Another month, another update. A few random comments.
Good Reads/Listens/Watches
- The Finance Buff on protecting investment accounts from ACATS transfer theft (link).
- If I were not currently chasing $7k/year of brokerage bonuses, I’d have 100% of our brokerage accounts at Fidelity with lockdown enabled.
- Hopefully other brokerages follow suit and enable this functionality.
Life
- FC1 decided to attend college in Utah next year. Incidentally, it’s the one that all four of her grandparents, Mrs FP, and myself attended (I spent 7 years there between undergrad & MBA). I think FC1 will be really happy there.
- After a small scholarship, tuition + room & board will be ~$14k/year. I’m not sure what we’ll spend on incidentals (flights/books/etc), nor what our ultimate cost-sharing arrangement will be, but I guess I’ll find out soon enough.
- I’m not sure that I have many lessons learned to share other than the fact that Utah is uniquely permissive in allowing students to change residency after 12 continuous months of residing in UT. What sets UT apart from other states is that months spent in school count towards the 12 continuous months, meaning a student could hit the 12-month requirement after their freshman year by simply taking summer classes or by working in UT over the summer. FC1 also applied to both Utah State and the U of Utah. I was rather impressed with the U of Utah in our tour there last summer. USU gives really generous scholarships for incoming freshmen (see table below). After scholarships, her school of choice will be roughly the same price as USU and the our local flagship where I teach.
- If you live in the “western states” area, check out the Western Undergraduate Exchange (WUE). We met many students (and prospective students) on our tours taking advantage of this program.
- Utah is a pretty place. It has a great economy. It is not a bad state to attend college nor live post-graduation.
- It got really cold, with wind chills dropping temps below -20°F. The university was canceled one day. My kids’ schools were canceled for almost a week. During one of these cold days, I biked the dog for ~3 miles at 8am then biked ~7.5 miles to work. There was a stiff 15mph headwind so temps were <-15°F with wind chill. Halfway to work (and thus after 6 miles of riding), I developed excruciating pain in my toes (it didn’t help that I made an idiotic shoe choice that day of canvas crocs). I did my best to push through the pain over the remaining 3.5 miles to get to campus and take a shower, hoping that it would warm them up, but the water was pure torture on my toes. ChatGPT says I got frostnip and that I’m not going to die. The last time I remember getting frostnip was biking in the sleet with crummy gloves in grad school. That time, it was my fingers that got frostnip. Lesson learned: I’m getting too old for this nonsense so I’ve started driving to campus in weather < 0°F.
- We hoarded a few items that Costco was dumping:
- $0.97 chips for the kids’ lunch. We bought 8 boxes.
- $10.00 Columbia fleeces. We bought 11.
- The night before they were priced at $15. It pays to check daily, I suppose. I visit Costco maybe 5x on a typical week and have observed them dropping prices on Friday nights, but sometimes Saturday mornings.
- I ordered an item (medical-adjacent) from Costco Canada this month that was unavailable in the US. I used this service to forward to the US. It worked out well.
- Speaking of international arbitrage, I’m planning to order FC1’s specialty contacts from Portugal for 30% less than Costco optical: https://www.interlenses.com/biofinity-xr-toric-6.html. Worked well enough for our dog meds that I thought I’d continue the experiment.
- We’ve had unfrugal dog for a while now. Long enough for her identification tags to have worn out to the point of uselessness. When reordering her dog tags, I came across a product called a dog tag silencer. I spent $14 on the product which probably cost $0.25 to manufacture. While I experienced a twinge of regret after spending the $14, it is probably some of the best money I’ve spent in a while. No more being awoken to the loud tags of an itchy dog. Priceless. Why didn’t I do this sooner?
USU’s formulaic scholarship index for non-residents (link).
Columbia fleece hoarding.
Inspired by Calvin and Hobbes, FC5 made two funny snowmen.
After years of them refusing to tag along, FC3 & FC5 went to a climbing gym with me.
We’ve been on a Settlers of Catan kick for about 6 months (game here, and expansion pack here). It has become our Sunday morning tradition. Usually 6 of us play. It’s a great game if you haven’t played it before. We learned it about 20 years ago and it has been the source of countless hours of entertainment over two decades now. As newlyweds, we would play for hours with our next door neighbors during undergrad. We made a WWF-style belt out of cardboard and duct tape that the winner would take home. Such fun memories.
$0.97 chip hoarding.
