Financial Update – May 2019

Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • Mr Money Mustache on our constantly running “Purchase Justification Machines” (link).
  • Interesting Bogleheads thread on fun post-retirement “jobs” (link).
  • Interesting Bogleheads thread in which hundreds of individuals share their career path & whether or not they recommend it (link).
    • The thread really illustrates how diverse (and overachieving) that group of individuals is.

Life

  • Dodged an EF2 tornado that briefly touched down about 2 miles from our house.
    • The joys of living in tornado alley! Glad I wasn’t caught in that storm while bike commuting!
    • It makes me rethink the wisdom of carrying relatively high deductible ($10k) homeowner’s insurance. This storm system brought some very small hail, but luckily not as bad as the ping-pong-ball sized hail as we got a few years back…..
      • A colleague, whose house received hail & wind damage during the storm, will need to get a new roof. On my recommendation he had switched to Esurance a few months ago. In the process of switching insurers he raised his deductible from $2k to $6k. As a result, he is now $4k poorer.
        • Just a friendly reminder that high deductible insurance plans are great (much like DIY repairs) until $%*# hits the fan.
    • Extreme weather, with associated hail damage, is one of the subtle ways in which living in the Midwest is not nearly as cheap as it sounds on the surface (along with criminally high property, state income, and sales taxes).
  • Hung out with Warren Buffett, Charlie Munger, Bill Gates, and Tim Cook at the Berkshire meeting (along with tens of thousands of fellow weirdos like Mr 1500).
    • It was fun. I woke up really early (3:30am) to stand in line several hours early, causing me to fall asleep for the second half of it. I’m unconvinced that this is a winning strategy…I will adjust next year.
    • This part on delayed gratification was perhaps my favorite (video).
      • “I don’t necessarily think that for all families and all circumstances that saving money is necessarily the best thing to do in life….Do you really tell your kids that they never go to the movies or never go to Disneyland or something of the sort because if I save this money, 30 years from now we’ll be able to stay a week instead of 2 days? I think there is a lot to be said for doing things that bring you and your family enjoyment rather than save every dime. Delayed gratification is not necessarily an unqualified course of action under all circumstances. I always believed in spending 2 or 3 cents out of every dollar I earn and spending the rest, but I always had everything I wanted. One thing you should understand….if you aren’t happy having $50k or $100k, you won’t be happy with $50M or $100M. A certain amount of money does make you feel and those around you feel better just in terms of being more secure in some cases, but loads and loads of money (I probably know as many rich people as just about anybody)….I don’t think they’re happier because they get super rich, but I do think they are happier when they don’t have to worry about money. But you don’t see a correlation between happiness and money beyond a certain place so don’t go overboard on delayed gratification.”
        • This topic is a source of frequent discussion in the frugal professor household. Are we going overboard? Are we unnecessarily depriving our children of enriching activities (i.e. a second trip to Disney)?
          • I think the answer to this question is a resounding “no” for our family, but it’s a constant source of introspection.
            • I remain convinced that the best stuff in life is freeish.
        • I should probably change the tone of this blog (and my life) to be less apologetic towards spending money. Spending money happens, especially with 5 kids whose favorite past time continues to be the surgical removal of their internal organs (yes, we did this AGAIN in May).
  • Rock climbed at Red River Gorge, KY, perhaps the most popular climbing destination in the Eastern US.
    • Specifically, we climbed in Muir Valley which was impeccably maintained.
    • It was my first time sport climbing outside. I flashed a 5.10b, but I need to get better at lead climbing.
    • After a full day of climbing, I personally devoured a 16″ pizza at Miguel’s Pizza, one of the most unique places I’ve visited in my life. It’s the epicenter of the climbing scene there, where at least a hundred climbers were congregated to chow down, camp, and relax. The dirt bag community is a pretty unique. I like these guys….they are my people.
    • Total cost for mindbogglingly awesome climbing trip: $50 car rental (my portion b/c split expense w/ friend), $5 parking pass (my portion b/c split expense w/ friend), $10 large pizza, $50 flight, $10 airport parking.
  • Took a business trip to the Atlanta area.
    • Got stuck in rush hour traffic at 3pm for over an hour. Wanted to die. Renewed my vows to never live in a huge city.
    • I’m amazed at how dehumanizing air travel is, which has gotten noticeably worse over the past 5 years, at airlines other than Southwest. With the exception of Southwest, everyone charges to check bags, creating an incentive to bring excessive carry-ons. At Delta, for example, unless you pay to upgrade your seating priority (which I don’t) to get access to the overhead bins, you must battle to the death for an overhead bin.
      • Perhaps the winning strategy is to simply gate check for free when the overheads fill.
      • The net result of this nonsense is pissed off customers, slower turn times, customers resorting to rewearing underwear 10 times to conserve luggage space (or at least that’s what I do). All for a few extra dollars in luggage revenue.
  • Signed up for our 4th BoA cash rewards card, earning another $200 in the process.
      • We now have enough of these cards where we can strategically assign one of them to be a dedicated travel card and another to be a dedicated gas card for road trips, with the remaining two being allocated towards the most lucrative “Online” category. Doing so will enable us to earn 5.25% cash back on a larger fraction of our total spending, though payments to doctors, utilities, etc remain stubbornly at 2.625%.
    • Our monthly tradition of purchasing a $1k Costco cash card is still working great, providing us 5.25% cash back on all Costco purchases (gas, groceries, clothing, and most importantly….food court pizza).
      • I regret to admit that we came up $27 short in gift cards this month and had to swipe our BoA Cash Rewards card, like an unsophisticated caveman, for the transaction. The forgone rewards amounted to $0.47 (=$27*(5.25%-3.5%)). I will never forgive myself for only earning 3.5% cash back on the transaction.
  • FC1, who is 12 years old, used her credit card for the first time on a last-day-of-school celebration. She is an authorized user on my otherwise inactive Fidelity 2% Visa (as are all of my kids…even my 5 year old). Any swipe of the card will now be entered into the “bank of dad” google sheet (net of the 2% rewards, which I’ll credit to her). It’s a good system that doesn’t require any cash, does not generate any coins, and teaches how my daughter how digital money works (including cash back perks of using credit cards). She is (correctly) learning that a credit card is the same as a debit card with some added perks. For example, if she loses a credit card it can be easily replaced without any financial consequence, unlike losing a wallet filled with cash.
  • A colleague of mine recommended an alternative to Skype/Google Hangouts for collaboration purposes. It is fantastic (& free). http://appear.in. No usernames. No forgotten passwords. No nonsense. It just works. It is now my preferred collaboration tool.
  • Stumbled across a cool website (https://brickseek.com/) that aggregates the pricing and inventories of products at select brick and mortar retailers (Walmart, Target, Lowes, etc). I found it helpful this past month when purchasing something locally (which admittedly is a rarity).

