2016 Investment Planning

I’ve been doing some planning for 2016 and decided I should take a gander at my investment plan. Apparently I’d already made a spreadsheet for 2016 months ago and so it took me all of about 10 seconds to estimate things – I just had to update the current balances.

I’m working with a target asset allocation of 30% fixed income (age in bonds + 2 percentage points for having > $200,000 in investments) and then the stocks split 50/50 to US and international.

Category Current Value To Add EOY 2016
Total $209k $52.5k $261.5k
Fixed income $60.8k $17.6k $78.4k
US stocks $77.7k $13.8k $91.5k
International stocks $70.5k $21.1k $91.5k

US and international stocks are somewhat out of whack, so I’ll add more to the international stocks in 2016 than to the US ones.

I started out with adding all of my fixed income ($17.6k) with my pre-tax 401(k) contributions (including employer match) and then will put the remaining 401(k) money to US stocks. I’m still undecided on this, but I may make it international stocks instead. I like the Vanguard international fund better than the Fidelity one, but it might be more worthwhile to get things less out of whack. I still have a few weeks to think on this and it’s not a super big deal either way. I’ll update this so it all happens automatically on January 1st.

As far as timing goes, my pre-tax 401(k) contributions will be spread out over the first 5 pay periods of the year, finishing up in mid-March. I will make the full Roth IRA contribution once I have $5,500 in earned income, so sometime in February or March, and the after-tax 401(k) money will be invested in Vanguard in July once I’ve maxed out my contributions there.

I plan to use my 2016 Roth IRA contributions to open up the Vanguard Total International Stock Market Index Fund there. I’ll then finish up my international stocks allocation with my after-tax 401(k) money in the summer and the last dribble of it to US stocks.

Easy peasy after many years of doing this!

 

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November 2015 net worth update (+1.1%)

31-Dec-2014 31-Oct-2015 30-Nov-2015 MoM YTD
cash $12,300 $6,600 $7,700 +$1,100 -$4,600
savings $47,800 $59,600 $62,700 +$3,100 +$14,900
investments $164,500 $210,800 $212,200 +$1,400
+0.7%
+$47,700
+29.0%
mortgage $143,000 $135,600 $134,900 +$700
+0.5%
+$8,100
+5.7%
net worth $531,600 $591,400 $597,700 +$6,300
+1.1%
+$66,100
+12.4%
taxable assets – debts $70,600 $51,000 $46,100 +$4,900
+9.6%
+$24,500
+34.7%
$ until FI* $811,300 $851,300 $826,900 -$24,400
-2.9%
+$15,600
+1.9%

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

The stock markets seemed mostly flat overall for November, so this month came out nicely. (And I haven’t registered for January grad school yet, so those thousands of dollars haven’t come out.) It’s looking like I’ll hit my $30,000 in general savings goal in January, rather than in December at this rate. My savings rate was 63% this month.

It looks like I’m on track to have my smallest annual net worth increase since 2010 this year. My net worth went up $22,000 in 2010 and then about $78-79,000 in 2011 and 2012. My estimate at this point is that I’ll fall just short of $600,000 this year for an increase of $67,000 for the year. Pretty much all of that went into my retirement accounts. This year feels like it was all about being slow and steady and not concentrating on money, which is probably for the best to do every once in a while.

Expenses: I spent $4,469 in November including the mortgage or $3,622 without it. Some of my controllable expenses broke down as follows:

