December 2015 net worth update (+0.5%)

31-Dec-2014 30-Nov-2015 31-Dec-2015 MoM YTD
cash $12,300 $7,700 $7,200 -$500 -$5,100
savings $47,800 $62,700 $65,600 +$2,900 +$17,800
investments $164,500 $212,200 $212,000 -$200
-0.1%
+$47,500
+28.9%
mortgage $143,000 $134,900 $134,100 +$800
+0.6%
+$8,900
+6.2%
net worth $531,600 $597,700 $600,700 +$3,000
+0.5%
+$69,100
+13.0%
taxable assets – debts $70,600 $46,100 $41,600 +$4,500
+9.8%
+$29,000
+41.1%
$ until FI* $811,300 $826,900 $783,300 -$43,600
-5.3%
-$28,000
-3.5%

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

Happy new year, everyone! Here’s to a great 2016!

I managed to sneak in a “small” net worth increase this month. I say “small” because the entirety of my net worth increase can be attributed to getting my tuition reimbursement in 2015 instead of in 2016, which was more than the net worth increase in December. I paid January’s tuition this month and bought a textbook, which took a dent out of my savings accounts. I did surpass my $30,000 in general savings goal, however, which is quite exciting! Ignoring the tuition spending, my savings rate was 86% this month or 40% with the withdrawals. (It’s a bit higher than usual since I transferred the extra money in my checking account to savings.)

I also managed to sneak over $600,000! That’s pretty cool too. And “$ until FI” is finally under $800,000 again! Let’s see if I can keep it there :)

Expenses: I spent $2,807 in December including the mortgage or $1,780 without it. Some of my controllable expenses broke down as follows:

  • $156 Clothing
    • ($164) Athletic wear: returns from November shopping
    • $167 Bottoms: a pair of jeans, two pairs of corduroy pants, and a pair of colored leggings
    • ($89) Dresses: some returns and purchased 4 dresses, of which I hope to keep 1-2 at most, so I should see another credit here in January since they won’t get here until then.
    • $130 Shoes: bought a pair of ankle boots to replace my pair from 2010 that are a bit small
    • $13 Socks: bought a pair of ankle socks to go with the boots
    • $99 Tops: returned a long-sleeved top, bought a sleeveless top that was on sale, bought 5 long/three-quarter sleeved tops.
  • $3 Entertainment/Social [average so far this year: $116, average last year: $211] – Remember the Milk pro for two years ($48), dinner with a friend ($15), and spending some cash towards the facial listed below (-$60)
  • $2 Eating out by myself [average so far this year: $6, average last year: $18] – some gum at the airport, that I should have put on the shared credit card
  • $22 Work lunches [average so far this year: $39, average last year: $147] – I was lazy with some of the short weeks…
  • $376 Presents – finished my Christmas shopping and a couple birthday presents thrown in there for good measure
  • $395 Housing miscellaneous – two thermostats ($50 each), a new dual switch ($10), a timer for the master shower fan, and installation by an electrician
  • $62 Cell phone – $15 to Ting for my last bill and $47 to Cricket
  • $15 Medical – a prescription
  • $20 Eyebrows
  • $33 Toiletries [average so far this year: $48, average last year: $33] – cold medicine and clinical strength deodorant
  • $100 Annual facial
  • $123 Recreation – a new pair of running shoes
  • $82 Transportation: tolls replenishment (x2) and one tank of gas
  • $30 Travel: the food expenses that didn’t make it on the shared credit card

December was my lowest month of non-education spending this year!

Savings: $65,600 (up $2,900)

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 old credit union checking account, and general and grad school savings accounts at my new credit union (Alliant).

  • 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.
  • Actions: I paid January tuition and bought a textbook out of my grad school savings account. I added about $2,200 more than that cost to my general savings account, which balanced things out.

Investments: $212,000 (down $200 or -0.1%)

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. Dividends! About $2,000 across all of my accounts

Next month will be great for my investments with frontloading my pre-tax 401(k)!

Mortgage: $134,100 (down $800 or -0.6%)

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.

I’m really excited about the balance this month because it’s now lower than my annual base salary! That’s pretty exciting!

TOTAL: $600,700 (up $3,000 or +0.5%)

I ended 2014 with a net worth of $531,600, so I saw a change of +$69,100 or +13.0% in 2015. I set the y-axis on this graph to $650,000 so we could see how my net worth grows towards that throughout the year. Hah! I did not get there and I will discuss why in the 2015 wrap-up post that I will publish in January sometime. I did manage a pretty reasonable increase though! It works out to about $190/day.

December 2015 Net Worth Graph

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2016 Plan

Goals

1) Enjoy living together!

2) Do well in grad school and enjoy it!

3) Do well at my job!

4) 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), some additional funds to the after-tax 401(k)*, the maximum to the Employee Stock Purchase Plan (and selling that right away), and the maximum to my Health Savings Account. This will account for probably about 75% of my savings in 2016, though the ESPP funds will be reallocated once they’re sold.

5) 7,000 steps per day.

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

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

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.

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.)

