Financial Update – Dec 2019

Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • Bill Gates on the need for increased taxation on wealthy at the Federal and State level (link).
    • His main argument is that, to close the deficit (and thus the federal debt level), we should increase taxes on the wealthy to fix it.
    • He argues that taxes don’t distort incentives to work (for the wealthy?); after all, he started Microsoft when top marginal rates were double what they are today.
    • He wants WA state to tax income, something they don’t currently do (alongside many other states).
    • I don’t think I agree with Bill on this one, but he’s a genius so it’s worth reading. When I disagree with people orders of magnitude smarter than me, it almost always means I’m wrong.
    • I found it curious that Bill didn’t advocate once in his post that the government spend less. I’m of the opinion that fixing the sinking ship that is the U.S. fiscal situation should first be addressed by (at least partially) plugging the massive spending “holes” at the bottom of the ship, much like any household trying to get out of debt should first focus on what is easily within their control: by spending less. I’d consolidate EITC, Medicaid, Food Stamps, WIC, Section 8 vouchers, etc, into a simple cash transfer system with moderate effective marginal tax rates (much less than the current 100%) on earned income. On the revenue side, I’d look at low-hanging fruit like removing the subsidy on employer sponsored healthcare plans, which amount to over $12k/year in untaxed compensation in my case. This subsidy disproportionately helps the wealthy and dwarfs the medicare income cap that Bill mentions for the vast majorities families (except billionaires, of course). Further, I’d kill the sacred cows of deductibility of mortgage interest and property tax deductions, which disproportionately help the wealthy.
  • Knowledge Project podcast on happiness (link).
    • The Knowledge Project is becoming one of my favorite podcasts since I discovered it around 6 months ago.
  • FrugalEngineer Kim on losing $80k on her Oregon home sale (link).
    • There are some great lessons learned in the article.
    • The 1% seller’s agent experience seemed brilliant.
    • One of my colleagues is in the process of selling their home and moving into an apartment. I’ve never seen a person with a bigger smile in my life.
  • More wisdom from the Dangerz, the van dwellers turned full-time sailors (link).
    • Scroll to the top comment.
  • Paddle to Seattle (link).
    • 90 minute movie about a pair of friends who paddled from Alaska to Seattle.
    • It brought back really good memories of the several times I’ve kayaked the San Juan Islands (different trips to Cypress & Lummi islands).
    • I’d recommend it for people who like kayaking. The scenery was incredible.
      • For the non-kayakers (who I assume is 99.9% of the readers of the blog), the trailer is all you’d want to see.
    • The movie reiterated to me the intrinsic desire humans have to: 1.) do hard things, and 2.) be out in nature.
  • A friend of mine sent me this satire piece about White Coat Investor’s wife leaving him for a man who took her out to an $18 Applebee’s for dinner (link).
    • I shared it with my wife who laughed heartily enough to make me feel uncomfortable…
    • I wasn’t sure if it was satire the first couple times reading it…
  • I’ve been listening to the personal finance podcast “Your Money Your Wealth” for a few months since I discovered them on a random YouTube query (link).
    • The banter between the two reminds me of the guys from NPR’s Car Talk in the 90’s.
    • I don’t think I’ve learned anything from them, but I’ve enjoyed having them on my podcast feed for the entertainment value.

 

