spacefem, posts by tag: finance - LiveJournal

You know I felt bad about our spending this month until I saw that it was the lowest since February. Maybe this is just how we are. Of course, the other months we had big house stuff we were buying... so it's hard to tell what the number should be. I decided to do something different for this spending report. Rather than just stare at the numbers, I pulled our report from January.

January was a fantastic month for us, we had an official DON'T BUY ANYTHING, nothing went wrong in the house, we didn't even leave the house. It was the peak of a global pandemic. I was working from home, and hating that, there were no parties and no place to take the kids. But we did awesome on the budget! So I figure that should be our baseline, "needs only" line in the sand, right? How did we do?

Groceries: $1122 in August compared to $950 in January. Not too far off really, we were going to the store LESS in January and attempted to avoid all junk food... marc and I had "dry january" with no alcohol, so the kids had "no cookies", they told me this was bullshit but somehow survivied.

Restaurants: $423 in August compared to $121 in January. Yeah, I know. Well I will say that $116 of that was one nice dinner Marc and I treated ourselves with to celebrate our 14th wedding anniversary! We can do that once a year. January had 7 little one-meal drive through trips and one $60 takeout order. August had 19 restaurant visits. Besides lunches out, there was a trip to the zoo with the kids concession stand lunch, a girls night out I went to, I brought donuts in to work, we had a fun day it hutchison when the cosmosphere was free and had to eat at the famous anchor inn mexican buffet.

Automotive: $118, nothing in January. We did not go to car washes, didn't buy washer fluid.

Pets: $190, nothing in January. We had a pet food order come in ($80) and paid to board the dog while we went camping with my sister.

Shopping: $341 in August, $256 in January. You know, I had it in my head that we were PERFECT during "no buy January" but there was an amazon order on the statement! I never do those anymore. The biggest shopping trip we had in August was a $150 trip to Target for school supplies. Okay, there were a couple shirts in there. But this was after we scoured the house to use last year's school supplies... the schools always re-ask for classroom stuff, paper, dry erase markers, that doesn't just live around the house. Both months were lighter on shopping, to be honest.

Oh, about $60 of January's shopping was to Nintendo for switch subscriptions. We apparently had to do something during pandemic, no-shopping month.

Gas: $327 in August, $118 in January. I guess even my short little work commute is a thing.

Alcohol: $174 in August, $67 in January. No comment.

School registration: $170 in August. Public schools, two children, registration fees for who knows what but this is a thing every year.

Donations: Donations were the same except $150 to Heartspring, an organization that helps kids with special needs, for their annual Pedalfest bike ride. Despite our efforts though Pedalfest has gone virtual. So I'm putting that in the donation bucket.

This all feels like a bunch of little stuff but when I add it all up it's $1500 difference! Which is... about what the totals are. egads! I don't know what to hold my family to, that's the hard part. once you spend less than you make, your motivation is just to not be an overconsuming asshole. where's that line, I always wonder? my family would set it in a very different place than me.

There are many good ways to track spending. Mine is weird, but it's working for me, I don't see any downsides, so I'm going to write about it.

First here are two ways that I don't use.

Dave Ramsey recommends the envelope method. When you get paid, you convert it to cash, and sort it into appropriate envelopes based on your budget. When your "grocery" envelope is out of cash, you scrounge around that week. He hates all credit cards. The downsides I see to this: it sounds like a real pain in the ass, you have NO real record of where cash goes, and you miss out on credit card points, which I like. Upside: you definitely won't get into credit card debt!

Most of my finance communities OVERWHELMINGLY recommend an app called You Need A Budget. It lets you assign a "job" to each dollar and tells you automatically where you're at. The downsides I see: first, these apps will require you to input your credit card and bank info for easy tracking, they have to, you can do it manually but that sounds awful. Second, the app is $12 a month after the trial. Its users say it's worth every penny but... you know, pennies.

Maybe that's my pattern. I hate all manual tracking. I hate the idea of putting my receipts into a place and writing them down someplace.

So I use the credit card method. All the credit cards I currently use at least have a website where I can check my balance whenever I want, a notification setting to text me when they're used, and a download utility where I can go get a csv file of my transactions to mess with in a spreadsheet.

