2016 In Review

2016 was a year full of huge highs and lows! I started the year with a pretty solidly ambitious plan and despite the various life changes that happened, the year actually turned out pretty well financially, all things considered. You should note while reading this post that my husband and I have separate finances and that everything described in this post is only about my finances or my half of the shared finances.

Goals

First, let’s review the measurable goals I set out for the year.

4) Contribute the maximum to all tax-advantaged accounts available to me.

Success! I maxed out my pre-tax 401(k), got the full employer matching, maxed out my after-tax 401(k), maxed out my Roth IRA, and my HSA. I also contributed the maximum I could to the Employee Stock Purchase Plan and sold it all right away.

5) 7,000 steps per day.

Success! I averaged about 9,100 steps per day, which means I blew this goal out of the water. I got more steps as the year went on (as we got out of winter), so 7,000 steps seemed like a stretch goal last December and it was – I didn’t reach it in January or December, but I did every other month this year. My goal going forward is to average 10,000 steps a day each month. My FitBit One is really helpful at measuring this and then every few months or so, I put the month summary data into a spreadsheet so I can compare by month.

Over the course of 2013-2016, I increased my weight up about 20% to my heaviest-ever weight in mid-2016. With a lot of the job stress, I had stopped prioritizing exercise without changing my diet and it was starting to show. I saw a nutritionist partway through the year who helped me make some small diet changes, started drinking almost entirely water (I probably drink 1-2 sodas per year, have maybe 12 drinks of alcohol throughout the year, though I did keep my one small glass of juice with breakfast) and really significantly re-prioritizing exercise. Combined with reduced work stress after the layoff, those changes all made a huge difference and I’m now only up about 10% from what I weighed four years ago, which is much more reasonable.

6) Spend no more than in 2015 ($48,000).

Fail! Hah, this goal was a complete fail, with all the life that happened. I’ll go into more detail below.

7) Save 70% of my net income before tuition savings account withdrawals. (This is achievable if I spend no more than $48,000.)

Fail! This goal was also a complete fail, since I spent way more than $48,000. My savings rate, before tuition withdrawals was 47% for the year or 38% after tuition withdrawals.

8) Increase my liquid funds (including my stock index funds outside of retirement accounts and my Series I Savings Bonds, but ignoring the grad school savings accounts) to two years of living expenses. This means adding $40,000 to my general savings account in 2016, some of which will probably be put into Series I Savings Bonds and/or CDs.

Success! At its maximum, I got this figure up to 2x expected annual living expenses, ignoring the mortgage payment, so I’m going to call this goal a success! Of course, I hadn’t planned on getting married and thus being in a tax bracket higher than 10-15% at most while on my planned break (which I will go into more detail on later), so I’m still trying to figure out what my exact plan for covering living expenses is here.

9) Pay down the mortgage with what’s left. I anticipate having about $0 left after all of the other goals in 2016. (I don’t anticipate being able to meet the liquid savings goal in 2016 – my current figures show me coming up about $5,000 short.)

Pass! I’m going to call this goal a pass. I didn’t make any extra mortgage payments, but that is perfectly fine based on how my husband and I plan to handle the condo going forward (which I will talk about soon!)

10) Turn my “taxable assets – debts” figure around so that taxable assets are > debts. (This is my “golden” goal for 2016.)

Success! I did achieve this goal, though not in the way I had originally planned. In fact, I only improved the figure by $8,600 from -$41,700 at the end of 2015 to -$33,100 at the end of 2016. I’ll explain exactly how I mean I achieved this goal later.

Spending

2016 was the most expensive year that I’ve had. I spent a whopping $68,000! For some of these categories, it represents solely my spending and for other categories, it represents my half of the joint spending. I may switch up how I report on this next year as I have two separate budgets for 2017: one for joint spending and one for personal spending.

2016 Spending.png

Surprisingly, if you take out the wedding and the living room remodel (my half was $8,000 combined for those two), then I was within 10% of my original budget. Or if you look at it another way, I spent exactly 50% of my budget for the year in the first half and then another 100% of my budget in the second half, resulting in spending about 150% of my original budget. I didn’t write a Q2 wrap up post because I thought it was so boring being exactly on point with 50% of my savings goals done and 50% of my budget spent. Who knew the second half of the year would turn so exciting…

I spent a pretty tidy sum amount on medical care this year (just under $3,000) and on rebuilding my closet ($7,000). My husband and I spent very little on travel compared to what we usually do ($4,400 for my portion and $8,500 total) this year to compensate for the living room remodel. Transportation was more expensive than usual due to my car commuting, which is thankfully behind me now. Our grocery spending was pretty reasonable for the cost of living in our area, coming in at an average of $450/month.

Some awesome things that this spending saw are:

  1. $16,000 (joint amount) Living room remodel including designer fee (totally worth it!) and painting. We went from worrying we might need more space and should move to loving our place again. We absolutely love our new couch, new furniture arrangement, and wall colors. I’m also really glad we paid a designer because it reduced the process of buying one item at a time and spending ages trying to figure out what it would go with. We’re almost done with the remodel – just waiting on one more piece of furniture to come and then we can hang the gallery wall which is full of travel and wedding photos. I still can’t believe we bought a $5,000 couch, though it is incredibly amazing to sit and lounge on.
  2. $500 Deposit on a reception venue to celebrate our marriage with our friends and family next year!
  3. A trip to Banff for an extended long weekend! Such a gorgeous place and absolutely on our list of places to return to with more time to wander. (That’s the featured photo on this post!)
  4. Our wedding, including our postnuptial agreement and my rings that we ended up splurging on after the wedding.
  5. Grad school tuition! I’m so thankful to not need to rely on the tuition reimbursement program through my former employer in order to keep pursuing my degree, despite the opportunity cost.
  6. $299+tax Bose QuietComfort 20 Acoustic Noise Cancelling Headphones – My husband has the over the ear ones and these are the in-ear ones. They are absolutely amazing for working in a crowded office!
  7. $3.99+tax Stylebook app
  8. $1,300 Improving my desktop computer set up and ergonomics at home
  9. $75+tax A wristlet wallet for my iPhone that is so useful. I had one for my previous phone and I procrastinated for a year with this phone before spending the money to buy a new one and I really shouldn’t have.
  10. $40+tax A new case for my iPhone 6S. I originally bought the silicone case that Apple makes. It does fine at keeping the phone free of scratches, but it was a huge pain to get in and out of my pocket/purse, so I finally replaced it and it was definitely the best money I spent that week.

