2017 Talking

Let’s talk out 2017 some more.  I’m tempted to put the $6400 in the savings account over to the Betterment emergency fund, to maintain a decent cash reserve.  That would put the Betterment fund at $11,400.  They suggested $25k, but that was based on my income, not based on my spending.  $11,400 should be adequate for 3 months of emergency fund ($3800/month).  It would cost me $78 in interest to do this.  Maybe less if I invest the money… but it’s volatile.

My friend suggested I just pay it off as fast as possible so I stop talking about it so much as fast as possible.  I am sympathetic to this point of view.  I would like to think about something else, and I know whatever is after this is probably more interesting.

Okay… something else I wanted to do.  What kinds of money did I spend in the first 3 months of 2016?  What might I be tempted to repeat?

Amazon:

X-Files: The Collector’s Set [Blu-ray]

Echo Dot

The Legend of Zelda: Twilight Princess HD – Wii U

Xenoblade Chronicles X

2 of BIC America Venturi DV84 2-Way Tower Speaker, Black (Single)

Videodrome

Sleepwalkers [Blu-ray]

Hurt Locker [Blu-ray]

Pandorum [Blu-ray]

Event Horizon (1997) [Blu-ray]

West Side Story (Three-Disc 50th Anniversary Blu-ray/DVD Combo in Blu-ray packaging)

Stephen King’s The Stand

WD Red 8TB NAS Hard Disk Drive – 5400 RPM Class SATA 6 Gb/s 128MB Cache 3.5 Inch – WD80EFZX

Freeline Skates

Ripstik Caster Board (Red)

Twin Peaks – The Entire Mystery [Blu-ray] [Region Free]

And then an android phone, a memory card, etc. for the Philippines trip, which is when the vacationing started and I really slowed down.  What do we see here?  Well, this is Amazon, so it’s stuff. And it’s mostly toys and escapism.  The hard drive is to hold movies – more escapism.  The speakers are to play sounds that come from games and movies.  The X-Files… I still watch it on Netflix.  So I probably bought that too early.  I guess I should start watching it on Blu Ray :-P.  Anyhow, if I avoid games, movies, and electronics, that should shut down most of my unproductive Amazon purchases.  I’ll still purchase cat litter and protein powder.

Beyond Amazon, I know the most expensive stuff is travel for the summer and for Burning Man.  Last year’s January was pretty damn responsible, with most of my money going for property tax and mortgage paydown.

Feb. had a Dave Ramsey book, a San Francisco trip (to see a friend off for NYC), a video game from Sony, the X-Files Blu rays.  Not terrible.

3/9 and 3/15 are when my tax refunds came in 2016.  March was Burning Man tix.  Also paid $500 for yo-yos on eBay in March, and thousands in May/June.  Yes, the stuff was rare.  No, I can’t do it again this year.  Good reminder for myself: stay the fuck off eBay.  Delete the app from my phone.  Doing that now [done].  Also, I need to unsubscribe from all my eBay mailing lists.  In March I also put out $2000 to help other people potentially purchase BM tix (I was paid back later).  I don’t need to do that in 2017.

April… I see $1599 for AppleOnline… but I have no clue what that was for.  I don’t remember any device or anything I purchased… maybe it was something I canceled?  There’s no way I would’ve missed a $1599 charge.

04/25 1,599.00 DEBIT CARD PURCHASE 042316 APL*APPLEONLINE 800-676-2775 CA

I’m thinking this is a macbook air I ordered and canceled.  That would make the most sense.  Weird… I don’t see the refund.  Oh stupid me, this is probably the WWDC ticket my work reimbursed me for, so of course I wouldn’t see the refund.  Okay… anyway… yeah April, May, June really everything just fell apart with me buying rare yo-yos and vacation spending.  Total nerd orgy of spending.  Can’t do that again.  Okay… well nothing too shocking.

Note to self: buying toys didn’t solve the boring parts of 2016.  So in 2017… play with your 2016 toys.

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Year Summary

$57,542 seems to be the savings total for 2016.  The previous high was $55,622 in 2014, so I have managed to hit an all time high, which feels good (and is necessary to beat inflation ;-).  It’s clear 2016 could have been even better though, if I hadn’t spent the money on the new computer/desk stuff, and if I hadn’t taken such expensive vacations.