 


View from my front door. The eerieness of seeing that funnel cloud (and green sky) a couple miles from your house is pretty surreal.

 


View from our friend’s house a few doors down.

 


Hail from a storm system a couple of years ago, about 6 months after replacing our roof. Luckily it didn’t last long. As a homeowner, I loathe hail. As a renter, it never bothered me much (especially my car was safely parked in a garage).

 


Obligatory climbing pics.




I’m the yellow blip 70 ft up there.

Miguel’s Pizza. Fantastic joint.

The place is way cooler than it looks.




FC3 ruining a last-day-of-school picture by tormenting FC4….what else is new? Holy crap, summer is officially here!!!!

 


Unusually expensive dinner while on business travel (you only live once, right?). $5 Costco double cheeseburger (what?!?!) + $4 chicken salad + $1.24 for 3 pounds of bananas. I think I’m the only schmuck in the history of business travel that almost exclusively submits Costco food court receipts for reimbursement.

 


Summer = Lake days are back! 



We are unreasonable parents who make our kids wear bucket hats while boating. The unhatted child is not ours.

 


FC5 (a boy) wearing a girlie life jacket. The kid has grown like a weed this past year and has outgrown his previous life jacket. The next size up was his sister’s old one (why we bought a pink life jacket rather than a sensible unisex color is beyond me), but he initially refused to wear it due to the color. Rather than spending $20 on a new one, my wife tried bribing him into wearing it with up to $10 cash. He didn’t take the bait. Then FC2 brilliantly suggested we bribe him with candy instead. He took the bait in the form of a can of soda. Thanks to FC2 for the assist on that one! Lesson learned: FC5 has yet to learn that $10 > a can of soda. This knowledge will be useful for future negotiations.

 

 

This month’s finances

  • The good:
    • No catastrophes.
    • Redeemed $717 in BoA cash rewards ($200 of which is sign-up bonus from 4th cash rewards card).
      • Borrowing on the cash-back success from this month, I believe I’ve devised a way of making infinite money. All I need to do is spend infinite money, which would entitle me to infinity * 4.5% back in cash rewards (which is infinity). I see no flaws with this logic.
      • Personal Capital informs me that I’ve redeemed $3,283.45 in BoA CC rewards over the past 12 months. This number is over-inflated because it contains rewards which were strategically deferred until I hit the $100k status (unfortunately, you can’t do this any longer). Conversely, it’s under-inflated b/c we’ve only been exploiting the new 5.25% category since earlier this year.
        • If you listen to podcasts such as ChooseFI there seems to be an almost unanimous consensus that travel rewards cards are the only way to go. Hopefully my personal experience illustrates that the 4.5% average no-nonsense cash back route across all purchases (plus a little help from sign-up bonuses) can be superior, particularly when your idea of a family vacation is cramming 5 kids into a minivan for thousands of miles to save money on air travel.
  • The bad/abnormal:
    • Bought a bunch of climbing gear (no apologies!) in preparation for upcoming CO Springs trip. It’s not cheap but should last a lifetime.
    • $721 for annual homeowner’s insurance premium.
    • $521 in summer sports camps for the kids.
    • $321 in mulch.
    • $189 for 6-months of auto insurance (1 liability only for our seldom used sedan + 1 comprehensive with relatively high $2.5k deductible).
    • $147 for annual premium on $1M Geico umbrella insurance policy (I somewhat arbitrarily lumped this in Auto expenses this month).

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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2 thoughts on “Financial Update – May 2019”

  1. Hi- I just found your website and read all your content over a week or so. I am a Finance nerd too so I found your posts really intriguing! You’ve got a few things dialed in way better than me… your family’s frugality is a whole class beyond mine. 🙂 I also really love all the active things you do both individually and as a family… especially with 5 kids in tow… Wow! Anyway, I’m sure to be a dedicated reader now. Thanks for the great content!

    Reply
    • Jenn,

      Thanks or stopping by. Glad to hear you found a thing or two useful.

      If you’re inspired by our frugality, check out this guy’s blog: https://rootofgood.com. He makes our lifestyle look lavish. I’m always embarrased looking at our budget relative to his.

      Reply

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