Financial Update – Dec 2023

Another month, another update. A few random comments.

Good Reads/Listens/Watches

• Lex Fridman interviews Jeff Bezos (link).
• Smartless dudes interview Arnold Schwarzenegger (link).
• I discovered the YT channel of Peter Santenello, who makes ~45min documentaries of people from all walks of life (link).
  • It’s like a long-form version of Humans of New York. Pretty fascinating content.
• Beau Miles checks in on a forest he planted two years ago (link).
• Leo, a fun/goofy animated family movie (link).
• Bogleheads share 2024 resolutions (link).

 

Life

• A friend invited Mrs FP and me to join a “Music League” with a group of our undergrad friends. It’s fun. It’s free. Here’s how it works:
  • Each week, there is a new round.
  • The moderator generates the prompt for the week.
    • The first few in our group were “overrated Christmas songs,” “college daze,” “best 70s song,” etc.
  • Everyone submits a song to best match the theme.
  • The system aggregates submissions into a Spotify playlist. I had to create a free Spotify account for it to work.
  • Everyone votes on the best song(s).
  • Votes are aggregated, a winner is assigned. There is chat & comment functionality to discuss.
  • Rinse, repeat. A pretty fun time.
  • It’s a great way to keep in touch with people. Kind of like fantasy football, but music themed.
• Another lap around the sun. Weird. The years keep zipping by. I guess that means I’ll do one of those dedicated end-of-year posts.
• Some pretty big inventory discounts on Model Ys these days. Best I’ve seen was slightly over $5k off of MSRP (link).
• I learned how to send GIFs on my phone to my kids.

 

This is the GIF FC2 texted me after I get a perfect score in NYT Connections. It has become a favorite of ours, given our love of the show.

Mrs FP did it. She bought a Costco hoodie for $12.00 (on clearance). They were out of my size.

 

Our Costco on a Friday night, our favorite date night. Apparently we are alone in that regard. Best time to shop, since the discounts ($XX.97 or $XX.00) are applied Friday afternoon.

 

It is like pulling teeth to get my kids to go to the climbing gym with me these days. Not sure what prompted them to tag along this day. FC5 hanging out.

 

Garden of the gods. Fc1, FC2, and Mrs FP.

 

Garden of Gods again.

 

Garden of Gods again.

 

Denver Nicklecade. Brought back some major nostalgia of arcades from my childhood. FC4 and I beat Time Crisis II. It may have required a “continue” or two (or a hundred). Mercifully, it was in the “free” section, so wet got unlimited continues. Fun times.

Despite my best intentions to teach my children that claw machines are a scam, they inevitably play and win. FC4 pictured above with her prize.

 

 

This Month’s Finances

• The good:
  • Still employed.
• The bad/abnormal:
  • Not much.

We closed the year with $354k of investment gains (investment losses were $225k in 2022). Total gains of $666k over the life of the blog (didn’t track earlier; would have been fun to know). Quite the roller coaster!

Our annual savings rate plummeted from ~65% gross (~70% net) to ~40% gross (~50% net). I guess that’s what happens with a car purchase and lazy accounting (since I lazily “expensed” the car in my financial statement rather than “depreciating” it slowly over the useful life of the car).

Spending is trending in the “wrong” direction, but nothing feels excessive. It feels right. We have a vague plan of allowing each of our kids to plan a family trip after their senior year of HS. I have no idea what this will cost. FC1 will soon be a senior and is considering Switzerland/Europe. She wants to hike and climb. Should be a fun trip. None of us have ever been across the pond before, so it will be an adventure. If you have any recommendations for family friendly adventures in Switzerland/Europe, I’d love to hear them. My bother-in-law lives near Frankfurt, so that’s a potential home base for our excursions.

Random 2023 spending details:

• Selected Retail:
  • Costco (food, clothing, pharmacy, gas, food court, etc): $20,975
  • Amazon (non-food): $2,064
  • Walmart (food, misc): $1,773
  • Local grocer (misc food like cilantro): $112
• Gyms/fitness:
  • Ninja lessons (FC3, FC4, FC5): $2,123
  • YMCA: $1,405
  • Climbing gym(s): $1,000
  • Disc golf expenditures: ~$0
    • I probably played 100 rounds of disc golf this past year, with each round taking 90 minutes. 150 hours of entertainment/exercise for $0.
• Selected Home/Utilities:
  • Prop Tax: $9,263
  • Natural Gas: $1,173
  • Water: $1,055
  • Electricity: $975
  • Internet: $559
  • Mortgage interest: $4,176
• Taxes:
  • Fed taxes: $19,363
  • Soc sec: $10,035
  • State taxes: $7,605
  • Medicare: $4,451

Misc stats:

• BoA CC rewards: $4,369 ($364/mo)

 

Annual returns in my employer’s retirement plan. Vanguard’s Collective Investment Trust (CIT) returns beat Mutual Fund (MF) returns by a basis point in the US stock market + US bond market, but by 10 basis points for the Int’l stock market and 8 basis points for a 2024 TDF. International stocks continued to trail domestic returns. If only I had a crystal ball…

• Total US Stock Market:
  • CIT (401a/457): 26.04%
  • Institutional Plus MF (403b): 26.03%
• Total Int’l Stock Market:
  • CIT (401a/457): 15.62%
  • Institutional MF (403b): 15.52%
• Target Date Fund 2040
  • CIT (401a/457): 18.42%
  • Institutional MF (403b): 18.34%
• Total Bond Market:
  • CIT (401a/457): 5.71%
  • Institutional MF (403b): 5.70%
• Money Market Fund:
  • All accounts MF: 5.06%

So my 70/30 domestic/int’l stock portfolio produced a blended average return of 22.91% (=0.7*26.03%+0.3*15.62%). By holding our int’l stocks in CITs, we generated about 3 basis points of excess returns this year, or $600. Not a huge amount, but I don’t mind picking proverbial dollar bills off the ground in any aspect of life.

 

 

Footnotes:

1. Fidelity unambiguously has the best HSA on the market. $0 admin fees + cheap investment options (e.g. FZROX, FZILX, FSKAX, etc).
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). If you prefer to DIY (as I do), then a three-fund portfolio is great (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, and it’s trivially easy to manage. Further, a DIY portfolio allows one to tax-loss-harvest more easily. Lastly, a DIY portfolio can help avoid the dreaded cap gains distributions caused by a fund-of-funds (e.g. Vanguard Target funds in Dec 2021).
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 (Fidelity now offers fractional shares). With a simple index fund, you don’t have to deal with either of these issues. Bogleheads discussion here (link).
9. I hold VTSAX in my taxable brokerage account because its tax efficiency (no cap gains distributions thanks to its patented technique).
10. CA’s 529 plan has the lowest expense ratio US equity index fund of any in the US (link). I’d have 100% of our 529 money there if not for the state tax deduction we receive in our own state.
11. My Collective Investment Trust (CIT) version of Vanguard’s Total Int’l Stock Index has a 0.059% expense ratio, yet produces 0.15% of “tax alpha” due to reduced foreign tax withholdings. Vanguard implemented this change around 2019. Therefore, I report the effective expense ratio of negative 0.091% for this holding (=0.059%-0.15%). The “tax alpha” shows up in the performance differential in the fact sheets here (CIT vs MF) and is more thoroughly explained here. Unfortunately, this 0.15% of “tax alpha” is not available in the mutual fund version.

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