Financial Update – Oct 2019

Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • The Biggest Little Farm (link).
    • Our friends saw this indie film at a local theater and highly recommended it to us. It documents the journey of a couple as they embark on an ambitious plan to change careers to become farmers. In the process, they attempt to transform a neglected/barren avocado farm outside of Los Angeles into a utopic ecosystem of plants and animals.
    • Our library had a copy and, after being on the hold list for a few weeks, we checked it out. My wife and I watched it on a Saturday night but we liked it so much we wanted our kids to watch it as well so we watched it again as a family the following day.
    • It’s one of my favorite movies I’ve ever watched with my family. My kids talked about the movie for weeks.
  • I found this “exploring alternatives” YouTube video to be pretty inspiring about a woman who built her own tiny home at the age of 62 and is thriving in her simple retirement (link).
    • I love her simple, self-reliant existence. The fact that she gets around town with an ebike is icing on the cake.
    • I found this additional “exploring alternatives” video to be quite inspiring as well (link).
  • MyMoneyBlog discussing the implications of Schwab’s $0 trade commissions (link).
    • This news, followed by the resultant chain reaction from TD Ameritrade, Etrade, and Fidelity is completely irrelevant for the buy-and-hold index investor. Index funds and their fraternal twin, ETFs, have been trading commission free since I bought my first index fund in 2005. Despite the personal irrelevance, it is a noteworthy shift in the industry. Recently, I have seen many Fidelity commercials touting their superior cash-management account (made better through the brokerage+CMA combination), zero-expense ratio funds, and now their free trades. It’s a good time to be an investor (particularly if you ignore the inflated P/E multiples on equities (investopedia article), with commensurate lower expected returns, and abysmal yields on fixed income securities).
  • The Finance Buff writes about changing ACA premiums. What I found particularly interesting was the successful utilization of heavily subsidized ACA insurance by one of his readers who accomplished this by simply retiring early and managing his MAGI (link).
    • The commenter linked to a number of articles, this CNBC one being one of them (link).
    • It’s stories like these that reinforce my belief that healthcare in early retirement is: 1.) a non-issue despite what most people seem to believe, and 2.) probably much better than a non-issue, and perhaps superior economically to one’s pre-retirement situation.
  • Steve Levitt, from Freakonomics, on the broken state of math education in the US (link). Memorable quotes from the episode:
    • LEVITT: To me, the biggest change in the world over the last 50 years has been the emergence of data and computing, and it strikes me that the math curriculum hasn’t kept up with that at all, both in terms of thinking about what students need to succeed in the world, but even, maybe more broadly than that, about what role humans play. Could you talk a little about that?
      BOALER: Yeah, absolutely. You’re right. When we look at the world out there and the jobs students are going to have, many students will be working with big data sets. So, we haven’t adapted to help students in the most important job many people will do, which is to work with data sets in different ways. So, statistics is really important, as a course, but is under-played. This is a fifth of the curriculum in England and has been for decades. But here in the U.S., it’s sort of a poor cousin to calculus.
    • An academic aside unrelated to the main message of the episode: LEVITT: Well, a lot of academics has nothing to do with the real world. The kind of stuff I do is related to the real world, but it’s always a little bit off. I’ve had dozens of papers where I thought, wow, this is important. This could have a real impact on people. And nothing has ever happened. Zero. The final straw about academics is about three years ago, I embarked on three different research papers, all of which I thought were really important. And the other day I got onto Google Scholar and I thought, I just want to look and see how much they’ve been cited. And I went through them, and the sum of the citations across those three papers was six. And I said to myself, wait a second. I just spent three years pouring my heart into something that has basically been read by six academics and nobody else in the world. What am I doing?