The chase app is my spending card because it has this "weekly snapshot" where I can see at a glance how much I have spent this week, including the pending charges that I just swiped 30 seconds ago. I'd like to know about any other cards that have this because I use it a lot:



I don't know if chase is the best for points/rewards all the time. Some travel hackers love it but I am not them. I mean yes if I happen to know that I get 5% on groceries this quarter with my freedom card, then transfer those points to my sapphire and then to hyatt rewards for 50% off a hotel, it's like I get $10 back when I spend $100. If I don't use the special categories, don't need a hotel, then it's $1. Complicated as hell. But if you're a US person and you want to try it here's my link.

The more simple card is the one I have from fidelity that gives me 2% back no strings attached auto-deposited into Josie's college fund. $2 back on that $100. No thinking required. But the spending tracker isn't as cool, they don't have an awesome app, so it has become my Card in the Drawer used for spending I don't have as much control over day to day so I don't need to stare at it. Automatic bills, subscriptions, charities... it'll be the same balance every month and it'll be very boring. I can watch my spending card to limit my spending, without it being clouded by "well I spent more this week because of the electric bill" or whatever. Those things confuse me.

I tell everyone getting their first credit card that the trick to avoiding debt is to know in advance what you plan to spend on it and what you're going to use it for. Don't just start buying stuff. Spend consciously. Know that you are going to spend $1000 on groceries and $100 on clothes, or whatever, and then you'll be able to predict what the bill is and definitely afford to pay it off every month.

I program all credit cards to message/text/alert me when they're used. Yes, even if I swipe it myself. This sounds like a pain, but it helps me hold each transaction in my hand individually like Marie Kondo, so I can ask myself if it sparks joy. If an auto-bill crept up this month, I'll know it. If a subscription I don't use is on there, it has its time on screen to be specifically considered. If, heaven forbid, a card is ever compromised, I will know pretty quickly.

At the end of each month I get the statements for my cards. I record the "purchases" line on a spreadsheet I have kept forever. It has each card's purchases total, the whole total spending, and a notes section where I keep track of big unexpected expenses of interest in case I'm wondering why my total was high. Repairs, vet bills, the house breaking... I've learned that there's something pretty much every month, so how much is it? Or maybe we had a fun trip or made a big donation. just a few words explaining myself.

I also download a .csv file of all transactions. I've only done this for a few months, and really, you should only do this if it's fun for you, it's work. but it's interesting to me. Every credit card I have comes with this utility. You can even download a year at a time. I combine them all together, sort by "merchant", and categorize appropriately. I do not keep track of individual things I buy, just where I buy them. I assume that if I spent money at the grocery store it was on groceries, and try to stick to that, even though it's only 90% or so true that's good enough for me. Most things we buy at Target are Not Groceries, Kansas still has specific liquor stores where we buy alcohol so that helps, all the odd merchants get throw into the "shopping" category. Doing this helps me understand our best case scenarios, worst case scenarios, what a "good" month looks like, what a bad month looks like, so when we want to talk budget we have great ideas of what we should be spending.

There are lots of good tips out there. Most of them acknowledge the fact that a month is a long time, and to keep credit cards in check you should have a system for checking in more often. I think one of my lj friends said they pay off their full balance every week instead of every month, I like that. All I know is that I used to have credit card debt and now I don't, I'm on like month 40 or something of paying everything off every month. I got out of the debt by staring at that "purchases" total on my statements and trying to predict what it should be... less than my income, that's the magic yet totally unsurprising answer! Sat down, made a budget, and started tracking.

To summarize:
1) Two credit cards: one for spending, one for auto-bills
2) I have predicted what the balance on the "Spending" one should look like, per day/week/month, and I watch the balance very closely
3) The whole story is told by the "total purchases" line on my statements

I get a lot of questions when I post my spending entries, so I wanted to sum this up. I am not a financial expert but this is working for me. I've paid off all balances for something like two years now, it seems like a good run.

compared to our may spending report...

Restaurants: $330, about the same as May. I'm happy to say that our two biggest restaurant bills were a ton of food for my birthday party, and a ton of pizza when my sister and parents visited.

Groceries: $1175, darn close to the budget!

Alcohol: $129, down from $200

Home improvement: $805. The last bit for the backyard, but mostly a plumber for the sewer line (sigh) and the quarterly exterminator guy comes out. Hey, it's down from $1640 last month!