  • $519 Clothing
    • $126 Athletic wear: online shopping for some base layers and return from last month ($164). Final cost from this month’s items should be $167.
    • $22 Bottoms: 2 pair tights
    • $105 Dresses: some returns and purchased 8 dresses, 6 of which I returned. Cost of those 2 dresses I’m keeping is $174
    • $240 Shoes: 3 pairs of new flats ($110, $54, $77) to replace ones that don’t fit anymore
    • $26 Tops: two long-sleeved tops
  • $78 Entertainment/Social [average so far this year: $126, average last year: $211] – some cash (~$20) and eating out with friends ($55)
  • $0 Eating out by myself [average so far this year: $6, average last year: $18]
  • $15 Work lunches [average so far this year: $39, average last year: $147] – I was lazy during the short week…
  • $109 Presents – starting on my Christmas shopping. I’m now done with 4/9 people! And I did not finish the rest in November, oops!
  • $6 Housing miscellaneous – a couple light bulbs and some pins
  • $78 Cell phone – This is the first time I’ve paid for my cell phone bill other than new SIM cards since June 2013 thanks to a healthy stream of referral credits (thank you readers!). It feels strange to pay for it again. This covers the $25 activation fee on Cricket (oops at poor planning on that), $40 for the “Basic” plan which gives me 2.5 GB of data (more than enough as I’ve averaged ~200 MB over the last 4.5 years) and $9.99 for a Cricket SIM card. Next month, I’ll pay $35 to Cricket and a small amount to Ting for my last bill.
  • ~$100 Dentist
  • $20 Eyebrows
  • $67 Toiletries [average so far this year: $48, average last year: $33] – Stocked up on bra washing soap, bought another cleanser to try, and bought a moisturizer.
  • $2,000 Shopping – new laptop (it was time to replace my 2011 model) and parts to upgrade my desktop computer
  • $102 Transportation: tolls replenishment (x2) and two tanks of gas

Yes, I’ve been spending a lot on clothing this year. But a) I can afford it while still having a healthy savings rate, b) I’ve been changing sizes a lot, which has resulted in not a good selection of clothes, and c) my overall spending for the year should still come in under (or around) last year’s. For example, I found myself getting dressed to go to an event with a closet full of dresses (about 10-15 that I’ve bought over the last ten years) and only one fit. I’ve remedied that now, so I’m hoping that I’ll manage to slow down my clothing spending.

Savings: $62,700 (up $3,100)

These funds are spread across a checking account that gets free ATM fees anywhere in the world, my current employer’s health savings account, a health savings account at my credit union, a bit of a buffer in my credit union checking account, and general and grad school savings accounts at Ally.

  • My grad school savings account is (as of October) at the amount I need it to be to pay for the rest of my grad school in cash, if necessary.
  • I’m contributing the maximum to my HSA this year.
  • The rest of the savings increase went to my general savings account, which I’ll be focusing on for the rest of the year.
  • Actions: I bought $10,000 of Series I Savings Bonds with part of my general savings account and transferred part of my grad school savings account somewhere else to get a deposit bonus.

Investments: $212,200 (up $1,400 or +0.7%)

This includes my pre-tax 401(k), employer 401(k) matching, my after-tax 401(k), my Roth IRA, and my taxable investments including stock index funds, Series I Savings Bonds, and ESPP cash/shares.

The change here comes from:

  1. Employer matching contributions
  2. A month’s ESPP deposits

It’s hard to believe it’s almost time for another round of 401(k) contributions. It feels like I just finished this year’s!

Mortgage: $134,900 (down $700 or -0.5%)

I’m just letting the regular, automatic payment go for now, until my cash savings is at the level I want and my 401(k) is fully maxed out for the year.

TOTAL: $597,700 (up $6,300 or +1.1%)

I ended 2014 with a net worth of $531,600, so I’ve seen a change of +$66,100 or +12.4% so far this year. I’m going to set the y-axis on this graph to $650,000 so we can see how my net worth grows towards that throughout the year. (Hah!)

I’m feeling lazy with the chart tonight. I promise one next month.

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Why Frugal Blogs Are Terrible For Me

Some people are inspired by uber frugality blogs. For me? They make me feel guilty that I spend too much money.

MMM, I can sort of handle. I just look at the parts about relative frugality, renting vs buying, how expensive cars are, savings rate time to retirement, etc. I don’t look at how much his family spends each year.

Other blogs in which people rave about how little they spend are really counterproductive for me.

I inherited the money scarcity mindset that my mom has or maybe had as she seems to be spending money more easily these days than she used to. When I was younger, I refused to let myself spend money and would guilt myself over it. I’ve finally mostly acquired a healthy relationship with money, thanks in part to my spending plan and in building a good nest egg.

I’ve never had a need to have the money scarcity mindset. Yet I’ve had it for most of my life, feeling like I can’t afford to buy a pair of pants I really want or a nice purse or to refresh my wardrobe. In high school, I saved 80% of my paychecks by transferring 80% of my income to my savings account immediately. That much was probably a bit excessive.

I would play games with myself as to how cheap I could get my grocery bill.

I would tell friends I couldn’t afford to do X activity when really it was that I didn’t want to.

