Tuesday, October 22, 2019

September 2019 Net Worth Update - Another All-time high

September was another great month for our net worth, which grew by over $22k to $982,369. It's hard to believe that we're basically one good month away from achieving millionaire status. I think it may set in once we are mortgage free, because until then we don't see a lot of accumulation of assets outside of our retirement accounts and home equity.



CASH / INVESTMENTS

Our cash balance jumped in September, but partially because we closed out our mortgage escrow account. The account had accumulated around $3k which we had never included in our numbers before. Now we've got that cash, but we'll also be writing a big check in a few months to pay property taxes. Sadly, our county charges a 2.5% processing fee for paying taxes with a credit card, otherwise I'd consider using our credit card to get 2% cash back.

The market continues to march forward and we continue to go up in lockstep. The S&P 500 was up almost 1.7%, and we saw those increases plus our normal monthly contributions. 
We haven't made any changes to our investment holdings or strategy. 

HOUSE/MORTGAGE

We sent the same amount to our mortgage that we were planning to, but since they had already closed our escrow account, the payment went further towards principal than normal. We have enough cash to pay our tax bill, but may dial our payments down a bit in the next couple of months to not deplete our cash too badly when that bill comes.

Our home value also crept up again this month, so the increase to our net worth associated with our house was just over $10k. If our house were paid off, half of that increase would have been in liquid assets, which I’m really looking forward to. We’re now targeting just 4 more months to be mortgage free.

Our home related expenses were under $200 this month as we took care of some curtains, and bought some trim that will be installed over the next few weeks. Our big home remodeling projects will start next year, but we'll give ourselves a few months to relax and build up cash before we start tearing down walls. 

Tuesday, September 17, 2019

August 2019 Net Worth Update

Another new month brings another new all-time high net worth for the DIY$ household. We continue to march towards $1M mark and a paid off house, closing the month with a net worth of $960,099. 



CASH

As expected, our cash balance bumped up a bit in August. Hovering between $20-25k is our sweet spot for now. There are times when I feel it should be higher since we do spend a lot, but if we really had to live on a shoestring budget this could easily last us three months and probably as long as six months. Once we pay off the house, this amount will definitely be adequate.

I also got a raise that goes into effect in October, but we've already allocated the increase to go towards our mortgage for the next few months, so it shouldn't really impact our cash balance.


INVESTMENTS

We haven't made any changes to our investment holdings or strategy. Since the market was down, so were our accounts. Our year-to-date returns are still quite good, but even in a bull market it's good for the market to take a breather every once in a while.  

HOUSE/MORTGAGE

We're back to making extra large mortgage payments and were able to knock another $3,300 off our balance. After this month, we're now targeting complete mortgage payoff in 6 more months. If you're doing the math, 6 * $3,300 is much less than $40k, so clearly this plan does assume that the rest will come from my annual bonus.

Our home value also popped up a bit this month. One thing that I'm sure helps is that homes in our neighborhood are now consistently selling for over $500k, with several close to $600k. Our neighborhood is mid-range priced for the area and homes still are moving pretty quickly. Less expensive neighborhoods are still very much in a sellers market, but the more expensive neighborhoods nearby with homes priced between $800K and $2M have been selling a lot slower. 


We had very few home related expenses in August, but that's only because we did a lot of work ourselves with tools or materials that we already had. This month that meant breaking out the pressure washer and cleaning off the driveway. Living in a heavily wooded area contributes to needing to this every so often and it takes 10-12 hours to do it right. I'm not sure how much it would cost if we hired it out but it's a very simple and satisfying job. 


I haven't kept track of all the money we've saved by doing work ourselves, but it would easily add up to tens of thousands of dollars over the past six years in this house. 


Monday, September 16, 2019

Sage Career Advice

One of my favorite college professors was a retired investment banker. He had spent his career as an ex-pat throughout Asia and built up an 8 figure net worth before 'retiring' (to be a part-time professor) at 50. I looked up to him and occasionally went to him for career advice even after I was not taking classes from him.

While I was in my last year of college, I accepted a job to work as a financial advisor at an insurance company. My short time at that company is worthy of a separate discussion, but something from the experience has stuck with me over the years.

After I accepted the position, I went to meet with this professor to tell him the good news. He congratulated me and then had just a few questions about the job. The one that stuck with me was:
"What is the average age and tenure of the people in your office?"
Although he didn't say it, looking back I can tell that he would have steered me clear of this job had I asked him about it first. He knew several things that I didn't know at the time. First, insurance companies churn through new hires. Most people who join these companies quickly flame out once they exhaust their lists of friends and family to sell crappy annuities or high commission mutual funds to. In this regard, I also became a statistic, only lasting about 3 months before taking my licenses to a discount broker.