  • Alone in the wilderness (Part I) and (Part II).
    • Thanks to reader JD for the recommendation!
    • These movies made me feel more inept as a human being than any I’ve ever seen. It documents how Dick Proenneke hand-built a cabin at the age of 51 in remote Alaska and basically lived off the land for decades in near isolation. I’m convinced if there was a nuclear war wiping out every other human being and man-made structure on the planet, Dick Proenneke could have single-handedly rebuilt civilization in a matter of a couple of years (and figure out a way of procreating by himself).
    • Both DVDs were available through my library system. Part II was somewhat redundant to Part I, so if you only have have 60 minutes to spare, watch Part I.
  • GoCurryCracker on preparing for the “imminent” recession (link).
    • I liked this quote: “Through the process of building a portfolio worth at least 25x your target annual expenses, we will all experience investment ups and downs. Watching my portfolio lose (and gain) $1,000 in a single day was challenging when I was trying to pay off my student loans. Then losing $10,000 in a day was tough. Then $100,000. Then $400,000. Over time we become accustomed to the volatility, which mutes the emotional response.”
      • I still remember my first couple days of investing in my early 20s. I would watch the stock market hourly and curse the bad luck that I had funded our IRAs when the market dipped 2% the following week. With a $10k contribution, I had just pissed away $200! That was a lot of money to us at the time. And that whole 2008 debacle was pretty demoralizing to live through as well. Suffice it to say, after having our portfolio grow from $10k to $100k to (perhaps soonish) $1,000k, we have become pretty well immunized to market volatility over the years. It is the duty of every investor to develop this immunity.
        • When teaching my students, I sometimes zoom into that period of time in 2005 when I made our first Roth IRA contributions. Zoomed in, the volatility looks unbearable. Then I zoom out to the financial crisis and the +/- 2% squiggles in the market look inconsequential (which they are). Then I zoom out another 5 years, then another 5 years and eventually the financial crisis looks like an inconsequential little squiggle (which, over a 50 year investing horizon are indeed inconsequential to the buy-and-hold investor who is dollar cost averaging through their career). What I tell my students in their early 20s is that their investing horizon is ridiculously long….some of them will live another 80 years. That is an astounding amount of time to let compound interest do its thing and to ride out any volatility. Further, any time I invest in my pre-tax accounts, I realize that I’m getting an immediate tax alpha of near 30% (22% federal + 7% state) due to the differential tax rates while working vs in retirement. This knowledge of tax alpha helps me sleep much better at night. If the market drops 30% tomorrow, at worst I’m simply losing “house money” generated by the tax alpha.
    • Note that GCC doesn’t excuse unnecessary risk due to inappropriate asset allocation near/in retirement. I agree. For more thoughts on that, check out BigERNs series on the topic.
  • Kim, the Frugal Engineer, wrote a detailed post on geo-arbitrage which supplements her Q&A quite nicely (link).
  • MyMoneyBlog on the international exposure achieved by holding multinationals within a domestic index fund / ETF (link).
    • The key takeaway for me from the article is that 65% of VTI (and thus VTSAX) revenues come from outside of the U.S. Thus, one holding the lowly domestic fund (either total U.S. market or S&P 500 indices) is accomplishing a decent amount of international exposure.
    • Given that my target portfolio allocation is roughly 70/30 domestic/international, I suppose the article implies that the % revenue derived from international sources in my target portfolio is in the neighborhood of 35%(fraction of international revenue from domestic funds)*70%(allocation to US equities)+85%(fraction of international revenue from international funds)*30%(allocation to international equities) = 50%. This sounds pretty well diversified to me, though admittedly any portfolio allocation is a complete crapshoot. Given that Vanguard target retirement funds have a 60/40 domestic/international split, this implies > 50% of these revenues are derived from international sources.



