Financial Update – Jan 2020

Another month, another update. A few random comments.

Good Reads/Listens/Watches

• Several interesting Bogleheads threads:
  • On 2020 goals (link).
  • On forgiving yourself for stupid financial mistakes (link).
  • Giving advice to a recent college grad (link).
• Yesterday (link).
  • Mrs FP and I really enjoyed it. We let FC1 and FC2 see it the next day.
  • Greg Mankiw, famous Harvard economist, recommended it on his blog last June when it first came out.
    • Mankiw also recommended the Big Sick a couple years back which I also enjoyed (link).
  • I put the DVD on hold at the library, but I think I was number 100 in the queue or so. In the ensuing months, every time I walked past a RedBox it would taunt me with a $1.75 (+ tax) solution to my “problem.” In the end, we waited for our turn. Libraries are great. Patience is too.
  • I’m happy to fill the role of movie critic 8 months after a movie comes out. Super useful, I know.
  • Speaking of Greg Mankiw, here’s an interesting 60-minute interview on the intersection of politics and economics (link).
• Dangerz 2019 year-end blog post (link).
  • I remain convinced they accomplish more in a single year than most people do in a lifetime.
• Reader Jeremy shared an interesting article on how to fix healthcare in the comments of my “prescription rant” post (link).
  
  • I think the author’s conclusion that the solution to our healthcare problems is not medicare-for-all, but rather a well-designed skin-in-the-game system, is brilliant.

 

Life

• With the exception of FC5, we all got the flu. It was horrific.
• January was cold. < 0°F with wind chill. Despite having studded snow tires, I almost biffed it a couple times on snow/ice while biking.
• FC1 has been asking for contacts for months to replace her glasses. Since starting my current job we haven’t carried vision insurance, but I decided to pick it up this year for $25/month. Since the premiums are pre-tax, this only ends up costing me $25*12*(1-24%-7%)=$207 per year on an after-tax basis. The vision insurance gives us $10 exams (as opposed to $70 at Costco). Since I try to get as much value per insurance dollar (or any dollar, frankly) spent, I wanted all of us to get eye exams. 5 of the 7 of us have done exams already (2/7 had done exams last year). Further, we get a $95 contact allowance per person per year OR a $63 eyeglasses benefit per person per year. Absent this insurance, I never would have had our kids do an eye exam. It turns out that FC5 is pretty far-sighted and we had no idea. Our optometrist recommended glasses for the little man. The markups on the optometrist’s in-house glasses made me want to vomit. After insurance, it would have cost $160 to get FC5 a pair of glasses at the optometrist. After insurance, kid glasses cost $37 at Costco. The most frustrating thing was getting the optometrist to hand over the prescription. He was quite reluctant to do so because he knew that doing so would forfeit him the inflated margin on their in-house glasses. The conflict of interest makes me sick to my stomach.
  • For reference, at Costco kids frames were around $50 + kids lenses (polycarbonate) were around $50 . For adults, frames were in the neighborhood of $60 + lenses were in the neighborhood of $60. After subsidy, the kids’ glasses cost $37 and adult glasses cost us $57.
  • In the past we’ve had a great experience with the much cheaper Zenni Optical, but opted for Costco this time. 
• Unfrugal dog cost us an arm and a leg this month. The big ticket item was a fence we installed. She also got spayed. Consequently, she had to wear a cone of shame for 2 weeks. They had to shave her stomach for the surgery. Unfrugal dog scratched her belly raw so Mrs FP came up with the idea of having her wear a t-shirt that was tied off at the waist. She looked like a schoolgirl from the 80’s. The only things she lacked were slap-bracelets and MC Hammer pants. Also, she ate a pair of Mrs FP’s old glasses. Bummer.

The evidence. Mrs FP was planning to get contacts this year but decided against it when this happened (so she could use her insurance benefit for glasses instead).

 

Eating with the cone of shame proved to be a mental challenge.

Don’t let the sweet face deceive you. The owner of this face is a never-ending money pit.

January brought a lot of snow and unpleasant weather.


The kids participated in a pinewood derby in which they lost handily. The best part was that I didn’t have to build anything; we used cars from prior years.

