The first half of the year our cash flow is limited – my 401k is front loaded, and we both pay full social security taxes, but everything is going well.
Net worth is on the rise for the year, up about 10% for the year so far. This is mostly stock market gains which I’m not convinced will stick…. but I’ll take it for now!
After my initial tax estimates, we have not finished filing them. Usually, T finishes them off. We may just pay the exorbitant TurboTax fee (since we need extra forms to handle a reimbursement resulting in a 1099) if he doesn’t have the time/energy to go through them by hand in the next few weeks. We’ll see.
Our house held up to the crazy amounts of rain without any water in the crawl space (yay for the drainage project we did when we moved in). However, the shower in one bathroom is leaking a little. The likelihood was noted during the inspection – but we decided to wait until it was a problem before addressing it. For better or worse, the bathroom is tiny, so it will be a relatively small project. We’ll spend a month or two to gather ideas & plan (while using the other shower exclusively), then hire the job out this summer when T’s schedule is slightly more flexible. The shower tile is original 1950s teal green, so it will be fun to get something a bit updated!
The patio project still is not done, but some progress was finally made again after months of rain. T is in charge of this one, so I try really hard to not worry about it until he needs my help. It is working, but I also have to be patient with progress.
This is going great right now! My boss in Colorado is excellent and I enjoy working for him. I’m not sure whether my particular arrangement would work out with many other people leading the team, so I’m very grateful that it is working. It is going to be a busy month, but everything is really good.
I originally wasn’t planning on going on a big trip with T this year, but I’m tempted to tag along to his conference in Europe this summer. The ideal plan is that I fly out ~2-3 days after him (save on dog care costs/impositions), come for the social banquet at the conference, spend a day or two wandering by myself, then we spend a handful of days exploring together. If I can use points / miles for my flight and the extra day of hotel, it is pretty cheap – just food/entertainment and dog care. We’ll see – I have to explore what we’d want to do, and if it is worth using vacation and dog care for. 🙂
I got to visit my family in the Midwest for a few days in January, which is always a really great time. My niece and nephew have grown up so much, and it is so much fun to spend time with them. The adults commiserated over the new administration and the direction of our country, hoping for the best and making plans to fight for it.
We’re still spending a lot of time hiking and training our high energy adolescent dog, who just turned two years old. He’s fun, sweet, energetic, time consuming, imperfect, lovable, goofy, and such a good boy!
Work is going well, although it is very full lately! Most of my tasks are enjoyable, and it’s a fun phase of the project. I feel lucky to be working on it with such great people. The travel is still not bad – about one week per month to a place I like, on a schedule that I set. I also just confirmed that I’m slated to give a short presentation at the big design review in the UAE later this year – which is awesome visibility! I’ve presented at similar reviews in my job at Los Angeles, but haven’t had the opportunity for this job yet. I was assertive and offered in a way that would make it easy to say no, but my awesome lead supported me.
I’m trying to average 70k steps per a week – which is very different than 10k steps a day and gives me a bit more flexibility to slack off a bit during the work week.
Tenure-track academics generally get a detailed review about halfway between hire and tenure review, and T’s all came back very positive! Yay! There have been rumblings about how funding of science will go in the current administration. A disruption to this would impact his ability to fund his students and continue to build a group rather than him directly, but obviously he needs to have students. His area is not one of the known targets, but still, it all seems a bit unpredictable.
T still has to do his Christmas thank you notes. I want him to write his notes to his parents stating that we have used the money to make a donation to the ACLU. I am 99% sure they voted for Trump, although we didn’t talk about politics over the holidays. It is not a useful conversation to have, despite them being in a swing state. If they were my own parents, I would discuss it. (We did make a donation, but it isn’t directly correlated to any specific Christmas present. He probably will just write a normal but very late thank you note.)
I also have a list of other places that fight injustice, and am picking one each month to support. I have not historically put my money where my politics are and voted with my dollars. However, in a blue state with blue reps, it seems like donations are the most effective way I can resist. I think the second most powerful thing is helping in nearby swing districts for the 2018 elections. I’m also attending a local branch of the March for Science. Because this all is NOT normal.
