It tools weeks of wrangling, but multiple calls and e-mails to multiple insurance companies have paid off.
Last year, my homeowner's and auto insurance premiums were:
- home: $1031
- car #1: $1233 (comprehensive)
- car #2: $630 (liability)
- total: $2894
Now, after raising deductibles and lots of relentless haggling back and forth, I've gotten them reduced to:
- home: $676
- car #1: $620 (still comprehensive!)
- car #2: $267
- total: $1563
So I just saved $1,331 per year. Not bad at all. Between this and the $2715 savings in health insurance premiums when the SO and I both switched to high-deductible health plans, and this is a good year for insurance. Probably should have done this sooner, in retrospect, but from now on, I'm gonna keep a much closer eye on the insurance bill -- because jousting with insurance agents could be way worse.
Viewing the 'Quantitate!' Category
It tools weeks of wrangling, but multiple calls and e-mails to multiple insurance companies have paid off.
I just spent the majority of this weekend working on a comprehensive financial spreadsheet tracking every single investment transaction I've made in 2015.
(I know, I know, I have NO life.)
I'm using GoogleFinance functions that dynamically update share price and market values, and I am having a blast using pivot tables to break out the data in a variety of ways. Behold the plots I've done so far --
Asset Allocation pie chart (excluding stock options) --
Asset Location bar chart showing asset classes in various tax buckets --
Which accounts and funds my investments have gone --
Cumulative timeline of this year's 401(k), IRA, and brokerage contributions --
And now I know that I'm $24,869.60 short on my target allocation for international equities. And I can also recall random Vanguard fund tickers with disturbing familiarity, heh.
Quick snapshot of the financial situation as of close of business 9-Apr-15:
Home: $169,378 minus ($129,766.66) mortgage = $39,611.34 equity
- 401(k): $113,746.98
- Roth IRA: $115,696.03
- Rollover IRA: $65,449.31
- Rollover IRA Brokerage: $9818.84
- HSA: $1132.78 (currently in cash; need $2500 minimum balance to invest)
- Taxable: $149,983.61
- Stock Options: $294,073.85 vested (out of $504,931.90 total)
Net Worth: $819,710.37
In recent weeks/months, I've made the following adjustments to my portfolio:
- Swapped 20% of my 401(k) from Vanguard Institutional Index (VINIX) to Vanguard Extended Market Index (VEXAX) to approximate the Vanguard Total Stock Market Index (VTSAX, which I can't get directly in my 401(k)), and balanced my future contributions to be an 80/20 split.
- Seeded $11K from money market into a taxable VTSAX holding, and will henceforth be using that instead of my S&P500 holding, which I'm retiring.
- Increased my taxable investments from $400/week to $500/week -- because I got a raise and bonus at the end of last year, and what else am I gonna do with it? :P
- Killed my (brand-new ) traditional IRA. I apparently make too much money to take the deduction now.
- I want my domestic to international equities ratio to be 2:1, but I'm at 2.76:1 right now, so I'm aggressively rebalancing my AA more towards international without triggering taxes. All of my Roth IRA and 80% of my taxable contributions are going towards Vanguard Total International (VTIAX). If this approach is taking too long (e.g. if by next quarter that ratio has barely shifted), I might buy/sell within my Roth space, or rebalance my 401(k) contributions.
I set a goal in Mint where I called reaching $1M in assets (excluding home/car equity and HSA) "FIRE", and the projected completion date is sometime in 2017 (April 27 at the moment, but it jumps around a lot). I love the fact that market appreciation is actually dwarfing my (fairly substantial) monthly contributions. Go Go Gadget Compound Interest!
The SO and I have finished our tax returns for 2014. Just for funsies, we ran the numbers to see what our taxes would look like if we were to get married.
The results were NOT pretty. Essentially, my income would push him into a higher tax bracket that would nix his traditional IRA deduction, and his standard deduction would nix my itemized [mortgage interest] deduction... and we'd wind up paying an extra $2822 in federal taxes every year. It does not matter if we file jointly or separately -- the two are within six dollars of each other.