Unfrugal dog enjoying the fresh snow. Dog tag silencer in purple. I’m still going strong with the running, thanks to my annoying watch that tells me to do so (even in the snow)
This Month’s Finances
This year was the first time I remembered to claim the state tax deduction for US Government Security income earned through Fidelity money market funds. It saved me a whopping $8 in state income taxes this year. Relevant links:
- Helpful Finance Buff article
- Fidelity Link 1 (cusip level)
- Fidelity Link 2 (ticker level)
For my Fidelity cash management setup, I’ve converged to 100% FSIXX (which has a $1M minimum investment, but I snuck in via the Merrill Edge transfer-in-kind loophole). As a result, I should save a bit more than $8 next year.
I felt the strong urge to tweak my asset allocation, but so far I’ve resisted. We’ll see if I can continue to resist…
- The good:
- Still employed.
- Continued to stuff tax advantaged accounts.
- Our state lowered its top marginal tax rate from ~7% to ~6%. It’ll reach 4% in a couple years, which is over a 40% drop from where it’s been since moving here 9 years ago.
- This has a bunch of interesting implications for us. It’ll make Roth contributions/conversions more attractive. Our state tax savings from 529s will be reduced (due to lower marginal rates). Etc.
- The bad/abnormal:
- Not much.
Footnotes:
- Fidelity unambiguously has the best HSA on the market. $0 admin fees + cheap investment options (e.g. FZROX, FZILX, FSKAX, etc).
- I lazily approximate home value as my historical purchase price.
- 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.
- ~$0 cell phones described here.
- All expenditures at Costco & Walmart are classified as “Food at home” for simplicity (even if it’s laundry detergent, clothing, medicine, toys, etc).
- 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).
- 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).
- ETFs are slightly more inconvenient to hold relative to index funds. With ETFs, 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). - I hold VTSAX in my taxable brokerage account because its tax efficiency (no cap gains distributions thanks to its patented technique).
- CA’s 529 plan has the lowest expense ratio US equity index fund (link). I’d have 100% of our 529 money there if not for the state tax deduction we receive in our own state.
- My Collective Investment Trust (CIT) version of Vanguard’s Total Int’l Stock Index has a 0.059% expense ratio, yet produces ~0.11% of “tax alpha” due to reduced foreign tax withholdings. Vanguard implemented this change around 2019. Therefore, I report the effective expense ratio of negative 0.053% for this holding (=0.059%-0.11%). 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 ~0.11% of “tax alpha” is not available in the mutual fund version.
Disclaimer: This site is for entertainment purposes only, as disclosed here: https://frugalprofessor.com/disclaimers/.
Thanks for sharing about Money Transfer Lockdown, just enabled it
It’s a great feature. I think I learned about it a year or two back. It baffles my why the other brokerages don’t follow suit.
Thanks for the monthly update. You’re helping my wife and I get ready for retirement. would you be willing to share the spreadsheet template you have created to manage your finances? It would save a lot of dev time on my part. Best, Randy
I posted my spreadsheet several years back here with instructions on how I manage it. Hopefully this helps: https://frugalprofessor.com/my-updated-net-worth-and-more-tracking-spreadsheet/
Jelly of the great Costco markdowns!
I’m a sucker for the deals!
Holy moly! I’ve never heard about a dog tag silencer and now one is on it’s way to us. Thank you!
I hope you enjoy it as much as us!
I haven’t started thinking about college scholarships for our young kids yet. How many schools did you consider? Do a lot of universities have similar indices like USU?
I don’t understand how my parents convinced their kids to work hard and get good grades, but I am forever grateful. After going in blind on the first ACT attempt, I learned about the simple formulaic scholarship index at USU. I’m amazed to see it’s basically unchanged! Scholarships felt like a game and gaining a few points on a test seemed a lot more efficient than writing hundreds of essays in hopes of relatively small dollar amounts. I was motivated because I knew I’d have to pay my own way. I studied hard and retook the ACT which bumped me into a full scholarship tier. It was a good (and cheap) four years where I saved money instead of going into debt. That has definitely made life easier.
My daughter applied to 5 schools (3 x UT + 2 x in-state). In the end, there was only one clear choice for her so it made much of the work pointless in hindsight. But I guess it was an exercise in hedging / risk management.
USU is the only school that we looked at with a simple & public scholarship index, but surely there are others out there.
