Thursday, July 5, 2018

May 2018 Net Worth Update

May was a great month in many different ways. We went on a long-awaited European cruise from Barcelona to Venice, I finished reading 11 books (!), and our net worth increased by over $22k to $801,743.


Our cash balance in May was pretty flat, which was a little surprising considering that this included our hotels in Europe and all our food/souvenirs. Most of our trip was on a cruise ship and those expenses we paid way before May, but we still spent more than a normal month. We don't have any expensive trips planned for a while, so shouldn't have any problems keeping our cash in the $20-25k range.


We continue to make big extra payments on our mortgage and knocked another $2,700 off the balance in May. This was roughly $2,000 more than the minimum payment, so we're still on track to have the house paid off in 2021. The extra payments we make are manageable in our budget, but can be a stretch during some of our more expensive months. Some similar houses in our neighborhood have been selling for over $500k, so this house value sounds reasonable even though the jump in home price from one month earlier looks big.


Talking about our investments sometimes feels like a bit of a broken record. Yet again, we are sticking to our plan. Why fix something that isn't broken though, right? I add regularly to my 401k, which remains 100% invested in stocks. Our other investments are nearly 100% stocks, with small amounts in bonds and REITs. More than 99% of our investments are in retirement accounts that won't be touched for over 10 years and we are comfortable with the volatility that comes with stocks. 

Monday, June 25, 2018

In Praise of Simple Entertainment

We recently had some houseguests and while getting to know each other the typical conversation topics emerged of what each of our families do for fun and the types of vacations we enjoy.

I think I gagged a little when, after some slight complaining about not earning/having enough money, the father told us how great of a deal they got by spending just over $5,000 to take their kids to Disney.

Don’t get me wrong, I don’t mind spending money on vacations (heck, we just got back from over a week in Europe!). But where I do have a problem is when people spend so much on vacation or other entertainment that it limits their ability to achieve any financial goals beyond keeping afloat, and when there is such an obvious contradiction between their words (“life is so hard”, “bills”) and actions (“I love Disney”).

On top of that, what ever happened to simple forms of entertainment? It seems like I am increasingly in the minority of not indulging in frequent costly entertainment for myself or my kids. If we don’t go to an amusement park every week of the summer (or at all), we’ll be fine. To a 5-year-old, playing in the backyard sprinkler is just as enjoyable as going to a waterpark.

Our lives are by no means devoid of entertainment, but we do try to keep our day-to-day lives simple. In no particular order, here are some of the simple things that we do for entertainment:


Last year we added a backyard playground and fence, and some of our kids are old enough to just send outside by themselves. They make great sidewalk chalk art, play ball, and climb all over a play set we recently got from a neighbor whose kids outgrew it.

I know several parents who feel the need to constantly take their kids to play at places that cost money like those indoor trampoline parks, amusement parks, or arcades. What I’ve learned is that if I take my kids places like that often, it’s no longer special and becomes harder for them to appreciate more simple forms of entertainment like playing at home. If they never have the opportunity to be bored and to practice using their imagination, paid entertainment can be something of a dependency, always looking for the next thing.


Our neighborhood HOA dues include access to a neighborhood pool, tennis courts, playgrounds, and more. Of course, we pay around $700 per year for this, but we have to pay that whether or not we use it. We aren’t there every day, but we get our money’s worth. Even if you don’t have a neighborhood with something similar, communities have parks, splash pads, and many other things that we all pay for in some way like through property taxes or rent.


Every so often, I’ll pick up a 500 piece jigsaw puzzle from the dollar store. When the weather outside  is gross and we need to stay inside, working on a puzzle as a family is a great way to spend time together.

While on vacation a few years ago, we brought home a small chess set for my son as a souvenir. He has really enjoyed playing with that small set, so on a more recent trip we brought him home a much nicer set. In addition to chess, we play a few different board and card games together (Phase 10 anyone?).


Most Saturday mornings, you can find me with some or all of my kids out for a a trip to the library. I’ve mentioned here before that I read a lot, and most of what I read I get from the library. So far, we’ve done pretty good at instilling a love of reading in our children. I’m sure it doesn’t hurt that I pay my son for every book he finishes, but I never have to force any of my kids to read. I’d probably post here more often if I read less, but that’s a topic for another day.

That’s just a few quick ideas that come to mind, and honestly this is how much of our free time is spent. It’s a mindset that has to consciously sought to not automatically associate entertainment with costly activities. If you have additional ideas, I’d love to hear them.

Wednesday, June 6, 2018

April 2018 Net Worth Update

Back from the declines of March, April saw our net worth snap back to $779,035. Here's how it broke down:


Our cash balance went down a bit in April partially from an extra big payment against our mortgage, and also some unexpected travel due to a death in the family. I consider time with family a priority and consider ourselves blessed that we don't have to decide attending family events and money.


In April, we had planned to make another large charitable donation but chose instead to put those funds towards our mortgage. Charitable giving is still a large part of our budget since we tithe 10% of our income to our church. Until our house is paid off, we have decided to defer other large donations that we have been making to our colleges.

