It’s been nearly a month since I last wrote! Here is what’s up.
We’ll get a net tax refund this year. I’ve really struggle to estimate our tax bill this year (apparently). I assumed T’s paycheck would be posted in 2014, but later realized it would be the first few days of January. I only considered the fact that we wouldn’t get the 401k contribution, but forgot that we also wouldn’t have the associated income. At any rate, we have most of our infos in Turbotax, so I’m pretty sure this time. I think. That frees up the $3k I had set aside to pay our taxes, as well as whatever refund we get. We’ll owe to California (as always) and we’ll have a federal refund that will cover it.
We’re getting a puppy! I had some buffer in our budget, and we decided now is the time to add a new family member. This likely will impact our vacation plans. I knew I was serious about a puppy when I realized I was willing to delay/forgo an intended vacation in order to accommodate a puppy into our life. :)
(It is coming from a very reputable breeder, and no, I’m not accepting opinions on why we should rescue. We are absolutely NOT supporting a puppy mill or a breeder whose puppies end up in rescue.)
Drainage work is supposedly starting next week, but the date isn’t confirmed yet. It is the most recent project in our series of home maintenance projects that the average person would never see (furnace, bathroom fans, and now drainage). Can’t wait to do the roof in a few years! (<— sarcasm)
We’ve made no other real progress on the house. We haven’t been home many weekends so far, but I’m hoping to get some minor things (hedges, picture hanging) done this weekend. We still haven’t even got a desk.
New job is great! I mean, I’m still new and figuring out the work. But I like the people a lot, the project will be interesting, the commute is amazing, the hours are reasonable, and I really have no complaints. And…. Dubai next week – woo hoo!
Reasons you were not promoted totally not related to gender. Related: I was asked last week if this was “my first big job”. I tried really hard not to roll my eyes. At least I wasn’t mistaken for an intern or student. Gah.
You must watch this. Apparently there is some back story about the dancer being a rebel that is also perhaps interesting, but I only cared about watching the dancing.
I love the feeling of a new year. Maybe it helps that the past two new years have come with new jobs, but there is such a feeling of possibility and the perfection of a blank slate.
In approximate order of priority….
- Save $18,000 each in our retirement plans
- Reduce food and discretionary spending by 10% over 2015 (excluding travel, house)
- $25,000 mortgage prepayment OR equivalent mortgage prepayment + cash saved
- $9,500 in targeted savings
- April property tax bill saved by December.
- Consider rolling over old 401ks into IRA or consolidating. (I’ve hesitated on this, as an IRA makes the backdoor Roth option, that I never use anyway, tricker. But my current plan has good options, so I’m not sure why I shouldn’t just roll them together.)
- Consider a back-door Roth for T. We could do this in T’s name (I think) with no tax implications.
Run (or hike/backpack) 1000 miles. This is something I did in 2012, and it was hard. It requires me to be consistent. It will help if I do a marathon. I might fail. I’m allowing myself to count hiking and backpacking this time, so that will help a bit. I use a simple app to track this.
Find a local yoga studio. I used to live about 1 block from my yoga studio, and even then, I was inconsitent. I have some leftover money at a yoga chain, and after that, I’ll shop for a closer studio.
Eat more vegetables. This one isn’t quantifiable, but it is something I want to list anyway. We used to eat ~90% vegetarian at home, but have been experimenting more with cooking the past year. I finally know how to cook meat and make it taste good. That is great, but I still need to get more veggies in. This will come through regular meal planning and just serving more veggies. I’ll also have the occasional green smoothie, because I like them more than I like salads.
Establish a weekly & daily routine/habits. Most of what we do, we do out of habit. I have good ones and bad ones, but I can say I was very inconsistent in 2014. I’d like to have things be more structured.
Knowledge, Learning, Education, Career Development
Read 35 books. I would like to read even more, but I am not sure I’ll make the time to do so. I enjoy the act if reading, but the reason I like to set a goal for number of books read is because I like to be exposed to the knowledge and ideas in books. I want to learn something new, experience more of the world than I could without of books, and sometimes, just to enjoy a good story. My “to read” list is ever growing and I want to make some progress.
Take a class. I’m not going to specify format (online, classroom) or topic. It likely will not be related to my career. I am considering a language (French, or maybe something else) or coding in a new language (Python?), but I just need to pick something and commit.
Take a knife skills class. This is a one day thing. I put it on my wish list for Christmas (we’re celebrating late), but I will pay for it if I need to. I’m pretty proficient in the kitchen, but wouldn’t mind speeding up the prep work.