Savings

2016 Savings.png

Despite having my lowest savings rate since graduating college, I still didn’t do too badly for savings this year. I maxed out my pre-tax and after-tax 401(k) accounts, saw the full employer 401(k) match, made the regular mortgage payments which unlocked a reasonable amount of equity, maxed out my Health Savings Account and got the full employer contribution, maxed out my Roth IRA, and put $1,100 into my general savings account. That all added up to about $55,000, before accounting for taking grad school tuition out of a savings account.

By The Numbers

2016 Net Worth Increase.pngDespite my highest year of spending yet and a relatively low year of income, I saw my second highest net worth increase since college, due mostly to adjusting the condo value up about 17%, which accounts for over half of my net worth increase.

My investments (~30% fixed income, 35% US stocks, 35% international stocks) were up about $16,700 for the year, which was a return of +6.72according to XIRR. My average return since I started investing in stocks back in early 2010 is +5.45%

Thanks to the timing of the layoff, my gross income only dropped 4% in 2016 from 2015. My gross income was 204% of my spending in 2016, so I did spend less than half of my gross income. Of the remaining half, about half went to savings and half went to taxes.

$ to FI vs net worth over time EOY 2016.png

In early 2016, I surpassed the halfway marker to financial independence – my net worth became higher than the remaining amount required to reach financial independence. Unfortunately the year got expensive quickly and I went further away from financial independence, but that trend reversed in the last few months of the year. Hopefully in 2017 the trend will improve again.

I surpassed six figures in my Roth IRA at some point in 2016, though it didn’t stick. I also surpassed one year’s base salary (at my pre-layoff salary) in my pre-tax 401(k). Unfortunately due to the increased spending, my investments are worth the same number of years as they were at the end of 2015, which means that my investments grew by the same rate as my spending (40%). Had my spending not increased, my investments would have gone from 4.20 years to 5.81 years.

4% SWR versus expenses over time EOY 2016.png

I came really close to the 4% SWR on my investments being four figures in 2016! I need my investments to grow by 5% more than where they were at the end of 2016 to hit that figure. It’s possible that I will hit it in 2017, depending on how things go. My portion of the fixed shared expenses is covered with this current figure! That doesn’t leave much in the way of discretionary spending yet, though it is still exciting progress!

Conclusion

I felt really guilty about how expensive the last few months of 2016 were, especially with my then lack of income. One (offline) friend commented that it sucked that life was expensive while I also had a drop in income. Doing this annual review though showed me that 2016 wasn’t all bad and that it’s important to look at the big picture. It showed me that I didn’t really see a drop in income and if you look at household income, we actually had an increase thanks to my husband being well appreciated at his job. If you just looked at my net worth growth, you would have no idea how expensive the year was. If you looked at just my spending without looking at my income, it would look pretty bad. When you consider that this is only my portion of the spending – I’m guessing more than either of our separate base salaries before taxes. Oops!

Here’s to a less spendy 2017!

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The evolution of managing shared spending in a dating relationship

I started working on this post after my husband and I had been dating for about a year. I’m publishing it now as a snapshot of how our financial management evolved during our dating relationship. I’ll have plenty more to say about how we will manage money going forward in our marriage, don’t worry!

Friends and Early Dating

My husband and I have been friends since college. We occasionally went out for food together prior to beginning to date and we just split the bill by what food we ordered. That’s what most friends do, right? When we were first casually dating, we continued to do the same. I remember one occasion when we were trying to figure out how to split the bill, he put his card down, and poof the server took off with it! I turned out to have some cash and gave him some for my share. Since that instance, we’ve always made sure to figure out what we’re doing before either of us put our cards down on the bill. I still remember the first time we went out for dinner after we had The Relationship Talk and we looked at the bill and went “What do we do?”, realizing that maybe there was a new process to this paying for eating out madness. He also asked me how much I was going to tip, which I found quite amusing at the time. (He later explained that he didn’t want to tip vastly different amounts on similar bills.) Until we moved in together, we had several approaches:

  1. If the amounts were way off, sometimes the person who ordered more $ of food pays the whole bill
  2. Sometimes one person randomly pays for both of us
  3. If we split all the food or ordered within $1 of the same amount of food, we split the bill 50/50
  4. If the amounts we each ordered are off by less than the amount we would tip, then we adjust the amount with the tip

For any costs in cash, usually whoever has the most convenient denomination of cash pays.

For expenses that we couldn’t split at the source, we set up our checking accounts so we could transfer money to each other without seeing the other’s balances after we’d been dating for about six months, which made random things so easy to split. It did drive me a bit nuts with the number of transfers going back and forth, but it was a great system. (Square Cash made this pretty easy when I moved my money to a different bank.)