  • We got the dog.
    • Dun dun dun…. 
    • The experience reminds me of the Jim Gaffigan sketch “You know what it’s like having a fourth kid? Imagine you’re drowning, then someone hands you a baby.” The same is true for adding a dog for a family with 5 kids.
    • The first night was horrific…just like a newborn baby. Nights have gotten substantially better since then.
      • During the first horrific night or two, Mrs FP googled how to calm a puppy. Google said to play the puppy piano music, so we played it our George Winston station on Pandora. The first night the Pandora ads would upset the dog, so the second night we played it via my laptop with the SndControl app which mutes the adds. It was a really comical first couple of nights. We have since dropped the piano music.
    • We are absolutely clueless on what we are doing, but that also was also (and remains) the case for raising 5 children.
    • The jury is still out on how this dog experiment will go…hopefully better than our guinea pig from 3 years ago.
    • Mrs FP had an epiphany this month; with all 5 kids now in school she had complete freedom for a couple of months. Then she squandered it for a dog.
      • In her defense, she allowed the dog for the emotional benefit of our kids knowing full well that it would significantly complicate our lives.
      • She is the least animal loving person of anyone I know. Seeing her interact with this dog who idolizes her is comical. In response to the infinite love the dog gives her, Mrs FP robotically pats her in return.
  • My 6-year old laptop was slowly dying an agonizing death. It’d take 5 minutes to boot up and open up an internet browser. The trackpad stopped working a year or two back. In decades past, I’ve had success reviving poorly performing computers by reformatting their hard drives & reinstalling the operating system fresh. The laptop was running Windows 8.1, so I threw a “hail Mary” and tried to revive it with Windows 10, which I installed via a USB drive. It was my understanding that the window of opportunity to upgrade to Windows 10 had past, but Reddit informed me otherwise. After the fresh installation, the laptop is running like a dream. Emboldened by the success of the laptop refresh, I did the same with our 6-year-old desktop and a 6-year-old personally owned workstation at work.
    • Stating the oblivious here, but reinstalling a fresh operating system is a great way of extending the life of your computer hardware at least another 5 years.
      • It’s worth noting that most computers now really serve one purpose: to run an internet browser. It’s pretty interesting how a $150 chromebook has almost as much functionality as a $2k computer given the shift towards cloud computing. The shift towards cloud computing means that older hardware is more than sufficient to run a web browser.
    • Public Service Announcement: After installing a new version of Windows, Windows stores an old copy of the prior operating system which takes in inordinate amount of storage space. After installing what I thought was a fresh version of Windows 10 (in which I specified the option “keep nothing”), I was appalled to find > 100GB of hard drive space taken up. Luckily, Window’s “Disk Cleanup” tool did the trick. Be sure to select the “Clean up system files” in the bottom left corner to get access to the “Previous Windows installation(s)” removal option. Doing this single step on my laptop freed up 176GB of hard drive space. Despite being relatively tech savvy (for an old man), I’m embarrassed to admit that I had no idea that this had been plaguing my laptop (and other machines) for years as I upgraded from Windows 8 to Windows 8.1 to Windows 10.
    • Incidentally, I also learned the newest version of Dropbox (which you have to reinstall manually) has a smart sync option which keeps all items on the cloud until you need them. Only when you need to access them does it download the file. After a couple weeks of not using the file, it removes it from your hard drive. Brilliant. I freed up a bunch of hard drive space with this new feature.
    • The primary reason that I didn’t upgrade to Windows 10 when it came out is because we rely heavily on Windows Media Center for our OTA (antenna) TV DVR, which we use to record Shark Tank, America’s Got Talent, American Ninja Warrior, and This is Us. Windows 10 does not support WMC (a huge bummer). We’ve had mixed success with Plex’s DVR through the years so I could never commit to the Windows 10 upgrade. However, after some trial and error, I’ve got Plex configured really well to replace WMC. It’s currently $120 for a lifetime subscription to their software (we paid this fee over 3 years ago). The Plex server software runs on our desktop PC and turns it into a media server, serving the entire library of our movies to any of our devices in the home. The one thing Plex’s DVR does not do well is facilitating the watching of a TV show that it is still recording. Hopefully they improve upon that in future years.
    • Being able to watch free HD live TV on a computer, phone, tablet, or TV is pretty sweet.
    • Like our cell phone setup (which is essentially free), I cannot tell you how liberating it is to not have a monthly TV expense coming in despite having a fully-functional HD DVR for all the major networks set up (thus including major sporting events). I recommend it. To do so, you’d need:
      • An ~$80 digital TV tuner (I love the SiliconDust HDHomeRun series).
        • This TV tuner integrates with your home network and streams TV to any device an app (phones, tablet, computer)
      • A ~$20 antenna
      • A $120 liftetime Plex Subscription (only if you need DVR functionality).
        • Who wants to watch commercials for the rest of their life? The $120 is a no brainer.
        • Reddit said that Channels DVR is better than Plex as an OTA DVR, but I couldn’t justify an $80/year expense in perpetuity for marginally better DVR performance.