Life

  • Took a 2-day rock climbing trip to Vegas (Red Rocks).
    • Red Rocks was gorgeous. It reminded me a lot of Zion National Park, minus the crowds. It reinforced my desire to generally avoid national parks going forward.
    • We did 5.6/5.7 trad climbing. Easy climbing. Lots of exposure. Lots of fun.
      • We did the full 3 pitches on Johnny Vegas (link).
      • We did only the first 1st pitch only on Solar Slab (link).
      • In the dead of winter, the sun set at 4:30pm so we had to turn around pretty early. Especially since the hike to the car was about 90 minutes from the base of the cliff.
    • I flew Frontier. I was hell-bent on not incurring a penny of baggage fees so I fit every bit of climbing gear I own (minus a rope which my buddy brought) in a black backpack. During the boarding process, the employee reiterated multiple times that if the backpack didn’t fit in the size of a shoe-box, it’d be a $60 one-way charge. Desperately wanting to avoid the ridicule and the cost, I resorted to desperate measures. I put on two pairs of socks and two t-shirts. I contemplated putting on my long underwear as well but decided against it (I was already sweating). Amidst my effort to compress my gear to a smaller volume, my climbing chalk exploded, resulting in a white dust cloud of doom. I remedied the chalk situation by dumping the remainder in a garbage can while an airport cop looked at me with raised eyebrows. As I awaited my turn to board, at least two people were picked out for having too-large of backpacks. It felt similar to a war-like environment in which snipers were picking out my comrades (one of which had the most overtly oversized backpack I’d ever seen…he was doomed). When it came my time to board, adrenaline was coursing through my body but luckily I passed through unscathed. On the return trip home, my buddy took much of my gear in his checked bag to avoid the drama on the way home. Since I only climb outdoors with him, this simplifies the logistics of future trips.
      • It was interesting seeing the disparity in mood between people going to Vegas and people coming home. Going down, the mood was joyous. Coming back, the mood was quite somber.
    • Vegas is now officially on “the list” as a potential retirement destination. 0% income tax, very low property taxes (0.69% effective rate), no sales tax on groceries, super cheap airport, good weather 9 months out of the year (the remaining 3 are during summer during which you could leave), located near lots of great places (Zion’s, Grand Canyon, SLC, San Diego, etc).
  • We ordered a couple of 24″x36″ canvas prints at this place rather than Costco/Sams as we’ve done in the past. They turned out pretty nice. After shipping and taxes, it came out to about $40 per canvas. Not too shabby.
  • We went to the dentist for our 6-month check-ups. The water flossing continues to do good things for our gums since both of us are improving on that dimension. At the end of the visit, the dentist informed me that the insurance policy had changed and now permitted a free fluoride treatment which he highly recommended. I obliged, but was left wondering why he hadn’t brought up this highly recommended treatment prior to my insurance covering it; if it’s so highly recommended, I would have gladly paid out of pocket for it previously. It really reiterated to me how much power insurance companies have in shaping the care we receive. Odd, since it seems more natural for that power to be in the hands of doctors.

 


Walking the 90 minute approach to the mountain (the right of the two above). The trailhead was 20 minutes from the Western-most Costco in Vegas (we went there for dinner & bathrooms both evenings). Those are Joshua tress in the background. Really cool place. When I left the midwest it was in the teens and snowing. Quite the contrast!


View of Johnny Vegas from below.

View from midway up Johnny Vegas. The guy in blue was part of a two-person group who passed us on the wall. The pair were professional climbing guides based out of Alaska (Skagway if I remember correctly). Both guys were really cool dudes. The man in blue pictured below lives full time in his van (a common theme among climbers). I had a fun time picking his brain on van life while perched 300 ft up on the face of a cliff. He assured me that vanlife isn’t what instagram makes it out to be….in reality it entails more urinating in Gatorade bottles and fewer women in bikini’s. I figured I’d pass along that valuable information to anyone else considering vanlife. The man in blue proudly described his strategy of keeping his operating overhead low so that he can live his life on his terms. He does what he wants, when he wants to. His one exception to frugal living was buying high-end groceries at Whole Foods (I didn’t have the energy to expound on the merits of Costco to the man).

 


The shirtless mustached man was the second member of the dynamic duo. He was a really cool dude.
  


Hanging out with a buddy from grad school.

 

Fun times at the Denver Nickel-Cade playing games from the 90’s. Tuesdays are their 2-for-1 admission day. Woot!

Each child was allocated $2 of Nickels. After burning through their allocation, FC1 and FC4 insisted on scavenging for lost nickels, tickets, and toys under games for over an hour despite the abundance of free games to play (2/3 of the games were free). I think they had more fun finding stuff than they did playing the arcade games! Other parents would have expressed absolute horror at the prospect of their children mopping the filthy Nickel Cade carpet with their hair for hours. Instead, I was pretty amused.



