Financial Update – July 2019

Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • I picked up the book Playing with Fire from the library, by Scott Rieckens (creator of the documentary I haven’t seen yet).
    • TLDR: Scott and his wife were making $180k pre-tax in Coronado, CA and spending 99% of it on life (fancy cars, ocean-side apartment, fancy meals, boat club, etc). Scott was jaded with his job then stumbled across Mr Money Mustache via Tim Ferris’ podcast. He immediately became a convert to FIRE and miraculously convinced his wife to join him on the path (by emphasizing that FIRE would maximize the time they spent with their daughter). Within a year, they relocated to Bend, OR and increased their savings rate from ~0% to ~70%, dramatically accelerating their retirement date a few decades to their early-mid 40s.
    • Their pre-discovery-of-FIRE life is an reminder of how mindlessly most Americans drift through life as cogs in the cycle of consumerism. Their post-discovery-of-FIRE journey strikes me as the only logical way to trod through life: to deliberately eschew mindless consumerism and instead pursue things that bring true happiness (time with family, time with friends, time outdoors, underwater basketry, or whatever floats your boat).
      • Speaking of needing to break free from the cog, this Humans of New York post seems relevant (link).
        • When I was in college I met all these people with dreams of starting NGO’s and changing the world. But then they had kids, and got a new condo, and a new car, and they got stuck. Everyone keeps saying: ‘one day, one day.’ But you ride the metro in the morning and you see all these people who’ve been working the same job for twenty years. They look empty almost. We all know that nothing takes eight hours to do everyday. But that’s the culture. We’re stuck in that structure. We’re stuck in meetings. Or killing time on our phones. Just waiting for the weekend. And what’s the point of it all? To buy new things. To seem important. I just can’t do it. I have to find a way out.
  • This WSJ article highlighting the practice of transferring guardianship of to friends/family to game the financial aid system (link).
    • I’m frankly amazed that similar schemes aren’t more readily utilized; it seems like such an obvious loophole.
  • Not much else, to be honest. Spent most of the month in nature or with extended family. It felt great to disconnect from the eternal time suck that is the internet. It turns out that life goes on without having up-to-the-nanosecond updates on Trump’s latest incendiary tweets or the market’s latest gyrations. Also, I’m happy to report that life also goes on without watching cat videos on Reddit (or whatever random stuff hits the front page).

Life

  • As mentioned previously, we visited MT & WY.
    • I slept on my Klymit sleeping pad & pillow (perhaps my favorite earthy possessions now) for 14 days (12 of which were in nature and 2 of which were in hotels).
      • You know it’s a good month when you’ve slept on a camping pad for at least half of the days.
  • Completed a 2-day trad climbing course in CO Springs (technically eleven mile canyon, 1 hr west of CO Springs) then stayed a third day to climb on our own. The grand finale was doing a couple laps on a 2-pitch trad route called the Staircase (never mind the fact that each of my children could have done that 5.5 route).
    • Camped for free for a couple of nights in the adjacent National Forest. What a great resource these are if you don’t mind living without a restroom.
  • Family reunions x 2 in UT and CO.
  • As expected, Mrs FP’s new $5/month RedPocket plan on Verizon’s network performed better than Tello on Sprint’s network in WY & MT (albeit at ~5x our $1/month pay-as-you-go usage). It came in handy during our travels in helping snag hotels. After years of near-zero data usage, the 500 mb/month + 100 min/month plan seemed to accommodate nearly infinite internet usage while on the road. Nonetheless, we still utilized offline versions of Google Maps because why not save on data?
    • For whatever reason, changing phone providers is always a PITA. This time was no different. The change required at least 0.5 hours on the phone with tech support to figure out. After the initial switching cost was incurred, it has luckily been smooth sailing.
  • The Playing with Fire book referred to a 16-minute YouTube video from the NYT called “Slomo” that I hadn’t seen before. It’s pretty interesting and perhaps worth watching (on 2x speed, of course). My favorite part was the old man in the cafeteria giving the advice of “do what you want to.”
    • Even though I’m not FI yet, I find myself increasingly doing what I want to. A decade ago I found myself bored to death in cubicle hell at Boeing, so I quit life for 7 years to collect a couple of graduate degrees. Over the past 8 years I’ve been somewhat frustrated by living in cornfields, so to keep my sanity I’ve developed a hobby of rock climbing + backpacking + recently took my family on a multiple week trip to three national parks. “Doing what you want” is indeed a pretty liberating way of living life and I’m learning that my ability to do so is correlated with the strength of my balance sheet. What prompted me to initially quit Boeing was having built up $100k of wealth over 3 years while living on $30k/year. I’m not quite at the point of “FU money“, as JL Collins refers to it, but each day I get a little closer to it and it feels good.

 


Like clockwork, the thunderstorms hit us daily at around 3pm. We’re about 5 minutes away from getting dumped on here at 8.5k feet of elevation. I’m frantically repelling to retrieve gear before the rain hits.


I’m grateful to have kept in touch with friends from former lives. My climbing partner pictured above is a friend from grad school; another father of many who, like me, is desperately (and unsuccessfully) trying to cling to his youth. I forgot to take off my $10 Casio watch and cracked it while climbing but I won’t replace it until it stops ticking. After climbing, we did a celebratory swim in the river below. Like an idiot, I broke my “ring” toe monkeying around on the pedestrian bridge by my left elbow (a misplaced heel hook on a 4″x4″ steel beam while traversing the underside of the 40 foot long bridge).