Travel

In 2014, we took a few trips and they were relatively easy to share the costs:

  1. In March, we went on a trip to an all-inclusive resort. Pretty much everything was paid for upfront, so one of us paid with a credit card and the other transferred half the cost. Super easy. If you’re ever traveling with friends, these are great trips to take! One of us took out some $ from an ATM to have some spending cash and the other transferred them half of that. We ended up spending none of it though so we both had enough cash to last us several months of normal cash spending.
  2. In June, we went on a trip to another city, a short-ish flight away. One person booked the flights on a credit card, the other booked and paid upfront for the hotel, and the person who paid less for those two transferred the other the difference. We did one activity that one person paid for in advance and the other transferred them half. Once we were there, we followed our normal pattern for splitting costs.
  3. In July, we went on a driving weekend away. One person booked the hotel and activities and the other paid them back once we had the final amounts. My husband filled up the gas tank. We followed our normal restaurant pattern.

As of early 2015, our trip to New Zealand was our biggest shared cost so far, the first one being our shared checking account for groceries. At home, we split every expense except groceries at the source. This sounds tedious to everyone else, but it works for us. When we go out to eat, we either pay for what we ordered or we split the bill evenly if our separate amounts are within a dollar of each other’s. We agreed as we were booking this trip on about how much it would cost, how long we wanted to go for, where we wanted to go, and the type of trip that we wanted to have: hotels not hostels, renting a car instead of tour buses, not a big group experience. We also decided to put most of the expenses on one credit card (and agreed to use a recent card that my husband got) and then deal with things when we got back. We both had separate credit cards that we used for non-shared expenses. This system worked out pretty well!

Living Together

It took us a few months of living together before we found a good routine with our financial management systems. The system I described in that post isn’t exactly what we ended up doing over the last two years. We did, however, stick to our plan of splitting the outgoing shared expenses other than the mortgage payment 50/50. Our incomes when he moved in were pretty similar and so that seemed like a fair system. Our incomes eventually diverged quite a bit, but we’ve still kept to the 50/50 system as we don’t want to create a financial dependence on the other person’s income.

We determined who would pay what with the question “If we were renting, would the landlord or the renter pay for X?” In order to keep my condo equity safe and clearly separate, I paid for everything related to the condo. I paid the mortgage payments, monthly HOA dues and special assessments, property taxes, and any maintenance or improvements. He paid for most everything else: groceries, travel, restaurants, utilities, new towels, etc.

To keep things simple, all of the shared expenses that he paid for were put on one credit card and I have an Authorized User card on the account. We also set up a financial aggregator account with it so that I could see the data without him sharing the online banking password. Every few months, I would enter my part of the data and his part of the data into a spreadsheet and make sure that things were relatively even since we weren’t splitting at the source.

When we did a living room furniture remodel this year, we agreed to split every item purchased at the source so that we fully owned all of the items together. I ended up getting a couple of credit cards (including the Chase Sapphire Reserve!) for credit card bonus points with the large purchases and then he paid me back for his half of the furniture pieces.

After we got married, we moved to a slightly different system (which I will talk more about next year), though I continued to pay for everything related to the condo until the postnuptial agreement was signed. I am so excited to retire the haphazardly updated spreadsheet of shared spending!! I’m really glad I kept that spreadsheet though as it made creating our 2017 joint budget much, much easier.

Happy holidays, everyone! This is my last post for 2016.

Living My Values in 2017

This is normally the point in the year where I contemplate the upcoming year and what financial goals I want to accomplish. This year, I’m switching it up a bit. Instead of writing SMART goals, I’m going to talk about my values.

Financial

No debt. I am pretty strongly against debt. I’ve never had student loans or credit card debt. I aggressively paid down my mortgage. One of my strongest financial values is to maintain this status with the only debt in the household being the mortgage on the condo. My husband is absolutely on board with this plan. His student loans are long gone at this point and neither of us have ever maintained a balance on a credit card nor do we plan to start doing so.

Save for retirement. Other than my first year out of college, I have contributed the maximum I can to all retirement vehicles available to me. I plan to continue that going forward, though it does look different from year to year and from job to job.

Spend consciously. I don’t practice extreme frugality, nor does my husband. Instead, we consider purchases for a reasonable duration of time before committing to them. We buy reduced stress. We buy a non-financial lifestyle that brings us joy. We naturally don’t spend our entire incomes, which results in a large gap between our spending and our incomes and thus results in a high savings rate.

Security. I value financial security above so many other pieces in life. I plan to keep one year’s expenses in cash at all times. Any funds available beyond eliminating debt, saving for retirement, and one year’s expenses will be invested in a taxable investment account, per my Investment Policy Statement.

Home

Home. Loving my home is so key to my mental health. Living in a home that brings me joy, that I want to go home to, that I want to hang out in, is so important to me. More important than travel.

Possessions. Thanks to Stylebook, I’ve been buying clothes more strategically. We’ve also been working on drastically reducing the amount of stuff we have in the condo, which has been a continual work in progress and I’m sure will be for a while. Trying to be more conscious of what comes into the apartment is also helpful here. Both my husband and I have parents that are minor hoarders and so living with less has been a point of growth and learning. I had no idea it wasn’t normal to keep everything you had ever owned in your life…

Style. I like having clothes that fit my body, no matter how much my body shifts around. This seems to go against the grain of the personal finance blogosphere, but I get enjoyment out of a closet that I like and that’s worth something.

Mental

Learn. It’s really important to never stop learning and to push myself to stretch my mind. Having a career as a tech professional is not the only answer to this. My Master’s program has been great for this. What does learning and pushing myself mentally look like after my Master’s program? If I’m not learning or not enjoying my job, then what’s the point? I have enough savings now that it’s becoming more and more difficult to put up with a job that gives me minimal fulfillment.

Health

Keep moving. I have a monthly average steps goal of 10,000 steps per day. I find that the closer I get to that figure, the happier I am overall. Getting outside is such a stress reducing factor, no matter the weather, even if certain types of weather make it less enticing to spend time outside.