I hated buying good bras because they’re really expensive. Eventually, I set myself a budget for bras that allowed me to buy 4 per year (now it’s up to 5) and not worry about the cost.

I set aside the cost to renew my passport, my Nexus/Global Entry card, and my driver’s license every month, despite the fact that I could easily cash flow any of these things.

I’m only just now in my late twenties starting to take care of my hair and skin because it seemed expensive and complicated.

I didn’t have a texting plan on my cell phone at 22 because I was too cheap. So one of my friends texted me repeatedly to try to convince me to get one. I eventually got one when I started dating someone and texting more.

I agonized and agonized over how expensive my rent was after college. I mean, I went from my parents paying my $350/month in rent in college to me paying $1,500/month in rent, which is definitely a huge jump.

I hate buying cell phones, computers, and electronics in general. Decision paralysis totally kicks in, plus spending guilt. I guilted myself when I replaced my four year old iPod that would no longer hold a charge several years ago. Mine wouldn’t hold a charge! And I still guilted myself!

There’s a difference between being frugal and cheap. I’m finally frugal and I’m proud of it. Some people have a terrible relationship with money in their 20s due to overspending. Mine was from unnecessary financial guilt and anxiety.

We all have to find our own level of frugality and then not let lifestyle inflation kick in from there.

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Saving 60+% of my income is discretionary

Most months this year, I’ve been indicating my savings rate of my net income along with my spending, net worth changes, and what actions I took with my finances that month. It’s solidly been sixty something percent, except for the month where I had no income and I thus had a negative savings rate. I don’t expect you my readers or anyone else to save that much of your income. I don’t expect myself to either. I don’t need to save this much money every month.

My goal is to let myself spend freely (but consciously) while living below my means, having no debt, and not increasing my lifestyle with my income.

I didn’t start out intending to max out all of my retirement accounts out of college. I found the lifestyle that worked for me the first year out of college while contributing enough to get the full match in my 401(k) and I have maintained it for the subsequent five years, even though my income has mostly increased.

This works for me because I’m naturally a saver. I’m also in my twenties and so to retire at a normal age, I really don’t need to save that much.

I started working around 21.5, which would give me 38 years until I can withdraw with no complications from retirement accounts. A savings rate of 19% from age 21.5 would be enough to retire on at age 59.5. A savings rate of 14.5% from age 21.5 would be enough to retire on at age 65. I’ve saved far more than that though, so I only need to continue saving 12% going forward to retire at age 59.5.

If you’re willing to commit to working until you’re in your sixties, you don’t need to save a lot for retirement in your twenties. Money is a tool that you can use to make your life what you want. Early retirement is one way to spend it, just like travel, experiences, and stuff are also ways to spend your money. We all need some balance in our money lives. Don’t overexert yourself trying to save too much too quickly and burn yourself out.

There is this sense in the early retirement community that we should keep working our high paying jobs until we have saved enough to retire completely and then no one seems to be able to pull the plug. And yet there are lower income people quitting their jobs to freelance every month, with $20,000 in the bank and people with hundreds of thousands of dollars saved up can’t seem to quit their jobs they don’t like. If you don’t like your job, find a path to a different job. Don’t just stick it out at your job for the money. Life is too short for that.

Networthify has a great calculator that shows you how much you need to save per year to be able to retire in X years. This works great no matter what age you’re starting out at.

I make enough money and have enough money now that when I take a pay cut, it’s my savings rate that gets cut and not my spending. My gross income this year will be about 15% less than 2014 and my spending will be about the same. I grossed about 15% less in 2014 than I did in 2013 and my spending was about 7% more. I would happily take a lower paying job and reduce my savings rate if it was for the right job. And this is a great place to be in.

If you’re a natural saver, live your life consciously. Save the rest. Don’t fret the little things if you’re meeting your goals, enjoying your life, and living below your means.