Car repairs: $1569 to fix marc's breaks and bearings. we have spent $4500 this year on a car that I think is barely worth $5K. The problem is 1) it's all been a little here, a little there. Not one big thing that cost $5K so we could look at it and say "the car is totaled!" the other problem is that used car prices are so high, we wouldn't dare buy another car this year. So I REALLY hope that the money we've shoved in will please the car karma spirits (carma?) and they'll leave us alone for a bit?

I deposit an amount that closely resembles a car payment into an emergency savings account each paycheck. I feel zero guilt about dipping into that fund this month for our stupid car.

Other stuff: $100 for AAA hit. I need to call my car insurance to see what roadside assistance would cost through them. nothing like a "surprise!" annual subscription when you're watching spending really close.

$60 for AT&T to activate Josie's new phone. The phone itself will only cost $10 a month which is great, and the activation fee should have only been $30. But there was a chance there for AT&T to double charge us and if there's one thing they jump on, it's screwing up a bill. I'll call them.

Gas: $300

Shopping: $530, up from $418 in May. I REALLY want new running shoes, mine are shot! $200 was hair dye. Don't get me started, Marc's DJ fund is paying for it - him and the girls are way too latched into the vibrant hair trend and I bitched at them about it but at the end of the day, I am being outvoted.

Vacation: $200 on tickets to six flags, tickets to a cave tour... that is the tip of the iceberg pre-sales on vacation. the rest will all hit july and the restaurant tab alone will be zillions. but that was our biggest trip of the year, and we used points to get a free hotel, and no flying anywhere. I should try to relax.

If you like my spreadsheet rabbit hole finance posts, then you're weird and I'm surprised you exist but you're in for a treat.

According to Wikipedia The FIRE (Financial Independence, Retire Early) movement is a "lifestyle movement with the goal of gaining financial independence and retiring early." This article was started in 2018. Apparently the idea started decades ago, and most of the concepts started decades ago, but these past couple years it's taken off.

I got into it because I like to live below my means and they have the good ideas for it.

FIRE people (and maybe other people) assume that the stock market increases 4% a year. Or if it increases 7%, inflation might be 3%, net 4%. The picture has been better than that in recent years but 4% is apparently safe. It also means that if you save up 25x your annual expenses, you can live off stock market earnings. If you spend $40,000 a year, and save up $40K x 25, that's $1M. 4% of $1M is $40,000. Every year, forever, in theory, you can scrape off $40,000 off the top of your portfolio and you'll still have your $1M. (cue your favorite canadian band now if you'd like)

So there are two ways to achieve FIRE... get your required expenses down, or get your savings amounts up. If you spend $30K a year, you only need $750K. If you spend $75K a year, you need $1.8M.

I like my job and am not terribly interested in early retirement, but as a cheap engineer who loves math, I can't get enough of this, because it gave me a reason to use excel's NPER function... number of payments required to achieve a future value.

nper(rate, payment, present value, future value)

first you plug in numbers, like if you spend $40000 a year and can save $10000. You'll notice that "salary" isn't a thing that matters in the formula. I mean it makes life better, but it doesn't tell the whole story, one could earn $500K a year and give $400K to charity, save $20K and need to spend $80K. Then they'd only care about the 20K/80K in the formula. Likewise, I'm doing stuff like saving for a vacation and saving for my kids college that doesn't really "count" towards anything, they are not required expenses or contributing towards my retirement, so it all goes out the window. All that matters is expenses, and savings.

nper(4%, -$10000, 0, 25*$40000) = 41 years

SO BEAUTIFUL. I love spreadsheets so much. this works in microsoft excel or google sheets and who knows what all else.

Then as you play with the numbers, you realize that it's only the ratio that matters. If you save as much as you spend, you reach FI in 18 years. Doesn't matter if you save $10K/spend $10K or save $80K/spend $80K.

I translated it all to a "savings rate" because people like to think about that. Savings/total = savings rate. Save 10, spend 40 means you're dealing with 50 TOTAL and saving 10/50 = 20%. Not 25%... everybody with me? Savings/(savings + spending) = savings rate.

And here's where I fell out...

