Financial Update – Sep 2019

Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • One of the more well-written and inspiring things I’ve read on the internet in a while from the Dangerz (the former van dwellers turned perpetual sailors). To see the text of their instagram post, you’ll have to scroll to the top of the comments (link).
    • I’m unsure why this couple hasn’t gone viral. They are incredibly wise, live one of the most interesting lives I’ve heard of, have an interesting entrepreneurship journey, post incredible photos/videos, and have an incredibly well written blog documenting their journey.
      • Here are some of their more memorable blog posts I’ve read in the past year: link1 and link2.
    • They strike me as truly authentic people who are happily living their dream.
  • Inside Bill’s Brain: Decoding Bill Gates (link).
    • I really enjoyed the 3-part miniseries, which covers his brilliance and dedication to significantly reducing human suffering.
  • MyMoneyBlog reports that Vanguard has entered the robo-advisor space for a 0.15% management fee (link).
    • On the surface, it looks pretty compelling for those incapable/unwilling of spending 10 minutes/year managing their own 3-4 fund portfolio.
    • As the article states, the service is relatively price competitive with Vanguard’s target date funds to due utilization of low ER ETF’s in lieu of the relatively high ER investor-class funds which are the Achilles’s heel of the target date funds.
      • It’s a shame that Vanguard won’t transition these to Admiral shares, but it’s my understanding that this won’t happen. Mike Piper discussed this fact several years ago (link).
  • WSJ article indicating that, for the first time in history, index fund assets have surpassed actively managed mutual funds (link).
    • I continue to remain baffled how actively managed mutual funds retain so many assets. I’m of the opinion that they continue to exist due to investor ignorance & perverse incentives in the industry.
  • Bill Gates shares 6 powerful 2-minute videos on what it’s like living on less than $2/day (link).
    • TLDR, it’s extremely difficult to live on $2/day.
    • It’s amazing how easy it is for us in the first world to forget the fact that 10% of the world’s population is in a constant life-or-death battle to put food on the table. It makes me embarrassed to have ever complained a day of my privileged life.
  • Interesting Bogleheads thread discussing how a $100/month expense necessitates an extra $30k of retirement wealth (link).
    • A similar argument should be made for the accumulation side. Recurring expenses hinder wealth accumulation (what the thread ignores) and accelerate wealth decumulation (what the thread discusses).
  • I enjoyed this “Exploring Alternatives” video about a guy who lives in a beautiful off-grid cabin in Canada he built for $65,000 CAD. Seems like a pretty enjoyable existence (link).
    • Speaking of off-grid existences, the (fictional) movie Captain Fantastic is pretty good. I saw it a few years back on a colleague’s recommendation who said I would relate to the protagonist. My colleague was not wrong.
  • Ellen at Uncommon Dream on the benefits of slow travel. They’ve moved their two kids from Colorado to Costa Rica to Columbia. In the post, Ellen highlights the benefits of minimalism, simplicity, renting, and human-powered transportation (link).
    • They seem to be experiencing a zen-like existence that I aspire to, yet continue to fail to achieve.
    • The article describes well how easy it is to fall trap to convenience and consumerism while surrounded by the first-world excess we all live in. It’s much easier to walk/bike when you live in a walking/biking culture.
    • I read the article and told my wife “Hah! We should sell all of our crap and rent an apartment instead! Ellen says so!” Instead, after reading the article Mrs FP thought “I should walk more.” Suffice it to say that my not-so-subtle efforts to convince my wife to sell everything we own and live in a tiny home are failing. I already have a self-imposed family rule that we don’t drive anywhere within of a 1.5 mile radius, so I’m unsure how we could operationalize Mrs FP’s newfound desire to walk more.
  • GoCurryCracker on the pitfalls of one-more-year-syndrome (link).
    • He makes the point that each additional year worked is another year of forgone tax-free Roth conversions (up to $24.4k/year if MFJ).
      • If I were in that situation, I’d likely fill up the 10% and 12% brackets as well, especially if I lived in a tax-free state like WA, NV, WY, etc.
    • Similarly, I view every year worked as a squandered opportunity to get free health care through medicaid expansion (link) or heavily subsidized ACA insurance.
      • Having spent over $15k on healthcare in the past 12 months (22% of our total household spend), this is a non-trivial benefit to avoiding the one-more-year syndrome.
      • MyMoneyBlog has a relevant article this month on healthcare economics here.

