months ($200 bonus for opening the account!)
- $1,400 Condo furnishing sinking fund
What changed this month? I moved $5,000 from my checking account to Series I Savings Bonds, $5,000 from my online savings accounts to my Roth IRA. The other $900 is spending from my condo furnishing fund. I also consolidated all of the targeted online savings accounts except for the condo furnishing sinking fund into one.
I’ve also done the math to calculate where I would find twelve months’ expenses: online savings account and cash flow, then Series I Savings Bonds, and lastly, 50% of my stock index funds in taxable. Those three (ignoring cash flow) add up to $36,000. Doing that math really helped me to feel comfortable with using cash flow to pay down the mortgage and/or invest.
I’m running out of big things to use my condo furnishing sinking fund for. From my list last July and more, I have bought a futon for the second bedroom, a small table in the entryway, added some color and storage in the second bathroom, a BBQ and other furniture for my balcony, framed photos of my own and hung around the condo, a lamp for the office, a plant, and possibly other things that I’m forgetting. The only things I can think of to still buy are ceiling fans for the master bedroom and the living room, if I’m allowed to in my condo, a wall clock to decorate the front entryway, and to frame my college degree. Those three things most likely won’t add up to $1,400 – I’m guessing closer to $500.
Investments: $92,500 (up $13,200 or +16.6%)
This includes my Roth and Traditional 401(k), my 401(k) employer matching (fully vested!), my Roth IRA, my taxable investments including stock index funds and Series I Savings Bonds.
You might question my counting my Series I Savings Bonds under Investments vs Savings. I’m counting them here mostly because of their tax-deferred until maturity nature. I also consider them part of my emergency fund, but in reality my entire monetary (i.e. non-property) net worth is my emergency fund, so that doesn’t necessitate it being part of savings.
The increase here comes from:
- February 401(k) contribution and employer matching
- Contributing the 2012 maximum to my Roth IRA ($5,000)
- Buying $5,000 of Series I Savings Bonds (half the annual limit for 2013)
- Quarterly dividends in all of my stock index funds
- Healthy market gains
A fancy milestone: My 401(k) balance is now over $50,000! It was also really awesome to see the balance of my Roth IRA jump so much since I hadn’t made a contribution in almost two years.
Mortgage: $245,700 (down $4,200 or -1.7%)
My mortgage is a 5/1 ARM at 2.5%. Before the refinance, it would have been paid off November 1, 2038. ~$7 less was paid in interest with the March 1st payment versus the February 1st payment. More of the regular payment should be going to principal than interest each month by
May April of this year!
The March 1st regular payment saw some extra principal funds from my February paycheck. I also threw another $200 at the mortgage in early March after zeroing out my February budget and my entire income tax refund. It’s really fun watching the mortgage balance go down in such huge chunks! :D
I estimate with the extra principal payments in March that the payoff date is down to November 1, 2040, shaving 7 months off of the amortization. I need to send an additional ~$27,500 in extra principal payments this year to stay on track with the five year payoff plan, which I am on track to hit by July/August.
TOTAL: $242,600 (up $7,100 or +3.0%)
I ended 2012 with a net worth of $211,300, so I’ve seen a change of $31,300 or +14.8% so far this year. I’ve set the y-axis on this graph to $315,000 so we can see how my net worth grows towards that throughout the year.
Interesting fact: in June 2012, my net worth was up $32,700 YTD. This year, my net worth is up 96% of that amount only three months in!
Posted in Uncategorized on March 31, 2013
I hope everyone had a lovely weekend! It was absolutely gorgeous here, a great start to spring! :)
Ever since I moved, I’ve been getting the occasional offer to open a Chase checking account and get a free $125. That’s not a bad deal, but I was reasonably busy with moving, settling in, etc. and I didn’t have the energy to sort out the fine print, so I felt it was better to ignore it. I missed one offer back in December/January and then a couple weeks ago, I got one via email for a $200 bonus! So of course I jumped on that pretty quickly.
Some details on the deal:
- I have 60 calendar days to deposit at least $100 and then the bonus will be deposited within 10 business days.
- Offer has an expiration date.
- Offer is not available to those with existing Chase checking accounts.
- Offer is not available to those who closed a Chase checking account within the last 90 days or if you closed your last Chase checking account with a negative balance.
- The account to be opened is a Chase Total Checking account.
- One can only receive one checking account-related bonus per calendar year.
- Bonus is considered interest.
- The account must be kept open for six months or the bonus will be lost.
The catch? The account has fees, unless you follow their rules, which is exactly why I left banks for credit unions several years ago. Here are the options to avoid the monthly service fee:
- Receive a direct deposit of $500 or more in the checking account.
- Have a daily balance of $5,000 or more across your Chase checking, savings, and other accounts.
- Have a daily balance of $1,500 or more in the checking account.
The direct deposit one is annoying since I have my cash flow set up nicely, so Option #1 is out. I am perfectly happy with my current savings accounts structure and Chase has even lousier savings account rates than my online bank does, so Option #2 is out.