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October 2015 net worth update (+2.2%)

31-Dec-2014 30-Sep-2015 31-Oct-2015 MoM YTD
cash $12,300 $9,300 $6,600 -$2,700 -$5,700
savings $47,800 $50,500 $59,600 +$9,100 +$11,800
investments $164,500 $205,200 $210,800 +$5,600
+2.7%
+$46,300
+28.1%
mortgage $143,000 $136,400 $135,600 +$800
+0.6%
+$7,400
+5.2%
net worth $531,600 $578,600 $591,400 +$12,900
+2.2%
+$59,800
+11.2%
taxable assets – debts $70,600 $57,100 $51,000 +$6,100
+10.7%
+$19,600
+27.8%
$ until FI $811,300 $821,400 $851,300 +$29,900
+3.6%
+$40,000
+4.9%

October’s net worth is finally a new high for the year. The previous high was back in July at $582.1k. I used my savings and the ESPP sale this month to bulk up my savings accounts – I’m trying to get my non-grad school savings up to $30,000. I have about $9,400 more to go on that plan. My savings rate this month was 66%, which seems to be about solid for the year.

Back when I thought the stock market might give me some positive returns this year, I’d thought my net worth might get to $630,000 to $650,000. Now even $600,000 would be lovely!

Now that I’m done contributing to my retirement accounts for the year, I can make some headway on the “taxable assets – debts” figure. I have to pay the next course’s tuition before the year is out, but I should still be able to get that figure down to about $43,000 by the end of this year.

Expenses: I spent $5,651 in October including the mortgage or $4,623 without it. Some of my controllable expenses broke down as follows:

  • $1,386 Clothing
    • $219 Athletic wear: online shopping for a winter workout top. Picked one and am returning the others. Final cost should be $55
    • $149 Bottoms: dark skinny jeans ($90) and cost to hem them ($15), 4 pair tights ($46)
    • ($71) Bras: returned the one I fit last month that didn’t work out and exchanged the bras I had bought a few months ago that no longer fit (Nordstrom has such great return/exchange policies!)
    • $989 Dresses: 10 dresses, 6 of which I am returning, and 1 return that finally posted from September. net cost of the purchases after returns: $465
    • ($25) Outerwear: returned the vest I bought last month and bought one I really like and turned out to be cheaper
    • $26 Socks: stocked up on a few more pairs of socks
    • $28 Tops: 5 returns from last month and increasing my camisole supply with 4 more
  • $207 Entertainment/Social [average so far this year: $131, average last year: $211] – some cash ($40), eating out with friends ($112), and printing photos ($55)
  • $4 Eating out by myself [average so far this year: $7, average last year: $18]
  • $8 Work lunches [average so far this year: $42, average last year: $147] – bought my lunch one day and the rest was some snacks
  • Donations – spent the remainder of my donations budget for the year! That felt good.
  • $241 Presents – starting on my Christmas shopping. I’m now done with 3/9 people! Now to finish the rest in November :)
  • Second half of my annual property taxes (not discretionary, but definitely makes October always an expensive month)
  • $20 Eyebrows
  • $86 Hair cut
  • ($138) Toiletries [average so far this year: $46, average last year: $33] – Refresh of my multivitamin supply, returned the skincare products that weren’t working for me, and bought a different cleanser that does seem to be working.
  • $38 Shopping – two charging cables for my new phone and a 2016 calendar
  • $269 Transportation: tolls replenishment (x2), one tank of gas, one taxi to an event, and renewing my vehicle tabs

*Note that I’m not counting my grad school costs in this spending report because the point of this is to track my general living expenses. I am still tracking the grad school costs myself, but won’t include them in all of my reports.

Yes, I’ve been spending a lot on clothing this year. But a) I can afford it while still having a healthy savings rate, b) I’ve been changing sizes a lot, which has resulted in not a good selection of clothes, and c) my overall spending for the year should still come in under last year’s. For example, I found myself getting dressed to go to an event with a closet full of dresses (about 10-15 that I’ve bought over the last ten years) and only one fit.

Savings: $59,600 (up $9,100)

These funds are spread across a checking account that gets free ATM fees anywhere in the world, my current employer’s health savings account, a health savings account at my credit union, a bit of a buffer in my credit union checking account, and general and grad school savings accounts at Ally.

  • My grad school savings account is now at the amount I need it to be to pay for the rest of my grad school in cash, if necessary.
  • I also increased my HSA contributions to the maximum now that I’m done with my retirement accounts. I’ll re-evaluate this for next year (very shortly as open enrollment starts soon), but this felt like the right decision for now since my HSA was worth less than one year’s out of pocket maximum.
  • The rest of the savings increase went to my general savings account, which I’ll be focusing on for the rest of the year.