 

Life

  • Through a miracle, I managed to keep 5 kids alive in my Mrs FP’s absence as she cruised the recently ravaged Caribbean with her parents & sister.
    • FC2 largely refused to leave the house for several days and instead read thousands of pages (literally).
    • FC4 wept for hours because she missed her mother so much. I wept for hours because I missed Mrs FP so much.
    • Prior to my wife departing, almost all of the frugal children expressed absolute horror at the prospect of eating scrambled eggs (& bananas) for dinner on a daily basis. I have no memory of this, but they claimed this is what happened last time Mrs FP left town. To their great surprise, we didn’t have scrambled eggs once (though I did cook some hard boiled eggs at FC4’s request).
  • Mrs FP and I volunteered at another college football home game as a fundraising activity for the kids’ church activities (scout camp, etc).
    • Same as last year, I felt the moral obligation to rebuke people for wasting their hard-earned after-tax dollars on overpriced merchandise (e.g. a hoodie with a silly logo selling for almost $100). Luckily, I held my tongue, which was a bit easier to do this time around since I only rang up $1.5k of merchandise as opposed to $5k last year in the busier location. This year was also easier for me since I’m growing more cynical with age and care less about the consumerism-driven financial implosion of those around me.
      • The funniest experience was when a guy in his mid 30s approached me with a $30 pink stuffed unicorn, about the size of a football, branded with the school’s logo (incidentally, this was the hottest selling item in the kiosk). After bringing me the item he lamented “She saw this and lost her $%^&, demanding that I buy it for her.” I responded by commiserating, “Yeah, I know the feeling…I have 5 kids myself.” At which point he replied that the stuffed unicorn was for his mid-30s girlfriend, who had just walked up to join her boyfriend at the register. At this point I put my foot in my mouth, took their $30 + tax, and let them go on their merry way.
    • There were about six 12-16 year old boys selling water, Gatorade, hot dogs, and pizza about 10 yards from our outdoor merchandise kiosk. I was absolutely memorized watching these kids work for around 1.5 hours before the game started as people strolled into the stadium. My favorite salesman was a 13 year old boy selling hot dogs. As a sea of fans walked by, he would single out young kids (around 6 years old or so), look them dead in the eye, point to them with both hands, and tell them that they wanted a hot dog. It was a pretty entertaining technique to watch as these young kids be hypnotized by his sales pitch and demand a $4 hot dog from their parents. It was like watching a pack of lions instinctively singling out the weakest buffalo as its prey.
      • The minimum age to be a “hawker” is 12. I’m dying for FC1 to try this. Even if she doesn’t make a penny (or perhaps I’m hoping she doesn’t make a penny), I think it would be a fabulous learning opportunity. It would be like earning a mini MBA at the age of 12. Learning supply & demand, risk & reward, competition, differentiation, and perseverance.
      • FC1 has a 12 year old friend (another girl) who does this. Perhaps I’ll strongly encourage her to do so.
  • We went to a U-pick orchard and stuffed ourselves sick with pounds of raspberries and apples, our third consecutive year doing so (both visiting and stuffing ourselves sick).
    • Any time I visit that orchard it makes me want to start a new life and live off of the land.
  • My neighbor listed her home on Zillow using the very noncommittal “make me move” feature about 6 months ago (the blue icon that nobody includes in their Zillow queries). She put an astronomical price of $550k as the asking price and I scoffed at her greed. I though her “make me move” price was a good $50k over the fair value of her home. Further, I thought the “make me move” feature of Zillow was a worthless gimmick. For 6 months I arrogantly thought she was a crazy woman and that I knew better. This month, I had to bitterly swallow my pride because she got the full $550k offer without involving a single real estate agent on either side of the transaction (i.e. no 6% commission on that transaction)!!!! She sold the home by taking her own pictures and having a single showing to the buyer. Further, the new home she’s purchasing across town she’s doing as a for-sale-by-owner. Consequently, she undercut the asking price by 3% on that transaction as well. Across the two transactions, she’s paying $0 in real estate commissions on close to $1M of real estate transactions.