Our our first 2017 mortgage pre-payment will be $5k, and I sent it in this week. I’ve lost some of my early excitement and enthusiasm over mortgage pre-payment. It is discouraging to note how long it will take us… but the pace I’m striving for balances other goals and liquidity with the reality mitigating an expensive market.
I did the first pass of our taxes in TurboTax, but we may end up doing them by hand (online free IRS fillable forms) for final submission. TurboTax asked us to upgrade to the most expensive package to handle expense reimbursement for serving on a government grant review panel. They reimburse a flat per diem for lodging, airfare and meals, but it results in a 1099-MISC as non-employee compensation. I believe we just have to fill out Schedule C-EZ to deduct the portion that was expenses (and Schedule SE), but the TurboTax won’t let us do this without paying even more. I expect a small refund overall ( ~$500 or so).
It was notable what TurboTax said our tax bill would be before I entered all our itemized deductions for state taxes, property taxes, and mortgage interest. Ouch. This is helpful to keep these tax implications in mind when I mentally compare our former rent with our current house expenses.
And that’s it! We’re just plugging away at our fairly boring goals and trying to hold unnecessary spending down.
Our goals this year are really simple – minimize spending, then allocate the savings that results from that!
1. Retirement accounts maxed for each of us. I plan to front-load mine to the first half of the year, and T’s will be spread throughout the year evenly. There isn’t a real reason behind this strategy, but it is what I did last year and I liked it.
2. Mortgage prepayment of ~$30k. This is a little more than 2016, but it seems to be the right thing to do. Owning a home in a super expensive market drives this choice. We have been doing our best to mitigate that now so that we’ll have flexibility to afford kids here in the future. We’ve talked about other options, but it is pretty unlikely we’d leave T’s job.
3. General increase in cash/liquid reserves of $20k. Some of this might be allocated to a home maintenance fund (we’ll need an expensive roof at some point in the next decade), the rest will go to general long term savings / cash reserves. My targeted savings fund for when we may have a kid in the future is already nominally funded to cover unpaid time off, although I should double check my calculations. It also would be a good idea to optimize my strategy for where we hold the cash.
4. Split any remaining savings 50/50 between mortgage and cash savings. The amount in this bucket will depend on what our overall spending turns out to be. I want to set a spending goal of $90k, but our plans (travel, home projects) aren’t firm enough to know if that is achievable. I’m thinking I’ll have another $10k, but it could be more or less.
Our total spending in 2016 came out to be $105,025, compared to $104,900 in 2015 and above my 2016 target of $100k. Spending included $10k in auto spending that wasn’t initially slated for 2016 (due to Volkswagen scandal our timeline was accelerated) – the target excluded this. I was nominally successful at reducing our spending in other areas by almost $10k, even though I missed our goal.
Reductions in spending compared to 2015 – Home Maintenance, Pets, Food/Drink
The biggest reductions were in Home Maintenance (which is a fluctuating category) and Pets/Pet Care (which I expected). We also spent slightly less on groceries, $900 less on restaurants, and purchased less wine. Although I like the wine club we are a member of, I’m thinking we may quit this year. We haven’t had the time/desire to go to Napa anymore, and we don’t really need any more wine for our “collection”.
Increases in spending compared to 2015 – Clothes, “Home/Misc”, and Travel
The biggest increase was in Transportation, which was due to the new car.
We spent more in the clothing category, with big ticket items including some boots that I wear to work almost every day, two high quality raincoats, a Lo&Sons OMG bag, and replacement hiking boots for T.
Electronics spending increased and included an iPhone SE to replace my busted iPhone 5 and Bose Noise Canceling headphones. Home spending increased and included some more blinds, some dining chairs, and lots of miscellaneous stuff. I suspect a detailed look into this category would reveal several mis-categorized charges, but it isn’t critical to me to dig into it. The “other” category includes a used bike for me ($400).