Practice joy. I’ve always been a naturally critical person. In 2016, I started to practice contentedness with where I was in life and to find the positives in situations where really there didn’t seem to be any. I have an exercise where I write in a joy journal all of the pieces in my life that currently bring me joy. I’m always surprised at how many there are, even while I’m incredibly stressed out over something else. Practicing joy has helped me in so many ways.

Water. One of my projects this year was to start drinking more water. I have not always been the best at staying hydrated, but I’m finally making progress. I set my goal to drink 64 oz per day and I well exceeded that in the summer and since then, have been getting pretty close most days. My husband and I have noticed that we don’t drink water nearly as well when we’re traveling and my body definitely feels different as a result, so that’s something we plan to be more conscious of on our next trip. I’ve also made some minor diet shifts that made a huge difference.

Community

Support. In a way, this comes back to spending consciously. I have a variety of charities that I strongly believe in and love supporting their causes, as does my husband. It also means supporting other people in their learning and growth.

Relationships. In addition to movement keeping me happier, so does a certain level of social activity. There’s a careful balance between too little and too much and it’s so easy to fall on the side of too little when we are busy with our own lives, families, and careers. My relationship with my husband is central to my well-being, as well.

 

Reflections on Homeownership: 4.5 Years In

 

Life was so busy this summer that I forgot to write my annual reflections on homeownership post, so here I am at 4.5 years in instead. I cannot believe that I am coming up on my five year anniversary of buying this wonderful condo come this spring! This fall marks 5 years since I started looking for a piece of real estate to buy.

There have been many discussions lately over the fact that in today’s hot real estate markets, you need to decide pretty quickly whether you are committed to spending several hundred thousand dollars on a particular piece of real estate. Yet, every week it seems we discover something new and fascinating about this condo in which we live.

Lately, one question has been “How much did I really think through this neighborhood selection?” Within a mile radius, we have what I thought was pretty much everything one needed: a post office, courier services, multiple grocery stores, a library, a drug store or two, a hair salon, barber shop(s), a gas station, park(s), and multiple restaurants. Yet, whenever we want to go to a restaurant, our first choices are never the local ones, which results in Uber’ing to another neighborhood. There is no takeout in the area that I like. (Is that a good thing or a bad thing? Probably not so bad for the wallet.) Our friend in the nearest proximity is a full mile away. It is pretty easy to get downtown and it’s easy for friends to park near us if they drive to visit. The commute to my job at the time was pretty good, as it is to my husband’s job, but my commute to campus is a bit inconvenient, as was my commute to my last job.

We finally finished the furniture tetris game I mentioned last time we talked about my ideas on homeownership. We now have furniture that we both love and that we chose together. We repainted many rooms. We’ve decorated together. It really solidly feels like our place. It is wonderful. Our home brings us joy again.

A realtor told me that they would list this condo of mine for ~45% more than what I paid for it. Two more years or so and that would run up against the $250,000 single capital gains exemption for home value increases, though we may not need to worry about that as we got married and that increases the exemption to a ludicrous $500,000. (I’m unsure what exactly the requirements are to qualify for the married exemption over the single one, however.)

In 2016, this condo cost a whopping $14,000 in housing expenses (mortgage interest, HOA dues, property taxes, condo insurance, electricity, repairs, interest lost from having the equity locked up, and tax savings).

I was pretty conservative in my calculations when I bought this place, which has now put my husband and I in the situation where our housing costs (including the full required mortgage payment of which only the interest is included in the $14,000 figure) are around 6% of our combined gross income in 2016. If you take out the principal portion of the regular payment, it’s even lower.

Perhaps I skipped the 4 year post back in the summer because we were super busy going to open houses every weekend. We were frustrated with our furniture tetris and unsure that we would ever figure it out, so we became convinced that we might need a larger place. This condo has two bedrooms and is relatively spacious in the lower 1000 sqft range, but we were not utilizing the space particularly well. With our then-existing furnishings, there wasn’t enough room for each of us to feel like we had personal space to pursue our home-based hobbies. The increasing market ranges mean that we would need to spend about 40-50% more than the value of this condo to get a three bedroom townhouse. We developed the mantra “Is this cheaper than moving?” (which is pretty much true for everything when your alternative is to spend several hundred thousand dollars) and we started trying new hypotheses. We hired an interior designer to help us refurnish the living room, who came up with ideas that we never would have. It was expensive, yes, but it sure was cheaper than moving. The designer asked us early in the process “How long do you plan on staying here?” and our answer was “So long as we stay in this city and don’t have children, quite possibly decades.”

Homeownership means that our lives revolve around our central home, rather than our home moving as our lives shift.

Layoffs: one door closes and a window opens

Note: This is more personal than most posts that I write here. It has been multiple months since the layoff happened now and I’m in a pretty reasonable place emotionally at this point, though triggers do still happen sometimes and publishing this post last week was a trigger in the few seconds that it went live, which is why I held off on publishing it for a week.

Layoffs. We think they happen to everyone but us. To no one we know. To no one in our family. Until they do and our world explodes. No matter how much you possibly wanted to leave your job, a layoff still results in far more emotional shock than you would think it does.

I could write a post about how to prepare financially for a layoff, but it’s pretty simple: keep your finances in great shape and you will be okay when you get laid off. That two year liquidity fund I was saving up with so I could take a sabbatical? Super handy when I was unexpectedly laid off this year. As was my severance package.

Nothing, however, can prepare you for the emotions that come along with getting laid off. How it feels to be told your job was eliminated in a room with multiple other people by someone you’ve never talked to before. How it feels to go into work one day and see a mysterious email about a mysterious meeting. How it feels to go into work one day assuming you have a job and leave no longer having one. How it feels to most definitely now be the lower income earner in the household for a bit. How it feels for people to assume your spouse is supporting you financially because you are “unemployed”. How it feels to wonder if you should spend any money at all on joyous things when you spent years teaching yourself how to spend money on yourself. How it feels to not get paid on the last business day of the month for the first time in almost seven years. How it feels to live off of your savings account for an indeterminate amount of time. How it feels to be laid off in an expensive season of your life.