Investments: $210,800 (up $5,600 or +2.7%)

This includes my pre-tax 401(k), employer 401(k) matching, my after-tax 401(k), my Roth IRA, and my taxable investments including stock index funds, Series I Savings Bonds, and ESPP cash/shares.

The change here comes from:

  1. Employer matching contributions
  2. A month’s ESPP deposits
  3. Selling the Q3 ESPP shares
  4. Investment returns of about $9,000, almost bringing me to even for the year

I also did an in-service withdrawal of my after-tax 401(k) contributions, which got me a check in the mail and I then deposited it into my Vanguard Roth IRA. My Roth IRA is now worth about $65,000, which is pretty solid!

Mortgage: $135,600 (down $800 or -0.6%)

Some statistics here:

  • 2.5%: the interest rate on my 5/1 ARM
  • January 2018: when the interest rate on my mortgage is set to reset, possibly to 7.5% though current calculations would put it at 3.125%.
  • 27.7%: portion of my regular payment went to interest (originally was 59%; down 0.1 percentage points)
  • 62.1%: amount of equity in my condo, assuming purchase price (up 0.3 percentage points)
  • 52.6%: amount of the mortgage I’ve paid down (up 0.6 percentage points)

I’m just letting the regular, automatic payment go for now, until my cash savings is at the level I want and my 401(k) is fully maxed out for the year.

TOTAL: $591,400 (up $12,800 or +2.2%)

I ended 2014 with a net worth of $531,600, so I’ve seen a change of +$59,800 or +11.2% so far this year. I’m going to set the y-axis on this graph to $650,000 so we can see how my net worth grows towards that throughout the year.

October 2015 Net Worth Graph

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Q3 2015 Update

Income

I saw about $7,000 in paychecks in Q3, about 90% of that coming in September, when I finished maxing out my 401(k) for the year. My net income this year is actually reasonably evenly spaced out, pretty close to 25% of it coming in each quarter and each quarter’s net income being with $1,000 of each other, with each being around $28,000 to $29,000.

Saving

In Q3, I saved 64% of my net pay: depositing 96% of my net pay to various savings accounts and withdrawing about 32% of my net pay from savings accounts (mostly selling ESPP and paying fall tuition). My savings deposits were split up to the following accounts:

2015 Q3 Savings Distribution

This quarter, I finished maxing out the after-tax 401(k). My employer has continued to make their matching contributions every paycheck this quarter, even though I finished contributing to my pre-tax 401(k) last quarter. Most of the rest of my savings was tossing money into my general savings account.

Spending

Q3 2015 Spending

All in all, I spent $10,755 in Q3, with education taken out. I had estimated I would spend $7,691 in Q3, so I went $3,064 over my estimate.

Housing: $6,200 I came in over in this category by about $2,000 because I hadn’t budgeted for any of the projects we did: replacing the guest bathroom sink, painting the second bedroom, fixing the fridge, replacing the guest bathroom toilet seat, and buying a SIM card for my unexpected purchase of a new phone. Looking at my history, I seem to spend about $2,000 to $3,000 per year on home maintenance/wants and so I plan to budget for that going forward.

Clothing: $1,200 I hadn’t planned on any of this spending. I am, however, super happy with my closet and will write a blog post about my process at some point. I’m still looking for a few more pieces which I should hopefully find in Q4. My plan going forward is to then keep an inventory of my closet every season to help figure out what items I need to find, rather than budgeting by a dollar amount.

Shopping: $865 None of this was budgeted for either (well except for the cell phone, partially). What did this get me? A gorgeous Kate Spade crossbody bag, two throw pillows for the futon in the second bedroom, a new iPhone 6S 64 GB, and some plants for the balcony.

Transportation: $550 Most of this was car insurance. This was under budget because I switched car insurance carriers and only paid for a six month policy vs twelve. The other $130 was fuel and tolls.

Medical: $400 One visit to the doctor and new lenses in my glasses. Medical stuff be expensive in the US.

Personal care: $395 Monthly eyebrow waxes and the rest was mostly infrequent purchases: my annual chapstick stock-up, shaving gel, multi-vitamins, and hair products. The other bit was trying out some new skincare products.

Recreation: $302 Annual cost for sport #1 and a pair of hiking boots so hiking doesn’t kill my ankles. (You don’t see any costs for hiking here because a) it is cheap and b) since it’s a joint activity, my boyfriend pays.)

