Being financially stable doesn’t make you better

While I was procrastinating something the other day, I read through a thread on an internet forums wherein forum members shame their coworkers/friends/relatives for not being as good with money as them. These forum members also have tales of being ridiculed for being so cheap/frugal. And yet, they’re ridiculing their friends/coworkers/relatives in this anonymous, but very heavily search engine indexed forum. Say what?

This whole world would be better if we could learn to not judge others for their choices. This is something I’ve been working on the last few years, but at this point, I have my financial judging down to one: complaining about something that you could fix, but aren’t.

For the longest time, I judged a spendy friend for spending in different ways than I value. I also judged my boyfriend for spending in different ways than I value. But both of those two people have solid reserves and spend less than they earn – just in different ways than I would. To my friend, I probably spend more on security (savings) than they consider necessary. I think they spent more on housing than probably necessary, but you know what I can comment on? They have a really lovely house. And I absolutely love really lovely houses even if I don’t value spending my money on them. (Okay, I do, but in smaller doses of money spent.)

What does judging others for their different financial ideas get you? All it gets you is a negative attitude towards them. You don’t have to share every single possible interest with someone in order to be friends. I have friends who I work out with, friends who I work with, friends who I discuss money with, friends who I travel with, etc. Unless someone told you exactly the decision process that led them to do X where X is something you don’t agree with, you quite possibly don’t even know where they’re coming from. I’ve had people judge me for buying a brand-new car, without knowing that my plan was to hold it for 10-15 years. People judged me for pre-ordering an iPhone 6S when it was announced, without considering that perhaps I am frugal in other ways and that is a way in which I choose to spend my money, or realizing that I spend $35/month on my cell phone plan.

If you’re financially stable, that’s probably one of your values. I know it’s one of mine. I value being financially stable and secure, living in a home I love, having a closet of clothes that fit and make me feel good wearing them, getting plenty of time outdoors, and staying active.

Instead of spending time judging others for their so-called terrible decisions, instead try to remain positive. You might even end up educating them or learning something yourself. For example, when a coworker judged me for buying the new phone, I told them that I paid cash for it and have a cheap cell phone plan, which they hadn’t even realized was an option. They then bought their next cell phone in cash as well and have a cheaper cell phone plan as well now. I will say I was surprised at the person who was incredulous that I would pay $800 in one go for a phone. Yet it’s a device that they too use all the time and get a ton of enjoyment and use out of it for an $800 thing that will cost me about $1/day. I would almost say I get more use out of my phone these days than out of a personal computer.

That said, the guy boasting about having only two dollars and thirty seven cents in his checking account? Definitely not going on a date with him, no matter how cute he might be. I am allowed to reserve some judgment for potential romantic pursuits. After all, you want to find a life partner who shares many of your core values.

34 Comments

Pre-nups and marriage: the future of shared finances

This is a super controversial topic, I know. But I plan to marry only with a solid pre-nup in place. I always knew I would marry with a pre-nup, since I was in my early twenties and my parents told me how much money they had then. My mom tried to tell me again recently and I told her I don’t need to know as it’s their money for them to spend in their lifetimes – I don’t need it. I definitely knew I would marry with a pre-nup when I was a 23 year old buying a condo with a 20% down payment and cash reserves leftover while still maxing out her 401(k). Hot stuff that sure intimated guys! My boyfriend, on the other hand, seems to find it attractive that I am wildly independent and know my way around Vanguard. I still remember his calm response when I first told him how much money I had saved, which was back when my net worth was in the high $300k range.

My boyfriend and I have started discussing what our pre-nup will look like, slowly, what our finances will look like in the future, how we will handle this appreciating like wild fire (too soon?) condo that I own right now as my separate property. A hot anniversary dinner topic, I know.

He was flabbergasted when I told him of how many people on the financial internet are so strongly in the one pot finances camp that they belittle people for ever separating their money or having a pre-nup. With the slow pace we are taking to the altar, by the time we get married, we could very well have a solid $2M net worth minimum combined. That’s a pretty huge difference from people who meet in college, with no money, have $50k/year jobs and get married in their mid-to-late-twenties. We are two financially stable, high income adults, a far cry from the people we were in college when we met.

Pre-nups aren’t just for people from old money. They’re for people who think strategically about how they will grow their wealth as a couple, while financially protecting both parties. For example, I picture using a pre-nup to re-title assets so that we could own this condo together without a mortgage or selling off any assets. Or we could use a pre-nup to re-title our separately lopsided, but balanced combined investment portfolios where one of us has 80% of their portfolio in taxable accounts and the other has 80% of their portfolio in tax-advantaged accounts, though both are completely indexed with maxed out 401(k)s, Backdoor Roth IRAs, and happy Vanguard accounts.