5% - 77 years
10% - 59 years
15% - 49 years
20% - 42 years
25% - 36 years
30% - 31 years
35% - 27 years
40% - 24 years
45% - 21 years
50% - 18 years
55% - 16 years
60% - 14 years
65% - 11 years
70% - 10 years
75% - 8 years
80% - 6 years
85% - 5 years
90% - 3 years

Yes that's right, if you have a 90% savings rate you only have to work for 3 years (I rounded up). That means if you earn $100K, save $90K and live happily on $10K, you'll have the $250K required to retire really soon! If your living expenses are $40K, you have to save $360K a year to do the same thing (actually you'll have $80K extra, just send it to me as a thanks for writing this entry).

Most of us strive to achieve 10%, then at some point realize the 17 year benefit of getting to 20%. And of course it doesn't tell the whole story. Will I get social security? Maybe. Will I have healthcare costs that aren't included in my "required expenses" now? Maybe. Will it even out in the end? Maybe.

But only goodness can come from saving more, and spending less, and I find this very motivating.

Last year I announced that I'd paid off my home mortgage by my 40th birthday. It was a 15 year mortgage, but we paid it off in 10 years, I was really proud of myself. I did this by 1) being cheap as hell 2) increasing my monthly payments, so some more went to the principle every year, 3) throwing every random side gig/bonus/tax refund etc at the house. I also built up an emergency fund and saved up enough to buy my latest car with cash. And I always contribute to my 401K. But I wasn't invested anywhere else, didn't start the kids college funds, didn't have a roth IRA, didn't know how to even begin with it.

This year I wanted to get started on some of that so I've done lots of reading and most places I've read said I was silly to pay off the mortgage early. I like to know the truth, and I like spreadsheets, so I ran the real numbers.

I THINK my mortgage was around $130,000 and 3.5%. Based on that I had to pay, on average, an extra $360 a month to pay it off in 10 years instead of 15.

I saved $13K in interest.

If I'd invested the $360 in the whole market index funds I know about now, I would still owe $40K on my house. I'd have a $107,000 portfolio. That's using real prices of whole market index funds (VTSAX, FSKAX), not stock market growth assumptions. It helps that the stock market has done awesome... but even the crashes would have been kind to me. In the terrible crash of March/April 2020, I would have had $57K in investments, and only owed $50K on the house.

I basically would have been "ahead", with an investment account outweighing what I owe on the house, a whole year earlier.

I'm not really sure how to feel about this. I guess if I was totally logical I'd shrug and say I made a decision that cost me (107K-40K = $67K) and feel bad about it. If I'd made some other decision that lost me $67K I would be LIVID and full of regrets. But having a paid off house feels really good. It's freedom, I do not HAVE to make a mortgage payment, it lowers my required annual expenses by a lot. That's a grand total used in calculating emergency savings and retirement requirements that I have real goals for. In the meantime, I am making a lot of great strides in taking what I made in payments and getting it saved/invested instead (well, when I'm not using it to fix said house... we put a lot of projects off too).

I know I'll never be able to buy into stock market index funds at 2020 prices again (or 2012, or 2016...) but I'm oddly okay with that. Or maybe I just don't want to feel bad about my decisions? We'll never know.

I've always struggled with conflicting advice about emergency funds. I think I am developing my own ideas.

Dave Ramsey's baby steps say to make sure you have $1000 in an emergency fund, then pay off debt, then build your fund to 3-6 months of expenses. Well which is it? 3 months, or 6? Suze Orman says it should be 8 months! If the average income in my neck of the woods is $60K, are we telling people to put $45K in low-interest savings accounts?

I struggle for a few reasons. First, most obviously, that's a LOT of money to save up. That is not a few months of saving, that is years! And once you have it, you really don't use it? If you can buy a freaking car with your savings, shouldn't you do that instead of taking out a loan?

Second, if you do save up that much where do you put it? An untouchable place? Can you invest any of it? I think a lot of my financial reading-up this year happened because my old go-to, credit union CDs, shifted to about nothing in the interest rate department.

After some reflection in my life, I'm starting to realize I have two very different types of "emergencies" to deal with, and some different approaches.

Normal emergencies happen WILL happen every year. Car repairs, vet bills, appliance replacement, who knows. Shit happens. I must accept it.