Life: Annual cost of my umbrella insurance policy. (Hint: it’s between $200-300 per year.)

Entertainment: $201.67 – I’m about $100 under budget here. This was pretty much entirely eating out with friends. For reference, I spent $212/month on this in 2014. I’m now spending $200/quarter.

Travel: $78 I came in under in this category because my boyfriend covered most of the on-the-trip costs of our summer trip.

Food: $67.13 This is super underbudget – my budget had been $360 for the quarter! My boyfriend pays for the groceries and our date nights / out with friends together, so this is $28.12 me grabbing food when I’m out somewhere and $39.01 work lunches. I’m doing great with this category! For reference, I spent $350/month on food in 2014.

(Note that details on Gifts and Donations are left out.)

With the overages this quarter, I estimate that I am on track to spend $44,795 this year overall, which is about $6,675 over my original estimate or an 18% increase. That is up $2,600 from my Q2 update, which is pretty close to what I went over this quarter. It is still under my 2014 spending of $48,040 though, by about 7%. I seem to consistently spend about $40,000 to $50,000 per year and my boyfriend moving in saves me somewhere around $4,000 to $6,000 per year, so I expect to land in the lower range going forward.

Goals

Let’s check in on my goals from the beginning of the year. I’m doing mostly okay, though I’m definitely going to fall a bit short of my savings goals, which I’m okay with.

1) Enjoy living together! Have an awesome trip to NZ!

ON TRACK! Living together is going great overall. It’s definitely taking some time to get the place to a point where it feels more like things were chosen by both of us, but we’ve definitely been making some good progress on that and on figuring out alone time too.

2) Contribute the maximum to all tax-advantaged accounts available to me. This means $5,500 in a Backdoor Roth IRA, $18,000 in a pre-tax 401(k) and possibly some additional funds to the after-tax 401(k) and possibly my 2016 Roth IRA amount in a savings account ready to deploy in January. This will account for probably about 2/3 of my savings in 2015.

DONE! I’m done with the Backdoor Roth IRA, the pre-tax 401(k), and the after-tax 401(k). I transferred my after-tax 401(k) funds over to my Roth IRA in October.

3) Learn the ropes at my new company and have an awesome first year!

ON TRACK! Things are going great so far. I like my group and things seem to be much less toxic than in my previous company. It’s definitely a different culture though and that has been quite an adjustment.

4) Exercise for at least 45 minutes per day. My phone is really helpful at tracking this for me!

ON TRACK! I’m not really sure how this is going as my phone wasn’t working to tell me this for two months. I did exercise for 49 minutes on average in July. Anyone know how to get an iPhone to tell you how to do this? It tells me my steps and Fitbit seems to get the active time somehow, but my iPhone isn’t telling me that directly and I don’t want to pay for Fitbit premium to get the monthly report that they used to give away for free.

5) Go to the gym (or run) three times per week.

FAIL!This is just a flat out fail. I’ve managed to lose some of the stress weight from my last job and get a reasonable amount of general exercise and outside time (yay city life!), so I’m fine with this. My new goal, especially with grad school is to make it to yoga/running once a week.

6) Contribute enough to a Health Savings Account such that Out Of Pocket Maximum ~= Current HSA balance + Employer contribution + my contribution.

ON TRACK! I ended up increasing this to the maximum once I maxed out my after-tax 401(k). I’ll re-evaluate this each year.

7) Succeed at Operation Bayes – I’ll explain this later.

SUCCESS! Now you all know that this was applying to and getting into grad school, which I did successfully! Yay! Now to kick butt at grad school! So far, so good.

8) Spend under $40,000.

FAIL! I’m now on track to spend $45,000 this year, which is still $3,000 less than 2014.

9) Save 70% of my net income monthly…and 100% of my bonuses. (Yay for a big raise that will allow me to save that much of my monthly income!)

FAIL! Between the ESPP, lump sum contributions to my 401(k), etc. this got far more complicated to calculate in the same way that I was doing before. So far, I’ve saved 68% of my net income overall or 72% if you ignore the withdrawals to pay for grad school. I’m on track to save 69% of my net income overall if you ignore the grad school withdrawals or 63% if you include them.