Even taking into account the savings of putting him on my employer health plan, marriage would still be a major net loss financially (and I'm not sure if spouses get their own HSA match). We don't have (nor do we ever want) kids, so that issue would does not apply, and other quantifiable benefits (like the spousal estate tax deduction) only apply if one of us dies. And in the case of my untimely early demise, I'd much rather leave my assets (with the exception of the house) to my parents anyway, since they need and deserve it way more.
Social Security is another consideration, but that won't be relevant for a while. And you only need to be married for one year to get spousal benefits, so there's no rush unless someone is actually dying (and I suspect if we're still together three decades from now that we'll be married by then anyway).
So what would it take for the marriage penalty to go away? Paying off the house would get rid of the itemized mortgage interest deduction for me, and the SO could get enough salary increases to phase out of the traditional IRA range all by his lonesome. We might hit the Roth IRA phase-out range faster if married, but I think that possibility is a more remote one due to how high that threshold is.
Joint high(er) incomes don't scale favorably regardless, but if I quit my job (due to achieving FIRE) and my earned income drops, then marriage could turn beneficial if we live off his income alone... but we'd have to run the numbers if I want to employ tax strategies like Roth conversion ladders. If we both FIRE on combined assets, then income would be too low trigger the penalty.
But in the current situation, I can only come to the conclusion that it makes NO sense to get married. I really want to at the very least break even. I realize that this is horribly unromantic, but this is just the way my mind works. I'm relentlessly rational, and the SO is similar, so we fit.
The next time my father nags me about not being married, maybe I'll just ask him to pay me three grand a year. That'll probably shut him up!
Up until now, I've been using Roth IRAs exclusively. I just followed the extremely typical advice for young people to use a Roth, because it's better to pay taxes when one is younger, making less income, and thus in a lower tax bracket.
I also thought that the math worked out better, at least if one assumes a constant tax bracket. In a Roth, you pay your taxes up front, but everything after that grows and is withdrawn tax-free. It's a very simple FV calculation. In a traditional IRA, the same contribution amount goes in and grows tax-free, so you wind up with the same FV as the Roth, but the withdrawal is taxed.
This seems like a bad deal until you remember that you get to keep the taxes that you would've lost with the Roth. If you also invested the amount that you would've paid in taxes, and let that grow over time, it essentially makes up for the withdrawal taxes on the IRA itself, at least if the tax rate is the same. However, that investment with the saved taxes is outside of the IRA, so it is not tax-advantaged, so you actually wind up with less FV than if you'd just gone Roth to begin with.
So I managed to think through all of that, but for some reason, I never questioned the implicit assumption that my tax bracket in retirement would be the same as now (or higher). I guess I wanted to make sure that I "could" withdraw as much as I wanted in retirement, so I didn't see the harm in accepting that I'd have a high income in retirement.
Now that I'm properly thinking through my current income and expenses, it has become abundantly clear that this assumption is false. My savings rate is in excess of 50%, so I am spending nowhere near my current level of income, and my expenses are expected to drop even further once the mortgage is paid off. There is ZERO need for me to replace my current income, so I will be in a LOWER tax bracket in retirement -- and that's a good thing, because it makes FIRE that much easier to achieve.
So it seems like Roth has been the wrong way to go all along. I should've been using a traditional IRA and taking the tax break right now. Oh well.
I've gone and made myself a traditional IRA in Vanguard, and I'm swapping over to it. I may even inquire about recharacterizing this year's contributions. This just goes to show that always assuming a worst-case scenario can cost ya.
(I also have another reason why I'm interested in switching to traditional, and that has to do with the Roth Conversion Ladder, which I'm learning about right now. Maybe I'll write it about it later, after I've got it worked out in my head.)
I realize that pensions are rare like unicorns these days, but I actually have a small one under a previous employer. It's not worth much because I only worked there for three and a half years before being laid off, but the pension is supposed to pay out $261.88 per month starting in 2049 (when I turn 65).