Come up with a list of fun local activities to spend weekends on. We did some of this in 2014, but I was often too overwhelmed to do much on the weekends. I need to fix this.
Be awesome at my new job. I don’t know what to put specifically, but I’ll be learning a LOT this year. I’m excited. While there is a lot of new stuff, there is a lot that feels familiar, and I’m happy to be back in an engineering role.
Hong Kong + ?: Japan? We should be able to score a free ticket (with miles) for me when I tag along on T’s conference trip this summer. I spent a semester during college in Hong Kong, and I’ll die of jealousy if I don’t get to go too. I want to add on somewhere new, and Japan is seeming like the most likely option, although we won’t have nearly enough time. I have some SPG points that I have to figure out how to use, but that should help with the hotel.
Toronto: Friend’s wedding, super excited!
Home: For Christmas. Also, I’m going this month to celebrate 2014 Christmas. I also think it would be good if T went to his parent’s this summer, but I likely won’t join.
Portland: Doing a race here this spring. I have some leftover southwest credit from a trip I cancelled, so this should be low cost.
Other than that, we’ll have some yet to be planned backpacking / camping and some weekend trips around the area. I wish to go back to France, but it is pretty unlikely. I’m going to Dubai again for work in the next couple of months, but I’m not sure I’ll have time to do much exploring. I feel like I am too new to try to extend the stay for touring much, but I do have one day free, assuming jet lag cooperates.
House Plans & Budget:
I allocated $12k for maintenance (higher than I plan for a typical year), and $4k for furnishings. We may not need all of this. This excludes earthquake retrofitting, which I still have 2014 money set aside for…
Improve Drainage. This is a ~$10k bill, so that is the bulk of our maintenances. We knew about this, but I was hoping to put it off for a year or two. After the first big rains of the year, we decided it is best to take care of it now. We have several bids, and likely will start the work soon.
Blinds: I want these on a couple of the bedroom windows. T estimated $500-$600. We don’t really need them for privacy, but our guests do. My MIL has said multiple times that we “need” valences so it looks finished, but I do not really care for the look of window treatments in general.
Desk: I think we’re going to build our own, due to lack of affordable options in the style I want. It will still cost maybe $200+, but at least it will be what I want.
Repaint bathroom stall. The tile only goes to about eye level, and the paint doesn’t seem to be bathroom appropriate. It is already peeling a little, but now that we installed fans, it has gotten a lot better. Someday, we might retile, but that is not going to happen any time soon. This should be relatively inexpensive.
Paint ceiling. We can have this done professionally for $600, or do it ourselves for less.
Replace light fixtures in main living area. We have something like this right now. Not only do I think they are ugly, they take up about 250 watts when they are on. The biggest challenge is deciding what to replace them with.
I don’t really feel like summarizing 2014.
My goals were vague. There were a lot of unknowns going into the year. My job turned out to be a lot less personally fulfilling than I was hoping. We weren’t sure if we were going to look at houses – in fact, we didn’t really plan on it. We didn’t budget much, intending to spend the money was “saved” by living in a cheaper neighborhood on exploring our new area and doing fun things.
My tracking spreadsheet for 2014 doesn’t give me the complete information I want, so I adjusted it for 2015. I think it is going to work a lot better for us. Here is what I have for 2014 highlights:
- Our net worth increased by $132k, with about half of that in retirement account balances, the rest cash/home equity. I’ve decided to use the purchase price of our house as its value, unless there is a drop in the market.
- Our total spending was about $94k, excluding closing costs, downpayment, 2013 tax bill, mortgage prepayment, but including mortgage principal payment.
- A large chunk of spending (about $25k) was home maintenance (furnace, bathroom fans) and a few furnishings. This should be a little less next year, then flatten out to $5k-8k per a year long term average after that.
- Our total food spending averaged about $1000 a month. This is obviously way higher than necessary, and tips more towards eating out than groceries.
- My estimate of our total 2014 tax bill (federal + state) is about $74k. This is unusually high, since we had some one-time income. But it is an insane number! It would be even higher if we didn’t itemize and claim mortgage interest / property taxes.
I’ve looked at the detailed spending numbers. In general, I’m OK with them. I see some easy areas to reduce for 2014 (food and wine mostly – we intentionally had an indulgent first year in the bay area). I see some areas we’ll increase (travel!). It wasn’t a bad year money-wise. Seeing our net worth increase makes me less worried about spending a bit more than I’d like in some areas. Still, I want to be sure our money is tracking our values.