You find sad joy in knowing others who also got laid off that day, friendly faces in a time of uncertainty, making for a shoulder to cry on. You follow your list of self-care, going on long walks in the sunlight every day that week. Somehow your partner is the one more unsure of how to proceed through this, confused that you are simply in checklist mode until you break and then he’s there, holding you steady.

But the finances? It is so wonderful to not worry about those in this strange time.

That checklist that you had ready to go for when you gave your notice? That checklist is so key at keeping your emotions in check while you wade through the last week at a job you didn’t love. In a haze, you call your 401(k) plan provider to request an after-tax 401(k) in-service distribution the afternoon you receive your layoff notice. The check comes in the mail the next week and you deposit it into your Vanguard Roth IRA.

Health insurance? You don’t even think about it. Your checklist already knew based on where your deductible was for the year, that it makes sense to keep COBRA for the remainder of the year even if it costs the insane $500/month versus joining your partner’s plan.

You’re free. After a series of jobs where you didn’t fit or didn’t succeed after a series of jobs where you had flourished, you’re set free to figure out what you want. What will you do next? You’re not yet financially independent, yet you don’t need to immediately find a new job. You can take the time to figure out what to do next, rather than rushing on to a new job that you don’t love either.

Your sense of independence has always been so key in your life. How do you reconcile that with being unemployed for a season? How do you reconcile that with your partner earning more than you ever have while it also being a success for him to be earning so much as it shows how valued they are in their organization?

The layoff took away your decision on when to leave the job. That bandaid was ripped away from you, by someone you don’t even know. The door is shut and gone forever. The job can no longer be fixed or improved or gotten better, no matter what your manager told you the previous week. Which window do you pick?

You try to be cautious about who you tell because everyone else has their own Feelings that they then want to discuss and this isn’t the time for you to manage everyone else’s Feelings. This is a time for you to get support. You shut down the person who offers you a job in their group like five times in a day. You ignore the person who outbursts their emotions about when they got fired. (Not the same thing, buddy.) Your parents try to tell you that having the mortgage paid off would be better than having cash in the bank and you call bull on that – liquidity is far more useful.

Life goes on. That self-care that you had been working on all year when you started to realize you hated your job? It, your partner, and your savings account carry you through this confusing time.

How I Use Stylebook to Manage My Closet

iPhone Screenshot 1 I’ve been using Stylebook since January to track and manage my closet. Last fall, I did an analysis of what I had in my closet and what I would like to have and identified where the gaps were. Not long after that, I got an iPhone and discovered the wonder of iOS apps, including Stylebook. I’m a huge believer of having data on your life and data gives you the power to make informed decisions, so I’m surprised I never really tracked my closet before. I probably had the mistaken impression that that was for “fashion snobs”, which I felt was not me.

Closet Organizing

The key data piece in Stylebook is importing your entire closet. This sounds like a lot of work and it definitely takes some amount of time, though I had recently done a huge closet purge when I started using the app, which made the import go much faster.

Categories

Their categories didn’t quite work for me, but you can really define your own categories. I’ve eventually shifted my categories to the following:

  1. Tops
    1. Three-quarter sleeved
    2. Long-sleeved
    3. Short-sleeved
    4. Cardigans/Hoodies
    5. Sweaters
    6. Sleeveless
  2. Bottoms
    1. Pants
    2. Shorts
    3. Tights
    4. Skirts (though I currently have none)
  3. Shoes
    1. Flats
    2. Boots
    3. Sandals
  4. Bags
    1. Cross-Body Bags
    2. Totes
    3. Clutches
  5. Outerwear – three subcategories to match the different types of jackets I wear in my region
  6. Dresses
    1. Fall/winter Casual
    2. Formal Dresses
    3. Spring/summer Casual
  7. Other
    1. Scarves
    2. Belts
    3. Hats
    4. Necklaces
    5. Swimsuits
  8. Athletic clothing
    1. Tops
    2. Pants
    3. Footwear
  9. Items that don’t currently fit – subcategories for each size
  10. Gone Items
    1. Tops

As you can see, I track pretty much all items of clothing in Stylebook except for pyjamas.

Importing Items

I add an item to Stylebook when I decide that it has a place in my closet. Many websites have pictures of their clothing on them and I use those pictures to use as the item’s picture where possible. When that’s not possible, I either take my own picture quickly and take a new picture later when I have some more time or I search for a similar item in Google images and try to find one without a person in it. The background is much easier to clear in Stylebook with its tools when it’s a distinct color from the clothing item and there are no pieces in the background layered over top of the item.

You can add a variety of fields on your items: colors, fabric, size, season, brand, status, price, and notes.

I didn’t use the Season field at first, until I learned how useful it is when I couldn’t figure out why I felt like I had nothing to wear in the summer. I went and added the Season field to all of my clothes and then realized I had about 2 items I would wear in the summer. That helped me be comfortable with going out and buying some new summer clothes.

The Notes field is completely freeform and I use it for a few purposes:

  1. I note when I added the item to my closet, i.e. “January 2016”. (This allows me to then search for “2016”to find all items added in 2016 or for “February 2016” to find all items added in that month – super useful.)
  2. I include the description of the item from the brand’s website.
  3. I include general notes about the item. For outerwear, I indicate a temperature range where I wear the piece. (This has really helped me to think consciously about when I would wear a piece of outerwear before adding it to my closet! One piece I bought this past spring was for a very specific temperature range that I realized I didn’t have a piece for and then it turned out that is a very common temperature range where I live as I have worn it 72 times since I bought it in April.)
  4. If I have multiple of the same item in the same color, I write “Multiple x3” to indicate how many I have.

