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Posted in Uncategorized on June 26, 2014
You know you’re a finance nerd when the first thing you wonder about when you’re considering leaving your job is what about contributing the full amount to your 401(k) for the year?!
As some of you may have noticed, my job satisfaction hasn’t been the greatest over the last while. Well, I’ve finally decided that it’s time to look for a new job externally. I’m working on preparing my shortlist of companies to whom I will send my resume (my goal is three) and then I will work on studying for interviews.
I’m not really remotely concerned about finances. In fact, I’m trying to convince my boyfriend that he should scrounge up the vacation days to go traveling for two weeks while I’m between jobs. Maybe that Europe trip we were planning for next fall could happen this fall/summer!
As of today, I have contributed ~$8,000 to my 401(k). I decided to leave June’s contribution as is because I’m reasonably confident that I will have a full July paycheck. I can then max out my 401(k) with my July paycheck, leaving me with a paycheck of about $650.
The other question is what I will do with my 401(k) plan after leaving. My current plan charges a fee if you leave your money in the plan, so I will have to evaluate between a) leaving the money there and paying the fee, b) moving the money to a Rollover IRA at Vanguard and having to undo my Roth IRA conversion for 2014 and not be able to do the Backdoor Roth IRA in any future years, and c) moving the money to my new employer’s plan. My hope is that option c) would work out, but option a) might be better than option b).
B) Cash flow
The $650 July paycheck would be concerning if I didn’t have enough vacation days banked to probably get a gross payout of those at around $3,000. Those two amounts together should be enough to cover August spending as normal. I hope to take at least a couple weeks off between jobs, which means that I will probably draw down from savings a bit, but that’s okay because I have about 6 months of expenses squirreled away in a savings account ($20,000) and especially with no 401(k) contributions at the new job for the rest of 2014, I should be able to replace any savings fairly easily. I’m not really concerned about money with this change, but I want to plan out how things are going to happen. I’m also going to stop making extra payments on the mortgage for a few months as the job situation shifts, stockpiling a bit of cash instead.
C) Health insurance
If I leave after the 1st of the month, my health insurance coverage will cover me through the rest of that month (I’m going to double check on this). If my boyfriend and I lived together, he could add me to his policy during the break, but since we don’t yet officially, I would probably pay for COBRA for any otherwise uncovered time necessary. I also have about $1,400 left in my Health Savings Account from the last plan year, which I will probably transfer elsewhere after I leave. Perhaps just to my credit union, where I could get 1% on it since my balance is so low.
My insurance has been so cheap with my current company that I don’t know what to expect with another one! It is the tech industry though, so I could end up paying even less. We’ll see how that falls out!
D) Social Security tax
If I stay with my current company, I will finish paying it in October. I’ll have to adjust my withholdings on my W-4 with the new company so that I don’t end up with a huge refund in April.
E) Future compensation
I don’t expect to replicate last year’s $200,000 gross income anywhere. I do, however, expect that any reasonably sized company would match my current total compensation range of $150,000 to $170,000. With a smaller company, I’m aiming for anything at or around $120,000 with a sane expectation of work hours (40-45 per week), 3 weeks of vacation the first year, and more holidays than I currently get. Obviously this will reduce my savings rate a bit, but that’s totally okay. I should still be able to make the full 401(k) and Roth IRA contributions, cover my normal expenses and have about $30,000/year leftover after tax to save outside of retirement accounts for a total overall savings rate of around 70%, which is not too shabby.
I also plan to ask questions around: base salary, bonuses (cash/stock? vesting schedule?), employee stock purchase plan (do they have one? what does it look like?), 401(k) (matching, plan details, vesting schedule, if they allow after-tax contributions, vesting schedule), health/dental/vision insurance info, fringe benefits, and days off.
All in all, I am really excited about looking for a new job. It has been years since I interviewed and I’m now interviewing as an industry hire rather than a new grad hire. I’ve located several companies that I’m really excited about the prospect of working for and I’m updating my resume.