Second, companies need new employees to be able to continue growing. When I was hired, I was one of the only 'new' people at the office and I rarely saw people with less than a couple of years. If I was paying attention, this should have been a red flag. Naive little me was probably only thinking how cool it was to be in a grown-up job in a grown-up office (I even could order business cards if I wanted to pay for them!). What I should have asked myself was "Why weren't any of my classmates considering working here or somewhere similar?" or "How many people has my cubicle neighbor seen come and go in his 2 years here?"

My current employer hires thousands of new people each year and still has several people with 30+ years at the company. I just hit 6 years and 75% of the people hired with me into our department are still with the company.  I'm not planning on leaving anytime soon, but rest assured when that time comes, I'll have a lot of questions about the company, culture, and employee demographics before joining another company.

Tuesday, August 13, 2019

July 2019 Net Worth Update

Financially speaking, July was a pretty good month in the DIY$ household. We had one of our most expensive months ever, but still managed to grow our net worth to a new all-time high of $955,950. 






CASH

Our cash balance went down a bit this month but is still above our preferred minimum of $20k. We'll be recovering over the next few months since a lot of this was due to one-time expenses such as summer travel, rental cars, expensive yard work, and semi-annual insurance payments.


INVESTMENTS


Our investment portfolios continue plugging along, primarily in low-cost index funds. There should be more to report here once we pay off the house. Until then, we're contributing enough to my 401k to get my employer match and not really investing outside of retirement accounts. 

HOUSE/MORTGAGE

Since we had so many other demands on our cash last month, we weren't able to make as big of a mortgage payment as we've been doing, but still paid nearly $1,000 more than our minimum payment. Our home value is back up to where it was a few months ago before a house was sold at a really low price and threw off the online estimates at Zillow.

Last spring we got some new sod for an area of our front yard that had gotten overgrown with weeds and where the actual grass had all died. We got 4 pallets and laid it ourselves in a single afternoon/evening. Last month, we got 4 more pallets for the rest of the front yard and parts of the back yard that needed and spent our Friday evening laying it ourselves. 

As far as yard work goes, laying sod has got to be one of the most straightforward jobs. It's definitely hard work, but I never really considered hiring out that part of the job since it's something I can do myself. Coincidentally, our neighbors got sod professionally laid the same week that ours was delivered and I was really curious how much we were saving by subjecting ourselves to such hard work. 

As we were laying the sod they talked to us and without even having to ask, they let us know what they paid. It made the pain worth it to know that what ended up taking us only 4 hours to do, would have cost us $500 for someone else to do. I'm still young enough that for $60/hour I'll do the work most every time.  

Tuesday, July 30, 2019

Book Review - The Sellout by Charlie Gasparino

I’ve probably read several dozen books about the Great Financial Crisis, and just now got around to reading ‘The Sellout’ by Charlie Gasparino and really enjoyed the approach he took in telling the story.

If you were glued to CNBC for much of 2008-09 like I was (it was on all day in the lobby of my office so I could often hear it all day long whether I wanted to or not), you may recognize Charlie Gasparino. He is a reporter on CNBC often known for being the first to break major news, and was on TV a lot as the crisis unfolded given his deep connections throughout the finance industry.

A lot of other financial crisis books focus on the authors play-by-play point of view (like Hank Paulsen’s ‘On the Brink’), or that of a single company (check out ‘A Colossal Failure of Common Sense’ focusing on Lehman Brothers or 'House of Cards' for Bear Stearns). The Sellout takes a slightly different approach from any book I’ve read on the topic.

Given the authors' long tenure covering Wall Street, he already had relationships with a lot of the key players and knows them well. The CEO of Bear Stearns even reached out to him in the midst of the crisis. This unique perspective allowed the narrative in the book to start long before the crisis started and to tell the stories that lead to the CEO’s of the various firms rising to the helm of the different companies.

Personally, I think that some of the most interesting stories were those of Bear Stearns and Merrill Lynch and it was interesting to learn how interrelated they were. Since the story goes back so far, you get a good sense of how the decisions made as their last CEO's rose to the top contributed to their ultimate downfall. A key takeaway for me was that leverage is a two-edged sword, and company leaders ignore or underestimate that risk to their own peril.

If you really want to dive deep into the demise of a single company there are better books out there. This one is just right if you want to know just enough detail to know what happened leading up to and in the financial crisis and why it happened, in a style that is engaging and doesn't drag on.

Monday, July 15, 2019

June 2019 Net Worth Update

June 2019 was a great example of why you shouldn’t react to short term declines in the stock market. After having one of our personal worst months ever, we had one of our best months ever. In June, our Net worth grew by over $42k to $937,191.

CASH

We spent half of the month of June either on vacation as a family or separated so I could work while the rest of the family continued to visit family. Our summer trips are fairly inexpensive as we usually stay with family. The one travel expense we haven’t been able to avoid paying a lot for is rental cars. Since our family requires 6 seatbelts, we’ve rented a lot of SUV’s and minivans (which always makes me thankful we don’t own a minivan).