      • A Roku dongle to load Plex app if your smart TV doesn’t support this natively.
      • Alternatively, if you’ve already bought into the Amazon ecosystem (with Fire Sticks, etc), then this Fire TV Recast looks pretty sweet, which has the server, the TV tuners, and the DVR all in one ready-to-go unit (link).
        • The advantage of the Fire TV Recast over my Plex system:
          • Much more idiot proof.
          • Stand-alone unit as opposed to software running on a desktop PC.
        • The disadvantages of the Fire TV Recast over my Plex system:
          • Requires buy-in to Amazon ecosystem.
          • Can’t watch recorded shows on phones / PC; only TVs with Fire TV sticks.
    • In my researching of TV systems, it seems that $50/month Youtube TV looks sweet for those who are less frugal than me. It appears to be pretty slick. The Bogleheads approve.
  • Over dinner one night, I was struggling to come up with a conversation topic with the kids. Too often, the topic devolves into the most recent made-for-TV Disney movies, or teen romance novels FC1 & FC2 are reading. I suggested we talk about marginal tax rates, so I brought out our haggard kid Ikea easel to the table and gave a 30 minute lecture to my kids about payroll taxes (including the employer’s contribution), tax incidence, the progressive tax system, and utilizing retirement accounts to capitalize on tax arbitrage. After 1 minute of discussion, 80% of the children skedaddled, leaving only my 12 year old daughter at the table. Nonetheless, it was a really rewarding experience. Suffice it to say when she gets a W2 paycheck next year for back-breaking farm work, she won’t be shocked to see that 7.65% of her paycheck is being deducted for non means-tested social welfare programs that, in part, help support her very well off elderly relatives.
  • The police department set up one of those speed indicator thingies on our street a couple of doors down from us. We had the time of our lives running past it trying to get the fastest time. My fastest was 16mph. It reminded me of that great scene from the office.
    • Many months back Joey at Money and Megabytes posted a great video showing the superlative humility of Eliud Kipchoge, who is the first human being to have run a marathon in 2 hours (link). It’s worth watching.
    • I’m officially refraining from celebrating any of my physical achievements for the rest of my life. How can I get excited about sprinting 16mph past a radar gun when Eliud Kipchoge sustained a 13.16mph pace for 2 hrs, running an average of a 4:34 mile? I feel similarly when thinking about the climbing achievements of Alex Honnold, Tommy Caldwell, or Adam Ondra. A few months ago I expressed happiness for running my first 6 minute mile (in crocs!) at the age of 37. In hindsight, this seems as silly as celebrating tying my shoes correctly.
      • I think there is a deeper lesson here. “Comparison <with others> is the thief of joy” is a phrase I heard first on the Bogleheads forum recently, with the insertion made by me. If I compare my climbing or running milestones with world class athletes, I will inevitably fall on my face. However, I think I’ll modify the quote to be “Comparison with one’s former self is an important mechanism for personal growth and joy”. I like both formulations of the quote, but I’ll continue to rejoice in my minor victories as an indicator of personal growth, however trivial they appear on a relative basis.
  • It snowed. It’s getting dark. With windchill, I biked to work in single digit temps.
    • Hello darkness my old friend…I’ve come to talk with you again…
    • And thus begins the 6 months of despair otherwise known as a midwest winter.
  • I took a pretty good fall on my bike while commuting (the second fall in the last 14 months or so and my third fall in 20 years). My single-speed Craigslist bike has two options: fixed gear and freewheel mode, depending on how the rear wheel is mounted. Freewheel mode is what most people are used to riding; when you coast, your legs don’t move. In fixed gear mode, when you coast your legs move too. Fixed gear mode is pretty nice in that you can brake with your legs and it disciplines you into keeping a good cadence on your bike. There is, however, a huge downside to fixed gear mode. If you happen to hit your pedal to the ground while pedaling, bad things can happen (this is true of both fixed gear and freewheel modes, but especially bad for fixed gear mode). As I arrived to campus one morning, I had a “pedal strike” in which my pedal hit a curb (example on youtube). Due to the pedal strike, I lost control of the bike, went over the handlebars, did a roll, and came through relatively unscathed (my pride less so). This crash never would have happened on my new mountain bike for many reasons (no fixed gear issue on mountain bike, much higher bottom bracket clearance, etc).
    • Here’s an email I wrote the apartment complex adjacent to the crash site. Unfortunately, they have not responded.
      • I was biking to campus today and had a catastrophic biking crash right in front of your building. I’m sure your security camera on the North-East side of the building captured it. It occurred on 10/25/2019 at around 8:35am (+/- 5 min). If you could share that video with me for my posterity’s sake, that would be great. If not, please post it to youtube / reddit so that my failure may be the source of joy for many people.
    • I like to learn from my mistakes. Corrective action: I bought $34 replacement freewheel to replace my crapped out one. I will no longer ride fixed gear (I should have learned this lesson when I almost crashed years ago during another pedal strike). Until I get the new freewheel arrives in the mail, I’ve been riding the new mountain bike. It’s been fun.
  • Trick or treating was fun. FC1 put her cross country endurance to the test by running house to house for 2.5 hours like a possessed woman.  I biked while she ran. She’s a chip off the old block.