Right now, we track some shared spending in a spreadsheet. By we, I mean, I enter the data in the spreadsheet and update him every few months, usually to confirm that our system is working as expected and we’re splitting expenses just fine with our lackadaisical he pays for some items, I pay for others, and we split some 50/50 approach.

I tried to suggest to him that we make a game in 2015 of which one of us could save more money. When he remembers, he kicks himself for not agreeing to this game because it turned out that I took two months off unpaid and he had a record income year, so he totally would have won.

No, we’re not engaged. But we envision a future together, building wealth together. A mortgage-free life with index funds and maxed out 401(k)s. Financial security is sexy and don’t let anyone tell you otherwise.

Here is to many more years of a life of delicious food cooked at home and adventures together! Swoon.

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Unbudgeting in 2016: reflections halfway through

It’s no secret that I spend a lot of time tracking my finances and I love that! I realized though as grad school kicked into gear that I have too many systems that require me to perform some actions on a specific date, which is problematic when grad school is more important than micromanaging my finances.

So I decided to unbudget in 2016.

What does this mean? I still tracked my spending via the normal ways, but it won’t be time sensitive anymore. I’ll be able to track my spending a month or two later with no effect on anything.

My spending has been relatively consistent since graduating from college. If I throw out the highest year (the year I bought my condo), my spending averages out to $44,000 per year. For 2016, instead of micromanaging how much money my checking account gets each month and it varying a ton, I just took my 2015 annual spending ($48,000), divided it by 12, and gave myself that amount each month. I generally know how much will debit from my checking account each month (credit card bills, mortgage payment, HOA dues, and property tax payments), so I’ll be able to do a quick check by looking at my balance and seeing if I need to add a bit extra.

Why did I do this? It seemed like an interesting experiment, especially since the system of detailed budgeting I used from 2010 through 2015 was largely unnecessary with the huge difference between my income and my spending. This is also essentially what my boyfriend does, so I wanted to experiment and see if it could work for me too. When I first told my boyfriend about my idea, he thought I was crazy and it would never work.

How is the experiment going?

It’s going great!

I started out the year with an auto-transfer from savings to checking of $4,000 on the last day of each month, but in late April (once I finished with 401(k) contributions for the year), I switched it up for my employer to direct deposit $2,000 each pay check to my checking account and the remainder to my savings account. I can split my direct deposit so many ways that I actually also set it up to put 1% of my gross income into my charitable donations savings account as well, which is awesome. The only thing I do manually now is I pay the balance of every credit card as of the last day of the month on the first of the next month, to start the month with a clean slate on the credit card balance, instead of paying attention to the due dates. I used to have my mortgage payment auto-pay on the last possible day it could, but I changed it to the third of the month so it came out earlier and then I knew how much was left in my checking account earlier. Any funds that are leftover in my checking account at the end of the month just stay there and roll over to the next month, which is how I deal with the irregular, but large-ish expenses like property taxes, insurance, and travel.

It’s kind of weird not knowing that I have set aside $X for property taxes so far, that I have $Y left in my clothing budget and $Z in my travel budget, but that’s surprisingly okay. If I spend more this year than I did on clothing last year, then I may consider a clothing budget to see if that helps with the spending. But for everything else, it has been fine. It’s nice getting invited to yet another wedding and not feeling like I need to add money to my presents budget because I don’t have a presents budget! It’s also nice getting the property tax bill and not being annoyed at needing to adjust my budget because it went up by more than what I had estimated. So far, I’ve stayed “under” budget, which is nice, but we also haven’t booked much travel yet this year.

The $48,000 figure was my total 2015 spending less grad school costs and charitable donations, rounded up to the next $1,000. I forgot to exclude medical expenses as I pay those out of my HSA, so really, I could have budgeted probably $47,000, but the buffer is nice to have. If I have funds left in my checking account at the end of the year (which I’m guessing I will), my plan is to just leave them there and then reduce the monthly deposits for 2017. So if I budget $48,000 again, but there is $4,000 left in my checking account, I’ll only transfer $3,666.67/month and not $4,000/month, which would leave a bit more room for savings next year.

So far, my spending seems reasonably in line with my 2015 spending, so I’m not particularly worried.

I have been tracking my spending reasonably close to when it happened, which isn’t strictly necessary, but it’s okay. The time saved not playing with the budget spreadsheet is huge.

This strange way of budgeting also means that it’s really hard to go over budget and irregular spending is accounted for since I never transfer money out of my checking account except to pay the mortgage/credit card bills.