Our insurance costs went up, but this is mostly due to paying insurance for the new car in December when our regular car insurance bill wouldn’t have been due until 2017.
We did the minimum traveling in 2015 (visiting family), but in 2016 we added on to a conference and went to Portugal and Barcelona. It was a frugal trip, but still cost money. We also bought flights to visit our families and did some other very small weekend trips.
Spending Plans for 2017
1) Better Tracking. I didn’t do a good of a job of tracking spending as we went, so I took dumps of all of our transactions and categorized them after-the-fact (often 2+ months later). This year, I think I will go back to manually entering transactions as they occur, and using electronic logs to double check. This should give us better categorization. I have a big category of “other” and “home” and such, and I know what kinds of things that might include but I don’t have insight into the details. I know we spent more on Gifts than indicated, but they were categorized as purchases for ourselves.
2) Reduce Home/Other spending. This goes with the item above, but I want to reduce that category in general. Tracking it more closely should help out a lot.
3) Reduce Food/Drink spending further. As I said, I’d like to cut out the wine club and also reduce restaurant / grocery spending some small amount. Although going out to eat and buying whatever we want at the grocery store are both things that we really enjoy, there is some room for improvement that shouldn’t impact our lives too much.
4) Monitor the rest. The other categories are not too concerning to me. Clothing is higher than I’d like but in family with previous years. I’ll monitor it. I expect pet spending will drop, although we’ve been talking about some private training lessons again early this year. We will likely spend a bit more on home maintenance, but the plans aren’t settled and major projects aren’t anticipated. I refinanced my student loan with Earnest to an even lower rate this year. When I think about it, I’m tempted to simply pay it off with cash on hand. Yet it is a lower rate than my mortgage, so it doesn’t make sense I keep holding onto it. I allow myself to pay $100 extra each month as a compromise. We’re still paying for earthquake insurance, which is very expensive and probably not the best use of funds – but it gives me peace of mind.
We bought a new car in December to replace our VW Golf, which was part of the Volkswagen emissions scandal.
Using rounded numbers, let’s say the new car cost $30k (out-the-door). We intended to pay cash, but couldn’t pass up a 0% interest loan when offered. We put down $10k just because, and a $20k to be paid over the next 4 years. Our VW buyback will net us $20k, so the total net cost of replacing the a car is $10k.
How do I account for this in spending? I see several options.
1) Count $10K of car spending in December 2016, put the $20k buyback money in an account, make payments from that account, and don’t factor any future car payments into my spending analysis. Track the car loan and depreciation in net worth as normal.
2) Count $10k of car spending in December 2016, treat the $20k buyback as a windfall, and count the car payments as part of our spending for the next 4 years.
3) Count $10k of car spending in December 2016, count a credit of $20k in car spending once we receive it (next month), then count the car payments as part of our spending for the next 4 years.
4) Do some math to figure out how long I expect to keep the car, how much it will be worth when we replace it, and “bill” myself for a car over X number of years. This seems overly complicated.
I’m inclined to do #1, which allows me to take advantage of a 0% interest without “feeling” like I’m adding a recurring payment. It’s also dead simple. Yet, it puts the cost of the car all in a single year, even though I get benefit for it for many years. That is also how I handled our first car, which was because we did pay cash up front. I liked #2 because it is conservative and we are getting use out of the money for many years – but perhaps overly so. How do you bookkeep your car spending? Or do you just not care?
While many agree 2016 was a generally crummy year, our finances did pretty well. I haven’t finished analyzing my spending for 2016 in detail, but I will. I’m not that interested in the day-to-day information for purposes of control, but I like to have the breakdown for my own introspection.
At the highest level, our money looked about like this:
Spending: We were coming in around $95k in spending (well under my goal and less than last year), but we replaced our car before the year ended. This could be its brief own post, but the shortest version is that Volkswagen is buying back our 2011 VW Golf Diesel for way more than it is worth, and we replaced it with a Subaru Outback. After taxes and such, we’re out about $10k for the difference. We took the 0% financing to increase our liquidity – although we will keep the full balance in savings and mentally note it as “spent”. If not for the emissions scandal, we would not have replaced the car yet (6 years).