Style Stats

I love the style stats in the app! You can see:

25 Most Recently Added

This screen shows the items you most recently added to the closet. I like to look at how aged these items are. The least recently added item in this list currently is from August 2016. I didn’t add anything to my closet in October 2016.

Never Used in an Outfit

This screen I don’t really care about. For me, it shows bags and jackets because I don’t usually include those in my outfits.

Never Logged on Calendar

This screen is pretty useful to see what items you added to your closet, but then never worn. If you’re someone who tends to buy items, leave the tags until you wear it, but then never actually wear it, checking in on those items here is really useful.

25 Least Worn

This screen is really motivational to me to make sure I’m wearing the items in my closet! If things stay in here for too long, I like to think about why they’re still here. Why am I not wearing the item? Did I buy it off-season and that’s why it’s staying in here for a long time of low usage? (I am not a fan of off-season buying.) Right now, here’s a selection of my list:

  • 1 day: A pair of hiking shorts that I bought because I was too warm hiking in pants. We didn’t have a lot of time to hike this summer, so I only wore them once.
  • 1 day: A dress I bought in September. The tights I would wear it with ripped, which has been a deterrent to wearing it again. I am replacing those tights though and then I’ll be able to wear the dress again.
  • 2 days: A gorgeous summer formal dress that I for some reason bought last fall that I had no reason to wear or buy and then it didn’t fit when it was summer! I’ll slowly get some wear out of it.
  • 2 days: A top I bought last December that is really cute and looks great on me that simply doesn’t fit into my lifestyle and weather. Plus it’s handwashable and I’m a tad lazy with those.
  • 2 days: Colored tights that are a little too out there in color for my more classic, subdued colored dressing.
  • 2 days: Colored tights that went perfectly with exactly one item in my closet that I sold on Poshmark because I never wore it. Thankfully they also go with something I bought in September, so I will get some wear out of them after all.
  • 2 days: A dress I bought for the many summer weddings we went to this year, but I only wore it to two of them because the other two were in the fall and I wore a different dress.

And so forth. If I can’t come up with a good explanation for when I’ll wear an item again, I add “Poshmark” to its description and try to sell it eventually.

25 Most Worn

This one is super fun. For me, it is full of bags, shoes, outerwear, cardigans, and scarves, since those are the items that are mixed and matched more often with multiple other pieces.

25 Worst Cost-per-Wear

I take a similar approach to the “25 Least Worn” items here. I have an ongoing project of wearing the items in this screen to get them out of here! It is really rewarding when they get out of here. Adding new items to my closet is horrible for this screen’s progress, which helps to not shop when I don’t need something.

25 Best Cost-per-Wear

This screen is so helpful for showing me just how much those expensive shoes, bags, or jackets really cost on a per use basis. I acquired a purse for $217 about two years ago now and despite not tracking its usage in Stylebook for most of its first year, it’s just about down to $1/wear, which is pretty good. It doesn’t show any signs of use and I will have it for a long time. It’s also shown me that the flats that I thought were “expensive” turned out to have far better cost per use statistics than some of the tops I bought that were way cheaper.

Archiving Items

Stylebook unfortunately doesn’t allow you to “archive” items, so I’ve developed a way to do this manually. When I think I should sell an item, but haven’t quite gotten around to doing so yet, I add “Poshmark” to the Notes field. I have three strategies here:

An item no longer fits

I have a category for when items no longer fit and I move the item there. I also update its status to “In Storage” and move the price from the Price field to the Notes field. (So that I still have the data easily accessible if it turns out to fit again.) This means that the “Value of my closet” field Stylebook tells me is the sum value of all of the items that currently fit in my closet. If I would wear the item if it fit again, then I keep it. Otherwise, I consider donating it or selling it and follow the other two strategies described below. This section is really helpful for when an item then fits again later and I can reverse the steps I described here to bring it back into my closet! It’s great for tracking items that are in storage somewhere else in your house/apartment too.

Deleting entirely

If an item that I’ve removed from my closet by donating or selling shows up in the Most Worn or Least Worn stats screens, then I delete the item entirely from the app. Before deleting it, I save its info into the iOS Notes app. I save the item’s picture, the picture of any looks, the price, brand, and notes fields, and indicate which days I wore it. I also delete the item from the looks that it was in, so that the other items will still show that they were worn that day.

Moving to another clothing category, e.g. “Gone items”

If the item doesn’t show up in the Most Worn or Least Worn stats screens, then I leave it in Stylebook and simply move it to another clothing category labelled “Gone items”. Like for when the item no longer fits, I mark the item’s status as “In Storage” and move the price to the Notes field.

Outfits Organizing

iPhone Screenshot 2

This is where you store all of the possible ways that you have worn or could wear the items in your closet! It is so useful to be able to see all of the different ways that you have worn an item before and then how often you wore it that way.

My lifestyle is so different from the default way the app was set up that it took me a while to figure out how to use this section. Initially I didn’t use it and just logged each item on the calendar every day I wore it. That was a lot of work so eventually I organized things into outfits. My categories here are always evolving and I rearrange them depending on the current season. This feature is really neat because then I can go back to an item’s page in the app and see all of the outfits I’ve made with it.

Categories

At the moment, the list looks like:

  1. Long-sleeved
  2. T-shirts
  3. Athletic
  4. Dresses, Fall
  5. Dresses, winter/dressy
  6. [Jeans] Size X
  7. Long-sleeved Cords
  8. T-shirt Cords
  9. Looks with Missing Items
  10. Dresses, summer
  11. [Jeans] Size Y
  12. Sleeveless
  13. Shorts

The [Jeans] Size X/Y categories are because I have the same pair of jeans in two different sizes and that’s my way of keeping the looks separate.

