Financial Update – June 2018

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Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • Hear me yak at Millionaires Unveiled Podcast:
    • I have a strong aversion to hearing my own voice so I have yet to bring myself to listen to the interview, but I recall having a fun chat with Clark & Jace.
  • Being Mortal, by Atul Gawande (link).
    • Free audiobook via Overdrive.
    • As I’ve shared previously, Atul was interviewed in this great Freakonomics episode (link).
    • Being Mortal is a must-read for anyone who plans on dying some day, or alternatively, if you know anyone else who might die.
    • The book discusses the dysfunctions of the current “treat-no-matter-what” state of the U.S. healthcare system, the importance of continued independence as we age (often accomplished via assisted living centers), the problem with nursing homes, the importance of advanced healthcare directives, and the important role of hospice care in the last stage of life.
    • They say that the only two certainties in life are death and taxes. I think that proper understanding of the tax code can actually solve one of these problems, but alas, it cannot solve the other problem. It’s kind of a downer to think about, but this book really brings home the importance of thoughtfully considering these issues before it’s too late.
  • Alone on the Wall, by Alex Honnold (link).
    • Free audiobook via Overdrive.
    • For those unfamiliar with Alex, he’s the most famous rock climber in the world. He’s famous not necessarily for his skill (which is unbelievable), but for his history of “free soloing”, which means climbing without a rope. A single mistake while free soloing means a few thousand foot fall and instant death.
      • If you want to have your hands sweat in terror, here are some short videos of him in action (link1, link2, link3, link4).
    • I don’t think the book will appeal to a non-climbing audience.
      • However, here’s a 1.5 hour interview with him that will appeal to the non-climber (link). This is much less about climbing and more about life. Brilliant & inspiring guy.
        • He bought a condo in Las Vegas, NV for proximity to rock climbing and the lack of state income tax. Smart man who understands geographic arbitrage!
    • Alex insists he isn’t crazy since he is climbing well within his abilities every time he takes on a free solo route. He says the general public confuses the words “risk” and “consequences.” He argues that he is is undoubtedly participating in high consequence climbing, though the risk is low since he’s climbing well below his abilities.
    • Overall, I came away from the book with a profound respect for the man. Primarily for his resolve to follow his passion in life.
    • I found his thoughts on mortality to be quite interesting. He said that the two questions he’s always asked are 1.) Why do you do it? and 2.) Are you afraid of dying? He responded that there is a bit of irony in the second question, as we’ll all die. We normally pretend that we won’t. Alex often thinks of death often.
      • I think if we thought more about our imminent deaths, we’d perhaps be a bit more strategic about our life choices and less myopic. Perhaps we’d put down the TV remote and go outside on a bike ride to enjoy the beauty of a sunset. Perhaps we’d trade in the fancy luxury car for a few months of travel abroad. Perhaps we’d trade in a high salary for a career that offered more life satisfaction.
      • I’m not sure my actionable takeaways from the book other than a deep desire to make the most of this life (which seems to be flying by at an increasingly fast pace).
    • His free solo ascent of El Capitan is being turned into a feature length film that will be released in theaters in the fall. I cannot wait (link).
  • Blogger Darrow Kirkpatrick reflects on the good and the bad from his early retirement at 50 (link).
    • Upon retiring, he sold his home in TN, lived in an RV for 6 months, then settled down in Santa Fe for the last 4.5 years where he rents a small townhome.
  • IRS cracking down on states (like NY, NJ, and CT) who are considering allowing residents to circumvent the $10k SALT cap through reclassifying property tax payments as charitable contributions (link).
  • AMC to launch subscription service to compete with MoviePass (link).
    • If they want to survive, this is the future of movie theaters.