~$1k of climbing gear racked on the harness that broke the budget a couple of months back.

 


Colorado Springs is not an ugly place. Garden of the Gods, Pikes Peak, etc is literally in the back yard of that city (not to mention two Costco’s).

 


Also, Heber UT (with view of towering Mount Timpanogos) is not ugly either.

 

This is how we lugged all of our camping crap around the country. 6 x 17 gallon storage totes purchased at Home Depot many years ago. $127 for cargo carrier purchased 2 years ago. Pretty good setup, which effectively doubles the storage capacity of the minivan without introducing any aerodynamic drag since it’s out of the wind stream. Prior to the trip I had considered purchasing a pop-up trailer to make camping easier & more comfortable. After having survived in National Parks for almost 2 weeks in tents without incident, the pop-up trailer is definitely being scratched off the luxury-I-might-someday-buy list. $123 receiver hitch purchased at Amazon (& installed ourselves) also purchased 7 years ago. We use that cargo trailer for hauling kid kayaks & kid paddleboards all summer long. Super functional investment.


Fully loaded as we leave Glacier with a $5 Walmart tarp for rain protection. I was sitting at that picnic table when the 2-year old black bear cub tore through the adjacent campsite. Goodbye Glacier. I don’t know that I’ll see you again for a long time, but it was fun while it lasted.

 

This month’s finances

  • The good:
    • No catastrophes.
  • The bad/abnormal:
    • A few hundred dollars in camping food (mostly mountain house at Costco) & gear (bear spray, bug spray, a sleeping bag, etc).
    • $434 in gas (& untabulated car depreciation).
    • I have begun to strategically pay my $8k/2 property taxes 4 days late to get me to into the next credit card cycle, buying myself another 30 days of credit card float in the process.
      • The penalty for doing so is $6. (12*$6)/$4000 = 1.8% is the implicit borrowing rate. Going forward, this will presumably be a profitable endeavor assuming investments grow at a rate higher than 1.8%.
      • Further, the 2.625% BoA credit card rewards exceed my county’s 2.35% credit card processing fee (less competitive than the 1.87% fee for federal tax payments at https://www.pay1040.com/), providing a net credit card benefit to paying with CC in addition to the float benefit.

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 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 (link). 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 getting 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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9 thoughts on “Financial Update – July 2019”

  1. Related to your property taxes, most credit cards allow you to change the “payment due” date. Knowing that vs the closing date allows you to engineer the closing date of the cycle. So instead of being some psuedo-random date, you can strategize if you’d prefer to synchronize your cards (ie, all tied to the calendar month) or disperse them through the month such that you can always get ~ 50 days of float on big purchases (30 day billing cycle + 20 days payment) on one of your cards. Enjoy the rest of the summer!

    Reply
    • I’m a HUGE fan of manipulating the closing date of my credit cards. To simplify my life I haven’t quite entered the realm of distributing closing dates across cards, but instead have the closing date end on the 4th for every single card I own so that the payment date is the 1st of each month. Since I’m paid on the last day of the month, this works perfectly. I’m paid, CC’s are autopaid in full, then on the 2nd I dump every single penny of $ into investments (minus $1k idle cash + $2,185.20 for my mortgage). It’s a good system.

      To maximize float, I will defer bill payments, when possible, to the 5th. In that case I get about 60 days of float.

      I spend $1k/month on Costco gift cards (to get 5.25% cash back there). The timing of this purchase coincides with the billing cycle to get that 60 days of float.

      It’s a fun game.

      Reply
  2. Love the cargo carrier set up! My wife and I were just talking about someday getting a pop up vs RV vs … after driving 2 vehicles to go camping over July 4th.

    Radical personal finance had a decent podcast about the idea shortly after our trip, that was timely and sort of summarized what we were thinking: https://tunein.com/podcasts/Business–Economics-Podcasts/Radical-Personal-Finance-p623635/?topicId=132063051

    As kids grow, we are finding it hard to make it work with a Honda accord or Kia Soul alone though we have a strap on roof bag that has been very useful over the years. I am hoping we can make it last a few more trips though, before working through minivan vs SUV (any thoughts welcomed on that debate, though I think the van will win as I would rather get a small truck then SUV)

    Reply
    • The cargo carrier setup is indeed a good one. This last trip was the first time we travelled with bins and it worked out fantastically. A couple years back we used a car-top-carrier and incurred a huge reduction in fuel economy. Never again.

      I used to listen to radical personal finance but haven’t for a while. I was a bit turned off by his interjection of religious prejudice into the podcast. He’s a really smart guy so I’ll check out the episode.

      Regarding Minivan vs Truck….minivan’s aren’t sexy but they are damn functional. My recommendation would be to put a trailer hitch on the Kia Soul, drive it until the wheels fall off, then replace with a minivan.

      Reply
  3. Great update! Was the trailer hitch thing hard to install? I’d love to do that, but looked at some videos and it looked intimidating to install. Did you have to move your muffler? Did you jack up the car to do it?

    Reply
    • We did it about 7 years ago while in grad school. I didn’t have to jack up my car. I just asked my wife to help me. I remember having to buy some snips to get through the hard plastic under the car to cut the slots for the hitch. We didn’t have to remove the muffler; it was attached by some sort of rubber hanger which enabled us to nudge it out of the way while we bolted the hitch on.

      If I were to do it again on our next vehicle, I’d consider doing it again but I’d also consider having it professionally done. I can’t imagine that a professional installation would cost more than $100?

      Reply

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