That leaves Option #3, which makes this entire thing like locking $1,500 up in a 6-month CD with an early withdrawal penalty of 100% of the interest earnings. How much would I earn on $1,500 with Ally in six months? About $7, assuming that their interest rates don’t go any lower. So $200 is $193 more in those 6 months than I would otherwise get and then I can close the account and transfer the money back to my online bank.
I was trying to decide what to do with the extra $200 and came up with a few options:
- Make a principal only payment on the mortgage.
- Leave it in the Chase checking account until I close it out.
- Transfer it to my online savings account.
I ended up going with option #3 because if I had left the money in my online savings account, it would have been earning interest which I would have left there. I was a bit of a dumbo and transferred the $200 to my online savings account on the last business day in March, which means my March net worth update doesn’t reflect the $200 bonus since the money is off in the space between banks until April 1st.
Readers, what have you done lately to get a bit more yield out of your savings?
Posted in Uncategorized on March 12, 2013
Sitting down and looking at my projected savings numbers for this year as I was doing my tax return last weekend, I started to realize a bit the enormity of how much I should be able to save this year. Assuming that I don’t get a raise, my RSUs vest at a medium stock price, and I don’t itemize my taxes, I should be able to increase my net worth by $100,000 this year. If you use the 52-week high stock price for my RSU vests and add in a 3% raise and itemizing, that’s looking at closer to $115,000. These numbers absolutely astound me considering that only three years ago, my *gross* income was less than what I am estimating to increase my net worth by this year and I bought a new car in cash that year, so my net worth didn’t go up by much despite my income (~$22,300). And a year before that? I was in college.
Some crazy part of me just wanted to throw every last cent at the mortgage. But then I started looking at the numbers. Here’s what my plan was to save this year:
- $17,500 Max out the Traditional 401(k)
- $2,000 Max out Health Savings Account for the plan year (rest of the $3,250 will go in next year, in 2014)
- ~$1,000 Roth IRA front door for 2012
- $5,400 Emergency fund aka cash savings
- $40,700 Five year mortgage pre-payment
- $6,000 Mortgage principal from regular payment
- $25,000 Extra savings (assuming no raise, RSUs vesting at a medium stock price and I take the standard deduction)
If I have $25,000 or so in extra savings room after accomplishing all of that, then maybe I should do the backdoor for the Roth IRA for 2012, since that’s giving up about ~$4,000 in tax-advantaged savings room, forever. I could end up working at a start-up with a bad retirement plan and wanting to roll over my old 401(k)s to a Vanguard Rollover IRA instead of into the new 401(k), so I might not have many years where I can do the backdoor Roth IRA contributions. That leaves me with $21,000 in extra savings. That’s still a lot of extra savings, so I started looking at my other options.
Buying Series I Savings Bonds from Treasury Direct is a bit of an appealing option when I see how much I’m paying in taxes now on the interest in my savings accounts and I could defer that interest until maturity (up to 30 years). The catch is that I don’t want to bunch up paying tax on their interest payments in a year with high income because then I could just be paying more in taxes than I would have to begin with. On the other hand, for now, they’re paying more in interest than my savings accounts are. I had been considering moving part of my emergency fund into CDs. One way to look at the i-bonds is that they’re a sort of 5 year CD with interest rates tied to inflation instead of stuck for 5 years.
I did a bunch of reading:
- Investing in I Bonds: An Intro to I Bonds for Young Investors
- September CPI up 0.6%: I Bonds Rate Announced
- The Finance Buff on I Bonds (link goes to his tag archive)
- Treasury Direct on I Savings Bonds (tons of good info on the official website!)
I’m also on the fence with my rewards checking account now that I have credit cards that have cashback/points. The rewards checking account was perfect back when it was paying me to do what I was already doing and even if I don’t make N debit card transactions per month, it’s not a bad checking account either since it has no fees. So my current plan is to buy $5,000 of i-bonds with the buffer I was keeping in my checking account, which doesn’t really affect the extra savings amount, come to think of it. I’m also going to give up on the rewards checking account starting in April – I’m already too far into it this month that I might as well keep going now. It’s going to be tight getting my N transactions in with my debit card by the end of the month, but I think I’ll make it by the end of the month. The cashback cards aren’t honestly that worthwhile either with how little I’m spending, but at least they’re rewarding me for what I would have been doing anyway.
These two changes have meant an adjustment in my asset allocations for the year. Very little, if any, of my 401(k) money will end up going to the Total International Stock Index fund. With the i-bond purchases, less of it needs to go to the stable value fund as well.
My target asset allocation at the end of 2013 will now be:
- 31% S&P 500 Index
- 6% Extended Market Index
- 37% International Stocks
- 26% Fixed Income (My age at the end of the year + the number of multiples of $100,000 I have in investments)
Based on this, let’s calculate my ideal portfolio at the end of 2013 and compare it to where my portfolio is now:
I’ve updated my 401(k) contribution allocation as follows:
- 74% Vanguard 500 Index fund
- 15% Vanguard Total International Stock Index Fund
- 11% Vanguard Retirement Savings Trust
Some more thoughts:
- I’ll hit the five year mortgage pre-payment amount by sometime in July.