    • Moral of the story: if you have flexible relocation (i.e. timing) plans, then I see no downside to putting a reasonably aggressive “make me move” offer on Zillow and let it sit indefinitely. At worst, you will have wasted 5 minutes of your time. At best, you’ll sell your home above market without a realtor. Given the near-zero downside and great upside, it might be worth a shot?
    • Unsurprisingly, there are a few bogleheads posts discussing Zillow’s “make me move” feature (link).
      • The collective wisdom of that forum never ceases to amaze me. You can type practically anything into the forum’s search box and come up with the most intelligent discussion on the internet on the topic.
    • Upon introducing myself to my new neighbor’s adult son and daughter-in-law, I had to excuse myself for the bright yellow safety vest & helmet that I constantly wear. When asked why I bike, I responded that it’s the most logical form of transportation, and that I also do it because I’m frugal. The daughter-in-law proceeded to tell me that I live in a very un-frugal neighborhood, presumably questioning my assertion of frugality. Ouch! Sucker punch to the gut! Little does she know that I’d be living in a van down by the river if not for my 5 kids…
  • During a recent trip out of state, I accidentally left some hummus to rot in my (personal) office fridge at work. Upon returning from the trip, the rotting made my office smell like a decomposing corpse every time I opened the fridge door. Discarding the hummus didn’t remedy the wretched smell. Neither did the box of baking soda that I poured into a series of paper plates to maximize its surface area and let sit for several days. What finally solved the stench was the bamboo charcoal packets I purchased from eBay a couple years back to minimize the stink of my climbing shoes. Going forward, these bamboo charcoal packets will be my go-to deodorizer. Surely this knowledge will come in handy while raising five increasingly smelly children.
  • I discovered a new cell phone usage monitoring app that I have really enjoyed aptly (and boringly) named “App Usage” (Android version here).
    • What I like best about the app is it shows the time of usage as well as the intensity of usage. I primarily downloaded it to infer how much I was sleeping, since I reasoned that time spent sleeping = (24 hours – hours spanned by cell phone usage). Alternatively calculated, time spent sleeping = max(consecutive time spent not touching my phone in a day), calculated daily. But now that I have it, I also use it to see how much and what times of day I’m on the advice. It is a fantastic app.
      • I’m happy to report that, since downloading this app, my cell phone usage has declined.
      • I’m unhappy to report that, since downloading the app, I’ve simply substituted my goofing-off from my phone to the TV/computer.
    • Despite failing to prevent me from ever goofing off on any platform, I love the objective visual “heat map” reporting which helps me understand the extent of my cell phone addiction. It’s one thing to think that you don’t have a cell phone addiction; it’s another thing entirely to clearly view how much you use that life-energy-sucking device. It also helps me realize whether I’m using my phone during hours in which my kids are awake, something I try to avoid.
  • We attended FC1’s first (and second and third) ever cross country meet. She did great and we were really proud of her. At our very first cross country meet, I felt a bit unprepared on a few dimensions. First, I was yelled at by a mob of parents for accidentally walking onto the course (it was very poorly marked). Second, we were unprepared for the vomiting that would ensue. From what I gather, around a dozen girls vomited during the race (roughly 10% of participants). One of our friends (another cross country dad) almost vomited at the sight of one of the girls’ vomiting. Mercifully, I didn’t witness any vomiting personally, but apparently the finish line resembled the vomiting scene from one of my favorite movies of all time, Stand by Me.
    • Lesson learned: I’m thinking we should be steering our children into chess club or debate.