So I totaled it all up and looked at my year. I had a $5K over average month, when our fridge died at the same time marc's car needed some major repairs. So that has become my emergency cushion. I thought about our average car repair or vet bill, kinda doubled it in my head, rounded up, thought about my history of unfortunate coincidental events, and that's what I think would be a good level of cushion in the boring checking account.

Then there's the Abnormal Emergency that I've never encountered: the OMG society is crumbling I just lost all my income how will we live. I have no idea how to plan for this.

I do think investing SOME of the money I save for that might be okay though. The stock market can tank, yes. Frequently by 30-50%. But that seems like an easy thing to work around. Whatever my goal is for the fund, make it 30% higher. An emergency fund of $20K in a bank is $20K. An emergency fund of $20K invested in the stock market is like having $14K in the bank, because it can go up or down.

I mean, if it's a six month emergency fund, that means you wouldn't need ALL of it during the FIRST crisis month, right? You could leave a smidgen invested to maybe recover?

Or if it makes you nervous, leave half of it in safe savings accounts?

there is just no winning. there is plenty of confusing.

But I do think we need to plan for both normal and abnormal emergencies, depending on our lives, and really separate them in our heads. Maybe three months in cash, the rest invested, and then shrug off everything else.

I go back to my old stock market charts... if you were the worst at investment timing back in 2016, you'd still be ahead of the terrible 2020 crash. Your 2016 $1000 would have grown a lot, then when the market tanked it'd be $1000 again. If you needed it you could take it. If you didn't need it, it'd be $2000 today. That seems like an okay story.

This was an interesting week in stock market land. It went down a lot, so the discussion in my finance groups went all over the place, with three main ideas on repeat:

1) People who were worried it was crashing more so maybe they should stop investing
2) People who are thrilled there's a lower price, so they're investing MORE
3) People saying to ignore all of it

#2 was an oddly popular idea, and it comes up a lot... should a savvy investor hold back cash and wait for the big dips/crashes/down weeks? What's the right time to buy in?

Well... they shouldn't have asked me. Because I have spreadsheets and I like to make very long posts. Buckle in for a long ride, nerds.

I made two characters, and gave them each $1000 per month to invest in VTSAX, a popular index fund of the whole stock market.

- Lucy is lazy. She gets her $1000 the first of the month, and just invests it all right then. She probably automates it, then spends the rest of her month just walking her dog.

- Wendy waits and watches. She gets her $1000 a month, then checks every day for a dip, looking for a window of low-price opportunity. She ONLY invests if this week is .02% lower that last week... I tried a few thresholds but you get the picture.

First I set them all up six months ago. Wendy found a lot of dips! She often had $1000-2000 in her account to take advantage of them.

After yesterday's awesome dip, Wendy bought in. She now has $6250. Lazy Lucy only has $6249. Thanks to all her hard work timing, Wendy is ahead by $1!

I looked at some other times. What if this week hadn't happened, what if we ended this scenario May 1? Well that wasn't good, Wendy only had $6491, Lucy has $6526... Lazy Lucy wins by $35.

December and January is what did it. There were little fluctuations but Wendy never found a good time to get in. There was finally a great dip at the end of January and Wendy had $2000 parked and ready, it fell from $98 to $95 and she jumped at it! But Lucy had bought in at $93 right after Jan 1... without spending any time, it was just automatic, and she'd bought at $92 on December 1, which was an all time high that Wendy said was a terrible time to buy.

Using yesterday as the end point...

I ran it for 12 months. Wendy has $12312, Lucy $12467 - ahead by $154

I ran it for 5 years. Wendy has $87617, Lucy $89278 - ahead by $1660

So then I invited MARGE, who splits the difference... she waits for a dip, and if it doesn't happen, she invests at the end of the month. $88657... still can't beat Lucy because most months go up.

I created people who looked at month to month comparisons for their dips, daily comparisons, changed thresholds... still, nobody beats Lucy. Maybe we shouldn't call her lazy? Is she lucky? Or just darn smart? She's got more money, that's for sure.

Oh and then finally the worst... Peggy who pays a financial advisor 1% a year to watch the market for her and look for these dips, she is $4200 worse than anybody.

I could keep going but I feel like I got the point. And looking at the chart below you can probably see it... the blue lines are the 1st of the month. The orange lines are the nine biggest dips. 4 out of the 9 dip prices are higher than the last monthly price!