What goes in an outfit?

In my individual outfits, I include: dresses, tops, cardigans/hoodies, pants/shorts/tights/skirts, shoes, and scarves. I include vests in outfits and outerwear in athletic outfits, but otherwise, I don’t include outerwear in an outfit because it isn’t key to the outfit for me. Everyone is different on that. For me, outerwear is more dependent on weather than on the other items I’m wearing.

Calendar

iPhone Screenshot 3This is the meat and butter of the app really as it powers all of the statistics. This is where you log what you actually wore every day. I log everything that I wear outside of the house, with the first item being the primary outfit I wore. You can log clothing items or looks/outfits.

It’s really fun looking back on a previous month – you can really tell what the overall weather theme just by looking at my Stylebook calendar! It does show you your Most Worn and Best Value for each month. Most Worn is usually a bag or a piece of outerwear for me, so those are not particularly interesting. Best Value is usually the cheapest item I wore that month, so also not particularly interesting. I’m more interested in the long-term patterns.

You can add notes for each item you add to the calendar. I use this for a few purposes:

  1. I indicate if I wore an outfit to the gym so that I can easily search for all outfits I wore to the gym
  2. I indicate the names of the bride and groom for the wedding I wore an outfit to. This makes it easy to search “wedding” and find all outfits I wore to a wedding in my Stylebook history.
  3. I occasionally use other indicators like “dinner”, “hiking”, “walk” etc.

I occasionally will plan my entire week of outfits at once by consulting the weather and what clean items I have in my closet.

Packing

My system for packing clothes on trips used to be pretty lazy for how great I am at organizing so many other things. Now I use Stylebook to manage my clothing packing. I make a new packing list for a trip and add the expected weather, how many flights, and anything else to note (e.g. wedding(s)) in the notes field. You can add multiple outfits at once to your packing list and then once you’re done selecting outfits, it asks you if you want to add the missing items to the clothing section of the packing list. They have a packing list of all the items once you’re ready to pack that is organized by subcategory! I especially love being able to use Stylebook to figure out what is in my suitcase because I can never find anything. We’ll see if it manages to solve my overpacking problem though…

What is it missing for me?

  • Goals of number of items across the following categories: (1) summer dresses/tops and (2) fall dresses/tops.
  • Dates an item left and entered my closet so that I can search on these more easily.
  • Closet holes in list form – the app has an “inspiration” section, but I tend to make lists of things and then search later for “black flats” for example.

What have I learned?

  1. How to buy clothes that fit into my closet, rather than buying clothes that seem interesting
  2. I will never be the person who buys ten items of the same shirt in the same color and is happy wearing those every day.
  3. I do, however, like finding a shirt or dress I love and then buying it in multiple colors.
  4. 1-2 pairs of jeans really are sufficient. There is no reason to have any more. 1 pair of athletic pants per style and size is sufficient too (hiking shorts, hiking pants, and yoga crops).
  5. It’s okay to only use a particular bag in the summer or another in the fall – the long-term view is useful.
  6. There is a huge range between “being a fashionista” and “not caring about fashion at all” and I fall somewhere in the middle.
  7. If I don’t have enough clothes to wear in a particular season between laundry days, life is very stressful for me.
  8. I like clothes.
  9. I like having enough clothes to be able to not worry about whether I have clothes to wear that day.
  10. By being more conscious about my closet, my closet is much smaller than it used to be, while wearing a far higher percentage of the items in it.
  11. Stylebook is so great at helping me shop my closet and organize things in a way I never could by just staring at my closet.
  12. I really don’t need that cute dress unless it will fill a closet hole.
  13. Unless I have key accessories to wear an item (re: tights that I would wear with a particular dress), I simply won’t wear it.
  14. Based on my lifestyle, I really only need one formal dress per season and if I wanted more, I should use Rent the Runway over buying dresses because my cost per wear would be better that way.
  15. Women should stop making excuses for why they buy more clothes and instead, use the Stylebook app to manage their closet.
  16. More expensive clothes don’t always have a better Cost Per Wear than cheaper clothes and vice versa.
  17. Clothing is something I am willing to spend a reasonable amount of my discretionary income on, so long as it is conscious.

Hindsight on Years of Aggressive Mortgage Pre-payment

I have written in depth about my mortgage and my aggressive payoff plans. I really hope that you don’t follow in my example and treat your mortgage like a pants on fire debt emergency like I did because that was a huge mistake. Keep in mind that while aggressively paying down my mortgage, I also maxed out my pre-tax 401(k), my HSA when it was available, and my Roth IRA. I also maintained a healthy six month emergency fund and another six months across liquid stock index funds and bonds.

I regret aggressively paid down a 2.5% mortgage. Over the course of 2.5 years, I made $126,000 in extra payments. At my current expense level including my required mortgage payment, that is 2.6 years of expenses. Instead of hiding $126,000 in my Vanguard taxable investment account in the form of stock index funds or in a cash savings account, I hid it in my mortgage, from which the only ways I can extract equity are by applying for a HELOC currently priced at ~4.25% in advance of when I need the funds or by selling half of the condo to my husband over time.

Doesn’t this chart look motivating? I made such huge strides on eliminating that mortgage debt pretty quickly: within the first 2.5 years, I paid off exactly 50% of the original mortgage balance.

Mortgage Balance Aggressive.png

Why did I do this?

I was scared of my mortgage.

My original mortgage balance was 3x my gross base salary when I bought the condo. I had never had debt before (no student loans or credit card debt) and having 3x my base salary in debt was HUGE.