I added in some new savings accounts I didn’t have in the spreadsheet before.  It’s going to need some cleanup after the IRA and 401(k) rollovers, opening of the Betterment e-fund, and my recent trend of actually using my savings account for… savings.

I really wish the Google Sheets chart I generate would be even on the x-axis in terms of time.  As is, it’s distorted and fixing it is too annoying.

Screen Shot 2016-12-30 at 9.59.35 AM.png

If you look at the big fat red section, that represents Edward Jones.  Understand, this graph represents my behavior — my contributions and withdrawals from savings.  It doesn’t represent the actual account balances or investment performance.  The balance on EJ accounts is now zero, so what the remaining $6400 height represents is loss from the investments in that account.  In other words, I contributed $6400 to those accounts during this time span that I never got back.  The IRA account may have done better, but $6400 is unacceptable.  Ugh.  Glad I’m out of that bullshit.  And that’s not even considering the opportunity costs of those investments.

$57,542/$98,383 (take home pay based on $159k income, which is a little too high) = 58.4% savings rate.  That seems good.  Clearly I need to make better decisions about how I’m investing.  I think Betterment is a great start to that.

Man, $98k on $159k, really?  38% tax rate.  I pay more in taxes than I’m able to save for myself.  Uggggghhhh.

I looked at the total savings and picked the first data point for every year to get a roughly even distribution in time:

Screen Shot 2016-12-30 at 10.53.11 AM.png

Tomorrow Morning

Tomorrow morning is my next paycheck.  I bought $140 worth of alcohol for a whiskey tasting on Jan 1.  I think I’ll keep one bottle and give one bottle to my stepdad.  Even with that “bad” spending, I still have $87 left after accounting for all December expenses, so I’m gonna call that a win.  I can put $3412/$4350 into savings in this paycheck.  78%.  It would’ve been more but I added another $250 for food for the first 2 weeks of January.

I’ll have $6400 in the savings account.  After that, it’s +$4850 bonus +$5000 January savings, and I have my $16,000, although admittedly not as much as I calculated earlier, which I guess didn’t include $140 for alcohol.  Well fuck it, I’m going to make that monster payment at the end of January.

I made it to more like +$2268 savings for the Dec. 30 paycheck.  Looking back, I suspect my $2800 was probably $250 fake to begin with because I didn’t plan to eat in the first half of January (oops).  Then the $140 of alcohol knocked me down more… and I paid for a $40 dinner, $20 shooting range thing… all good expenses because they represents gifts to the family during the holiday.  That accounts for $450.  I feel okay about it.

The Time Value Ripoff

I wanted to write this to make it clear what happens when an investment company charges you a fee within a retirement account.  These companies make their money by fucking people over in complicated ways, so I wanted to lay it all out.  The problem is that the real fee comes 30 years after the fact, when you retire.

My 401(k) rolled over from Great West Retirement Services to Betterment.  Great West decided to charge my account an $815 termination fee.  That’s about 4.5% of the money I put in ($36k).  My company said they would contribute $815 to the following year’s 401(k).

Consequences in different scenarios:

(1)  Me.  I max out my 401(k).  After the fee, I have $815 less under a tax shelter.  On a 30 year plan at 7% investment earnings, $815 turns into $6204.  Invested outside the tax shelter, it likely only gets about half of what it would be get when sheltered: $3,102.  So I’ve lost $3,102 in future dollars.  Assuming inflation is 3%, $3,102 future dollars is about $1,323 in today’s dollars.  It’s an impact of opportunity cost.  B/c GWRS decided they would charge that fee within the account, I have $1323 less at retirement.  But of course none of that is shown up front, and that’s even accounting for my company’s generous offer to make up to the $815 fee.

(2) Somebody who contributes < $17,185 to their 401(k).  In this scenario, the $815 is invested for only 29 years instead of 30.  29 years is $5,798.15.  30 years is $6,204.  $406 dollar difference.  Accounting for inflation, it’s ($1323/$3102)*$406 = $173 less at retirement.