 

This month’s finances

• The good:
  • No catastrophes.
  • Thanks to hoarding cash last month (by turning off dividend reinvestment and not adding to our taxable account last month), we were able to front-load tax-advantaged investments this year. $6.1k of our HSA is funded, 100% of our backdoor Roths are funded, 25% of 403b & 457 are funded.
    • It seems like a good strategy. I don’t see a much downside. Especially since the December Vanguard dividends occur so close to January 1st (Dec 24 this year) so there isn’t much of an opportunity cost for letting the dividend sit in cash for a few days.
  • We received a $1,198.96 reimbursement check from our former insurance provider for overpayment of medical services 13 months ago. Weird. This was around the time of the appendectomy and I remember getting a couple thousand dollar bill every other day. I assumed the insurance company (Blue Cross Blue Shield)  had done its job properly and didn’t once question the never ending flow of bills. In reality, it appears the insurance company let me pay $1.2k more than my out-of-pocket max. I probably should have caught this mistake on my own, but the opaque and 6-month-delayed nature of health insurance billing made it hard to do so. Lessons learned: 1.) don’t trust insurance companies to do their jobs properly, 2.) consequently, check their math.
    • As far as accounting this month, it served to offset our eye exams and glasses purchases x 5.
• The bad/abnormal:
  • I took our minivan in for a tire rotation to Costco and was unfortunately told our tires were shot. They lasted well under their 60,000 warranty (around 60% of that), but due to irregular wear patterns (likely caused by bad alignment), the warranty was void. Also, one had a nail in the sidewall and was therefore unpatchable. Bummer.
    • $672.13 for new tires.
    • $59 for wheel alignment at repair shop.
    • The pain from hemorrhaging of money on car maintenance is overpowered by the joy the minivan has provided with road trips and day-to-day kid-hauling convenience. Further, it has saved us a ton in airfare. Despite the concensus in the blogosophere that cars are the worst investment ever, in our case it’s some of the best money we spend each year since it unlocks the door to unfettered mobility. What’s the viable alternative to schlepping our 5 kids (and now a dog) around town or across the country to see family / national parks? Uber?
    • Earned 5.25% cash back + 2% executive rewards thanks to having a stockpile of Costco Cash laying around. At any given time we have a grand or two in Costco cash.
  • Unfrugal dog strikes again.
    • $1,308.45 for fence.
    • $349.28 to get her spayed.
    • $30 ish in dog food.
    • $14.44 for cone of shame.
    • $12.87 for “gentle leader” dog collar.
  • Mrs FP and I bought cell phones.
    • Looks like the deal is still live (link). 
    • Pixel 3a. Retails for $400.
    • $275 for “excellent” condition purple-ish (white) open-box phones – $100 best buy gift card which I pawned off on Raise.com for $83.14 after fees.
    • After tax & selling included $100 egift card for $83, we got them for $296*(1-5.25%)-$83.14=$197.32 each.
      • If you are going to do this deal and purchase 2 phones, the logical thing to do is to buy the first phone and use the $100 credit towards the purchase of the second. I didn’t do this because I was worried about the deal going dead by the time I could purchase the second phone. I was also worried about them running out of stock of open box phones. The $100 gift card is emailed the moment the phone ships, which in our case was a day or two after ordering.
    • It was one of the more irrational things I’ve done in my life.
    • Pros & Cons:
      • Pros:
        • Really good phone. Great camera, enabling us to better preserve memories. Compatible with Xfinity mobile, opening the door to free cell phone plan on Verizon’s network. Our prior phone weren’t compatible with Xfinity mobile.
          • On Xfinity mobile, it is $12 per month per gig of shared data across up to 5 lines. All voice + texts are free. If people do the rational thing and prioritize Wifi over data (and mostly turn data off their phones), there is no reason why a family of 5 would have to pay over $12/month for their phones.
          • Several of my extended family members are already on this plan and I’ve only heard good reviews so far. I’ll post a review once the deed is done.
      • Cons:
        • Our old phones (Moto G4 & Moto G6) were mostly functional. I don’t use my cell phone much at all. It seems immoral to replace something unecessarily.
  • $494 in after-insurance optometry + glasses expenses (we’ve only received 2 of 4 insurance checks so far, so this number will eventually come down).
  • $376.59 in generic tamiflu for the 7 of us.
    • I ended up using GoodRx to save 44% off of the insurance price at CVS, but I later found out that it won’t count towards my deductible. This is a bummer. I remain unsure if I made the right decision (it all depends on how our expenses unfold this year and whether we’ll hit our deductible). I had an extremely frustrating call with CVS in which I was told I’d have to overpay by 44% for the drug in order for it to count towards my deductible. It felt like extortion.
  • $84 YMCA fee.
    • As per tradition, we joined the YMCA again. We do so every year in the dead of winter to help us from losing our sanity. We find it helpful to let the kids get some energy out by swimming at least once a week.

As of 2/1, the Pixel deal is still live at Best Buy.

 

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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