They are now offering what I presume is a buyout. I can either:
1. Roll over a lump sum to an IRA or another employer's qualified plan ($6352.78).
2. Take a lump sum cash distribution ($5082.22).
3. Start monthly payments now ($24.71).
4. Retain the original pension benefit.
Should I take it? To figure out if this is a good deal, I calculated the present value of this future annuity.
Step one: Calculate the PV of the annuity at age 65. I'm arbitrarily using an interest rate of 6%, and a life expectancy of 100 (so 35 years).
PV(0.06/12,12*35,261.88) = $45,928.57
Step two: Discount that to today's dollars using the same rate.
PV(0.06,2049-2014,0,45928.57) = $5975.55
So it looks like the lump sum payment is a reasonable offer. I'm also assuming an extremely long life expectancy, which would bias the value upward. I'm not sure what rate I should use, but 6% is a figure I can hope to beat by investing on my own. I've tried plugging in different interest rates, but that causes the PV to fluctuate wildly.
I am really tempted to take it. If I roll it into an IRA now, I know I'll have control of and access to it before age 65, which is particularly helpful if I'm planning ER. I also avoid the risk of the company underfunding, raiding, or otherwise reneging on their obligation (I'm looking at you, Hostess) anytime in the next 35 years. I have so far been completely ignoring my pension in retirement planning, so this would allow me to take it into account.
I have until month's end to decide. Hmm.
I recently compiled a somewhat exhaustive record our household's monthly and annualized expenditures, I thought I'd share it on the blog.
Housing - $20,739
The mortgage, at $1377/mo or $16,519/yr, is the biggest housing expense, and it includes $2600 property tax and $1031 in homeowner's insurance. I work out-of-state, two hours away from home, so I also rent a room near work where I stay during the work week, which comes out to $310/mo or $3720/yr. I also budget in $500 for various DIY projects such as deck staining and weed whackers.
This is by far the largest part of our annual expenditures, and I’ll talk more about it at the end.
Utilities - $1760
Electricity usage per month is around 320 kWh, which comes out to $60/mo. Water usage is typically 100 cubic feet, or $20/mo. Internet (cable modem) is $30/mo. We don't have (nor do we want) cable TV. Trash and recycling pickup is $20/mo. Cellphones are currently free, because the SO gets reimbursed by his employer and I'm mooching off my parents' plan. Heating oil is spiky and my records aren't great because the SO orders the oil, but I'm guestimating it's about $200/yr.
I'm using long-term (two year) averages for the utility figures, so I think they're fairly accurate. Heating oil is the only exception, because that is highly dependent on the price of oil and the winter weather, but we already keep the thermostat in the low 50s so there’s not much more that can be done there anyway. The only area we might be able to reduce is trash pickup, because we don't generate enough trash to need weekly pickup, but my address is not allowed to use the dump, so I'm kind of stuck hiring a service. If there's no cost to cancelling and resubscribing, I might just sign up for a month of trash pickup a few times a year, but I'd have to look into that.
Automotive - $5413
Currently, we have two cars. Mine is 2 years old, the SO's is 14 years old, and both are paid off. Insurance is costing $1233/yr for comprehensive collision for my car, and $630/yr on liability for his. My maintenance costs are $120 for 2 oil changes per year, but the costs on the 14-year-old car are much higher; maybe $1200 or so? I haven’t really been tracking his car repair expenses, but I'm gonna try to start doing that now. As for gas, mine is around $1300. I have no idea what the SO spends on gas, because he rides in a carpool most of the time and he doesn't track his fill-ups as maniacally as I do, but since he does all the local driving to the grocery stores, I’m guestimating it at $600/yr.
In some ways, cars are a discretionary cost, but we're in a small town, and a car is our primary means of transportation. I have done the research on the public transport options in the area, and it is wildly inconvenient to go to the grocery store or the dentist's office by bus. We also travel regularly to see family out-of-state, and while it's possible to make the trip on public transportation, it was time-consuming and not fun at all. There is also the issue of potential emergencies, like rushing the cat to the vet. At the end of the day, we think it is worth it to spend the money for the convenience of having a car.