 

My cell phone usage over the past few days. The nice thing about, upon installing it, this app is that it looks a week or so before your installation date. I’ve strategically truncated the pre-installation dates from the above screenshot because my cell phone addiction and poor sleep habits were an embarrassment. What I would love to exist is an app that tells me the maximum time between cell phone touches (i.e. the length of time I’m in bed). I can infer that from the above picture but it’s not perfect. One of my stated goals for 2019 was to minimize my technology abuse, and after much trial and error with competing apps, this app seems to be the most effective at conveying what I was looking for. The nice thing is that I’m not penalized for listening to podcasts while bike commuting since the screen is inactivated, which is exactly how I want it.

 

FC5 got to the top of the 40 foot climbing wall for his first time!


Fun at the library while Mrs FP was cruising. Ironically, FC2 MIA at home reading. Self portrait on bottom left with an artistically embellished ability to grow facial hair yet artistically accurate inability to grow head hair.



We’re entering the 3 weeks of the year where the weather is pleasant! Stereotypical Midwest scenery/topography.


Eating ourselves sick with raspberries.


The deed is almost done. The one to the bottom left is ours (pickup date in 2 weeks), unless I can somehow weasel my way out of the transaction. I’ve offered a no-dog buyout option to the kids in the amount of $300 per kid but they didn’t bite. Pickup date is mid-October…

Also showcased in the picture are my world-renowned hair-cutting skills. Oddly, my girls have not taken me up on my offer to cut their hair. Even more oddly, my wife once entrusted me to cut her hair on the basis of my ability to draw a somewhat lifelike thumbs up (with fingernails and stuff) on a birthday card I made her. For the curious, we learned that one’s ability to cut women’s hair is uncorrelated with one’s ability to draw lifelike thumbs up.


Water rockets again. During a birthday party. Free (with the exception of a couple of gallons of water) entertainment for hours. The kids were enthralled. I’m glad no limbs were lost; that would have put my umbrella insurance to the test.


FC5 learned how to ride a bike in about 10 minutes. My patented teaching-a-kid-to-bike-with-a-climbing-harness-as-protection-system has been perfected over the course of teaching 5 kids. It’s one of my favorite memories with my kids. Also noteworthy is the purple “girl talk” hand-me-down bike from his sisters that we surely got for free at some point over the past decade. FC5 initially resisted learning to ride a bike for fear of riding a purple bike but eventually succumbed months later. I took him to his inaugural bike ride to Costco tonight; I don’t know that I’ve ever been prouder as a father.

 

One of our favorite Midwestern traditions – visiting a corn maze.

 

The start of a cross-country meet resembles a scene from Braveheart. FC1 killed it, finishing 4th in this race (averaging a 7:15 minute mile for the 2.5 mile run (4km)).

 

This month’s finances

I slightly modified my financial report in two ways:

  • I have created a new “dog” spending category.
    • Like most things in life, we’ll buy dog food at Costco and I’ll continue to be too lazy to differentiate these expenditures from all others. As a result, this “dog” category will only capture vet stuff & random dog stuff on Amazon. Consequently, our grocery budget will now be artificially inflated by dog food.
  • I now calculate what the hypothetical annual investing fee would be for a 1% AUM financial planner who invests in 1% ER mutual funds. This is not too dissimilar to how I imagine many of those investing with Edward Jones might be invested.
    • With our current investment balances, this would imply a hypothetical $14,602 annual fee for the privilege of investing as opposed to the $255 annual fee I currently pay (a difference of almost two orders of magnitude). As our account balances eventually double, so too will those fees. Eventually this annual fee would approach our household’s annual spending budget. I think it’s really startling to see it explicitly computed this way.
      • Those hypothetical fees are currently 25% of our annual budget; insane! 
      • The insidious thing about these fees is that they are never specified in a line-item fashion for customers to see.
        • Instead, these fees subtly erode one’s wealth month after month, year after year.
        • If the fees were explicitly itemized, I think things would change.
      • When compounded, the cumulative effects of these fees are obviously devastating.
      • On the flip side, the cumulative effects of frugality, tax minimization, and low cost investing are astounding. These seemingly subtle tactics will result in 7-figure gains when cumulated over decades.