Home: Seeing the impact of the mortgage prepayments on the year-end statement was fun, especially as I didn’t actually make the 2015 ones until early 2016, so it was pretty big. The total mortgage is still a big number, but it is shrinking!
The major project of the year was the earthquake retrofitting, which was extraordinarily cheap after tax incentives. We bought another couple blinds and 8 dining chairs (STILL no table), but we still are pretty behind the game when it comes to having a fully decorated house. And I’m completely fine with that.
I’m bookkeeping the tax-assessed value, which in California is limited to go up some smallish percentage each year. The “market value” is already quite a bit more, but since that may fluctuate (bubble?!) and it isn’t anything we can cash in on without moving to a cheaper market, I don’t see a benefit in tracking it.
Overall Net Worth: We had another strong year, thanks to increases in the markets and our savings. It’s been a long time since the markets had a really terrible year. I haven’t reported our numbers in a long time, but I will say we STILL have not hit the million dollar mark (unless we take advantage of market value of our home). This could be the year, but only if the markets do well again (only if we don’t devolve into world war III / end of democracy / global recession).
What next? I’ll make a more detailed post on this, but our strategy for next year is largely the same as this year. We’ll do another ~$25k mortgage prepayment. I’ll shoot to have my retirement account maxed by end of summer, with T’s on track for even contributions throughout. We’ll end the year with spring property taxes & insurance in the bank. I’ll target a modest tax refund of $1-2k. The remaining money will increase liquid savings until we know what is next.
I didn’t set explicit goals for the year, but I ranked my financial priorities. Now that most of the money is in for the year, I can say how I did on them.
- Retirement savings: At minimum, each max out a 401k/403b at $18k We’ve talked about whether this is enough, because I’m used to saving >20-25% of our income in retirement accounts. Yet, we both have pension accounts building (and pulled from our salaries to do so). Our retirement is on a fine trajectory.
Result: Done! not much to say here.
- Set aside 6 months worth of my take-home pay in baby fund (assuming SDI)
Result: Done! The changed the SDI (short term disability) benefit this year, and I think it is worse now. I really really hate how this benefit is structured, because it seems to be set up to explicitly minimize any benefit for the most common use of it (maternity) while still charging for it. I’m so annoyed with the lack of good parental leave options in this country. We can afford to take care of ourselves, so we will – but it isn’t ideal. And what about those that can’t?
- 25k mortgage prepayment (on top of the 25k that was hanging out in cash earned last year). I’d like this to be our baseline goal every year, with the option to skip it if we have a bad financial year.
Result: Done! Yay!
- More retirement savings
Result: We didn’t do this. I set aside even more cash instead to build up our buffer in the face of uncertainty, and this is probably the right thing to do.
My list for 2017 will look similar, although I think I’ll increase our baseline cash reserve fund and bump up retirement for T. It is mighty tempting to throw all excess dollars at the mortgage, but that really isn’t the most sensible thing to do. Sticking to $25k/year (until another priority comes along) is a good balance, lets me feel like I’m doing something “big enough” to not try to constantly one-up myself.
2016 Major spending planned:
- Vacation to Europe this summer: We went to Portugal and Barcelona, and it was really cheap for a Europe trip due to miles/points. Yay!
- Dining room table: We are still in limbo here. We did buy 8 chairs, but have yet to find the table.
- Patio furniture: Bought it late in the season, and happy with it.
- Earthquake retrofitting: This was underbudget due to tax rebates and such.
The two big things (vacation and retrofitting) were way under budget, which was nice. I don’t think we spent a lot on any other single thing, but did an average amount of purchasing in regular areas (food, home, etc.). I haven’t checked up on our goal to keep all spending under $100k in months, so I should also tackle that this month as well and do some sort of overall wrap up. It is kind of daunting to think about since I’m so far behind.