In addition to some travel in June, we also put down a deposit on a cruise we are planning for next year with the kids after we pay off the house. With all that, we managed to keep our cash at about the same amount as the previous month.


INVESTMENTS

Most retail investors don’t look at their investment balances very often, and usually look at just quarterly statements. If the quarter had ended after May when the stock market lost over 6% in a single month, I bet there would be a lot of calls from 401k customers to “get me into something better”. Not having a financial advisor to talk people out of making big emotional mistakes could mean that people sold out of the market after seeing May’s losses, and then missed out on June’s even larger gains of 6.89%.

We didn’t do anything silly after May, so were able to see our investment balances grow by $31k, our second largest monthly gains. Our largest monthly investment gains were in January of this year when our investments grew by $33k right after some big down months, a pattern we saw repeat now just a few months later.

HOUSE/MORTGAGE
As I expected, our home value continues to increase back to where Zillow had it just a few months ago. The really exciting thing about our house now is that we now have >90% equity in our home! The end is in sight, as we knocked another $3k off of our mortgage balance.

As I’ve mentioned before, this summer is going to be pretty expensive for us, so we may temporarily slow down on the mortgage payoff, but still should be able to pay it all off in the 1st quarter of 2020. Although most anything is on the table for sharing on this site, we still haven’t decided if we’ll share from other accounts with our real names when we pay off the house.      

 

Wednesday, July 10, 2019

Dealing with Golden Handcuffs

Golden Handcuffs refer to financial circumstances that keep someone tied to a career or employer when they might otherwise prefer to move on. I’ve never had a lavish executive pay package, but have still faced a small version of this dilemma and have put a lot of thought into it. It is a form of privilege to even have to worry about it, but one that I think many will face when considering retirement (early or otherwise) or other types of career changes.

While I was pursuing an MBA, I was blessed to grow my career as a financial advisor to the point where my income was greater than that of the typical newly minted MBA ($100-120k/yr at the time). When I started my degree I was making considerably less than $100k and had my sights on a post MBA career change into corporate finance. In order to avoid student loans, I took five years to complete my degree, which in turn gave time for my income to grow to substantially over $100k.

As I approached the end of my degree, I was faced with a real dilemma. If I took a job like the ones I had wanted a few years earlier, I would have to take a pay cut of more than $50k/yr. If I chose to remain in my same job/career, the income would continue to be great but I would lose a critical opportunity point where it would make sense to pivot out of the financial services industry.  

Ultimately, we did decide take a much lower paying job that has since given me opportunities and a career path that wouldn’t have been possible without making the change. My current income has also surpassed the higher paying job I left. Had we not made several deliberate decisions in our lifestyle and mindset though, the decision to leave would have been much more difficult and things may not have turned out the way they did. 

As our income grew, we didn’t allow our lifestyle to also creep up. 

A well-timed promotion blessed me with a near doubling of my income potential right at the time when my wife began staying home with our firstborn. While a great opportunity, the guaranteed portion of my pay actually slightly decreased. From day one, we made the decision to treat any of the additional variable income as a bonus and to use it to strengthen our base. Once we had a comfortable cash reserve, we began regularly making 4x or 5x our normal minimum mortgage payment such that by the time I graduated and quit my job, we were within 6 months of paying off that house.


Don’t kid yourself that you can’t make a similar income elsewhere

I took a pay cut because I was changing to a different career field, but had I wanted to leave and stay in the same industry I’m sure I would have been able to make similar income at another company. My golden handcuffs were mostly in my head...since I had never made that much money before it was hard to fathom being able to replicate it elsewhere.

Over the years, what I have learned is that switching companies can be quite lucrative and if they want you bad enough, they may even make you whole for whatever you have to leave on the table to join. I’ve seen several 6-figure cash signing bonuses, and often see folks who join a company externally do so at a higher level of pay, position, or both than if they had grown their career to that same point internally. 


Long-term incentives will always be there - Don’t count it until it’s actually yours

I recently got placed into a bonus pool where I will receive company stock grants each year that vest over multiple years. Unlike 401k match money that becomes 100% mine after I reached a specific tenure with the company, each stock grant I receive has it’s own time to vest before it will actually be ‘mine’. To prevent this from becoming golden handcuffs, we’re treating this like a bonus and will only include the vested portion in our net worth calculations. This will help to not ‘anchor’ myself on a number that at some point may become large enough to cloud my judgment.

Don’t get me wrong, I’m planning to stick with my current employer for a while, but it will be because each day I get to do work that I enjoy, with people I enjoy being around, that stimulates my mind, and that is part of a larger mission that aligns with my values. Oh, and the pay is nice too.