It’s amazing what a few points of ACT gains can do for scholarships. FC1 had the misfortune of scoring the exact same on each of her three attempts, but she would always do better on different sections on each attempt. Her “superscore” would have been 2 points higher if they allowed her to accept the highest of her section scores.
There is certainly gamification to be had on ACTs, though I don’t think we played the game very strategically in hindsight.
Was that .97 for the entire box of chips? Or each bag? Both of those numbers seem outside the reasonable range.
Between my sister-in-law and our family, we have about a million “fancy” board games (i.e., all the Spiel des jahres winners and runners up), yet all we play is Catan. However, I find the 6-person expansion pretty tedious to play because it takes so long. Have you played the Cities and Knights expansion? Even though I love the base game, I think cities and knights is clearly better.
$0.97 for a marked-down box of chips normally priced at $19.49. Hence the craziness with the 8 boxes, though perhaps I should have gotten more. They must have been near their expiration date. Jokes on them…we still consume Cheerios regularly that are 5 years past their expiration date and haven’t died yet!
One of my favorite Costco hauls was several years back they were selling discounted gallons of chocolate milk for something like $0.49 because it was a few days before their expiration dates. Glorious, glorious day.
As far as Catan goes, we love it so much. Fortunately, the kids do too. When the kids were little, we would play a less cutthroat version of it without the robber. If you rolled a 7, you simply got whatever card of your choice from the bank. Now that the kids are older, we play cutthroat and it is fantastic.
As far as the 5-6 player expansion goes, I actually don’t mind it at all because each player can build after each roll (unlike the base game). This helps speed the game along for us. It seems to take as long as a 4 player game.
We bought the Cities and Knights expansion about 15 years ago. I think we played it a few times but it never quite stuck for us and it somehow ended up at our inlaws’ house for over a decade. Funny enough, we just retrieved it from the inlaws’ a few months ago and FC3 has been begging us to play it. Perhaps you’ve convinced me to give it another try after all of these years.
At some point, Merrill and Fidelity stopped allowing FSIXX to ACAT over, so I opened a Wells Fargo account to buy FRSXX, which is basically the same fund but has an even lower expense ratio and normally requires a $10M+ minimum investment. That came over without any issues, so I now park most of my cash at Fidelity in FRSXX.
Thanks for the tip on Wells/FRSXX. I already have a Wells account open for the bonus chasing shenanigans, so I think I’ll give the arbitrage a go for the heck of it. 0.04% higher return on cash for life in return for a few mouse clicks? Sign me up.
That’s funny about the toned-down version. That’s actually the only way I’ll play, because my wife and sister-in-law always gang up on me with the robber (because I usually win and I’m a sore winner). I think the robber mechanic is dumb and slows the game down too much.
Way to score with the 95% discount on the chips! I wonder why they didn’t think they could sell those at half off or something.
The robber slows down the game a bit. Funny that you only play without it! The way we play is usually we gang up against the leaders, so it’s actually an interesting handicap feature, allowing those losing to catch up.
With soon-to-expire food, Costco doesn’t mess with 50% off. It’s >75% off in my (limited) experience. Granted, I think they donate much of it, but sometimes they dump it to customers which is my favorite.
Cities and Knights is next level Catan imo particularly when expanded to 5-6 expansion board. Ability to break longest road with a knight results in crazy realignments in strategies
You and Marshall have convinced me to give it another try! Thanks!
Hi FP! Just out of curiosity, what is your urge regarding asset allocation?
From a P/E standpoint, it would seem that US equities are a terrible investment right now relative to international stocks (or money market funds). Further, the trade war seems like a disaster. If I were a market timer, I probably would have sold already.
What asset tweak are you thinking about – bonds or the US/ex-US split?
I’m a Costco fan too, but we stick to once a weekend. More than that and it’d be a pricey habit lol! What’s got you hitting it up 5 times a week?
I probably ought to include bonds to my portfolio at some point, but they were stupidly overpriced for much of the last decade with yields <2% or so. They are starting to be more attractively priced.
I'm not sure which way interest rates are headed. Given this, perhaps money markets would be a better instrument than bonds.
Ex-us stocks look more attractive than US stocks from a P/E standpoint, but that's been the case for a while now.