From a non-financial perspective, here is what happened in 2014:
- We moved into a new apartment in a new city (technically in December ’13)
- We both started new jobs that were significantly different than our 2013 jobs
- We bought a house! It turned out to be a pretty straightforward process.
- I quit my job and accepted a new one. This is the first post-college job I quit for reasons other than moving far away.
- We did minimal traveling: 2 visits to my home, 1 to T’s, one to Portland, and 3 backpacking trips. Plus some work trips for each of us.
- My mom had heart surgery to correct a hole in her heart. Everything went really really well.
- I ran in an overnight relay race and had a blast. My running was otherwise pretty much crap.
- I read about 30 books, and the ones I rated 5 stars were: And the Mountains Echoed (Khaled Hosseini), Unaccustomed Earth (Jhumpa Lahiri), Ender’s Game (Orson Scott Card), A Constellation of Vital Phenomena (Anthony Marra), Never Let Me Go (Kazuo Ishiguro).
- My favorite non-fiction book was My favorite non-fiction books were The Future of the Mind (Michio Kaku) and I’m feeling lucky: The Confessions of Google Employee Number 59 (Douglas Edwards). I listened to both of those as audio books, mostly while running or commuting.
There were definitely good points, but overall, 2014 was a frustrating year for me, mostly driven by my job angst. Beyond the day-to-day things that were frustrating me, many of the people I shared my job frustrations with turned it back on me and made me feel like it was my fault I wasn’t having a good experience. “Oh, you just need to do X, that’s what I did!” “You just have to have the right attitude!” This was really demoralizing. The only person that I felt had my back 100% of the time was T. It did get better as the year went on, but it really had nowhere to go but up.
All in all, we made it through a year filled with changes. Budget honestly wasn’t a priority, but we will pay more attention to now that things are stable,
I’m really glad to welcome 2015, and more importantly, to start a new job. I like the feeling of a new year, of a fresh start, of a chance to set new goals and think about the next 12 months.
I can’t seem to write a clear post, so this is a collection of half (or quarter, or eighth) posts that I’ve tried to start. You’ve probably seen these links, and maybe you were the one that linked me to them. They made me think this week, so I’m sharing. Also, I can’t bring myself to close my open browser tabs until I do something with them.
- I never even considered that I should be apologizing for making money, so maybe this is more of a thing in creative fields. It is not a thing in my life, but judging by the comments, it is pretty common.
- I never intended to retire early, nor do I intend to work forever. I’ve always been confident I could create a life of meaning without a career. I’ve always been mystified by people who say “I want to work forever or else I”ll be bored.” Are they just defining “work” loosely, or do they really need a job or a business they own to stop from being bored? Anyway, I’d like to have options, and would prefer to remove the obligation to be profitable at some point. However, reading Jacob’s post challenged that belief, especially this statement, “I have not found anything sufficiently meaningful to replace a full fledged career with.” Interesting.
- This post, which shares: “Capitalism […] nurtures the illusion that career and economic success can lead to fulfillment, which is the central illusion of our time.” This is somewhat in discord with Jacob’s thought in the previous paragraph, but not really. A career can be part of fulfillment, but it isn’t the whole picture. There is part of me that wants to collect achievements in life, but another part of me that asks “what is this for? Will it make me happy?” I’m working on keeping those two things in balance.
- I recently read How Adam Smith Can Change Your Life, in which Ray Roberts dissects Adam smiths “other book”. You could read the original book yourself for free if you are so inclined. It didn’t change my life, but it did compliment some of the thoughts that have been bouncing around in my head lately. The thesis isn’t revolutionary, is it? Happiness is being loved by those around us and being a person of character who is worthy of that love. I also can’t get this thought out of my mind: People have always been attracted to owning “gadgets”. Today it is the iPad, in his time it was “a tooth-pick, of an ear-picker, […] a machine for cutting the nails.” The nail clipper was the iPad of the 1700s.
- With Orion being in the news lately, the conversation of “would you colonize mars” has come up. Or maybe I instigated it a few times. At any rate, my answer is absolutely not. Too dangerous, too scary, and why would I want a one way trip away from Earth and everything I know?? Yet, as a country composed of mostly immigrants, didn’t our ancestors all do that? For more recent immigrants, the trip wasn’t so necessarily one-way as it was, say, in the 1600s. But still. It is something I have been thinking about. It took either great courage or great desperation, or maybe both.