Readers, how have your budgeting strategies evolved over time?

34 Comments

The high cost of attending weddings

Inspired by a post I saw recently, I thought I’d tally up how much I’ve spent attending weddings.

2009

  • Friend Wedding: I learned the night before the wedding that you’re supposed to give presents. I clearly did not get them one and I found a friend as my plus one who had a car, lol.
  • Friend Wedding: Managed to swing it as a layover on a paid for flight. Stayed with friends. Looks like a $100 contribution to a present, $2 card, and $30 on food that weekend.

2011

  • Cousin’s wedding: my parents paid my way.

2012

  • Friend Wedding: Local-ish – they had a shuttle running, so I took that, which was pretty convenient. $75 cash gift.

2013

  • Friend Wedding: $427.65 travel (bought flights with points, saving ~$600-800), $50 cash gift; $1 card (there was a dollar store right by where I was staying)

2014

  • BF’s Friend Wedding: $978.87 travel (food/flights/rental car/one night lodging), no gift (BF paid for it and the card)
  • Mutual Friend Wedding: $75 cash gift (we couldn’t attend due to a conflict)
  • My Friend Wedding: $967.10 bachelorette party; $4 card x2 (one for bridal shower and one for wedding); $45 wedding gift; $50 bridal shower gift. It was local, so we took the bus there and a cab home that BF paid for. I think BF tipped someone too.
  • Total spent attending weddings: $2,123.97

2015

  • My Friend Wedding: $1,099.59 travel (I paid for my flights, my half of the Airbnb, my half of the rental car, and BF covered most of the food and apparently the gas); $100 cash gift
  • $5 wedding cards (one for a reception we couldn’t attend)
  • Total spent attending weddings: $1,104.59

2016

  • My Friend Wedding #1: ~$100 gift. Local-ish, but we may taxi there and back.
  • Mutual Friend Wedding #1: $75 cash gift. Local-ish, but it’s looking like we’ll drive there and back.
  • Mutual Friend Wedding #2 and My Friend Wedding #2: ~$1,300 travel combined for the two weddings (haven’t booked yet), $75 cash gift for each.
  • Total spent attending weddings: $1,625

Usually we can either make an adventure of a wedding location or we can visit with other friends and family (or both!), so the annual travel for weddings hasn’t been so bad. So far, I’m at $5,539.21 spent attending weddings and I’m only 28. Keep in mind that all of these are my costs – BF has contributed to some of the presents and paid his way on all of our wedding travels. All of our friends that are planning 2017 weddings are planning local ones, so maybe we’ll have a year off from summer wedding travel. (Hah, I shouldn’t jinx it.) We have three siblings remaining between the two of us who are unmarried and all of those weddings will be out of town, so each of those will probably have a minimum $1,000 price tag for each of us to attend. I would guess that the next five years will probably see about $1,000/year in average wedding spending. We do have enough miles built up that we could probably pay for some of these flights with miles, but we’d have to book the flights much further in advance for that to be useful.

Readers, how much have you spent attending friends’ and family members’ weddings?

,

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April 2016 net worth update (+1.6%)

In April, I:

  1. contributed ~15% of the amount I can contribute to my 401(k) after-tax, for a total year-to-date contribution of ~40% of the maximum.
  2. sold the Q1 ESPP shares and transferred their value to my general savings account.
  3. paid half of my annual property taxes. They’re up about $1,000 for the year from what I paid four years ago.
  4. made my 2016 Backdoor Roth IRA contribution of $5,500.
  5. saw my tuition reimbursement for the academic period that started in January and some other work reimbursements.
  6. saved 79% of my net income for a total savings rate overall so far of 76%. Looking at my income spreadsheet, I saw about 40% of my expected gross income for the 2016 calendar year in the first four months of the year (first 33% of the year). I expect my savings rate to be about 60% per month going forward until I hit the Social Security maximum and that my overall savings rate for the year will be about 70% before grad school withdrawals.
  7. saw my net worth go up by $12,000 to $703,000, which if you’re following along closely is up $102,300 from my December 2015 reported net worth or about 17%. Four months is definitely the fastest I’ve seen a $100,000 increase in net worth yet!!! (note that I rounded this number differently than the ones in the table below) About half of that increase was updating the book value of my condo and the other half was savings / employer 401(k) matching / stock markets.