 

  • The good:
    • No catastrophes.
  • The bad/abnormal:
    • $300 down payment for the dog.
      • The window of opportunity for soliciting feedback has passed, so please don’t try talk me out of this. Reading anti-dog comments at this point will throw me into a depression.
    • $204 on replacement trees after the city chipped in a $250 subsidy.
    • $63 on clarinet tune-up.
    • $35 on school photos.
    • And…I bought a $868 bike.
      • I’m not really sure how it happened….
      • I pride myself on being a relatively fit almost-40-year-old, but despite my fitness I sometimes get passed on my bike commute. There is no more satisfying feeling on the planet than yelling “on your left” and passing a fellow biker. There is no more demoralizing feeling than when someone does that to me (it’s hard not to feel deflated when even your best isn’t good enough). I have a dinky single speed that isn’t geared particularly well for high speeds (anything past 17mph or so and my legs look like the roadrunner cartoon from my childhood in the 1980s). Further, biking can sometimes be a drag in oppressively humid 100°F heat or bitter -20°F cold. Some day I’ll tell my grandkids about my commute….it was uphill and into a 20mph headwind both ways!
      • My dirty little secret is that I don’t particularly enjoy biking; rather, I view it as the most logical form of transportation. Biking can sometimes really suck, but it always makes my soul happy after the fact. I can count on zero fingers the amount of times I’ve taken my bike out for a joy ride over the past decade.
      • I went to a local bike shop and test rode a few bikes to see what was available. The bikes were appallingly expensive (one ebike was going for around $5k and non-ebikes were consistently selling above $1.5k). Unfortunately, craigslist and facebook marketplace (which I learned this month is a thing) were not particularly fruitful either.
      • Then, good old SlickDeals comes through with a score. A fantastically spec’d carbon framed hardtail mountain bike delivered from Europe for $868 (link). I bit hard.
      • I may turn it into my daily commuter. I may use it to ride on the non-existent mountains here.
      • I remain unsure why I bought it; I was in the market for a different type of bike (a gravel commuter bike)….
      • In my defense, there is zero joy in my current bike. I bought my old bike for $300 on craigslist in grad school. I’ve probably put $300 of parts & repairs into it (the handlebar tape is currently secured by packing tape). I estimate I bike around 2.5k miles/year. Since I’ve had the bike for 6 years, this would mean I’ve put around 15k miles on it (over that span, I’ve put far fewer miles on my sedan). The cost per mile ridden is therefore: $600/15,000 = $0.04. The IRS allowance on a vehicle is $0.58/mile (14.5X what I spend on a bike). And it makes me healthier, saves the planet from its impending doom, and blah blah blah….
      • I’m asking you, dear reader, to excuse the frivolity of this purchase. There was nothing wrong with my old bike.
      • Perhaps this will be the straw that finally breaks the faithful blog reader’s back, causing them to hit the unsubscribe button on my silly blog. As the reader leaves, he/she will surely recite the words of the Great Poet (T-Swift):
        • But do you honestly expect me to believe
        • We could ever be the same?
        • You say that the past is the past, you need one chance
        • It was a moment of weakness and you said yes
        • You should’ve said no, you should’ve gone home
        • You should’ve thought twice before you let it all go
        • You should’ve know that word, bout what you did with her <your $868 bike>
        • Would get back to me
        • And I should’ve been there, in the back of your mind
        • I shouldn’t be asking myself why
        • You shouldn’t be begging for forgiveness at my feet
        • You should’ve said no, baby and you might still have me <a blog reader that isn’t your mother>
          • <insert dramatic guitar solo>
        • I can’t resist, before you go, tell me this
        • Was it worth it?
        • Was she <your $868 bike> worth this <losing me as a reader forever>?
        • No, no no no no no no no no no no no no no!!!!!!!
          • <insert angry singing and guitar music> 
      • Yes, the irony of buying myself a new bike while concurrently making my 5-year-old boy ride a hand-me-down purple “girl power” bike is not lost on me.

Full version is downloadable here (link).