Readers, what do you consider in terms of financial concerns when you’re contemplating a new job? Have I missed anything?
Posted in Uncategorized on June 24, 2014
I’ve been using Mint, not for budgeting, but to make logging into all of my bank accounts easier. I recently told it to use Zillow to calculate the value of my condo. That shot my net worth up to…
(a bit of rounding here)
It really does feel like I’ve “won the game”, not that I can stop working forever, but I have quite a bit of financial freedom now. I’m 25/26 and the sum value of all my assets is over $400,000 and my income is in the high $100,000 range? I also think that Zillow is low by about $50,000 in how much my condo is worth, which would put my full net worth somewhere around $480,000 or about 11 years of current expenses. I’m going to continue counting only the purchase price of my condo in my net worth spreadsheet until I sell it, but it’s still kind of cool to see these numbers.
Also? I saw just under $1,000 in dividends across my investment accounts this quarter. (Note: I do re-invest dividends, so I just find this an interesting metric to watch increase.)
This is probably related to why I haven’t posted much lately – everything is just chugging along and not much out of the ordinary is happening. I’m not really discovering much new in relation to my finances lately either. I will have a post up at some point reflecting on two years of homeownership though!
Posted in Uncategorized on June 1, 2014
|liquid assets – debts||$49,000||$36,700||$15,000||+$21,700
|$ until FI||$823,900||$890,600||$846,400||-$44,200
Finally an interesting month! May saw my first of two expected bonuses for the year. It was about 20% smaller than it was supposed to be (thanks stock market), which led me to get upset with myself for throwing a lot less at the mortgage than I had thought I would. But you know what? I threw more at my mortgage from my regular paycheck than I had planned on (almost double!) and I really can’t control how much my bonuses end up being – just what I do with them. I added the X% of my gross from the bonus to my donations budget and threw the rest of it at the mortgage – what else can I really do?
Now with this big jump, I’m looking at when I’ll surpass $400,000 in net worth – sometime between July and September most likely. And $500,000? Well that will most likely happen sometime next year, probably in the summer as well.
I decided to start tracking a new metric here: $ until FI. I’ve rounded the number to the nearest $100 like all of the other numbers. The formula I’m using is (Rolling monthly average expenses – Mortgage payment) x 12 months x 25 + Condo value – Current net worth. I thought it would be interesting to track this since it is not only affected by the current amount of money I’ve saved, but also by my current spending level. It is really strongly affected by small variations in spending. Some past numbers on this:
- EOY 2010: $1,027,400 (average monthly spending $3,600)
- EOY 2011: $856,500 (average monthly spending $3,300)
- EOY 2012: $1,104,800 (average monthly spending: $4,220)
- EOY 2013: $823,900 (average monthly spending: $3,730)
It sure has fluctuated a lot! So my number is definitely a bit of a moving target and definitely a ways away and I’m sure it’ll continue to change before I hit it, but it’s still interesting to see. If my spending this year ends up being exactly the same as last year, then I should lower the $ until FI marker by $100,000 to about $723,000 and if I lower the $ until FI marker by ~$100,000 each year, it should take me about 8.5 years to reach FI at my current spending.
Expenses: I spent $2,860 in May after the mortgage or $1,835 without it. So far, my total spending for 2014 is $19,880, which is $47,712 annualized (woo! the annualized figure is under $50,000!) To hit my $38,500 spending goal for the year, I need to spend no more than an average of $2,660/month over the remaining 7 months this year.
Some of my controllable expenses broke down as follows:
- ($65) Summer pants – returned two of them. I’m so glad I ordered four because one of the colors I loved online, I didn’t love in person and vice versa with another pair.
- $45 Skirts – a colorful, knee-length skirt
- $91 Jewelry – since it is now summer and I’m not wearing scarfs like I do in the winter, I wanted some fun and cheap necklaces to use to accessorize. I bought three and my goal is to keep one or two and return the other(s). They were all 40% off at least!
