Financial Update – June 2021

Another month, another update. A few random comments.

 

Good Reads/Listens/Watches

  • Beau Miles kayaks to work over 4 days (link).

 

Life

  • During my recent trip to UT, my brother convinced me to get a Fitbit. I’ve really enjoyed tracking my various stats (resting heart rate, exercise, biking pace & distance, sleep). It was well worth the $90 I paid for it on sale at Sam’s (the blasphemy…I know). I bought 4 of them (for me, Mrs FP, FC1, FC2). We have daily competitions on who gets the best sleep score.
    • I like that my Fitbit isn’t a smart watch (with email, etc). The last thing I need in my life is another opportunity to be distracted by another screen. I dislike that it is a crummy watch (it’s annoying to tell time with it).
  • Mrs FP signed up for Chase’s Sapphire Preferred card for the 100k bonus (worth >= $1k).
    • To get the bonus, you need $4k minimum spend.
      • We’ll reach this easily with our (6-month) property tax payment.
    • If you sign up in branch (as opposed to online), the annual fee is waived the first year and you get a $50 grocery credit. Therefore, signing up in branch would save you $95+$50=$145.
    • She’ll downgrade to the $0 annual fee Chase freedom card before the annual fee hits next year.
  • The above somewhat renewed my interest in playing the new-credit-card-sign-up-bonus game. Between my wife and I, we’ll probably open up a new card every year to throw the $4.5k property tax payment on, collect the bonus, hold for a year, then downgrade to a $0 annual fee card. Rinse, repeat. My threshold to jump through these silly hoops is about a grand of cash.
    • Despite the above, the ongoing BoA strategy continues to go well, producing $2.7k of tax-free CC rebates over the past 12 months. It adds up since the vast majority of our (too high) spend flows through 5.25% cards.
    • Orthogonally related, but I learned that a colleague uses the US Bank Altitude Reserve card to get 4.5% cash back at Costco. The “trick” to get the elevated rewards is to use a mobile wallet at checkout. Not too shabby.
  • A new climbing gym opened up in town. It is fantastic. I will join soon.
  • I started coaching a 3-on-3 soccer league for my two boys (on different teams). We’ve been blown out each game. I have to actively try not to weep on the sidelines during the games. We were advised to not hold practices during this summer rec league, though I have the suspicion that other teams might be deviating from this policy.
  • For father’s day, my wife convinced my kids to go on a 16-mile bike ride with me. It turns out that biking with 5 kids is a lot slower and more challenging than biking solo. The last time we attempted a family bike ride (1-2 years back), a kid ended up with a broken wrist. At least there were no broken bones this time!
  • We continued to bowl as a family. Alas, I have not come close to repeating my miracle 202 from last month. It was a fluke.
    • This month’s scores: 134, 135, 141, 147, 155, 182.

 


If you can look past the oppressive humidity, heat, mosquitoes, bitter winters, (high taxes), and lack of topography, the Midwest is not a bad place to live. The structure on the right is a sledding ramp. It is located at the top of the most popular sledding hill in town — we need all of the help with elevation gain we can get! After snapping this picture, in ingested my daily allowance of protein from the bugs I inadvertently ingested on the ride home.

 

This Month’s Finances

  • The good:
    • Still employed.
    • Redeemed >$700 of credit card (+ Costco) rewards:
      • Fidelity wrote me a letter saying that I had $204.89 laying around from my old 2% Fidelity Visa card. It must have been sitting there for years because I haven’t touched the card since joining the BoA cult. What is odd is that I’d always selected the “auto redemption” option with that card so I never had to think about manually redeeming the rewards. They must have changed their auto-redemption system at some point so that I became unenrolled….?
      • $290 2% Costco executive rebate.
        • $290/0.02 = $14,500 of Costco spend over the past 12 months (excluding food court and gas).
        • In prior years, I’d bring the rebate check to customer service to exchange it for cash. Why? So I could funnel all Costco spend towards my 5.25% credit cards. This year, they’d changed their policies to prevent this from happening. However, I learned that they pay out the unused balance as cash at the check-out registers. This year, I bought a $10 clothing item and got $280 in cash back. Bummer to have forgone $0.525 in BoA rewards, but oh well. Next year, I’ll purchase only bananas to minimize the forgone CC rewards. Unfortunately, the price has increased from $1.39 to $1.69 lately….
  • The bad/abnormal:
    • $1,300 in drug & doctor payments.
      • I funnel all of our CVS drug spend through gift cards purchased at Raise.com for a >15% discount (~10% Raise + 1% Ebates/Rakuen + 5.25% BoA). Usually the cheaper denominations ($25) offer the highest discount. However, I learned the hard way this month that CVS’ computer system does not handle multiple gift cards particularly well on large orders. Takeaway: I’ll buy >=$100 gift cards next time.
        • < $1k to our OOP max. Halleluiah!
    • $171.52 on restaurants, our third-highest month of spending on the category in the past 5 years.

