Financial Update Jul 2017

Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • I watched Lion and really enjoyed it. I had never heard of it before but found out about it through Justwatch, a great streaming filtering tool.
  • Mike Piper, the Oblivious Investor, on why Vanguard’s Target Date Funds don’t use Admiral Shares (link). Moral of the story: it’s complicated and unlikely to change in the foreseeable future. Takeaway for me: mimicking the target date funds through a DIY 4-fund approach will continue to be the best strategy going forward.
  • Low cost investing really works. Great article at MyMoneyBlog illustrating this (link).
  • Great Freakonomics podcast on the stupidity of active management (link). Great insights from Jack Bogle (founder of Vanguard) and Eugene Fama (recent winner of the nobel prize in Economics), among other really smart people.

Life

  • Wrapped up our summer travels (Pics here: link).  Highlights include:
    • Spending lots of time with friends & family
    • British Columbia
      • By far the prettiest place we visited this summer.
    • Seattle
      • We used to live there years ago. It was a blast seeing old friends. It is such a beautiful place. Seattle is expensive and traffic is horrific, but I could easily live an hour or so away from Seattle in Bellingham-ish.
    • Colorado (Boulder & Colorado Springs)
      • I dragged my family up the iconic Flatiorn 1 in Boulder. We had to stop about 50 feet from the summit which was disappointing to me but probably prudent. I was proud of my kids for making it up there.
      • Garden of the Gods is incredible. We did lots of bouldering there with the kids. I wish I could have spent a few days (or a lifetime) there climbing. Gorgeous. The Manitou Springs Penny Arcade was pretty fun to visit as well.
    • Utah (Salt Lake City & Park City & Heber & Sundance)
      • There is a poorly advertised free ninja warrior obstacle course on top of Utah Olympic Park in Park City (link). We walked up a mountain to avoid the lift ticket fees (only to find out they offer a free shuttle up there) and spent a few hours on the course. Our kids had the time of their lives. I think we’ll be returning regularly.
      • The ziplines at Sundance were pretty epic (link). Being up there in that scenery made me never want to leave. Robert Redford, a full time resident there, certainly has life figured out.
    • 50 mile backpacking trip over 3 1/4 days in the high Uintas of Utah. Our last day we put in 20 miles of hiking. Link to route: https://caltopo.com/m/121B, Caltopo is a fantastic tool for planning backpacking routes, by the way.
      • 12MB stitched panorama photo taken from the top of Red Knob Pass (link).
      • It’s amazing to me that a couple hour drive and a few hour walk can put you out in the middle of some of the most remote wilderness in the country. I intend to do a trip like this annually until I kick the bucket.
        • We got rained and hailed on every afternoon like clockwork. My 5-year-old rain jacket purchased at Costco turned out not to be waterproof anymore. Whoops.
    • I’m amazed at how cheap it can be to travel. A few bucks of gas and a few bucks of trail mix is all it cost to do the backpacking trip. I’m intrigued by the idea of living full time out of a van (or at a minimum living out of a van while travelling), but my wife rightfully shoots me down while kids are in the house.
  • Protip: Our family has done free summer bowling for years using this website. My wife and I pay $25ish for the two of us total for a parent pass, but the kids are free. We bought some cheap rental shoes years back from https://www.bowling.com/. We hit this up every week or two during the summers. It has worked for us in multiple states so far.

This month’s finances

  • The good:
    • 100% of tax-advantaged accounts are now maxed out (457, 403b, HSA, IRA, and 529). We are now dumping money into taxable brokerage accounts. $10k in this past month and much more to come in subsequent months.
    • We crossed $400k of net worth.
      • By continuing to ruthlessly optimize our expenses, particularly our recurring expenditures, we’re well on path to continue to accrue wealth at a good clip.
        • I love the complete automation of this. I exerted the effort over 10 years ago (probably around 2005) to optimize our cell phone bill and concluded at the time that free VOIP + prepaid cell phones was optimal. A decade later we’ve stuck with this plan and harvested over $10k of savings, with tens of thousands of dollars in savings in the decades to come. We optimized our grocery bill a decade ago (by being mostly vegetarian and buying generic Kirkland products at Costco) and have benefited immensely from this plan. We’ve done the same for TV (antenna), internet (cheapo), insurance (high deductible), etc. We ruthlessly think and strategize around these recurring expenses, solve the problem once, then stick to the plan indefinitely, laughing our way to the bank.
  • The bad:
    • We pissed away another $3,500 in property taxes (which are not tax deductible thanks to AMT). Have I mentioned that I don’t like taxes? I constantly dream of the perfect tax haven. WA, WY, and NV are all scoring very highly on this dimension for retirement, with no state income tax and very manageable property taxes.
    • We spent $260 on home repairs with a few grand likely coming in the next few months.
    • $365 orthodontist bill + $93 asthma medication.

Full version is downloadable here (link).

Footnotes:

  1. Don’t lend money to friends/family.
  2. I lazily approximate home value as my historical purchase price.
  3. I have a 15Y mortgage; which results in a faster rate of repayment. The true cost of the mortgage should exclude repayment of principal, which I show above.
  4. $15 internet and $0 cell phones as described here.
  5. All expenditures at Costco & Walmart are classified as “Food at home” for simplicity (even if it’s laundry detergent, clothing, etc).
  6. I prefer Vanguard funds but my employer offers Fidelity instead.
  7. Nobody knows the perfect asset allocation. Just pick one and run with it. Use a target date retirement fund as a benchmark if you want some guidance (link).
  8. My low portfolio expense ratio is the primary reason why I don’t hold target-date funds, which have expense ratios anywhere from 0.16% to 1%. I can achieve a much lower expense ratio on my own due to Admiral shares, etc. And it’s not hard. Plus, a DIY portfolio allows one to tax-loss-harvest more easily.
  9. ETF’s are a pain to own relative to holding index funds directly. You have to deal with bid-ask spreads as well as the inability to buy partial shares. With a simple index fund, you don’t have to deal with either of these issues. I am currently invested in VTI b/c it’s $10/year cheaper than VTSAX in my Saturna HSA.
  10. The one blight in my expense ratio analysis is my 529 plan. The underlying Vanguard fund is almost free to hold (0.02%), but the high administrative fees bring the total cost of holding the fund to 0.32%. I abhor fees and would likely avoid 529 plans if I didn’t get to deduct up to $10k of contributions per year on my state return, saving myself $700/year in state income taxes.
  11. The only other administrative cost not captured by my expense ratios is a $19/year administrative fee for my HSA at Saturna Capital ($15 per transaction + 4*$1/dividend reinvestment).

Disclaimer:
This site is for entertainment purposes only, as disclosed here: https://www.frugalprofessor.com/disclaimers/

2 thoughts on “Financial Update Jul 2017

  1. I love footnote #1. I have a similar note on my balance sheet. Thankfully, regular monthly payments have never been late, but it always an uneasy subject. Are you thinking write-off?

    Hell of a detailed explanation of your financial position. Well done!

    • The loan was to a family member to help him fund his undergrad tuition. It was initially intended as a short-term loan, where he’d refinance with a formal lender once I helped him repair his credit, but it didn’t work out that way. 8 years later it’s on the books still. However, he’s doing residency for medicine right now so I’m pretty confident it will be repaid so it stays on the books for now. For as much awkwardness as it has created in our relationship, I don’t regret it. He was dealt an unlucky hand with his finances in undergrad, so we were happy to help.

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