- $59 Running shoes. These need to be replaced every 6 months with how much I walk.
- ($28) Tops – returned one of the button-downs I bought in April and bought another camisole.
- [Total clothing spending in May: $102]
- $235 Entertainment/Social – And we’re back to a more normal month for this year. [average this year: $229, last year: $224] This was about 80% date nights with a small amount going to cash withdrawals, a few movie rentals, and hanging out with friends.
- $13 Eating out by myself [average this year: $12, last year: $25]
- $327 Groceries – this was for two. [average this year: $245, last year: $152]
- $176 Work lunches [average this year: $157, last year: $77]
- $46 Internet – $7 less since I overpaid by $7 last month
- $25 Household goods [average this year: $16, last year: $29] – I accidentally bought a four year supply of garbage bags. Go online shopping.
- $77 Hair cuts – my annual hair cut.
- $20 Eyebrows
- $0 Toiletries [average this year: $11, last year: $31] – This is lower because some of these items have been lumped into groceries since we’re splitting.
- $290 Recreation: a yoga mat bag and a yogitoes yoga mat towel, plus a 10 pack of classes at a barre place near work that I’m liking so far. The yoga mat towel made a HUGE difference.
- $30 Travel – preparation for an upcoming weekend trip
This month was reasonably average for spending, which was nice!
I would love to get my spending down closer to 2011 levels, but as I looked over the electricity bill I just got, I’m realizing that may not be completely possible, ignoring lifestyle inflation. For example, my property taxes and HOA dues went up a combined $900 this year.
Electricity rates are up about 7%, so even though I am using less electricity than I did last year, I’m paying more. In 2013, I spent $699.36 on electricity. If I take the amounts from the bills I have so far and otherwise project with last year’s usage and this year’s rates, I will end up spending $709.57 in 2014 on electricity. I used 8,702 kWh in 2013 and that forecasting shows about 8,361 to be used in 2014, about 4% fewer kWh used while spending about 1.5% more $-wise. I realize that the actual $ increase for electricity is pretty small, but it is still an increase and not a decrease, despite my efforts to reduce the kWh used.
Savings: $22,300 (same)
These funds are spread across a Chase savings account, a general online savings account, a checking account that gets free ATM fees anywhere in the world, and my health savings account.
I’ve decided to keep the Chase savings account open even though I could now close it with no penalty as it has come in handy a few times, for example to get a deposit rather than a statement credit for credit card rewards and then immediately send them to the mortgage. Plus, it is only the opportunity cost on $300, which at the Ally online savings account rates loses me $2.55/year.
Nothing interesting is going to happen here for a while…
Investments: $152,300 (up $4,300 or +2.9%)
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.
The change here comes from:
- Over $2,000 in stock market gains and interest (more than I put in this month!)
- April paycheck 401(k) contribution and employer matching
Mortgage: $153,000 (down $21,500 or -12.3%)
Some statistics here:
- 2.5%: the interest rate on my 5/1 ARM
- February 2018: when the interest rate on my mortgage is set to reset, possibly to 7.5%
- 2.5: years of payments eliminated with this month’s pre-payments
- $20,900.00: extra payments made on the mortgage this month (woo!)
- $43.50: interest this month’s extra payments will save me on the next regular payment
- 35.4%: portion of my regular payment went to interest (originally was 59%)
- 57.3%: amount of equity in my condo, assuming purchase price
- 46.5%: amount of the mortgage I’ve paid down
Now this was an interesting month for the mortgage! I threw pretty much all of my bonus at the mortgage (minus the X% of gross to my charitable donations budget). Doing so shaved off 2.5 years of mortgage payments, saved over $40 of June’s interest cost and got me only 3.5% or $10,000 away from having paid off 50% of the mortgage. I’m currently estimating that I will hit that marker around September.
I also found quite a bit of extra money in my checking account when I zeroed it out at the end of the month, which resulted in a $3,000 extra principal payment from my paycheck instead of the usual $1,800! That meant I saved ~72% of my regular net income this month, in addition to my bonus!