- I’m wrapping up the final days of my job, and I have mixed feelings. I have no doubt I made the right decision, and have no mixed feelings about my new job. I’m happy to be moving on, but I also wish I could turn my old job into a more positive experience overall. Now that I’m leaving, I don’t have the chance. Yet, I don’t actually WANT the chance. I don’t want to spend the next 6 months fighting to improve things. That sounds terrible. I’m totally excited to jump to something else. Yet, I feel like a quitter for leaving my old job. I mean, I am quitting. I quit! I guess this is a first – the other jobs I’ve quit, I left for mostly personal reasons, like moving far far away.
Anyway, it is really December 21, and almost time for a rest for the holidays. Hopefully I’ll be back with some 2015 goals! Yay 2015!
First mortgage prepayment! I sent in my first mortgage prepayment this month! It was $4,000, and it shortened our mortgage by 3 months and reduced the interest we’ll pay by nearly $6000. Yay! We most likely won’t do our next big prepayment until summer, so I’m going to have to make this excitement last.
Taxes I spent some time yesterday on tax optimization / planning for our 2014 tax bill. We had a significant amount of one time income this year, so shifting tax burdens into 2015 could help a lot.
- Idea #1: Make sure the mortgage payment due hit 1/1/2015 is paid 12/31/14 so we can claim the interest in 2014. This was a failure for uninteresting reasons. T pointed out it wasn’t as though we were losing out on the deduction – we just had to wait until next year to get MOST of it (less, as our marginal rate will be lower next year.)
- Idea #2: Prepay the property tax bill due February 1st. Since our tax bill is about $6,000, I thought this idea was BRILLIANT and was really excited about it for about 7 minutes. However, my calculations show we’ll be hit for a small portion by the AMT, and property taxes aren’t deductible under the AMT. All this tactic would do would be increase the difference between our “regular” projected taxes and our taxes under the AMT. Boo.
- Realization: T won’t get paid for December until 1/2 instead of 12/31 as I had assumed. This was completely predictable (payroll schedules), but I never thought to check. This means FAIL at maxing out his retirement (although we still did set aside >$30k for him so I’m not too upset). It also means we won’t have to pay taxes on that month of income.
- Hope: I can hope my last paycheck won’t be issued until the start of the year, but that is pretty unlikely. My 401k is already maxed, so there is no benefit to getting it in 2014.
Anyway, I didn’t really accomplish much with the above excercise, other than learning a bit more about the tax code. I expect we will still owe about $3k (to CA) come tax time. I have a spreadsheet that can estimate my tax liability, but doesn’t consider the AMT. I found TurboTax’s free TaxCaster app/website to be really handy for doing these calculations. I also plugged in our 2015 info (with the knowledge that the code will change slightly) to see how close we are to the AMT in a normal year. The good news is, we won’t be close at all.
House The recent rain storm made us consider plans to improve the drainage at our house. We knew it should be done eventually, but we finally got to see how well (or not) everything worked. The house is fairly old, and did completely fine with no drainage for decades, so this isn’t a must. The previous owners put in rudimentary drainage within the last few years. We’ll get a quote, but we are hoping that we can pull this off as a DIY project. T is amazingly meticulous, good at planning, and good at fixing things. And I know how to dig holes and stuff too. I think. I mean, I’m willing to learn.
We also installed 2 bathroom vent fans! No more showering with the windows open! The project probably cost ~$400 in supplies (each fan was $100, then there was other stuff). My dad did the wiring as a late birthday gift while they were visiting, and T did most of the other work. We checked out the tools we needed (hole saw, industrial drill) from the library for FREE. This is the best service I’ve every heard of a local library having (you know, aside from free books). Because how often does one need a hole saw? Not often enough to pay $50+ for one! The new furnace is also in, and we are waiting on a rebate for about $2000.
Our next furnishing plan will be in the office. We need a bigger desk. The desk in there is too small, and T is constantly working out at our dining room table. This will likely wait until January, but I’m planning 8″ ikea countertop desk (or two 6″, mostly because they will fit in our car) + legs and probably a set of drawers.
How much money we need – update OK, I realized the numbers I shared yesterday are not accurate. Since we rented for part of the year and then switched to a mortgage, I screwed up the estimations. I need to take longer than 15 minutes and redo the analysis. Just FYI. I’m going to wait 6 months to do this. I just wanted to note that our post-mortgage spending will be more than whatever I claimed it would.
I don’t find net worth to be that helpful of a metric. Without a target, is just an abstract number. I like to see it grow, but what does it mean to me? In order for it to be more meaningful, I need to have a rough idea of what I’m trying to get my net worth to be.
But net worth isn’t the whole story. How much of that is income generating, and how much of that is in assets (e.g. home equity)? In order to add meaning to my balance sheet, I’m calculating how much we would need in order to be financially independent.