Each month we have 'gems' that we move from one jar to the other to help our kids have a visual representation of our progress in paying off our house. Each gem represents $1,000 and we make it a family event when we move from one to the other.


My mantra for our investments is "Stick to the Plan". It's not exciting, especially when I report out on it monthly, but the progress speaks for itself. We continue to add money from each paycheck and continue to be invested almost 100% in equities. Between market growth and our own contributions, we are up over $70k from the same time last year. Nearly all of our investments are tied up in retirement accounts, which will change once we have the house paid off.

Monday, April 23, 2018

March 2018 Net Worth Update - First Monthly Decrease in a While

March was the first decrease in our net worth since October 2016. I’ve been wondering when we’d see a pullback in the market, and we’ve finally seen something. Our net worth in March decreased by nearly $9k to $770,723.


Our cash balance went down a bit in March, largely due to some pre-planned charitable donations. We’re happy with that cash in the ~$20-25k range, so don’t have any concerns with this decline. If we ever need to beef up our cash, we could easily dial back how much extra we pay on the mortgage and it will build up pretty quickly. 


Speaking of our mortgage, we were able to whittle away another $2,675 this month against our mortgage. That meant we paid more than $2,000 more than our minimum payment. We’re targeting 2021 for paying off the mortgage, so will need to keep making some aggressive payments to stay on schedule.

According to Zillow, our home value declined slightly this month, but still is in a range that feels right for what I’ve seen with other homes in the neighborhood. In our neighborhood, homes seem to sell quickly and for top dollar when they have already been updated, but when a lot of work is required to get them updated they tend to sit for a while unless priced appropriately.


There were no major changes to our portfolio this month. Dollar cost averaging into our 401k allowed us to purchase at some slightly lower prices, and we continue to stay the course of being fully invested, primarily in equities. Although the market did go down in March, I wouldn’t classify this as a ‘bad’ month. A few people may have been spooked, but overall investor confidence still seems quite high.

The majority of our investing is done in tax advantaged accounts, but I keep a small balance in a non-retirement brokerage account where I’ve been slowly building up positions in some REITs. As much as we love real estate, it is unlikely that we’ll become landlords other than through owning REITs. These give us the benefits of regular income and near immediate liquidity, but without the risk and hassle of dealing directly with tenants. This account is pretty small right now (~$1k), but will be beefed up significantly once we’re done paying off the house. Until then, paying off the house is our number one financial goal.

Monday, March 19, 2018

February 2018 Net Worth Update

February 2018 Net Worth Update

Despite the stock market having a rough month (about time!), February was actually a really good month for us in net worth growth. We ended the month at $779k, up $11k for the month.


Our cash increased quite a bit in February primarily just from getting my annual bonus. It will come down a bit in March, but we are now at a spot we feel more comfortable in terms of our emergency fund. We also used this month to make an extra large mortgage payment and finish paying for an upcoming cruise.

Overall, there really isn't much exciting here. I do find it interesting that I don't even think of our emergency fund as available cash. Since we keep our savings account at a separate institution than our checking account, it doesn't ever cross my mind that we can use it since most of the time we've been fortunate to handle any emergencies out of our normal cash flow. I'm not purposefully trying to trick myself, but simply having the accounts separate does create a false sense of scarcity that may stop me from making unnecessary purchases as we focus on other goals. 


Just like anyone who was in the market last month, we took a decent hit. We actually added quite a bit to the market and still ended up down over $10k. The good news here is that we didn't sell anything, and actually lucked out that some of our larger purchases were near the lows of the month. Our allocation is still nearly 100% in stocks and that is not changing.

While it was never a large portion of our holdings, I did finally get bored with Bitcoin and sold it near the end of February (at just over $9,500/BTC, still up more than 2x from my initial purchase). Apparently, I wasn't the only one as BTC prices have been struggling the past few weeks. 


As you can see above, we wrote a big check towards our mortgage last month. Sadly, we can't do that every month, but our new norm for 2018 will be to pay around $2,000 over our minimum each month. In terms of home improvement projects, we are painting one of the last rooms that we haven't painted yet and are planning some yard projects in the coming months. 

Our new neighbors moved in and I was reminded how much money we are able to avoid spending simply by doing home improvement projects ourselves. Before moving in, they had the entire inside of the house painted. I don't know exactly what they paid, but based on a few data points I have (what other similar sized houses in the area cost), they easily spent $5k just for the interior. While it took us a lot longer, we've painted the entire interior and exterior of our house for around $2k. 

We're off to a great start to the year and on track to hit our financial goals.

Sunday, March 4, 2018

Book Review - Overhaul: An Insiders Account of the Obama Administration’s Emergency Rescue of the Auto Industry

I recently finished reading Overhaul: An Insiders Account of the Obama Administration’s Emergency Rescue of the Auto Industry and really enjoyed it. This one has been sitting on my ‘to-read’ shelf for years and I finally got around to it thinking I was just going to ‘check the box’ but not really learn anything new since I’ve already read so many books about this crazy time in the market. Boy was I wrong. 