TOTAL: $387,100 (up $25,300 or +7.0%)
I ended 2013 with a net worth of $345,900, so I’ve seen a change of +$41,200 or +11.9% so far this year. I’ve set the y-axis on this graph to $465,000 so we can see how my net worth grows towards that throughout the year.
And let’s take a look at how I did on April’s goals:
- Find and buy a second skirt. (I’m currently eyeing eShakti.) DONE! I love it!
- Use my debit card for the small transactions – under $6 restaurants, under $15 2% cashback, and under $30 1% cashback. DONE! This was pretty easy to do. I finally came up with a simple way to track this. Since Barclaycard expanded their definition of “travel” costs, I’ve gone back to using that as my default credit card.
- Decide what to do about the new yoga studio. Do I want to buy a yoga towel or a better yoga mat? A better bag to make carrying my yoga mat to work and then to yoga easier? What I have now (an $8 yoga mat, no towel) is definitely not going to work if I want to keep going to hot yoga. DONE! I did buy a yoga mat towel and a bag and the towel has made things much better. I’m still having troubles with the heat, so I decided to try the barre studio by work for 10 classes to get into better shape and then try hot yoga again (with a 10 drop-in commitment).
- Enjoy spring! DONE! This one was far too easy.
- Trust my gut instincts more at work. I’m no longer a newbie and I do know more than I think I do. PASS! I’m definitely improving here, but now things are changing again a bit and figuring that out over the next few weeks is going to be interesting.
- Send $1,800 to the mortgage on pay day. SUCCESS! I actually sent $3,000 to the mortgage on pay day and I think I’ll end up sending another $100 with the regular June payment :)
- Add X% of the gross of my bonus to my donations budget and send the rest of it to the mortgage. I am super excited about how my finances will look at the end of May! DONE! My donations budget is at last pretty much in the clear and I’ll probably make my next donation in August since I’m trying to make at least $100 of a donation at a time.
- Clean the balcony. PASS! We cleaned part of it?
- Call my parents four times. (I’ve been lacking on this lately.) PASS! I think I might have called them four times. Definitely at least twice.
Apparently I should make harder goals! Now for some new goals for June:
- Go to the barre place by work twice per week before/after work.
- Commit to some form of exercise each weekend day, any of: a) 30-60 minute walk, b) 45 minute run, c) any distance/length of bike riding, d) going to a morning class at the yoga studio near my place (three time choices!), or e) doing some sit-ups and push-ups at home. Log it in Google Calendar too.
- Send $2,000 to the mortgage on pay day.
- Keep my total spending (including the mortgage!) under $2,400. This should be do-able, especially since I don’t have to pay for groceries.
- Enjoy the first of our summer weekend getaways!
Posted in Uncategorized on May 24, 2014
Sometimes, I don’t feel like making big payments to the mortgage and I would rather throw the money into investments. I mean, my interest rate is only 2.5% and the balance is a lot less scary now that it is down in the $150,000 range from the $280,000 range when I bought two years ago. For now, I am going to continue with the plan of paying off the mortgage. There’s no rhyme or reason to my wanting to throw money in investments instead of at the mortgage, so it’s probably just fatigue from working on a medium-term goal. Or maybe it’s a desire to see my investments go up faster instead of seeing the mortgage go down faster. I think I’m more motivated by seeing numbers go up than numbers go down! (Hmmm, if that’s the case, perhaps I should track my equity instead of tracking the mortgage balance. Well, I do both in my own spreadsheets.)
Every once in a while, I calculate how much extra I would need to pay on the mortgage each month in order to pay it off exactly before the rate resets. As of today, that number is around $2,700 and I’m only throwing $1,800 each month at the mortgage. By the end of this year, the required number should turn into only $2,200, which might be possible. And by the time of my bonus at this time next year, it should be down to around $1,600 and the mortgage balance around $80,000. So the question at that point becomes “Would I rather take a year to pay off the mortgage and put nothing into investments in that time OR pay off the mortgage exactly before the rate resets and put everything else into investments in that time?”
