Thursday, March 26, 2020

February 2020 Net Worth Update

February is usually our highest income month, and this year was our best yet. This year I used most of my annual bonus to make our final payment on our house! The market started to slump in the end of February, but we still managed to end the month with an increase in net worth of $9k to $1,028,625. 


CASH


Our cash balance is up to a much more comfortable level now, especially now that the house mortgage is paid off. Our fixed monthly expenses are down by quite a bit, so what was once a ~5 month emergency fund all of the sudden became a ~9 month emergency fund. As of the end of February, storm clouds appeared to be brewing for my job and the economy as a whole, so we're comfortable not deploying this cash right away. 


HOUSE / MORTGAGE


Did I mention that we paid off our house? I've gone through some rough economic times, including being a financial advisor throughout the 2008 crisis. I know that people who work for me may be worried about their jobs and the market, and I do what I can do provide advice and comfort. What I was not expecting was how calm I feel through the midst of uncertainty knowing that I not longer have a mortgage. I never realized how much stress it caused me to have a mortgage until I paid it off and it truly is a weight lifted off of my shoulders. 

INVESTMENTS


Even though we aren't ready to invest all of our excess cash, we have started to automatically invest monthly outside of our retirement accounts and started adding back into our 529 savings accounts. I'll be showing a different breakout of our accounts in future months, but until this point almost none of our investments have been outside of retirement accounts. 

There is a part of me that has wanted to be opportunistic and buy into a down market with large chunks, but we've decided to stick with our plan to automatically invest monthly and not allow emotions to cause us to deviate from that set schedule. The difference in days between investing when we think we see the right opportunity and our normally scheduled purchases won't make a difference in the long run, so I'm keeping this hands off. 

In February I also did a Roth Conversion, something we try to do at the beginning of each year. Sadly, the amount we converted is already down in value and we'll still be responsible to pay taxes on the value at the time of the conversion. Prior to 2018 it was possible to undo a conversion to avoid this exact situation, but that is no longer an option. I'm still happy with did the conversion, and will continue to do them as quickly as we can afford.

OTHER


Similar to January, I also read 10 more books in February. Here are some of the best ones:

The Rosie Project by Graeme Simsion. I don't read much fiction, but this one came recommended by Bill Gates, and I have always enjoyed his recommendations (I also wish I could read as fast as he does). The main character in this book is a very quirky professor of genetics whose methodical routines are ruined when Rosie enters his life. 

Dopesick: Dealers, Doctors, and the Drug Company that Addicted America - by Beth Macy. The opioid crisis in our country continues to destroy thousands of lives and this book goes into the story of how Oxycontin spread so rapidly and then how addicts have gone from popping pills to injecting heroin. I've read a few books on this topic, I like the way this was one written, following the lives of multiple users and learning each of their own unique paths.

Monday, February 24, 2020

We Did It!

As of this month, we are officially MORTGAGE FREE! Our mortgage servicing company had this nice note posted the day after we wired them the final payoff but it still hasn't sunk in. 


I've been at the same company now for almost 7 years and have received progressively larger bonuses each year. Most of those years, we've taken pretty much the entire bonus and used it to pay down our mortgage. We're very fortunate to have a high income, but at the same time I also know co-workers who make as much or more than me who are nowhere near paying off their homes. 

When the direct deposit hit, I had all the information ready to get the wire transfer out and within about an hour of getting the deposit I had sent the wire to our mortgage company for the last and final payment. You could say I was a little excited. The next day, we celebrated by taking a long weekend family trip to one of our favorite spots just a few hours drive away. 

We have had a mortgage payment pretty much consistently for the past 13 years on three separate houses. We've become so accustomed to making monthly payments that it still doesn't seem real that we'll never have to make another mortgage payment. I'm really looking forward to the first paycheck I get in March that won't have to go straight towards the mortgage, maybe then it will seem real.

Saturday, February 22, 2020

January 2020 Net Worth Update

January was a fairly unremarkable month for the DIY$ household financials, but we did manage to have our net worth creep up by $2,811 to $1,019,162. Read on to see how things all shook out. 