203GB hard drive space filled up on a fresh installation of Windows 10 (after installing a couple of apps).

28GB hard drive space filled up after running disk cleanup utility. It’s really dumb that the default “fresh” installation preserves all of that crap.


Remnants of the tax chat discussion with with FC1.

My kids played a new sport: roller basketball.

None of my children are very good at rollerblading, but FC3 is particularly unsteady (the nice way of saying “bad”). He is in the process of falling on his butt in this picture.


Public service announcement. Home depot does great kid crafts on the first Saturday of each month from 9am-noon (link). It’s free and the kids have the time of their lives. We’ve been doing this off and on for about 6 years now? The very first visit, your kids get their own aprons. After each craft, they receive a new pin to add to the apron. I mostly hate it because setting foot in Home Depot makes me feel like less of a man (for example, I don’t spontaneously grow more chest hair at the sight of power tools. In contrast, when I see power tools I express horror at their cost and utter confusion as to their intended function). I also hate these kid crafts because I inevitably end up stepping on them as they bring them home and they make their way to my floor. Despite these downsides, we go because my kids love it so much. I’d say ages 4-12 is probably ideal.


We have a 5-year-old family portrait canvas hanging in our living room. Mrs FP begged me to take a new portrait, so I set up the tripod and used my phone as a remote. My camera takes 10 frames per second and we ended up taking 1000 pictures. In 999 of them, one or more of my kids were blinking and/or picking their nose. I think the above is the only picture in which they didn’t do so. Not captured here is the horrific cold & wind; it was in the 30s at the time we took the picture. We had our kids bundle up in coats, then chuck them out of the way as we took the picture. FC5, who is 97.5% Eskimo, insisted on wearing short sleeves throughout the ordeal. The whole process was comical; we’d go outside, throw our coats down outside of the picture frame, take 200 pictures, put the coats back on, then go inside to see how they looked. After concluding that all 200 pictures were ruined by nose picking, we’d repeat the process 4 more times until we got a satisfactory picture.

The only blood drawn by the biking accident of doom. It would have been a lot worse if not for the Kirkland Signature wool socks (4 pack for $10?) that saved the day. I’d like to say that the biking accident caused my shoes to fall apart, but it didn’t. Despite the massive hole in the front of my shoes, I cannot bring myself to replace them even though I have 9 brand new pairs in my basement (literally). Relatedly, an old timer stopped me in the Costco food court the other day to ask where I got my shoes. Apparently he’s a huge fan of the Walu. We are kindred spirits.


This is what my phone said as I started my morning bike commute. Are you kidding me October?!?!?!?!?!?!?