Life

  • Began our annual summer vacation to the mountain west.
  • I play golf about once or twice a year with my folks when we get together. I played yesterday with them and got a hole in one, the first (and surely the last) of my lifetime. 160 yards. 9 iron. Hit it a mile in the sky. Pulled it a little. Landed it in the fringe to the back left of the green and the backspin of the ball and slope of the green made it roll in the cup. We didn’t see any of this action as the green was elevated. It was only after I thought I had lost my ball that my father found it in the bottom of the cup. At least I can die now knowing that I got a hole in one.
  • After a 10 year hiatus, resumed playing ultimate frisbee.
    • I am the token “old man” on the team, most often assigned to guard the least athletic person on the opposing team.
    • Most players are undergrads or recent grads from the university. In a few short years, I’ll be old old enough to be their parents. How did that happen?!?!?!?
    • I’ve never played in such a competitive league before. I had to learn terminology such as “hostack”, “vert stack”, handlers, cutters, dump.
      • When I played before, the strategy was “try to get open; then, upon catching it, try to throw to someone who is open.”
      • While the more sophisticated strategy is ruthlessly efficient and designed to maximize scoring, I find it somewhat boring and too predictable.
  • We got a new guy at work. The day he showed up, I gave him the unsolicited lecture on maxing out 457 & 403b & 401a plans and what the optimal health care plan is. He must think I’m crazy.
    • It’s funny. On the internet I play the role of “give-unsolicited-financial-advice-man” to a few dozen readers of the blog. It’s fun. I think I understand taxes & investing & money pretty well. It’s fulfilling to maybe help a person or two along the way. But when an opportunity arises to play the role of “give-unsolicited-financial-advice-man” in real life, I get looks like I belong in the loony bin.
  • Completed transfer-on-death deed for home.
    • Paid $20 for fillable PDF here. Select state & county on right hand side.
    • Paid $20 to file at county register’s office.
  • Updated will (& financial power of attorney & healthcare directive) using Quicken’s WillMaker’s software (link).
    • Since all of my assets are now transfer on death, the primary purpose of the will is to designate the guardian of the kids.
    • Notarized for free at local bank.
  • A urologist friend performed an elective procedure for me, saving me a cool $1k-$2k in the process. I offered free investing and tax advice in return in perpetuity. I think I got the better end of the deal.
  • Crammed 7 people in a 6 person tent on our road trip out West. An hour or two after easily falling asleep, one of my daughters rolled on my leg, awaking me from a deep sleep. I thought it was a rabid animal eating my leg, so I kicked as hard as I could to get the animal off. In the process, I almost kicked another kid (who was sleeping at my feet) in the face which horrified me. My adrenaline was pumping so hard that I couldn’t fall back asleep for about 4 hours. If we continue camping on road trips to save a few bucks, I will invest in some straight jackets to keep kids from moving on top of me. Or alternatively, I resolved to bring a second tent for me to sleep in alone.

The scenic location where I had insomnia for 4 hours.

This month’s finances

  • The good:
    • Filled up a few more buckets of tax advantaged accounts up to annual contribution limits.
  • The bad/abnormal:
    • $896 in healthcare deductibles.
    • $500 for 2 bikes + bunch of camping gear from Costco.
    • $395 in airfare for upcoming backpacking trip to Wind River Range in WY.
    • $220 brake job for minivan.
    • $211 replacement smartphone for one that crapped out.
    • Mentally wrote off $8k personal loan to family member. By keeping the loan on the books for the past 10 years, I was reminded often of the unpaid debt (i.e. monthly on this blog). I found myself wanting to micromanage their finances, arguing that we could have been repaid had they just cancelled their cell phone plans, gone out to eat less, vacationed less, or refinanced the debt with another source of financing. It was an unhealthy dynamic spanning almost a decade. In the future, if they pay us back, great. If not, I’ve already absorbed the loss mentally.
      • (Obvious) lesson learned; only “loan” money to friends/family members that you never intend to see again.
      • I have removed the line item from my financial statements and updated historical values accordingly.

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 a faster rate of repayment. The true cost of the mortgage should exclude repayment of principal, which I show above.
  3. $20 internet and ~$0 cell phones as described here.
  4. All expenditures at Costco & Walmart are classified as “Food at home” for simplicity (even if it’s laundry detergent, clothing, 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. I prefer Vanguard funds but my employer offers Fidelity instead.
  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 a pain to own relative to holding index funds directly. You have to 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. I am currently invested in VTI b/c it’s $10/year cheaper than VTSAX in my Saturna HSA.
  9. The only other administrative cost not captured by my expense ratios is a $19/year administrative fee for my HSA at Saturna Capital ($15 per transaction + 4*$1/dividend reinvestment).
  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 0.30%. 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. 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 4 free tickets/year to Berkshire’s annual meeting. Incorrectly classified as US stock index because it is a trivial holding and because it essentially is a US stock index.

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This site is for entertainment purposes only, as disclosed here: https://frugalprofessor.com/disclaimers/

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