Since I have another $100,000 in the books, let’s take a look at the table I used in previous years:

31-Dec-2015 30-Apr-2016 YTD
cash $7,200 $8,500 +$1,300
savings $70,600 $73,900 +$3,300
investments $207,000 $251,000 +$44,000
+21.3%
mortgage $134,100 $131,100 +$3,000
+2.2%
net worth $600,700 $702,300 +$101,600
+16.9%
taxable assets – debts $41,600 $30,300 +$11,300
+27.2%
$ until FI* $783,300 $642,600 -$140,700
-18.0%

*$ to FI=(average monthly spending over the last 12 months – mortgage payment)*12*25 + condo value – net worth

Cash is probably up because I’ve been underspending my budget so far this year. Savings is only up a small bit because I have been spending more from my HSA than I put into it so far this year, I spent from my savings account while frontloading my retirement accounts, and I used some money from my general savings account to fund my Roth IRA for 2016. Investments are the real story here since that was what I was concentrating on in the first third of 2016.

I am still investigating it, but if I plan to retire in my thirties or early forties, I’m not sure the Mega Backdoor Roth IRA is that useful considering that assuming 8% returns and a rate of inflation of 3.22%, I already have enough in my Roth IRA and 401(k) to support me at my current lifestyle after age 60. Not all employers offer it, so I’ve also debated using it while I can. I still have some time to decide as it would take me 3-4ish paychecks (about 2 months) to finish it. I’ll make the decision by October.

My savings goal for the remainder of the year is to build up my liquid funds (general savings account, ESPP funds, Series I Savings Bonds, NetSpend accounts, and taxable index funds) to two years of expenses which with the amount the mortgage would be reamortized to in early 2018 equates to about $90,000. As of April, those accounts add up to $65,400, which is a $3,900 improvement over December 2015. I estimate that it will take me most of this year to save up that amount, at which point my current plan is to go back to pre-paying the mortgage.

Expenses: I spent $6,149 in April including the mortgage or $5,122 without it, with no charitable donations this month. That breaks down to:

  • $3,609 in fixed/unavoidable expenses: HOA dues, mortgage payment, property taxes, medical bills, and transportation
  • $2,778 in discretionary expenses: clothing, entertainment, food, eyebrows, toiletries, vision, fitness, shopping, and travel

Some of my controllable expenses broke down as follows:

  • $1,310 Clothing [$1,875 total so far this year; $1,760 at this point last year] – cute belt ($31), hiking pants ($93), one summer dress ($50), spring jacket ($201), wind breaker ($109 – I’m kind of torn on this one, so if I don’t wear it at all in May, I’ll return it), sandals ($88), sleep top ($49), one t-shirt ($16), two long-sleeved tops ($129), and clothes mailed for return ($545)
  • $31 Entertainment/Social [average so far this year: $48, average last year: $116] – LastPass, using some cash from last month for something else, and a little bit of eating out with friends
  • $105 Food [average so far this year: $87, average last year: $51] – this covers all discretionary food. I have still been lazy with taking my lunch to work.
  • $0 Cell phone – got a rebate that should cover my Cricket cell phone bill for March and April and all but $5 in May
  • Half of my annual property taxes
  • $239 Health – yay for high-deductible plans…
  • $360 Vision – a second pair of glasses feels like such a luxury!
  • $20 Eyebrows
  • $112 Make-up – time to stock up
  • $8 Toiletries [average so far this year: $39, average last year: $48] – allergy medicine
  • $338 Recreation: my running shoes that I love were discontinued in favor of a new version that doesn’t fit me, so I bought three pairs discounted on Amazon. I also bought a running armband, a few barre classes, and sticky socks.
  • $24 Shopping: bought a sun hat and used a $25 gift card
  • $169 Transportation: tolls replenishment (x4) and two tanks of gas
  • $471 Travel: booked a long weekend trip!

In total, I’ve spent $14,219 after education and charitable expenses and my budget was for $48,000, so I’m on track to underspend my budget by about $5,000 at this point. We haven’t booked our fall trip yet but since I hit the deductible on my health insurance plan this month, that spending will reduce significantly. April is always one of my more expensive months because of the property tax payment.

Readers, how was your money in April?

,

16 Comments

Confession: I’m an account hoarder

You readers probably already know this, but I’m an account hoarder. Well, I have a bit of hoarding tendencies in general. So I thought it would make for a fun Friday post to list them all!

