Financial Update – Dec 2018

Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • WSJ editorial board on the exodus from high-tax states to no-tax states (TX, NV, WA, FL) (link).
  • Molly’s Game (link).
    • Based on true story of high-profile poker ring in LA & NYC.
  • Fascinating MrMoneyMustache forum thread documenting the implications of the recent Medicaid expansion (link).
    • There are lo longer asset tests to qualify for Medicaid; you simply need income to be less than 138% of the federal poverty level. According to this forum post, in the state of Washington, you can have an investment portfolio of $10M kicking off quarterly dividend payments of $50k (for an annual income of $200k) yet still be on Medicaid and pay $0 for healthcare, so long as the dividends don’t occur on consecutive months.
      • The market value of free medical care for family is easily in excess of $25k/year when considering the cost of premiums, deductibles, out-of-pocket max, prescriptions, etc. To gift this away annually to an early retiree with $MM in the bank who chooses not to work strikes me as absurd.
      • Since learning more about the details of Medicaid expansion, I am convinced that this is the ultimate early retirement arbitrage. It makes the economic case for early retirement an order of magnitude more compelling. After all, one of the largest outflows on a household’s income statement (healthcare) can simply vanish with 1.) sufficient assets to support early retirement and 2.) no (or very little) labor income.
  • WSJ video on lab grown meat (link).
    • It’s weird to think that the burger of the future may very well be grown in a petri dish.
  • WSJ video documenting people’s struggles with rising healthcare prices (link).
  • WSJ video on Elon Musk’s boring company (link).

 

Life

  • Took a business trip to Miami. Went from 20°F weather to 75°F weather. My frugal tendencies don’t change when it’s on the company’s dime. I stayed at an Airbnb (my first Airbnb) for $100/night rather than the conference hotel for $200/night. I walked 2 miles to the conference rather than Ubering it, hanging out with a dozen wild peacocks in Coral Gables in the process. I skipped meals rather than going out, bringing a couple pieces of fruit from home to tide me over (2 oranges, 2 apples, 2 fig newton bars).
    • My first Airbnb experience was enjoyable, but different. I shared a wall with an older couple, though my room had a private entrance & bathroom. I could hear their television and bathroom. Kind of a throwback to my undergrad days.
    • The host family provided me a granola breakfast every morning and a sketchy bike to cruise around on during the evenings. Coconut Grove was neat.
    • While walking the 2 miles to the conference I worried about getting killed by falling coconuts. I wonder if death by falling coconut is a real thing. After googling it, Wikipedia confirms that indeed people die by coconuts (link).
      • My 4 years working on the safety of aircraft systems while at Boeing has forever ruined me into perpetually thinking about worst-case safety scenarios in any circumstance in life.
        • It’s a weird compulsion, but one that has positive consequences.
    • I feel like I got to know the character of Miami better in an Airbnb than had I stayed in a generic & sanitized hotel room and Ubered everywhere. I think I’ll continue to use Airbnb’s going forward.
    • Eating 3x per day is definitely overrated. Our bodies are equipped to skip meals and still function.
  • Went snow skiing for the second time in 13 years.
    • A large portion of the ski crowd, much like the golf crowd, is living in an alternate universe. I like to people-watch in such environments. I feel like a fish out of water whenever I’m surrounded by these crowds. I feel much more comfortable around the dirt-bag climbing & backpacking crowds.
    • I guess everyone now wears helmets while skiing? Who knew?
    • I went sledding with my kids (who didn’t go skiing with me). I still think that sledding is just as fun as skiing at 100% less cost.
  • A friend suggested we track our Christmas spending. 
    • $0 for the gifts that my wife and I gave each other (or didn’t give each other).
    • Around $75 per child in spending. Lots of clearance items at Costco/Walmart/Thrift Store.

 

Chilling with a half dozen wild Peacocks on my 2 mile walk from Coral Gables to the University of Miami. Sorry in advance for the motion sickness induced by this video.

 


Though you can’t tell, this is the Atlantic Ocean. One of the few times I’ve visited it, having spent the vast majority of my life in the Western 2/3 of the country. I put a couple of fingers in it because I was two wimpy to swim in it. I kind of regret that.

 

Mad dash to see presents from Santa.

 

 
Some of 0ur kids are weirdos and actually like receiving books as gifts. They get that from my wife. When I was a kid, the only thing a book was good for was a paper weight.

 


Teen Beach Movie!


Totally random Power Ranger Halloween costume my wife picked up on super clearance. My son has never seen the show but was elated nonetheless.

 


One of my favorite games from my childhood. Remake available at Target though the guns are underpowered relative to what I remember from the original.

 


Guess Who. Classic game. Teaches great deductive reasoning.

 


I need to purchase Jenga. Great game.

BeyBlades. Really fun toy before one of them broke after dozens of hours of play.

 

This month’s finances

  • The good:
    • Cashed out $1,400 of accumulated credit card rewards.
    • Completed HSA transfer from Saturna to Fidelity and am now invested 100% in the FZROX fund. I love that Fidelity is now an HSA administrator. It is a game changer.
      • I’m gradually transitioning from Vanguard to Fidelity. I have all of my work stuff at Fidelity. My 2019 IRA contributions will be through Fidelity. They offer lower cost funds than Vanguard and have great customer service. For my taxable account, I’ll continue to invest at Vanguard since Vanguard’s index funds are still more tax-efficient.
        • For simplicity, I’d love to eventually have all of my assets in one brokerage. Perhaps I’ll eventually get there.
  • The bad/abnormal:
    • Another $2,227 in medical bills from two hospital visits close to six months ago.
    • $138.14 for a set of studded snow tires for my bike. I think this is a worthwhile investment to avoid further bike crashes from ice.
    • Oh yeah. $47k in investment losses.
      • It’s not all bad since I’m continuing to dollar cost average into the market irrespective of market prices.
      • Further, my obsession with credit card rewards optimization helped to profit me an additional $1.38 this month in rewards, helping to offset 0.00276% of my investment losses this month!!!!