So... I'm not a financial advisor and this isn't financial advice, but I do not hold back cash to wait for crashes. I do not pull out funds when the market is high so I can re-invest later. I do not try to time the market. Laziness pays off. I do not watch for dips. I spend my extra time posting on livejournal. Much more fun.

I'm reading "the year of less" and the author starts out by saying she'd report out on her spending by posting to her blog every month. So I'm trying it. I tend to download a YEAR of credit card stuff, once a year. in between I just always look at the "purchases" totals on the statements to make sure I'm on track, but taking a monthly breakdown and writing about the totals might help me too.

Before I get into it, I want to acknowledge that I am coming from a privileged place when it comes to finances. steady office job that I really enjoy, healthy enough to work, my family is healthy, debt-free, we have no huge expenses outside of our control. If you see how much I spend and can't relate to me or just feel frustrated, then don't read these posts. I just don't want to be so afraid of alienating people that I avoid talking about money. we do that too much in our world, and silence means we miss out on good advice.

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I finished "I will teach you to be rich" by Ramit Sethi. Here are some things he believes in:

1) Conscious spending. I call it "don't buy stuff that's not on the LIST" but instead of just applying it to grocery store trips he applies it to LIFE, you consider your priorities and what you want to spend on, then cut out the bullshit getting you down. He doesn't care if you go to starbucks every day as long as that's what your priority is.

2) Automation, which I call the "direct deposit method of budgeting"... I've done this since I was 20. Every paycheck was divided up. Did I sometimes cheat during the bad years and pay normal rent out of my savings? yeah, and I never felt good about it, but at least I was TRYING to divert my paychecks.

3) Swensen Allocation for portfolios. This is silly. It's this yale guy who says you should divide your investments into six different categories that nobody can ever remember. I know I went on an ETF shopping kick last year, but after that dust settled I like the Collins "simple path to wealth" logic. just pick a whole market fund and relax. Collins says you don't even need an international fund, because isn't every company pretty much international now? Seems legit.

Aside from that flaw, the book is funny, charming, and I agreed with probably 90% of it. Ramit Sethi is younger than me, egads! And crazy rich. go him. Is he judgey? Yes. He rails against people who "make excuses" in not-very-nice ways that I cringed at, but then I moved on to the real advice and appreciated it.

I think a lot about what finance book I would give to a young 20-something year old. This one might be a decent pick. One unique thing about it that I haven't seen in other finance book: career tips. It makes sense. There are two ways to have money: earn a lot, don't spend a lot. This book has sections about negotiating salaries and asking your boss for a raise.

Look, it sounds crazy, but in the corporate world, you will encounter colleagues who are doing their job and do not care to be better. Showing some heart can seriously get you ahead. Putting in extra time is nice too... but I have seen people work a lot of hours in unsmart ways that do not help them get ahead. This book has one simple section encouraging you to tell your boss, "I want to be a high performer. What's holding me back?" as a young entry level kid, I thought everybody asked this question. I was wrong.

He loves credit card points. He hates financial advisors. He hates evil banks, especially Wells Fargo. He hates the "noise" of the financial world complicating things and making us all feel like every day is up and down and you can't time anything right. He loves compound interest. He hates real estate!

Oh I do like that part too, finally an author who agrees with me that home ownership is not a magic wonderful financial decision, and a young person should not make it their primary financial goal. Set up a 401K first, please!

Unlike me though, he likes 30 year mortgages that you do not pay off in any kind of a hurry. Most everyone agrees with him. Nobody agrees with me, I liked paying extra on the principle every month. They say that was silly because I could have invested that money and gotten better returns, because my mortgage interest rate was good. Oh well.

Things I'm thinking that young healthy people should learn about finance:
1) How compound interest works
2) How the stock market goes steadily up, the majority of the time
3) How to tally up home ownership throw-away money (closing costs, taxes, insurance, interest, repairs)
4) How to compare that "purchases" line on a credit card statement your actual income
5) How to invest your Roth IRA in VTSAX
6) How to look around your house and realize all the crap in it used to be money
7) How to ask for a better raise

I'll keep working on this list. Someday I could write my own bestselling book, right? Well, except that I'm not that rich. But the book could get me there!