CASH

The only somewhat concerning change in January was our cash balance dropping below $20k. I'm not super concerned since I'm getting a bonus in February that will fill it back up, and this is only because we had to make final payments towards a vacation we have planned for later in the year with the kids.

HOUSE / MORTGAGE

I love seeing our mortgage go down, and dropping below $20k is a fun milestone. I get paid twice a month and for several years now we have basically been using one paycheck to live on, and throwing the other paycheck entirely towards the mortgage. We are on track to have the mortgage fully paid off in February and I'm not sure what it will feel like to have an entire paycheck each month not be automatically spoken for. 

OTHER

In other news, I had to make a trip to India in January for work. It was my first time to that part of the world and I really enjoyed my time there. The long flights and time away from family weren't fun but did help me complete 10 books in the month of January, starting the year well ahead of my standard goal of 52 books per year. 

The best books I read last month were:

Shoe Dog by Phil Knight. This is the story of Nike as told by the founder. It's a fascinating story, and one thing that really blew me away how many times the company teetered on the edge of insolvency despite massive annual sales growth. 

Talking to Strangers by Malcolm Gladwell. I've read every book Malcolm Gladwell has published and this one was a different topic from his other books but was still the same well crafted narrative style I enjoy. Among other things it talks about the snap judgments we make interpreting body language of strangers and how to identify internal unconscious bias, something we'd all do well to root out. 

Saturday, February 8, 2020

2019 Year End Net Worth Update

2019 was a great year for the DIY$ household finances. We had our highest income year ever (thanks to a promotion and two pay raises), saw huge gains in our portfolio, and banked a lot of our income towards paying off our mortgage. We got soooo close to paying off the house, but still need a couple of more months to get it completely paid off. 

For the month of December, our net worth went down a bit, mainly because Zillow shows the value of our home down a lot. This happened a year or so ago and quickly went back up, and I'm using the their figure to stay consistent.  


Even with a $33k reduction in home value, we still ended the year at $1,016,351

The end of the year is also a good time to take a step back to see the progress we've made over a longer time frame. 

In 2019, our net worth grew by nearly $200k, our largest annual gain ever. This is more than I earned in 2019 so it's really nice to see the impact of our investment earnings added to our regular savings. 

A few observations:
  • I know we've been putting a lot of money towards paying off the house, but seeing that it was $65k in a single year was little surprising. We'll have it completely paid off soon, and it's crazy to think that we could increase our other investments/savings at that rate once the mortgage is done.
  • Once the house is paid off, I'll be viewing our net worth slightly differently. The plan is to look at our liquid assets separately from our other assets (house, cars, etc) as we focus on the next goal of reaching $1M in liquid assets.
  • Our cash balance is creeping lower and will get even lower before it jumps back up at bonus time. I would much rather be in a position where I am waiting for a bonus to replenish my cash than to need the bonus to pay off consumer debt. When I was a financial advisor, we were paid quarterly bonuses and some co-workers would consistently rack up credit card debt each quarter, relying on their bonus to dig out of the hole they dug.
  • 2020 is off to a good start for our finances, but not without uncertainty similar to any other year. Our spending habits are mostly the same, but we do have some celebratory spending planned shortly after paying off the house. 
  • Most of what I've put on this site has been 'money stuff', and not very much 'DIY'. This year we'll be starting a pretty major DIY project at our house and I plan to document more of that. 

Monday, January 20, 2020

2019 Reading Overview and Recommendations

Since I started tracking my annual reading in 2010, my annual goal has always been to complete 52 books per year. Somehow I blew right past that number and went all the way to 121 books completed in 2019.

People often ask where I find the time, and the simple answer is that I don't really watch TV. Each night after the kids go to sleep I spend about an hour reading and try to get through 100 pages per day. I also have a lengthy commute that I mostly use for listening to audiobooks and podcasts which make up about 1/3 of my total reading. Smartphones and social media have lead to more distractions but since I get most of my books from the library, the deadline of a due date forces me to pace myself and make sure I finish the books on time.