This month’s finances

  • Thanks to reader Zack M, I learned that in-store Walmart purchases quality for 5.25% cash back via the BoA “online” category so long as you use their app to pay. I did this at Walmart and at Sam’s (the betrayal!) this month with success. He also shared how to earn 6.25% at Target (link).
    • This is my first experience using something resembling a digital wallet (though I admit it is not the full Apple/Android/Samsung Pay experience). I’m not sure I fully understand the appeal. I think the main benefit of the digital wallet is security, since each purchase occurs via a uniquely generated digital token. Aside from the security, I think digital wallets are a gimmick. Maybe if I paid $400-$1k for a faster phone it would be more seamless, but the 30 second load time on the Walmart/Sam’s apps on my Moto G4 were a drag. In contrast, my rubber band wallet with a couple credit cards has a lightening fast load time.
  • I added a red line to my annual spending chart at $45k to remind me of my non-healthcare spending goal which we blew through this year. I added an equivalent line to the monthly spending chart. A desired $45k/year in non-healthcare spending translates to $3k/month (=(45k-9k)/12) in non-healthcare spending after removing lumpy property tax payments.
    • It’s evident we will blow past this goal in 2019. Bummer. I think (probably naively) we can hit it in 2020.
    • Looking back historically, it’s evident that we’ve spent too much money since the inception of the blog. Setting up a home has proven to be costly. Raising 5 kids (and now a dog) has similarly proven to be costly. Spending $8k rising to $9k of property taxes each year (in addition to $10k of state income taxes) has also proven to be costly.
    • To hit the monthly goal of $3k/month in non-healthcare spending, we’ll have to roughly stick to:
      • $1,200 food (i.e. all Costco spend which includes laundry detergent, clothing, etc).
      • $1,000 housing ($600 mortgage interest + $150 repairs + $250 utilities), excluding $9k/year property tax
      • $800 everything else
        • $200 car
        • $50 dog
        • $550 all else
      • The above is fairly optimistic (and unrealistic given our spending history), but I’d like to stick to it. $3k/month is a nice arbitrary number that vaguely maps to how we should be doing in a perfect world; a world without broken homes or broken children (and now dog).
      • Given that we’re getting 5.25% cash back on most purchases, there is a bit of an accounting issue here. Thus far, I’ve accounted for the cash back in our financial statements by adding it to our income. Alternatively, the cash back could also be accounted for by lowering our expenses (which is what “travel hackers” implicitly do). Thus, the few thousand dollars of cash back we earn each year lowers the effective cost of our spending. If we don’t meet our spending goals this coming year, perhaps this weird accounting issue could help us to meet our goals.


  • The good:
    • No catastrophes.
    • Our ambiguously defined “other expenses” category, which captures all non-food, non-housing, non-auto, non-dog expenses (like travel, entertainment, and kid stuff like piano lessons) reached an all-time low of $230 this month.
  • The bad/abnormal:
    • $1,587 in dog expenses.
      • Dog (non-recurring)+ dog gear (non-recurring) + dog food (recurring) + vet visits x 3 (immunization visit x 2 + sick visit x 1).
        • Only time will tell if this dog will be the financial ruin of me. I’m hoping these non-recurring expenses drop to zero soon.
    • $399 car registration.
      • $59 cheaper than last year because our cars are getting older. Nice?
    • $49 for 12-month academic WSJ subscription ($4/month after for digital only).
      • I tried living without the WSJ for a few days but found it unbearable. The annual fee is worth it for Jason Gay’s hilarious sports articles alone.
      • I earned 5.25% cash back via BoA’s “online” category. Woot.

Full version is downloadable here (link).




  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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15 thoughts on “Financial Update – Oct 2019”

  1. Visiting twin lakes is a new bucket list addition of mine, though I am not sure I could handle flying in a tiny plane through those mountains to land on a lake. The other two dvds (frozen north & silence and solitude) are pretty good, too. They are all somewhat repetitive, though I think I could watch them every week or so as Alaska seems so beautiful. The Frozen North dvd is loaded with winter footage that blows my mind being from PA/VA!

    • Thanks again for the recommendation! I’ll check out those other DVDs you mentioned.

      Have you seen this guy’s blog? He’s going to all national parks and recently posted about his travels to the same part of Alaska that Alone in the Wilderness was filmed:

      One of the commenters in the Q&A with Kim at the Frugal Engineers is a reader from Alaska. He was pitching the virtues of living there: extremely low taxation + they pay you to live there through the oil dividend + it’s freaking Alaska. His comment spun me into several hours of research on the topic. We’ve had family that lived in Fairbanks + Anchorage. They said Fairbanks was too isolating but Anchorage was nice. I’ve known a couple other people from Anchorage and they only have the best of things to say about it. A snowbird approach would seem to be optimal with Alaska. Maintain residence up there (by spending 183 days/year there) and you’re free to spend the bitter winter months elsewhere.