 

With the introduction of a new bike into my life, I felt it an appropriate time to honor the former bikes of my life

 

Bike #0: Red Tricycle

I have no memories of this trike, but this is what google photos came up with when I queried “tricycle.” How cool is google photos? I’m glad my folks took pictures growing up and kept the negatives which we subsequently scanned. The analog of storing “negatives” in the digital era is a well backed up storage system. I recommend the free google photos, automatically made redundant through the cross-sharing of pics with a spouse in the event of a catastrophic loss of a single google account (hacking, etc). Automatically sharing photos across my wife and my google accounts is a great way of consolidating family pictures into one centralized location. Even though we may both take pictures with our individual cell phones, they are automatically pooled into both of our google photos accounts. The only limitation of this setup is that photo deletions are not synced across accounts, so when a bad picture is taken it would have to be deleted in both accounts. This is extremely cumbersome, so we’ve simply designated one of our accounts as “the master” with the other as “the backup.”

 

Bike #1: White Schwinn

My grandfather teaching me how to ride a bike. I didn’t know him very well since he lived on the other side of the country. I only recall meeting him about 4 times in my life. He was a great man but I remember him being somewhat unfun and a bit harsh. I remember dreading eating breakfast at his house because they only had oatmeal (which they inhumanely sweetened with raisins!). I remember him ranting about the importance of covering up from the harmful sun. I remember him constantly having CNBC on with the stock tickers scrolling endlessly across the screen. He started a PhD program in finance but had to quit to provide for his 4 kids. My memories are basically of his sternness and his disdain for frivolity. Little did I know that I would unwittingly morph into his up-tight, frugal-to-a-fault, sun-hating, unsweetened-oatmeal-eating, finance nerd clone three decades after this photo was taken. It’s too bad he passed away before my metamorphosis was complete; I never once talked about finance with him (I was in engineering school when he passed).

 

 

Bike #2: Blue Peugeot


Christmas morning when I got the bike. It had 5 speeds. I was in heaven!

 

I eventually tricked it out with this electronic horn that made cheesy machine gun and bomb sounds (which I think I won in a bike riding competition). Frugal Bro rocking the TMNT shirt & sword…long live the 80s. Frugal bro inherits the white bike.


Recklessly riding without a helmet.

 

Bike #3: Green Diamond Back Topenga


I didn’t hit puberty until my senior year of high school (which I still hold as the sole reason I never made it it to the NBA/NFL…or the high school basketball team), so I’m somewhere between 6th and 11th grade in this picture. I rode this bike through undergrad. When I was 12, it was stolen from a Taco Bell (I saw it happen out the window) but I chased after the guy, flagged down a cop car while in frantic pursuit, and got bike back after the guy was arrested. Fortunately, my only time in a cop car.
 

Bike #4: Blue Trek hand-me-up mountain bike from my little brother


FC1 in Seattle.


FC1 & FC2 during MBA.


During PhD. Eventually the bike rusted out after years of year-round daily commuting.

 

 

Bike #5: Red Cadillac branded road bike purchased on Amazon for $600


I did three triathlons (Lake Padden Triathlon in beautiful Bellingham, WA) on this bike. Bellingham, WA is on my list of places I would like to retire to, smack between the Puget Sound (with incredible sea kayaking in the San Juan islands) and the beautiful Cascades. Good rock climbing, a nice regional airport, and (most importantly) Costco.


With FC1 during PhD. Eventually, I crashed this bike going 1 mph while distracted by a lost-dog sign. I was in the process of getting on a pedestrian overpass to go over the freeway when I saw the lost-dog sign and hit my front brake to check it out. I simultaneously hit a bump with my front tire, causing the rear of the bike to fly up and crash down on the concrete overpass structure, catastrophically destroying the carbon fiber chainstays and rendering the bike unusable. It was a sad day. And embarrassing to have catastrophically crashed a decent bike while biking slower than walking pace. Thankfully, this mistake is a closely guarded secret.