With that said, I would love to drop down to a single car in the future. A used but not-too-crappy car would keep both amortized costs and insurance low. Aside from the work commute and grocery runs, we don't drive much anyway, so if I can ditch my commute, I don't think we'd still need two cars. That would save a few grand a year.
Medical - $4682
The SO and myself both get medical and dental insurance through our work. Our health premiums are $1690/yr (me) and $2513/yr (SO), and our dental is $156/yr, and $224/yr. I also threw his $100 annual deductible into the budget, but I haven't been to a doctor in 7 yr (I know! I’m terrible! I better not have cancer). It's kind of sad, how different our health plans are, because even if the SO switched to a high-deductible HSA-eligible plan, his annual premium would still be $1844, which is higher than my normal plan, but it's actually a fair price for insurance.
I half-joke that we should get married just so I can put him on my health plan and save almost $1000 a year. Even taking into account the amount we'd spend on a wedding, we'd break even after a year or two, heh.
Consumables - $5100
This category encompasses all the regular, discretionary but non-emergency spending, including food and entertainment. The figure that drove the last financial advisor crazy was the $160/mo ($1920/yr) I put down for groceries. Yes, that's what we spend, and no, we don't live on ramen (unless it’s homemade, delicious ginger tempeh soup with ramen and bok choy). I don't really dine out either, because unless I'm in a college town or a specialized restaurant, the vegetarian options tend to be either nonexistent or wholly uninspired. The SO does spend $40/wk going out to lunch, but that is how he pays for his carpool, so it should probably count towards the transportation budget. Between these two items, that’s $4000/yr.
Aside from food, the rest of the discretionary budget covers entertainment (generally either Netflix or various video games), pets, and odds 'n ends such as gifts and other miscellaneous purchases. The most costly indulgence is the Broadway tickets we get once a year, but aside from that one night out, I prefer staycations to vacations. All of those total no more than $1000/yr.
Total - $37,695
One-Time Large Expenditures - ???
We do encounter occasional, isolated, large expenditures which I’m not including in the regular budget, but we do have to take into account. Last year, I traveled to California for a wedding, and we had veterinary emergency, all of which cost more than $3000. This year, housing maintenance is shaping up to be the big unanticipated expense.
So housing takes up the bulk of annual expenditures. Paying off the mortgage alone would drop expenses down to $25K. If I'm no longer renting and driving out-of-state, that would chop off another $5K, and would drop annual expenditures down to $20K. Most of the other categories, such as utilities and medical/dental premiums, are fairly inelastic. We definitely need both cars right now, but maybe we won't in the future. There isn't much fat to trim in consumables, either.
At our current expense level, I would have to bring in $40K / 2 = $20K to maintain our lifestyle. After the mortgage is paid off, I'd only have to bring in $10K to $13K. Obviously this may change, but I am wracking my brain for what I might want to spend more on, and I'm honestly drawing a blank. I’ve never been big on consumerism, and the only areas where I enjoy spending money is food/cooking and pets. And the pets kind of prevent me from being able to have nice things anyway, because it's all just gonna get shredded by sharp (but adorable!) claws and teeth.
What's way more important to me than planning for possibly higher future spending is making sure that I can be fully independent without the SO -- because he might get run over by a truck tomorrow (yes, that is how my mind operates). That means being able to handle the doubling of all expenditures. This is absolutely essential to my peace of mind, and will likely result in a ton of overcompensation in retirement planning/projections, but I'm okay with that. At the end of the day, I'm the only one that I can truly count on.
I adore watermelon -- it is one of my favorite fruits. I'm generally not a big fan of summer (too hot, and sweating is gross), but one thing I do look forward to is watermelon.
This week, one of the loss leaders at my local Stop 'n Shop was a whole watermelon for $3.99.
I picked through the bin, tapping and weighing each one, until I found a behemoth that clocked in at 20.62 lbs.
Afterwards, I ran the math -- $3.99 / 20.62 lb = $0.19 per lb
Hee! I am very pleased with myself.