  1. The savings account I opened up at age six at a credit union (required to keep because it’s a credit union)
  2. The checking account attached to said credit union savings account (I keep it because it’s easy to transfer money to/from my parents there)
  3. The retirement account I started at 19
  4. The savings account at the credit union I joined at 22
  5. The checking account attached to the savings account in #4 that I still keep open because of #7 and #8 and my HOA dues auto payment is set up here
  6. One more savings account at the credit union in #4 for a bonus
  7. An empty joint checking account shared with my boyfriend at the credit union in #4 that we use occasionally
  8. An HSA with reasonable interest at the credit union in #4 where I transfer money when my employer HSA gets larger than necessary
  9. My current employer’s HSA
  10. My Roth IRA at Vanguard
  11. The empty Traditional IRA at Vangurd now used to fund said Roth IRA annually
  12. My Vanguard taxable investment account
  13. My old 401(k) that I count as closed but the provider’s website lists as having a $0 balance
  14. My mortgage loan
  15. A checking account at Schwab that refunds ATM fees anywhere in the world with no foreign transaction fees
  16. A brokerage account that Schwab requires to be open for #15
  17. A Fidelity Cash Management Account because I have their Amex
  18. The brokerage account for my ESPP purchases and employer stock
  19. My current employer’s 401(k) account
  20. General savings account at Ally (now empty, but will leave open for a bit in case the Alliant savings account rate goes down)
  21. Tuition savings account at Ally (now empty, but will leave open for a bit)
  22. Direct deposit savings account at Ally (now empty, but will leave open for a bit)
  23. Charitable donations account at Ally (now empty, but will leave open for a bit)
  24. Checking account at Alliant Credit Union
  25. General savings account at Alliant
  26. Tuition savings account at Alliant
  27. Charitable savings account at Alliant
  28. NetSpend prepaid card #1
  29. NetSpend savings #1 (5% interest!)
  30. NetSpend prepaid card #2
  31. NetSpend savings #2 (5% interest!)
  32. TreasuryDirect Series I Savings Bond #1
  33. TreasuryDirect Series I Savings Bond #2
  34. TreasuryDirect Series I Savings Bond #3

Most of them have logical reasons to keep open. Most. This doesn’t count my credit cards  of which I currently have ten.

Some people suggest keeping your savings far away from your checking account but I love having most of my cash all in one bank. It’s so convenient to see it all in one screen!

Readers, what’s your damage? How many accounts do you have?

28 Comments

March 2016 net worth update (+3.9%)

In March, I:

  1. contributed the remainder of the pre-tax 401(k) limit for the year! All done.
  2. saw my 401(k) balance surpass one year’s salary!
  3. contributed ~25% of the amount I can contribute to my 401(k) after-tax.
  4. finished my taxes in the TurboTax Deluxe download program my boyfriend and I had bought (much cheaper than filing two single returns with TurboTax online) and got my < $100 refund. I had great tax planning skills in 2015!
  5. saw the first quarterly interest on my 5% prepaid card savings accounts that I mentioned back in January.
  6. saved 82% of my net income this month for a total savings rate overall so far of 75%.
  7. saw my investments hit a new all-time high of one-month return, enough to recover from the losses in February and March, but 2015’s losses yet. My savings rate hides that though!
  8. saw my net worth go up by $26,000 or 3.9% to $691,000.

Expenses: I spent $2,591 in March including the mortgage or $1,564 without it, with no charitable donations this month. That breaks down to:

  • $2,212 in fixed/unavoidable expenses: HOA dues, mortgage payment, health, and transportation
  • $379 in discretionary expenses: clothing, entertainment, food, eyebrows, toiletries

Some of my controllable expenses broke down as follows:

  • ($27) Clothing [$504 total so far this year; $1,878 at this point last year] – return of a long-sleeved running shirt bought in January (-$44), returned the pair of jeans bought in February (-$71) and bought a pair that does fit ($145), returned the pair of spring khakis bought in February (-$60) and bought a pair that does fit ($65), and returning one of the dresses bought in February (-$63)
  • $131 Entertainment/Social [average so far this year: $54, average last year: $116] – a little bit of cash, but mostly hanging out with friends
  • $143 Food [average so far this year: $81, average last year: $51] – this covers all discretionary food. I was a bit lazy with taking my lunch to work this month…
  • $0 Cell phone – got a rebate that should cover my Cricket cell phone bill for 2.5-2.9 months
  • $693 Health – yay for high-deductible plans…
  • $20 Eyebrows
  • $112 Toiletries [average so far this year: $49, average last year: $48] – stocked up on deodorant, dry shampoo, and lipbalms
  • $137 Transportation: tolls replenishment (x3) and two tanks of gas

I budgeted $4,000 per month for spending this year and so far, I’ve only spent $8,069 of that. I also accidentally included medical costs in that figure even though I pay for those out of my HSA, which means I’ll likely have some money left over in my checking account at the end of the year because I spent ~$1,000 on health costs in 2015. After accounting for April’s mortgage payment and HOA dues and the property taxes for the year, I have about $4,419 in available funds for discretionary spending, which will likely end up going towards travel and/or a new couch.

Readers, how was your money in March?

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24 Comments

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