Okay, so fair enough, (2) is a bit bullshit because the fee was charged in December and made up in January.  The money is unplugged for X many days anyway for the rollover.  The calculation isn’t really 29 years vs 30 years, it’s more like 29.9 years vs. 30 years, but there’s still a “hidden” time value cost on average.

When you max your retirement, any money that is stolen from the account has a much higher opportunity cost (b/c there is so much benefit for money under the umbrella, and when you’re maxing and somebody steals money, you can’t make it up by contributing the following year).

A little detail planning.

I harvested $210.88 out of Lending Club cash.  $5000 in the Betterment E fund.  $2807.62 in USAA savings.

On December 30, I should be able to save $1137 + $2800.  That gives me $6955.5 in savings outside Betterment.  So I should have the $6k available for the Feb. 1 mortgage nuke.  $955 in cushion.

January 13 should give me $3285ish in savings.  January 31 should be $2078ish.  total is $5363.  If the bonus is $4850, that totals to $16,213.  So the math still seems to check out…

The Great West termination charge ended up being $815!  WTF.  4.5% of $36k invested.  Need to get myself away from all these bloodsuckers.

Early Withdrawal

I learned that my previous 401(k) company, Great West Retirement Services (GWRS) will be charging me a “termination fee.” My employers said they’ll contribute to my 2017 401(k) to make up for this fee, but it still reduces the overall amount under the tax shelter.  This is the kind of evil bullshit the finance industry is best at.  Nothing I can do.

I’ve been thinking about the more aggressive condo paydown plan.  It’s becoming more appealing over time.  Specifically, because even if I only execute part of the plan, it still puts me in an emotionally appealing spot.  If I only execute 1 month, the balance goes from $50k to $33k, 1/2 to 1/3!  If I execute only the first 3 months, the remaining balance is $18k, which is pretty damn low.  You know that can’t last more than 18 more months.  I could do 3 months of condo, and then switch to maxing the 401(k) for the rest of the year with good confidence that I could return to the condo pay off and kill it in 3 months.

Another thing I could do is only focus on the first 3 months period.  Perhaps phrasing it that way would make it easier to sacrifice more.  If I eliminated all my savings in that 3 months, I could do $16k+$11k+$8k extra, leaving me with a $12k balance (and no savings), but with 9 months left in the year to take care of everything and a guarantee that the mortgage would be dead in early 2018, worst case scenario.  No savings isn’t the best plan for job switching, but maybe I’ll know by then whether I am going to switch jobs.

Future me would have a mortgage balance of $3k or $4k in that scenario.  He’d feel pretty good about that, right?  What if I had a mortgage balance of $4k right now?  Well, it would be nice, but I’d still have a mortgage payment.  I’d really want it to just be dead.

Realistic?

Okay, let’s compare the first half of 2016 with what I’d like to save in the first half of 2017:

screen-shot-2016-12-22-at-3-47-11-pm

For the first 6 months in 2016, I saved $24k, or about $4000 a month.  This also includes the mortgage principal, which is sad, because it means my savings were only $3k / month not considering the mortgage payment.  In 2017, I want to pay off $50k in that same time period.  Subtracting out some stuff:

$50k – $6k (savings) – $5k (bonus) – $3k (tax refund) = $36k.  Then it looks suspiciously like $6k a month.  $1k of that is the normal mortgage payment, so savings better be at $5k.  But last year it’s pretty clear I was only able to do $3k: 60% of that.

This is assuming a really, completely, unpleasantly bare bones budget for 6 months in a row.  Like, not just *not* eating at restaurants, but also eating more food at work for free.  Will I be able to do that *and* purchase the magical cat detecting food bowl?  Of course not.  I have to be socially weird if I do this plan.  6 month hermitation.  Or I have to sell stuff…

The savings for the second half of 2016 is looking to be $34k.  That’s a lot closer, but it includes a $5k bonus (and a $2.4k property tax payment).  Good that it is improving.  Looks like most of my success is going to be in vacation ignoring.

2017 Rules

  • no restaurants (safeway hooray)
  • no steam purchases until condo is paid off
  • no new video games or movies until the condo is paid off
  • no new electronics until the condo is paid off
  • no vacation until the condo is paid off
  • yoga 6 times a week
  • no alcohol until the condo is paid of except with people who called dibs