The main reduction in this compared to 2014 is the income drop. My net income is down pretty much the exact dollar amount that my savings is down by this year, about $15,000. My income is high enough compared to my spending that I chose to reduce savings this year over reducing spending. I expect my 2016 net income to be pretty close to my 2014 net income, which will help with my savings rate next year.

10) Contribute the maximum that I can to the Employee Stock Purchase Plan.

ON TRACK! Definitely doing this.

11) Pay down the mortgage with any funds that are leftover after 2), including the proceeds of 10).

NOT HAPPENING! I’m reasonably confident at this point that I will not make any extra mortgage payments in 2015, mostly due to two months of no income, setting aside money for grad school, increasing my emergency fund, and maxing out my after-tax 401(k). All of those things took….$85,000. Wow!

But, I’m pretty happy with the progress I made paying off the first half of the mortgage in the first 2.5 years aka $143,000 in 30 months. If I don’t pay off the mortgage before the rate resets, my interest rate will currently reset to 3.08% based on today’s rates, which is still a pretty good deal, especially considering that the required payment will reamortize as well, so that would drop my required payment from just over $1,000/month to ~$550/month, making things reasonably manageable if I lost my income.

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The Time and Costs of Commuting

Commuting is mostly a necessary evil, something that no one really enjoys, but most of us put up with because it is a necessity to do our jobs. Living close to work to have a short commute just isn’t always an option, whether it is due to affordability, a past real estate purchase, preferring different neighborhoods to live in than to work in, and/or weighing where to live against the locations of your partner’s office and your own.

For the first five years I lived in my current city, I worked at one company, occasionally changing office buildings, but not in a way that ever negatively impacted my commute. My partner also has always worked in office buildings to which my condo is a pretty reasonable (under 2 mile) commute for him as well.

When I started job hunting last summer, I first only looked at jobs a similar distance from my condo. There are many jobs available in this 2-3 mile radius, so that seemed like a reasonable plan. I did in the end apply to one job not in that radius, which I mostly did to investigate how working at that company might be and practice interviewing.

After many months of job hunting, I had two offers in hand. One job offer was a reasonable commute (in that 2-3 mile radius) and the other was not. For a variety of reasons, I took the longer commute job after weighing that versus the cons of the job with the shorter commute.

I haven’t had a commute longer than half an hour or one that required taking public transit or driving since 2007. I’ve been reminded this year how much commuting sucks. I don’t regret choosing this job over the other one, so now I’m left to make the best of this commute. I have a few options:

  1. Take a transit route that doesn’t involve any transfers – it is a direct route. But it involves 53 minutes of walking and about 1 hour and 30 minutes on the bus for a total daily commute time of 2 hours and 23 minutes. This option is free – my employer pays for my bus pass.
  2. Take a transit route that involves one transfer, so two buses total. It involves less walking, about 36 minutes, about 24 minutes round trip on the first bus, and about 70 minutes round trip on the second bus, for a total daily commute of 2 hours and 10 minutes. This can end up increasing though if the two buses don’t line up well and you end up waiting a bit. I usually end up waiting about 5-10 minutes.
  3. Driving. I can leave at the same time that I leave to catch the bus and get to work 20-30 minutes earlier. Traffic can be a bit frustrating sometimes and it can take me about 50 minutes to get home. My total commute is about 1 hour and 10 minutes, plus another 10-20 on a bad traffic day. The catches? The all-in cost of driving is about $10/day at today’s costs. I hate driving. There are only certain time windows during which I can leave work with reasonable traffic and if I’m not going to leave during those windows, transit is a less stressful option.
  4. Move. The problem with this option is that my partner has a good commute now and moving would be complicated to balance our two commutes and who knows how long I’ll keep this job anyway? Plus, the transaction costs of selling my condo are so high that it would be cheaper to drive for 19 years than sell my condo. And then we would end up paying more in rent.

So options 1 and 2 are really about the same expected time and cost since they’re both free. They both have different pros and cons, including one with a shorter or longer walking from my house and one with a transfer.

I was really against driving until I calculated how much time it would gain me back. I could use that extra hour to do homework, go to yoga, or do other fun things. It’s amazing having that hour back. So far, I’ve been experimenting with driving 2-3 days a week and taking transit the other days and that seems to be a reasonable balance.

Readers, how do you commute? What would you do in my situation? Drive? Move? Take transit?

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