15 year fixed mortgage rates and 5/1 ARM rates were the same when I bought my condo. A decent portion of my income came in the form of deferred compensation and I didn’t want to lock myself into the payments of a 15 year fixed rate mortgage, so I thought that a 5/1 ARM was the perfect compromise – the rate of a 15 year fixed rate mortgage with a 30 year amortization. I didn’t trust in my then-income level enough to lock in the 15 year fixed rate payments. The difference between the two payments? $1,900/month versus $1,20o0/month when the lower payment caused me to see zero increase in my annual expenses over renting and I was stashing $2,000/month into savings on top of maxing out my pre-tax 401(k) and Roth IRA.

I didn’t understand compound interest.

My parents preached that debt is bad, anyone who carries debt is financially irresponsible, and no one should hold their mortgage or student loans or any other debt any longer than minimally necessary. I’m not really certain of their investing strategy because they think the stock market is too risky and you should invest entirely in bonds, real estate, cash. That’s a debate for another time. I started saving for retirement while I was in college (back in 2007), but all of that was put into certificates, not into the stock market. No one explained compound interest to me until I found the financial blogosphere back in 2011 and despite the number of advanced math classes I took in high school and college, I never figured it out either. You don’t have to save nearly as much for retirement if you frontload it in your twenties and thirties and invest in stocks. The Vanguard S&P 500 Index Fund, for example, has an average annual return of 10.83% since its inception in late August 1976. That’s just over 40 years ago. That is pretty much unheard of in cash returns! At least in my lifetime that I can remember.

I was scared of the stock market.

Yes, I had no comprehension of compound interest, yet somehow I was perfectly happy locking away money in retirement accounts for many decades and investing in stocks there, while being scared of investing in the stock market outside of my retirement accounts. I would rather get a guaranteed 2.5% return than incur the increased risk of the stock market that could possibly get me a 10.83% return. (For the record, Vanguard currently tells me that I have seen a 9.0% return over the last 6.5 years that I’ve had accounts with them or 9.8% over the last 5 years, which is when I started hunting for a condo.) I was so scared of losing money, of seeing my account balances go down, that I took the guaranteed 2.5% return instead.

Why was this a huge mistake?

Liquidity.

I’m sitting on a desire to take a sabbatical from my highly paid tech job and I’ve spent much of 2016 setting aside additional liquid funds in order to finance that. Had I not paid down the mortgage so aggressively, I would have already had that fund. Assuming I had invested the exact same amounts I paid extra on the mortgage into Vanguard Total World Stock Index Fund on the exact same days that I made extra mortgage payments, I would have had $148,924.73 in the index fund on 10/1/2016 and I would have been ahead. Now, the stock market has done reasonably well over the past 4.5 years, so in the following chart I also compare aggressively paying down the mortgage to aggressively saving in a 1% interest earning savings account:

Investing vs Aggressive Mortgage Paydown.png

Notice how the green line and the red line are pretty much on top of each other? Cash currently would be worse than aggressively paying the mortgage by a mere 2%. Investing has been at best 19% better than aggressively paying the mortgage and at worst, $215 better, thanks to a rising stock market over the last several years. You look at this second chart and wonder why I paid the mortgage so aggressively when I could have accomplished the same net mortgage balance within $2,000 by just keeping the extra funds in cash.

What does this math show?

If I could have been convinced to not blow all of the money I threw at the mortgage over the last 4.5 years, I would have been better off leaving it in a 1% savings account than throwing it at the mortgage quite so aggressively. That would have left me with significantly more liquidity.

In late 2011, I wrote a post entitled “What to do with extra monthly and bonus cash flow?” in which I explained several ideas I was tossing around:

  1. Split the money up three ways into investments, pre-paying the mortgage, and saving for a 20% down payment on a house
  2. Split the money up 50/50 into investments and pre-paying the mortgage
  3. Split the money up 50/50 into pre-paying the mortgage and saving for a 20% down payment on a house
  4. Invest all of the money
  5. Use all of the money to pre-pay the mortgage and pay it off really quickly

My conclusion? “Right now, I prefer the first option since it still allows the extra funds to be diverted back to mortgage pre-payments or investments at any point. The fifth option isn’t very flexible and the fourth option is the riskiest.” Yet, that is not at all what I did. I went with the fifth option.

But then, once I bought a place, I picked a 5/1 ARMset out to pay it off before the rate reset, which was absolutely a side effect of the fear of the rate resetting, and got addicted to the high of paying down the mortgage. It was so much higher than any high I have ever experienced from saving. I was really convinced that the mortgage would be paid off before the rate reset, before life happened in the form of my now-husband moving ina job change that unexpectedly reduced my income, starting grad school, and getting married. I’ll talk later about how we plan to handle the mortgage going forward in our marriage.

Back in July 2012, I thought “I’m not the sort of person who would *not* take out a loan to invest. I’m the sort of person who would have more job security if I lowered my yearly fixed expenses by $14,469.48 than by having a larger amount of money in the bank.” I no longer believe that to be true and I can’t take back the large payments I made on the mortgage without doing a cash-out refinance or opening up and drawing down a HELOC. I was addicted to the fact that early on in the mortgage, I could pay $X in an extra payment, which was about Y normal monthly payments and shave off 2*Y regular monthly payments off the end. I got addicted to paying down my mortgage.

It’s all incredibly irrational. Personal finance is all so personal. But that chart doesn’t lie – I would have been better off keeping my mortgage payoff fund in cash.

Aggressively paying down my mortgage being my biggest financial mistake shows how much financial privilege I have. If you hate debt as much as I do, I am absolutely on board with paying extra on your mortgage, but not this all or nothing approach for several years like I did. That said, buying this condo is quite probably the best financial decision that I have ever made – by a stroke of luck, it has appreciated an average of 11% annually since I purchased the property. I didn’t even need to pay the mortgage any extra to get the benefit of that appreciation.

Cash could have been turned into extra mortgage payments later.

Liquidity is king.