I’m not going to let myself re-evaluate how much I’m throwing at the mortgage until I have reached a point where I am throwing more at the mortgage each month from my paychecks than I need to to pay off the mortgage before the rate resets, since I don’t want to rely on my bonuses. After all, my original goal WAS to pay off the mortgage before the rate resets. It just turned out to possibly be possible to pay it off months/years before that happened.
Posted in Uncategorized on May 22, 2014
Ever since I moved into my condo (almost two years ago!), I have had a love/hate relationship with my electricity bill. My July and September 2012 bills don’t really contribute much data-wise and I should probably just throw out the 2012 data points from my spreadsheet completely. The electricity usage was truly mine starting with the January 2013 bill. As you can see below, I used about 5 kWh/day less this year than I did in 2013 on the January and March bills. I also basically cut my usage in half from March to May, May to July, and July to September.
I still think I can improve my electricity usage, so I’m going to take a look at all of the items that use electricity in my home.
TiVo – my boyfriend has a different system for watching TV that uses a lot less electricity, so I’ve unplugged the TiVo. That should save about 0.7 kWh/day from what I’ve seen online.
Heating - this is the killer of my winter electricity bills. I can’t really do anything about the fact that I have electric heating, but I can make that a bit more efficient. I figured out in March that my programmable thermostats were from the 80s, so I decided to replace them. That cost about $100 for the two of them, but it has been so worth it for the annoyance factor with the old ones. They also seem to interpret the temperature better, so maybe it will save a small amount on heating. I won’t really see much difference until next November/January on this though.
Hot water heater - my hot water heater is incredibly inefficient according to the label on it. Its about 8 years old, so it’ll probably be replaced in the next five years. It says that it uses 4,881 kWh/year. If that’s true, that would account for about 55% of my electricity usage in 2013.
Lights - there are a TON of lights in my place. I have fifteen 65 watt incandescents (8 in the kitchen, 4 in the hallway, 1 in the second bedroom, and 2 in the master bedroom/bathroom), a 72 watt incandescent on the balcony, and twelve 60 watt incandescents throughout the apartment. I do have about 5 CFLs as well. That’s over 30 lights throughout the condo. The kitchen lights probably spend the most amount of time on, so once I run through my current supply of the flood lights (four spares left), I’m going to look at CFLs and LEDs.
I found a 10.5 watt LED light for $20 on Amazon and a 15 watt CFL for $6. They’re actually about the same overall cost since the LED one lasts 3x as long. I doubt I will still be living in my condo in 20 years though! The LED one would cost me $0.54 less per year in electricity per light bulb over the CFL, assuming 3 hours per day and 11 cents per kWh. The CFL would save me $6/year per light bulb and it would be cost effective within a year ($6 in electricity savings and $6 cost per CFL light bulb). If I replaced all 15 of the indoor flood lights with CFLs, it would save $90 in electricity per year or an average of $15 per bill, though it would take until after the first year to see any level of savings. That’s a pretty decent chunk of change. My estimate is that I will use up the remaining four flood lights in the next 6-12 months and then I’ll buy a LED and a CFL and give them a try.
Fridge – my fridge is about 18 years old. It would probably cost less in electricity to run a newer one, but that’s not worth buying a new fridge for. I am sure that once I do replace it (which will probably be in the next five years), I will save a bit on the electricity bill from it.
I’ve made pretty minor improvements on my electricity bill in the last two years, but I’ve been happy with the progress and it’s kind of interesting to see. I just wish I had more data on this!
Sometimes it makes me feel like analyzing costs like this doesn’t mean much or isn’t particularly worthwhile when my employer’s stock price can drop enough that my bonus is several thousand dollars smaller than expected and that has a far bigger impact on my finances than saving $6 per lightbulb per year on my electricity bill.
Hope you all have a wonderful long weekend!