While in Denver, we took advantage of the above Arby’s promotion. In the beginning of the season, the promotion stated that if the Bronco’s scored 2 touchdowns over the course of a game then their classic Arby’s sandwich would be $1. As the season evolved, however, the scoring threshold was reduced to a single touchdown because the broncos are bad this year. It was comical to see all of their signage updated with stickers over the original “2” threshold. The 7 of us enjoyed a marvelous roast beef sandwich. It brought back great memories of the 5 for $5 promotion from 1-2 decades ago.

 

These Ravensburger puzzles have been awesome to our family through the years. Well worth the $12/puzzle investment. Also shown is our utensil setup. We have 3 of these utensil cups, which makes unloading the dishes a dream (and accessing utensils during meals). The optimal ratio of spoons to forks to knives is about 5 to 2 to 1.


They don’t have BoA branches in my state. When I travel (particularly to CA), I’m amazed to see such a high density of branches. After pestering my father about platinum honors for about three years (he’s an existing Cash Rewards holder), I helped my him sign up for Platinum Honors and the Premium Rewards Card. It was one of the highlights of my life.

 

This month’s finances

I did something new this past month. First, I turned off automatic dividend reinvestment in my taxable brokerage accounts. Why? I wanted the December dividend to fund my tax-advantaged accounts, thus accelerating the funding of 2020 tax-advantaged accounts. It seems like a good strategy that all should be doing. I hadn’t seen it written about before, probably because it’s so obvious.

  • The good:
    • No catastrophes.
    • $1,500 HSBC checking account bonus came through.
  • The bad/abnormal:
    • Christmas was expensive this year. Maybe $1k of gifts?
      • Nintendo Switch + accessories weren’t cheap.
        • The favorite game among adults at a family reunion has been “Overcooked”, a cooperative cooking game. It is fantastic. My wife stayed up until 1-2am multiple nights playing with her siblings. I’ve never seen her play video games before.
      • Digital games (as opposed to physical cartridges) on the switch are the way to go. No opportunity for kids to lose cartridges. Plus, they go on sale pretty frequently. We’ve purchased all digital games by first getting a 10% discount at Costco (plus 2% executive + 5.25% credit card cash back).
    • $205 for rock climbing trip.
      • $91 rental car
      • $77 round-trip Frontier flight (No baggage fee. Take that Frontier!)
      • $20 airport parking
      • $17 gas
      • A couple bucks in Costco pizza (we brought leftover pizza on the climb and it was glorious).
    • $104 vet & grooming (don’t ask).
    • $28.36 for Mrs FP to take 5 kids to Frozen 2.

Full version is downloadable here (link).

 

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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6 thoughts on “Financial Update – Dec 2019”

  1. Your thoughts on the Bill Gates tax piece took the words out of my mouth. Regarding Las Vegas, it’s worth researching some of the proposed legislation in Nevada. When we visited to scout Carson City for a FIRE town, a realtor told us the legislature was voting on something like 1,100 proposed changes, many from former Californians. We didn’t get into specifics, but that much change in a short period of time spooked us. I hear you on the weather though and cheap flights to just about everywhere – one of the perks of living in a vacation destination!

    Reply
    • Glad I’m not the only one to disagree with Gates!

      Thanks for the heads up on proposed tax changes to NV. As it currently stands it’s a bit of a haven. I’ll keep an ear to the ground on future changes.

      Reply
  2. Vegas is probably one of my favorite areas to climb. On a future visit, I would highly recommend Armatron (5.9, 6 pitches). It’s located high on the Brownstone Wall, nearly directly across from the Rainbow Wall. There’s only two pitches I’d rate above a 5.7 and they’re both fully bolted. The rest of the climb is an absolute blast on some of the coolest rock I’ve ever climbed on. See here https://www.mountainproject.com/photo/107418314 for an example. Beautiful view from the top, plus it’s an easy, quick scramble back to the base.

    ANYWAY. Climbing is one of passions, funny that I came here for the financials but got most excited about the climbing.

    Reply
    • Chris,

      Thanks for the recommendation on Armatron! It looks absolutely gorgeous! Fully bolted on anything above 5.7 sounds about my style. I’m still getting used to trad climbing. It requires a lot more faith than sport.

      Also on my bucket list are Pingora in the Wind Rivers and Devil’s Tower, WY. Climbing is an addictive hobby.

      Reply

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