Full version is downloadable here (link).

Footnotes:

  1. I lazily approximate home value as my historical purchase price.
  2. 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.
  3. ~$0 cell phones described here.
  4. All expenditures at Costco & Walmart are classified as “Food at home” for simplicity (even if it’s laundry detergent, clothing, medicine, toys, etc).
  5. 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).
  6. 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.
  7. 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).
  8. I continue to own VTSAX and VTIAX 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).
  9. 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.
  10. CA’s 529 plan has the lowest expense ratio US equity index fund of any in the US. I’d have 100% of my money here if not for the state tax deduction I receive in my own state.
  11. I own one share of Berkshire Hathaway (B Class) for the sole purpose of 4 free tickets/year to Berkshire’s annual meeting.
  12. 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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10 thoughts on “Financial Update – Dec 2018”

  1. Happy New Year FP! The business trip frugality bullet point blew my mind! That is definitely not what I do. I’ll bring snacks from home, but that’s mostly because I eat all the time (side effect of distance running) more than trying to be frugal. Anyway, kudos to you!

    Reply
    • Happy new year to you as well Joey. Yes, my frugality is pretty unique. I spent 5 years in my phd in econ/finance classes modelling economic behavior of agents who have increasing (yet concave) utility functions. In laymans terms, this means that economists assume that happiness is increasing in consumption, but with diminishing happiness as the level of consumption increase. I break this model. I actually am happier when I spend less money. Economists never model satiation as a realistic behavior of people. I feel that I’m satiated at my current level of consumption.

      One of these days I should pick your brain on distance running. From your prior posts, I infer you recommend: 1.) putting on shoes, 2.) going outside, 3.) running as far as you can (while able to maintain a conversation), 4.) rinse & repeat steps 1-3 until you can win a marathon.

      Do I have it right?

      I’ve done a few olympic triathlons over the years and found them to be pretty fun. Though after swimming & biking my legs turn to jello and the run has always been excruciating. What didn’t help my cause is that I suck at running to begin with, much more so after enduring swimming & biking hell.

      Reply
      • I’d love to talk about running. I like talking about running about as much as I like talking about personal finance! Yeah, you have it just about right. Consistency is the most important thing–do it every day or almost every day. That’s much more important than running “hard”. Once you’re consistent you can start adding in 1-2 hard days per week. Happy to talk more if you want!

        Maybe I should try “breaking the model” as well next time I’m in a situation where everything will be reimbursed. It’s probably a good exercise, and I’m definitely happy with my frugal lifestyle when I’m not on a work trip!

        Reply
        • Your running is an inspiration to me. You may have convinced me to start. In my late teens, I caught the running bug and would do 10+ miles in the foothills in the bay area. I should get back into it……

          Reply
    • Crossfire was such a great game as a kid! Playing again as an adult, I had forgotten how tired my forearms got from continuous shooting & reloading. The new version of the game has super weak guns making it nearly impossible to win. As a result, the games lasted at least 20 minutes over Christmas which was exhausting.

      It’s really fun replaying childhood games as an adult. Crossfire = awesome (though slight bummer on weak guns). Mastermind = awesome. Chutes & ladders = this game is excruciatingly boring. Candyland = same.

      Reply
      • That’s a bummer…what’s next, cotton ball gloves for Rock’em Sock’em?!

        We take great pleasure in: Rook, Spades, Munchkin and Settlers of Catan. Recently we were introduced to Dutch Blitz and enjoyed it!

        Reply
        • We became addicted to Settlers of Catan in 2004/2005 and played it incessantly for a few years during undergrad. Our neighbors were hooked too. We made a WWF-style victory belt out of duct tape for the winner of each game to take home. Such fun times. I’ll have to do a dedicated blog post one of these days about our favorite new ones. There are so many good games out these days. The past couple of decades have been a gaming Renaissance.

          Reply
  2. Great month FP! I assume you didn’t realize any of your loses for TLH? If so, what was the logic around passing the opportunity up? Simply keeping your basis high for retirement?

    Anyways, I’m curious on what snow bike tires you purchased. I’m biking to work and these winter months are slippery. Probably should purchase some so my wife doesn’t have as much concern.

    Reply
    • Good point about TLH. A few reasons why I didn’t do it this year:
      1.) I didn’t turn off dividend reinvestment so that would have triggered a wash sale.
      2.) I dumped money into VTSAX at the beginning of the month, so it would have triggered a wash sale.
      3.) I didn’t want to be out of the market. It’s easily to accomplish a 1-for-1 swap for VTSAX for S&P 500 at Vanguard, but my taxable account is at Merrill Edge for credit card rewards bonuses, making it slightly less easy to do so without risk from being out of the market.

      That said, I still have the option to do it in 2019 and likely will do it in January/February and use the proceeds to fund our Roth IRA contributions.

      For bike tires, I purchased these for my road bike: https://www.schwalbetires.com/marathon_winter_plus. Seem to have great reviews on Amazon. I purchased at 365 Cycles because it was cheapest there. I used to have these in grad school and they are an absolute lifesaver. I’m thinking about keeping them on my single-speed beater bike year-round and picking up a used road bike from my boss for the non-winter months. Changing tires is a pain in the butt. Perhaps I should pay to have it done in the future.

      Reply

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