Our total spending will be around $75,000 this year. We had a lot of spending in the home category (>$20k) as we moved into a new apartment then a house. We bought some furniture and did some home projects. I obviously excluded our down payment. I’ll let that stand for now, then revisit this calculation some time in 2015.
In order to achieve financial independence, we would need $2.5 million in investible assets (assuming 3% return, $75,000 / 0.03 = $2,500,000) in today’s dollars.
However, we are planning on some of our extra income into owning our house. Ideally, we’ll have the house paid off in ~15 years. With a paid off home, this number drops to about 37,000 per a year, or $1.2 million. Property tax & maintenance are included in that number, but I will need to revisit the number once we’ve been here a bit longer.
How far do we have to go? Right now, we have $330k in investable assets, not including our various cash funds, not including home equity. We have a long way to go! Assuming a very conservative 3% return on investment and $36k per a year, our savings can grow to 1.2 million in 15 years (calculator). This coincides nicely with my rough goal to have our mortgage paid off in approximately 15 years!
This calculation is pretty rough. First, I don’t think this year’s spending is very representative. Also, I ignored income taxes (the majority of our savings is tax deferred, but some is post-tax ROTH). To top it off, we both have pensions (his growing, mine not). I turned down a cashout of ~$20k for mine this year, as I calculated the value was about $33k Yet, it isn’t going to generate an income stream until I’m older And what about inflation? Anyway, I think a fair compromise would be to track progress towards 2 million, and use that as a benchmark until I make a more detailed calculation. That would be closer to 25 years, so we have to up our game or check our spending!
Doing even this rough calculation does give me some intuition about how I want to allocate my money towards my goals. I’m not making any changes just yet.
PS – I do very much like the “PF Score” as a usable and useful metric, and have been tracking mine this year.
It’s official now, I’ve accepted a new job!
You’ll note that I previously said the offer was better than I anticipated. I expected to have to negotiate to get it up, but was thrilled that they came out with a reasonable offer out of the gate. I almost took it as a reason to let myself off the hook for negotiating. After all, they say the effect of a commute is worth a 40% raise, so why ask for more?!
Still, I wanted to help buck statistics. I can’t find data that I’m confident in, but at least one source stated women negotiate less often: 26% of women, 36% of men. (Actually, both of those numbers are surprisingly low, and I found conflicting data.) The hardest part about negotiating was deciding to do it. To ease your mind, remember:
- It is extremely unlikely they will rescind an offer. It is totally normal and expected to negotiate.
- Often, the person you are negotiating with is NOT an experienced negotiator either.
- Sometimes the hiring manager is prepared to give you more and just needs you to ask so they can go to HR with your case. They might even be (slightly) on your side.
- The worst thing that will happen is that they say no.
- If they did rescind your offer over a reasonable counter, they are crazy and you don’t want to work with them.
The job had posted a salary range over $40k wide, and offered me 95% of the top number. I asked for the other 5%.
I came up with a “script”, practiced it with T, wrote it down, and used it during the call. Here is an excerpt of the notes I used:
This is the most efficeint negotiating tactic ever – very easy, very effective. Ask for what you want succinctly, then stop talking. Never negotiate with yourself!
The script I used was brief and largely lifted from this article. “I appreciate the offer, and I understand your pay structure [suffers from XYZ limitations], but I was hoping for something a little more competitive. Given that my experience is such a good match for the position, could we look at going to the top of the posted salary range, at X?
Then I followed my own advice and stopped talking. You can be prepared with reasons for why you deserve more, but you may not even need to share. Plus, then you have something new to say if they counter. The position was essentially opened FOR ME so it was obvious we both agreed I was a good match. The comment about their pay structure was to prevent them from having an easy reason to deny my request. I wanted to note I had taken that into consideration.
For the next 4 hours, I was pretty happy and proud of myself for negotiating. Then, I devolved into irrational anxiety. Haha. I got an e-mail early the next morning that said they could indeed meet my request, and raised the offer by 5%.
The result is that my compensation will be essentially flat compared to 2014 earnings, and a 5% or so cut to 2015 projections. However, the benefits/retirement are better and all of my compensation is in the form of salary (rather than 20%+ of it being bonus). And did I mention the commute is < 2 miles? Salary growth will likely be more flat, but work/life balance and job satisfaction should more than make up to it.
Compared to my 2013 compensation (doing similar work in L.A. area), my salary is up about 25%. Granted, this area is a little bit higher cost of living- still, good moves!