On Costco, I was there yesterday to buy two hot dogs for my boys. That's it. $3+tax. In and out in literally 2 minutes. Yesterday my wife went separately for a pharmacy visit. We're currently out of milk, so either my wife or I will stop by to pick up a gallon or two today. Our median transaction size is probably something like $30. When you go almost daily (since it is literally next door), I don't feel the urge to spend too much...unless I see boxes of chips for $0.97.
I’ve been reading your blog for over a year and greatly appreciate your generous insights. Question for you: is there no part of you that sees that you are 90% to FI (by your provided data) and by that metric should consider a 70/30 or 60/40 portfolio? Would that be considered the dreaded “market timing”? I find my own family’s situation similar to yours and can’t bear to go more than 70/30 (stocks:bonds). In that respect, I greatly admire your conviction to stay the course.
Yes, I should probably de-risk at some point. Maybe that point is soonish.
I guess the counterargument is that my job is great (almost literally the least bad job I can think of) and I am fortunate that my employer likes me well enough to give me tenure. I can see myself working here at a minimum until the kids are out of school (at least 7 more years). Given this horizon, losing half of my portfolio tomorrow wouldn’t materially affect me in any way. That said, losing half my portfolio on the eve of pulling the trigger from work would be less than ideal. Sequence of returns risk will be a lot more of a concern when I’m closer to pulling the trigger.
I don’t claim to have the right answers, and my current portfolio is arguably too risky. Maybe one of these days I’ll have it all figured out…I’m not holding my breath, though.
Thanks for your candid answer.
I’m sure you read this Vanguard forecast: https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/vemo-return-forecasts.html
It’s interesting that the Godfather of “can’t time the market” publishes this forecast that would suggest to shift out of US growth (negative returns over the next ten years), and US equities (3-5% return next ten years), and into international (7.5-9.5%) and fixed income (4.7%-5.7%).
Of course, even though this forecast looks very accurate considering the global markets moves over the last few months (international up, bonds up, US down), who knows if that’s a temporary blip and US growth goes on a massive rally here to play catch up.
I’ve seen Vanguard’s forecasts for years now, but they don’t strike me as particularly actionable. Forecasts, almost by definition, are going to be wrong…particularly when predicting stock returns. Unless I’m mistaken, they have been predicting that international stocks would outperform domestic stocks for years now.
That said, I do believe that international will outperform domestic over the next 10 years. And I wouldn’t be surprised if bonds will outperform US equities as well. Take that with a grain of salt. My predictions are surely as worthless as Vanguard’s. I don’t trust my own predictions, which is why a “do nothing” approach to investing more often than not outperforms a reactive strategy.
Hi FP. Thanks for the post. Can you pls elaborate of this. I am new to college env. My kids will be entering college in next 3-4 years. “Utah is uniquely permissive in allowing students to change residency after 12 continuous months of residing in UT” – How does student benefit from this (or us – from cost wise). Thanks
Many families focus on in-state colleges because in-state tuition is often less than half the out-of-state rate. However, Utah offers a rare opportunity: students can qualify for in-state tuition after just 12 months of residency.
This means you’d only pay one year of out-of-state tuition if:
* The student attends a Utah school for their freshman year
* They stay in Utah over the summer (working or taking classes), meeting the 12-month residency requirement
* They update their driver’s license and other residency documents
Starting sophomore year, they’d pay in-state tuition — saving tens of thousands over the remaining three years. Given USU’s generous freshman year scholarships (per the table linked above), it’s potentially cheaper than in-state options.
Why Consider This?
* Academics & Career – UU is strong in engineering, medicine, and business; USU is great for education, engineering, and business.
* Lifestyle & Growth – Utah is beautiful, has a strong economy, and offers an affordable cost of living compared to the coasts. Living out-of-state can also accelerate a student’s transition to independence.
Potential Downsides?
* UU has a commuter school feel, though it attracts many out-of-state students (especially via WUE).
* USU is in a smaller college town (Logan)—gorgeous but quieter than bigger cities.
Overall, for families considering out-of-state options, Utah’s residency policy can make a lot of financial sense.
In our tours of USU & UU, we met many tour guides & prospective students who were either 1.) WUE students from out of state, or 2.) students from out-of-state who did the residency change after their freshman year. I was largely oblivious to this opportunity until a few months ago.
Wow, “tuition + room & board will be ~$14k/year” – what a bargain! I can’t believe it! for tuition, private colleges cost $50-60K, even state universities cost at least $10K.
There are some “strings” attached to the low tuition at this university. That said, the scholarship will help a bit and entails no additional “strings”.