Many of the books I’ve read about the bailouts really focused on things like bank bailouts, bankruptcies, near-collapses, and TARP. The months post-Lehman collapse tend to get less attention, but that’s when the auto companies were on the brink of bankruptcy. I remember very well the drama of these enormous companies petitioning Congress for bailouts, and the daily uncertainty of whether or not the Government would allow them to actually declare bankruptcy. 

This book was a great insight into a lot of pieces I either didn’t remember or never knew about the auto bailouts. Did you know that in an attempt to save cash, GM actually turned off the escalators in their HQ? Spoiler alert: it didn’t work. I was also surprised to read that GM proposed selling their HQ in downtown Detroit and moving to a less expensive location. The government actually blocked the move saying that was one step too far and would cause irreparable damage to the city of Detroit and was only a drop in the bucket compared to the total problems GM was facing. 

This account also confirmed my long-held belief that GM leadership had no clue what they were doing. I’ve never met any of the main characters in the story but have met people in the finance departments of the big 3 and was never as impressed with those at GM. During and after this bailout, I vowed to never own a GM product and I don’t see that changing.

Several years ago, I also read The Reckoning by David Halberstam which issued a warning to US automakers that they were at risk of getting caught asleep at the wheel while the Japanese auto companies took over. It took a while, but right at 20 years after this book was written, US automakers were facing this reckoning for many of the exact reasons he warned of. 

Even if you’ve already read a lot about the 2008 financial crisis, Overhaul is worth checking out. 

Friday, February 2, 2018

January 2018 Net Worth Update

January sure started the new year with a bang for our net worth. We ended the month at $768,059, up nearly $25k making it our third best month ever. Here’s how it all went down:


Our cash went down a bit this month but January tends to be an expensive month for us so this wasn’t entirely unexpected. We paid our semi-annual auto-insurance, booked a beach condo for an upcoming trip, and also hit up the best clearance clothes shopping of the year. We’ve known our cash levels would hover here for a bit and should have it rebuilt in February to where we want it to be longer term.


Nothing too exciting here - still loving my Lexus and even managed to squeeze three kids in car seats in the back this month. While we were out, I took it in for an oil change and definitely felt like more of a target for an up sell compared to when I showed up in my old Corolla. Had I just let them do their thing, I would have paid at least double.


Sorry kids, this was the last month I’ll be adding to your 529s for a while. We’ve decided to redirect what we were saving to college to go towards the mortgage. We’ve always paid extra, and this will allow us to do even more. This single change accelerated our expected payoff by a few months, and we feel that we’ll still have plenty of time to save for college since we’ll have the house paid off before our oldest is even in middle school.

In the meantime, we’ll keep it invested 100% in equities and let it ride.


The market had a great start to the year, but honestly I am starting to hope for things to go down a bit or at least stay flat. It’s not that I mind buying in a higher prices each month, but really that this constant steady increase is setting inappropriate expectations for many investors. I’m not worried about me. I made it through 2008 on the front lines of the financial services industry and experienced things that can’t be learned from books. I’ve also got several years before I’ll actually be using my investments to live on and I’ve got a wife/partner that is very good at separating emotion from investments.

Who am I worried for? How about the guy who just started investing 8 years ago? Since he started, the market has done nothing but increase. Sure we’re had some scares with Greece, or the Fiscal Cliff, or Brexit, etc. But nothing really that has drawn the market down by 10%+ for long enough to really get scary. This guy thinks he’s a genius!

He’s probably got a Robinhood account and they fuel the fire by advertising things like “Mastered Stocks? Now try Options”. As if figuring out to buy and sell stocks on your phone in a bull market is all you’ll ever need to know to make money (As a former Registered Options Principal, I don’t even want to think about the compliance nightmare they’ve got coming).

Or how about the retirees who for years have been looking for safe, low-risk returns and have historically avoided stocks. Since interest rates have been so low for long and stocks have been rising so much for so long, they may have stepped further and further away from an asset allocation they’d be comfortable with during more volatile times.  

I digress. At least this first week in February we’ve seen a little bit of volatility and actually some down days. January market returns were over 5%, which boosted our investments balance by $24k. We’ll continue to do our thing by investing regularly and staying allocated close to 100% equities.  

The only change we’ve really made to our investments is that we changed my 401k contributions to now be going in as pre-tax contributions. We’re still putting the same amount in, but this increases our take-home pay, allowing us to pay even more towards our mortgage. Do you see a trend developing here? 


We knocked down our mortgage balance by $1,800 this month and will be able to do at least this much each month in 2018. As mentioned earlier we’ve made some changes that will allow us to further increase what we pay towards the house and are making mortgage payoff our top priority. We aren’t doing so at the expense of contributing to retirement or going on vacations, but will be scaling down some home improvement projects and other areas of savings/investing (see 529s).

We also now have these jars in our living room where we’ll all see them regularly. Each glass rock represents $1,000 of our mortgage and whenever we make a payment we’ll be able to move rocks from the left to the right. Only 185 rocks left, but this helps us get the kids involved and to visualize our progress.

January was great and I’m excited to see what the year has in store for us.