According to Goodreads.com, my reading added up to 41,470 pages with June being the busiest month (15 books read), and February and April tied for lowest (6 books each). Prior to 2019, the most books I had finished in a year was 76 back in 2013. I try to split my reading evenly between fiction and non-fiction but err on the side of non-fiction.

I try to read everything I can about the 2008 financial crisis and also really enjoy Corporate Biographies, Behavioral Finance, and Sociology/Demographics. For Fiction I enjoy Action, Legal thrillers, and the occasional Sci-Fi/Fantasy series and tend to avoid anything you might find in paperback at the grocery store.

My Ratings Methodology:

While I don't do full write-ups of each book I read, I do assign a rating (1-5 stars) to every one I finish. I tend to be very stingy with 5-star ratings, and only gave that distinction to 3 books all year. In general I use the Goodreads criteria for ratings, below with my distribution of ratings:

5 stars: 'It was amazing' (3)
4 stars: 'Really liked it' (38)
3 stars: 'Liked it' (43)
2 stars: 'It was ok' (31)
1 stars: 'Did not like it' (6)

Most books therefore, end up in the 3-star or 4-star category. I might still recommend a 4-star book, but not quite as vigorously as a 5-star.

For non-fiction, a 5-star book is one that causes me to think about something differently than I have before or causes me to change something I do or a way of thinking. 5-star fiction books must be reasonably believable but not predictable. As a rule I do not re-read books but I try to own everything I rate 5-stars, partly to support the author and partly to be able to lend to friends.

Here are the best books I read in 2019. I highly recommend you check them out. 

Just Mercy - Bryan Stevenson - This has not been made into a movie that is currently in theaters. I'm sure the book is better, but am very glad that the message will get more attention since so many people don't read. Bryan Stevenson is a lawyer whose primary goal is to overturn wrongful convictions.

A Man Called Ove - Fredrik Backman - I had already seen this movie and loved it. Even though the book followed the movie pretty closely, I still felt like I was getting to know the character even better than the movie depiction allowed. I recommended this to my grandpa in his 80's and he called me belly laughing after reading a particularly humorous part, so maybe it's the inner old person in me that really like it.

Dare to Lead - Brene Brown - I have read a lot of leadership books over the years but this one seemed to be very relevant to where I am in my career right now but also felt like it shared more real examples of how to implement the principles it taught.


2020 is the year for me to finally catch up on my 'to-read' list. I am down to under 40 books left and have been particular about what gets added to it, but always need new material. If you have any great recommendations, please share!

Tuesday, December 24, 2019

November 2019 Net Worth Update and New Goals Beyond $1 Million

November was another great month in the DIY$ household for net worth growth. We finished the month up $28k to $1,030,781. It was only last month that we passed the threshold into millionaire status and it has lead me to reflect on what we've done to reach this milestone. 

I've also turned my thoughts to 'what's next'? The next obvious goalpost is to have a paid off house, but we'll be checking that off in just a couple of months so we'll need something else to work towards pretty soon. 

First - here's what happened in November:


In November, the majority of our net worth gains came from our investment balances, since we continue to stay invested primarily in index funds and the S&P 500 returned 3.4% in November. We also got a nice bump from home price appreciation and an extra large mortgage payment. As expected, our cash balance went down since we paid our annual property tax bill, but we're still above our self-imposed $20k minimum, so nothing to be concerned about. 