 

Bike #6: Free random bike I used during MBA internship in Atlanta



I had a 10 week internship at Delta in Atlanta in which I was car-less. Though I was married with 2.5 kids, I shared a rat-infested house with 5 other dudes. I initially purchased a $100 walmart bike to get me the 2.5 miles to the “Sandy Springs” MARTA stop. Given the humidity in Atlanta, I’d arrive to the train drenched in sweat. Luckily(?) my sweat would dry because the train to the airport took around an hour followed by a 15 minute shuttle to the Delta office. All-in, it was a miserable 90-minute one-way commute. A couple days after buying the walmart bike it fell apart so I returned it. I replaced it with an abandoned bike that a previous tenant had left at the rat-infested house. I didn’t have the key to unlock the previous owner’s u-lock, so I used packing tape to fix it to the frame to keep it from rattling. It was a beauty.

My daughter’s first bike. I taught almost all of our kids to ride on that bike.


Given that FC5 just learned to ride the purple bike, it’s finally time to retire our kids smallest bike.

 

Bike #7: $300 Craigslist Single-Speed bike.


The first day of my 24th day of school. I cringe at the pre-discovery-of-Walu Crocs clogs that I’m wearing. Why didn’t my wife convey that it is socially unacceptable to wear Crocs and socks for 7 years of my adult life?

 

Doing my best impersonation of the pre-pubescent biking picture above.

 

Moral of the self-indulgent, google-photos enabled, trip down memory lane: bikes are great. Even though this month’s purchase was a bit impulsive, the bike will be well used and well loved and probably be with me for another decade…so long as I don’t crash it while being distracted by another lost-dog sign.

 

Footnotes:

  1. Fidelity unambiguously has the best HSA on the market. $0 admin fees + $0 expense ratio funds.
  2. I lazily approximate home value as my historical purchase price.
  3. I have a 15Y mortgage which results in much larger principal payments than a 30Y mortgage. Since principal payments are simply transfers from one pocket (assets) to another (debt reduction), I treat such cash flows as savings.
  4. ~$0 cell phones described here.
  5. All expenditures at Costco & Walmart are classified as “Food at home” for simplicity (even if it’s laundry detergent, clothing, medicine, toys, etc).
  6. 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).
  7. 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.
  8. ETF’s are slightly more annoying to hold relative to index funds. With ETF’s, you must 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. Bogleheads discussion here (link).
  9. I continue to own VTSAX rather than FZROX and in my taxable brokerage account because it is more tax efficient due to lower capital gains distributions. Bogleheads discussion here (link).
  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 0.29%. 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. CA’s 529 plan has the lowest expense ratio US equity index fund of any in the US (link). I’d have 100% of my money here if not for the state tax deduction I receive in my own state.
  12. I own one share of Berkshire Hathaway (B Class) for the sole purpose of getting 4 free tickets/year to Berkshire’s annual meeting.
  13. I bought 100 shares MoviePass for $0.0127/share to be able to tell my students that I held a stock that went to zero. So far, the stock price stubbornly remains above zero.

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12 thoughts on “Financial Update – Sep 2019”

  1. Have you ever watch the Dick Proenneke videos of Alaska?! I am pretty sure you would like them: http://dickproenneke.com/

    My university library messed up my Iliad requests but I just watched Alaska Silence & Solitude and hope they have alone in the wilderness I & II before my next meeting across campus so I can pop in and borrow.

    • JD, YES I’ve seen that series! I’m not quite sure how/when I’ve seen them, but they are indeed incredible.

      Thanks for the suggestion. I’ll have to rewatch one of these days.

      Edit: My local library has both DVD’s. Woot.

      • You’re inspiring me to ride my bike more!

        Investment fees are a silent killer. We convinced a family member to switch to Vanguard from an advisor (who charges 2% AUM to buy Vanguard index funds) and saved her……. $10,000/year! For a retiree living on a fixed income, that’s enormous!

        • Happy to provide the inspiration to bike more, though I’m not sure how I achieved that by griping about my often unpleasant commute.

          Regarding AUM fees, I agree with you agreeing with me. It’s asinine (I guess I like that word today). 2% AUM to hold Vanguard index funds is criminal. I have no idea how this is even legal. A $10k/year income gain is incredible.