  2. Great monthly summary as usual.
    You mention the Tax Alpha negating a 30% market loss. That’s an interesting way to look at it.
    Does this imply that you are planning on a 0% tax rate in retirement? Do you have an article somewhere explaining how this would look on paper or a link to one? I know the standard advice is to accumulate sufficient funds in a taxable account and then do a Roth Conversion ladder but I have a hard time conceptualizing this strategy. A hypothetical example of someone who just retired and plans to execute this strategy with a year by year action plan would make for an interesting article.

    • In the Q&A article with the Frugal Engineer last month, Kim is paying precisely $0.00 on Roth conversions:

      Jeremy at GCC blogs extensively on the topic:

      My “book” catalogs the mechanics pretty well: Search the document for “Zero taxes in retirement on $101.2k of income” which is found on page 47.

      • Paying $0 on converting $40k to Roth foregoes $1,400 in refundable additional child tax credit. So it costs at least that $1,400. As I read in the interview, she also has business income. By giving the standard deduction and the 10% bracket to the Roth conversion, the business income is now taxed at the 12% marginal tax bracket from the first dollar. If we see as the baseline the business income, the standard deduction, the 10% bracket, and the child tax credit — these will happen regardless how much they convert to Roth — the conversion is then taxed at the margin, not at a zero cost. The effective rate on the conversion depends on how much the business income takes up the standard deduction and the 10% bracket.

        • Thanks for the correction TFB. I agree entirely with you on all dimensions. I guess I just got too lazy to go into the weeds on the issue.

          The issue of what constitutes one’s “baseline” is an interesting issue (be it the Roth conversion or the business income).

          Piggy backing on the subtleties you mention, Kim could convert $24k/year to a Roth and get paid the refundable $1,400 CTC. Therefore, the contribution was tax free going into the Trad 401k; she pays negative taxes while converting to Roth; the principal and gains are never taxed again.

          If she converts $25,000 instead, her pre-CTC tax liability is now $100 (=10%*($25k-$24k)). $100 of her CTC is now used to offset that tax liability, presumably leaving $1,900 which would then have to be scaled down by 70% (=$1400/$2000) to compute the refundable portion of the CTC. In this scenario $1,330 (=0.7*1900) would be refundable. Therefore, in scenario 2 she is left with $25,000 + $1,330 = $26,330. This is $930 better off than before (=26300-(24000+1400)). This implies a 7%(=1-930/1000) effective marginal tax rate on conversions in the 10% region, and a 8.4% (=12%*70%) effective marginal tax rate in the 12% bracket until her after-CTC tax liability goes to zero, at which point the effective marginal rates revert to the statutory rates because there isn’t a weird CTC interaction any more.

          • As you know well, at lower incomes the weeds are quite thick. If their business income is say $35k (because Kim talked about keeping their gross income under $80k), they would qualify for EITC if they don’t convert. If they make a contribution to a Roth IRA they would qualify for the Saver’s Credit. Their child may qualify for the state’s CHIP program. The adults would also qualify for an enhanced Silver plan with low out-of-pocket on their ACA health insurance, versus a high deductible plan. Converting $40k to Roth blows away all those as well. We can say the $40k Roth conversion is taxed at 0% but then the $35k business income is taxed at 25% (9.6% after QBI deduction plus self-employment tax), plus additional out-of-pocket for healthcare. Or we can say the $35k business income has a negative tax rate after all the tax credits, and then the $40k Roth conversion is taxed at 20% or more. Either way, raising the family income from ~$40k to ~80k brings a significant additional tax cost.

          • Agreed entirely that the weeds are quite thick for modest income tax payers, particularly when kids are involved. Thanks again for venturing into the weeds with me regarding Kim’s scenario. It’s not too dissimilar to how I imagine my future situation being, so it’s a productive thought exercise to venture into the weeds.

    • I’ve seen several other bikers with “handle bar mittens” through the years, though I didn’t know what they were called until you said that. In single digit temps and below, my hands get pretty cold wearing only mediocre ski gloves. Thanks to your suggestion, I’ll now be able to find the product!

      • AK guy checking in again. We call them pogies and they are essential gear for winter biking. With good pogies you can wear liner gloves underneath down to -10 F and keep your dexterity. Sounds like you don’t use brakes or gears though, so maybe that’s unnecessary 🙂

        • AK guy is back! Thanks for the email; I just wrote you a detailed response!

          Thanks to this blog post, pogies are definitely going on the shopping list this month!


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