LOOKING FORWARD (2020)
With our house payoff in sight, we've set up to do a few things differently in 2020. 
  1. Switching 401k contributions back to Roth. For the past two years or so, my 401k contributions have been pre-tax to maximize my take home pay and put the difference towards the mortgage. Starting in 2020, we'll go back to contributions being Roth. 
  2. Resuming 529 contributions. We paused contributions a while back to accelerate mortgage payoff and now will go back to adding a few hundred dollars each month. We also now have a separate account set up for each kid (previously we just had one that we were planning on changing beneficiaries between the kids) and will be adding only to the new accounts for now. We still haven't settled on how much support to give each child in college, but want to have a decent amount earmarked for each.
  3. Adding to non-retirement investments. The majority of our investments are currently within retirement accounts that aren't accessible until 59 1/2 years old. We are planning to retire prior to age 59 1/2 so will need some non-retirement assets to bridge us until then, and there are other investments we'd like to do in the next few years that can't be done in retirement accounts. We won't be increasing our 401k contribution since we're already getting the full employer match. We're starting with $1k/month and will re-evaluate after a few months.
  4. Making some large purchases that have been on hold. We have around $20k worth of things we'd like to purchase, but have been waiting to pay off the house first. We won't buy them all right away, but will start actively shopping for them and buy when the price is right. 
  5. Start large home renovations. For the past few years, our home projects have been relatively small and inexpensive. Early next year, we'll be taking our master bathroom down to the studs and transforming it to what we've always wanted. We'll be doing most of the work ourselves, but still will probably spend >$10k. 
  6. Taking the kids on a big trip. We travel a lot with the kids, but it's usually just to visit family. It's been a few years since we've taken the kids on a big international trip, so they'll be joining us for a European cruise next year as a celebration for paying off the house.  
NEXT FINANCIAL GOALS (2021+)
Reaching two major goals at roughly the same time ($1M net worth and paid off house), I'm trying to find the next thing to set my sights on for motivations. Here is what I've come up with for new longer-term goals:
  • $1M Net worth excluding primary residence/cars/529s. This should be achievable in ~3 years barring any major market corrections. 
  • 25x non-discretionary expenses saved in liquid assets. Our investments are currently just under 8 times our annual non-discretionary expenses. This will increase automatically when our largest fixed expense goes away, but this is really the metric that determines our level of financial freedom and ability to retire. I'll be tracking this more closely in the future. At our current level of spending, we would need ~$1.6M.
  • Liquid net worth of $3M. If you ask me today, this is the amount at which we'd feel comfortable considering retirement. My job keeps getting better in terms of pay and perks, so my desire to retire as soon as possible has waned.

Monday, November 25, 2019

October 2019 Net Worth Update - Millionaire Edition

For a while now, I've been wondering what would happen first, paying off our home or reaching millionaire status. Well, now we know. We haven't quite paid off the mortgage, but have now reached millionaire status! 




Right at the end of the month, our net worth crept barely over the $1M threshold to end at $1,002,357. This doesn't really change anything in terms of how we live our lives, but it was a fun milestone to reach. 

CASH / INVESTMENTS

We're continuing to build up our cash in anticipating of a big property tax bill due next month. Once that's behind us it will hover for a bit until we pay off the house a few months from now. 

The market continues to rally even with signs of weakness in the economy and we continue riding the wave. Through October, the S&P 500 is up more than 21%, and 2% just just in October.  

Now that all the major brokerage firms are also offering $0 for trades, I've begun the process of selling my positions at Robinhood and moving the funds to a new trading account I opened at the same firm that holds our much larger accounts. I'll have this done by year end so I don't have to worry about getting another 1099 from Robinhood in 2021 since they are always the last of my 1099's to be issued.

Our household rule is that I keep ~1% of our portfolio in a trading account where I have free reign to make more speculative investments, but that percentage has declined as our larger accounts have grown and we haven't been making additional contributions to the trading account. I previously held it at Robinhood because the trades I've made have been relatively small (under $1,000), so $5-8 commissions were prohibitive. Post house payoff, we'll likely beef this balance up more.

HOUSE/MORTGAGE

Between our extra large mortgage payment and minimal home price appreciation, we added about $5k to our net worth between our house and mortgage. Although we're getting very close to being able to pay off the house by draining our cash, we're planning to wait just a little longer so we can keep our cash reserves still over $20k at all times. 

Without a mortgage our need for an emergency fund will actually go down but we are planning to stay at $20k since we also will need extra cash to cover some big home renovation projects that will be starting in the Spring.