          The frustrating thing about my calculation is that it highlights the Achilles heel of my portfolio: the overpriced 529 index fund (0.29%). I’ve emailed the state treasurer to complain, to no avail. Despite the fees, the state tax benefits still make it worthwhile in my case.

  2. FP, when will you be updating your ebook? I learned a lot about taxes from it. It was helpful in formulating my RE tax plan.

    • Thanks for the feedback on the “book.” Finishing it was one of my goals for 2019 but I haven’t touched it since I wrote that draft over the course of 2-3 days in mid-2018.

      I’m unsure how to proceed. Unfortunately, the tax code changes slightly every year (tax bracket cutoffs, standard deduction, etc), so the book will be inherently stale on an annual basis. I have designed the underlying Excel files to dynamically update throughout the examples, but I have yet to find a suitable solution for seamlessly updating the “book” in Word.

      So that’s where I’m at with the “book.” I believe, in its current form, contains a lot of information that is not otherwise easily accessible regarding the tax code. I’m frankly struggling to find motivation to finish it because of the inherent “staleness” problem mentioned above, but more importantly, I don’t think enough people will read it for it to be worth my while. For reference, there have only been 1500 downloads of the (free) draft version of the “book” since posting it online last year. It doesn’t strike me as a NYT bestseller. On the other hand, I’ve received some limited feedback that it has helped people.

      That said, finishing it was one of my stated goals for 2019, so if I don’t finish it I’ll have to publicly admit that I failed on the blog. That’s a pretty big incentive to finish.

  3. It is amazing that you have a full time job, five kids, post frequently and do/read all of the things mentioned in each post. Incredible.

    • Thanks? Having Mrs FP be a stay at home mom (by her choice) really simplifies our life. She really is the lubrication that makes this otherwise chaotic household function. Living in a small midwestern town cuts down on commuting time considerably as well. I can count on one hand the amount of minutes I spend sitting in traffic in a given month.

  4. Another great month FP! I echo your thoughts about biking as a form of transportation and not necessarily recreation/joy ride. My father-in-law enjoys biking for recreation, but illogically doesn’t bike commute to work. I once went on a century ride with him (100 miles) and was confused as we spent all day biking 50 miles, ate a sandwich and turned around…it didn’t seem like anything was accomplished.

    I’m approaching my first year of biking into the office year round and I truly enjoy it. Certainly helps I live strategically close to my office. A co-worker of mine is picking up her brand new $65k+ SUV later this week. I am so out of touch with the world. I didn’t believe it was possible for a domestic made car to cost that much until I googled it. I hope she has at least that much in her 401k.

    I really like your hypothetical 1% AUM fee analysis. It’s an interesting way to recognize the savings one achieves by investing in index funds.

    • Jim,

      Great to hear from you! It’s been a while since I’ve seen you posted. I assume you’ve been busy with the move & life. I hope all is going well.

      Glad to hear that I’m not alone with the not-always-loving-bike-commuting-year-round. Some days are indeed magical, but it seems more often than not that I’m riding into a headwind both directions.

      $65k for a car is asinine. What’s more asinine is that it’ll be traded in in a couple of years for the next shiniest version. There was an article in the WSJ today about the burgeoning auto debt market. It’s worth a read if you have access: https://www.wsj.com/articles/the-seven-year-auto-loan-americas-middle-class-cant-afford-their-cars-11569941215.

      • Ben Carlson at wealth of common sense writes/talks a lot about cars being a huge drain on retirement savings and future quality of living. I live in the sticks – a friendly little town on top of an army base with more churches than red lights – and it always blows my mind how everyone seems to drive tanks around … than I drive an hour to the urban campus I work at and it shifts from mega trucks to beamers – SUV’s seem steady regardless

        • We indeed live in an asinine car culture. Since most of us live sedentary lives, sitting in cubicles or SUVs or couches for 99% of the day (i’m guilty of this when not bike commuting or climbing), it’s no wonder that chronic health problems are so common.

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