I got my financial statement to balance exactly this month. It’s not easy to do because it requires that every penny is accounted for. I’ve said it before, but this monthly exercise imposes an incredible amount of financial discipline on us. I’d recommend it. You can tell your financial statement is correct when the predicted change in cash equals the actual change in cash. If not, you’ve made an error somewhere.

Full version 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). 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 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 (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 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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16 thoughts on “Financial Update – June 2021”

    • I’m youngish and can’t get excited about historically low bond yields that all but guarantee negative inflation adjusted returns (at least over the next many years). For example, the yield to maturity of Vanguard’s Total Bond Market index fund is 1.5% (https://investor.vanguard.com/mutual-funds/profile/VBTLX). Interest rates will eventually raise, however, but that is precisely when you don’t want to be holding bonds (given the inverse relationship between bond yields and prices).

      I’ll take my chances with equities over a 40-60 year investing horizon. That said, I have low expectations for future equity returns as well given the high valuations.

      Reply
  1. I recently got the Sapphire bonus as well. I signed up online so was immediately charged the $95 annual fee. Is there a length of time you need to keep the card open before downgrading? I’d like to avoid being charged another annual fee but don’t want to do anything to impact the bonus I received.
    Thanks!

    Reply
    • Congrats on the 100k bonus. What are you using the points for? Cash? Travel?

      I think the optimal thing to do is to downgrade (not cancel) a month before the annual fee is charge. This way it’s less obvious that you were bonus chasing.

      And, from what I gather, downgrading is preferable to cancelling because it more favorably impacts your age of credit for your credit score.

      About a decade ago, Mrs FP and I each got Chase Southwest credit cards during during an abnormally high bonus period, got the bonus, then cancelled immediately. It was so close to getting the card and paying the fee that they reimbursed the annual fee for us. I don’t think credit card companies like when you do this. I was probably put on a naughty list for a while. Apparently not any more since Mrs FP qualified just fine this year.

      Reply
      • Picked up sapphire myself last year and just got it for my wife. If we downgrade not cancel, can we sign up for sapphire again in 4 years or whatever chases rule is??

        I’ve never churned n burned a card but my records show getting near ~10k in ~6 years tax free from credit cards cash back!! I started investing it all into a brokerage account a year ago and have an extra +$400 since deciding to do that too, not game changing but free money is nice

        Reply
        • I’m not a churning expert by any means, but from what I gather you can downgrade and become eligible again in the future. At least that is what the folks at DOC were discussing.

          You’re right that the gains to churning / cc rewards are relatively small, but I’ll take a few grand in tax-free rewards per year if given the opportunity. Every little bit counts.

          Reply
      • Good to know, thanks. We just did the “Pay yourself back” as we don’t do any traveling. We also took advantage of the $150 referral fee by first me getting a card and then referring my wife to get her card. I don’t see any other deals out there that match this one but I’ll certainly be looking out for deals like this in the future.

        Reply
        • I ought to look into the “Pay yourself back” option as well. Thanks for the suggestion on the $150 referral fee. We’ll probably take advantage of that when I sign eventually up for the card.

          Reply
  2. Did the same with pay your self back and planning to do it again with my wife’s sapphire bonus by sept. for extra 25% in certain categories (makes it around $1,250 reward I think).

    Everytime I get curious about the flying point game I start unpacking all that fun and get lost enough that I default back to the idea that cash rewards are better then the time invested to squeeze out whatever extra for mile/point transfers and all that craziness.

    Reply
    • Thanks for the feedback.

      I agree entirely that the CC rewards game gets a lot more complicated once you deviate from simple cash back….

      Reply
  3. I have fond memories of living in the midwest (Indiana) for two years of graduate school. Only caught the tail ends of summer since I did an internship in Seattle. Fun times!

    Reply
    • The midwest would be more tolerable if I went to Seattle over the summers. I don’t think I’ve ever lived in a place with prettier summers.

      Reply
  4. I’ve had the Chase Sapphire Preferred card for several years. Perhaps it’s a waste of money to pay an annual fee of $95, but I’ve kept it because it offers primary insurance for rental cars (which saved me several hundred dollars on a rental in Ireland in 2019 — the agency insisted on adding their coverage until I was able to supply proof of the Chase coverage), and the ability to transfer points earned via a freebie Chase card to airline programs. My wife just signed up for it as well, but instead of going to a branch to avoid the $95 annual fee, I was able to generate a referral link from my account. So I’ll get 20,000 points, which are worth more than the fee waiver and grocery credit, in addition to her 100k bonus. It’s one year only for her, though — we’ll downgrade the second card to a Chase Freedom before paying another annual fee.

    Reply
    • Thank for the comment. I agree that it would be a decent card to keep if I were to rent cars frequently.

      Thanks for the heads up on the spousal referral. I’ll probably do that next year when i get the card.

      Reply

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