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

I’m anticipating total compensation from work around $170,000 plus bonus for a net worth increase of around $145,000. I’m anticipating saving about $87,000 of that figure.

*I’ve debated increasing my liquid funds some more before contributing to the after-tax 401(k), but since those contributions are withdrawable with minimal penalties/taxes and I already have a decent enough for now amount of liquid funds, I’m going to do the after-tax 401(k) contributions first.

Spending

  • $23,000 Housing: mortgage payments, HOA dues, property taxes (assuming a 5% increase from 2015), condo insurance, cell phone bill, condo maintenance
  • $3,600 Travel: We both have a reasonable number of points to put towards a trip, but due to various circumstances, I’m not sure if we’ll be able to use them, so I have no idea how much we’ll spend here. I’m going to guess $300/month for now.
  • $3,000 Gifts and Donations: I donate 1% of my gross income to various charities and give about $100 at weddings, birthdays, and Christmas to each person on my shopping list.
  • $2,400 Transportation: car insurance, vehicle tab renewal, fuel, tolls, oil change and wiper blades
  • $2,000 Clothing: guess as to how much I’ll spend
  • $1,400 Entertainment: hanging out with friends
  • $1,000 Recreation: I’m guesstimating 3 pairs of athletic shoes of some sort, a punch card of yoga classes, and a few other activities.
  • $1,000 Medical: I seem to spend about this much per year
  • $900 Personal care: eyebrow waxes, toiletries, facials and massages, and hair cuts.
  • $600 Food: This is just lazy eating out including work lunches.
  • $275 Life: Umbrella insurance and NEXUS card as I renewed my driver’s license and passport in 2015, so they’re good until 2025!
  • $200 Shopping: I replaced my laptop and upgraded my desktop in 2015, as well as buying a new cell phone, two purses, a sunglasses case, and a new computer desk and chair. I think I’m doing just fine in this category, but I’ll leave $200 here as a buffer.
  • $39,375 Total

I’ve written this down as a spending plan, but honestly? These are just the things I know about. For the last several years, I have pretty solidly spent in the $45,000 to $50,000 range. 2014 fell pretty much spot on $48,000, as did 2015. So I honestly believe I will end up spending somewhere closer to that figure than this $39,000 figure. I have a guess I won’t be too spendy since I’ll be otherwise occupied with grad school and I hear that keeping busy helps you to spend less money, but we’ll see how that goes ;)

Instead of budgeting in 2016, I’m simply going to transfer (2015 spending – charitable donations) / 12 to my checking account each month. Why ignoring charitable donations? That budget goes to a savings account that when the budget gets large enough, I’ll switch over to a donor advised fund. I’ll check in in June to see if I am significantly under or overspending that and then I’ll reconcile in December.

End of year forecasting

Including my employer’s contributions to various accounts and expected market contributions, I expect the end of the year to look like:

  • $735,200 in overall net worth (a $143,700 increase)
  • $95,900 in savings (a $36,100 increase)
  • $280,000 in investments (a $71,000 increase)
  • $125,000 in mortgage balance (a $9,000 decrease)
  • -$4,500 in taxable assets – debts (a $43,500 increase)
  • $644,600 until FI (a $116,700 decrease) *note to the naysayers: this is a target to shoot for and once I reach it, I’ll do some more exact calculations because until I reach it, I’m definitely not FI :) Until then, I’m using a 4% SWR of my investments bucket, a paid off mortgage, and the rolling last 12 months of expenses to calculate my target.
  • A split of 14% cash / 48% condo equity / 38% investments (changed from the 2015 EOY of 11% cash / 53% condo equity / 35% investments). At its highest, my condo equity was about 60% of my net worth.

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Envisioning the future of my finances

Some day, my pre-tax 401(k) will be worth more than one year’s annual salary.

Some day, withdrawing 4% of my investments could cover all of my needs. That some day will be sooner than you think – it’ll come in 2016.

Some day, my liquid assets will be worth more than my mortgage.

Some day, my pre-tax 401(k) will gain or lose more in a year than I can add myself, likely in the year I turn 30. My Roth IRA is already at this point.

Some day, my mortgage will be paid off, reducing my expenses by about $12,000 per year. Then I will increase my donations budget from its current 1% of my gross income to 2% of my gross income.

Some day, I will be a millionaire on paper.

Some day, I will start adding to my taxable account at Vanguard, beyond just adding to my retirement accounts. At the point that I start doing this, my retirement accounts will already be worth almost half a million dollars.

Some day, I will learn about tax loss harvesting.

Some day, my investment accounts will be worth enough to sustain my lifestyle indefinitely with a 4% withdrawal rate. Then I will increase my donations budget to 5% of my gross income, at which point I could open up a donor advised fund. Those seem cool! Also, simpler come tax time.

Some day, my investment accounts will be worth enough to sustain my lifestyle indefinitely with a 3% withdrawal rate. Then I will increase my donations budget to 10% of my gross income, at which point I would definitely open up a donor advised fund.

 

There are all sorts of levels of financial freedom that I look forward to discovering in my future. The level I’m at now is pretty cool too.

Happy holidays, everyone!

Readers, what levels of financial freedom do you look forward to in your future?

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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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