- I’m going to wait until my last bonus of the year hits to make my non-deductible Traditional IRA contribution for 2013 and then I’ll convert the 2012 and 2013 amounts in one go. I’ve invested the 2012 amount in Vanguard Total International Stock Market Index Fund Investor Shares for now.
- I’m not sure whether I’ll buy my remaining $5,000 in I Bonds for the year out of my savings account (counting it as moving that money into a 5 year CD) or buy them out of cash flow.
- That still leaves another $20-35,000 in funds to save/invest.
- At that level of savings, there are so many good options to choose from. I’m hesitant to invest money that I could throw at the mortgage in a vehicle that is neither tax-advantaged nor guarantees the principal. So I’ll most likely throw the majority of that extra savings at the mortgage this year, even though another part of me doesn’t want to wait until the mortgage is fully paid off to invest in index funds outside of my retirement accounts. I estimate that if I only make extra principal payments on the mortgage through the end of this year, I will not see a cashflow impact when the mortgage rate resets in 2018 since it’s effectively a recast to a higher interest rate.
- One option I’m considering is to invest my Social Security tax break in the last half of the year (I’m estimating hitting the maximum income by July or August) and keep chugging along at the mortgage with the rest of my funds.
- I’ve also contemplated buying Series EE Bonds, but I’m hesitant about the 20 year wait to get the “good” interest gains from them. I’m only in my mid-twenties – I can’t see twenty years into the future!
Savings plans are always a work in progress and I’m sure this won’t be the last time that I fidget with mine this year!
Readers, how is your 2013 savings plan going so far? Have you made any adjustments?
Posted in Uncategorized on March 9, 2013
It appears that the third try was the charm with filing my taxes this year!
Since I’m reasonably comfortable with the tax forms, having done my taxes myself on paper back when I just had a W-2, my first attempt was to use Free File Fillable Forms. It’s a service that is provided by the IRS for taxpayers of any income level and it is completely free. The catch was that there is no help whatsoever and I was getting XML parse errors when I tried to file my taxes. I tried quite a few things and eventually gave up on it.
My second try was with TurboTax. I’ve heard mostly good things about it from other people, so I thought I should give it a try. It was able to import my W-2 and my Vanguard forms, but not my RSU sales or any of my 1099-INTs or 1098s (mortgage interest). That wasn’t the end of the world since I didn’t have very many, but then I realized that I was too cheap to pay $30-50, so I gave up on it too. I was very close to just printing the forms out and paper filing again when Bichon Frise suggested I try TaxAct.com. Win! It was free AND there were no XML parse errors. I am so glad that I am finally done with this – I had originally started them back in early February and left them alone for a bit to breathe.
Last year, I used a CPA and decided to do them myself this year. How do I feel about that decision? I definitely think it was the right choice. I know enough about the tax code (and ended up using software in the end), that it actually cost me less time and money to do it myself, since I was double checking what the CPA did anyway since he/she didn’t necessarily know to file form 8606 (non-deductible Traditional IRA) and some others.
I was a bit cautious with my W-4 allowances after purchasing my condo last year, since I was unsure of how much I would end up actually itemizing. Back in November, I updated my calculations on how much income tax I owed for the year and realized that I’d already overpaid as of my November paycheck, meaning that I didn’t need to pay anything on my December paycheck and I adjusted my withholdings accordingly. Since I didn’t know I could itemize the origination fee I had paid on the purchase loan or the state income/sales tax, I had thought I wouldn’t itemize (or that it wouldn’t be worth much) for the 2012 tax year since the other items summed up to slightly above the $5,950 standard deduction for single filers. So my income tax refund, which I should hopefully receive by the end of March, is the tax savings from itemizing plus the approximately $400 that I had been expecting. A summary of what I ended up itemizing:
- Charitable donations (expected)
- Mortgage interest (expected)
- Origination fee on purchase loan (unexpected!)
- Real estate taxes (expected)
- Part of my vehicle tab renewal fee (unexpected, though < $100)
- State income or sales tax (unexpected!)
Now I have a better idea of what itemizing will look like for 2013. I’ll pay property taxes for the whole year instead of just half and I’ll pay a bit more in interest, but I don’t have the origination fee to itemize. So I expect that I will itemize about $1,000 more in 2013 than in 2012. I’ve set my W-4 with my employer to 2 allowances for now because my itemized deductions aren’t forecasted to surpass the standard deduction until I have paid my property taxes in full late in the year. At that point, I’ll calculate my remaining income tax to pay and adjust my W-4 allowances accordingly. I have developed a spreadsheet now, but if you’re looking to adjust your W-4 withholdings, I would suggest searching for “IRS Withholding Calculator” in your favorite search engine – it was quite helpful for me in the past.
What will I do with my refund? Exactly what I would have done with it had I had it earlier in the year – an extra payment on the mortgage.
Readers, how is your tax season going? Have you received your refund or filed yet?