Milestone in my Taxable Account

I finally hit a milestone in my taxable account: enough money to buy into a mutual fund.

I had previously been buying ETFs 1-2 shares at a time, leaving anywhere from $20-$80 in cash, and not really working for me.  Today, I deposited enough to bring me above the magic $2,500 for FSTMX.  I left my two “raw” stocks (MCD, ADM) invested because they would cost me ($7.95 each trade) to get rid of them, and they’re throwing off (small) dividends.

At the end of the day, Fidelity will have me owning just over $2600 in FSTMX.  I’ve changed my auto-transfer from my bank account to an auto-purchase of the fund as well, so that’ll continue to keep growing. The auto-investment ability into the mutual fund is what decided me.  I can “set it and forget it” to a certain extent.

I had a devil of a time picking between FSTMX and FUSEX. Similar expense ratios (0.10% gross, .10% and .095% net), FUSEX throws off more dividends, but it’ll mean the difference of $10/year for me at my level).  What really made the decision for me was that FSTMX is total market rather than just S&P500, and FSTMX only has 1% turnover vs the 3% of FUSEX.  In a taxable account, that can be a big difference.

This money is nominally earmarked for retirement, but could be used for other goals as they come up.  The goal is to build this account up enough to survive from when we retire at about 50 to 59.5 when we can start withdrawing from our tax-advantaged accounts without penalty – we have a long way to go!

Next milestone?  $10,000 to get into the advantage class of shares (FSTVX)!

Do you tend to invest in mutual funds or ETFs?  Why?

Framed House

Framed House

Framed House

We obviously have an extremely fast framing crew – apparently, we were assigned the Amish framing crew (which means quickly and high quality).  This picture was almost exactly one week after the previous picture with just the foundation.  I know the majority of the walls were delivered already put together, but I think this was *fast*.

They’re still telling us that we can move in at the end of March – based on what I’ve seen, we might be moving earlier, but I don’t know anything about building houses.  My guess is that they’re working extremely quickly to get the houses under roof and with the siding on before the weather turns too bad, then progress will slow down a bit.  The day before and the day after this picture was taken, there was a dusting of snow on the ground (not for long).

There’s already one mistake on the house (a missing window on the right side), and I’ve reported it to the sales guy and production manager – in writing.  They knew about it, and they expect it’ll be fixed in the next two weeks – as soon as the window arrives.  That’ll be interesting to see how they just cut a hole in the framing and put a window in.  I wonder if they’ll try to put the siding on that side last.  There are a few other places I’d like to see windows (like the two front upstairs bedrooms), but they weren’t options, so those’ll have to wait until it really bothers me to do something about.

The Cash Problem

This topic has come up in conversation many times, but the gist is, what do you do with a large sum of cash that you may or may not need soon (ie. emergency fund)?  Next year, we’re going to put aside almost $1000/mth towards our Roth IRAs – except we won’t know until March/April 2016 if we can contribute to our Roths or not (due to income limits).  There’s a really good chance we will be able to based on our deductions, but it’s not a 100% chance, so I don’t want to put money into a Roth to have to pull it back out again at tax time because we made too much.

$1000/mth is a lot of money to not have working for us.  Our best interest rate is 0.79% at CapitalOne360 (to give you an idea, we’re getting $45/mth on the 85k waiting for our house purchase).  If we put the money into our taxable investment account, I’m not sure that I’d go through the effort of taking it out as I’d pay a short term trading fee on at least $3k of that (I’m a buy and hold investor).  I need to research if Fidelity will let me transfer in-kind between the taxable and Roth accounts – then I can just move over $5500 of FSTMX and be done with it.  If we can’t contribute to a Roth for the previous year, it’ll just end up in our taxable account anyway.

The Roths are only going to have a max of 11k annually (unless we get another limit bump from the IRS), but our emergency fund will have almost 60k in it.  That’s a lot of unemployed little green workers.  I’m tempted to split how we deal with it and put 5-6 months in actual cash, and the rest in a taxable investment account with a relatively low risk.  I know we don’t want to be losing it all in a market crash, but at the same time, I feel bad for not putting it to work for us.

What do you do with your “cash” buffers/emergency funds?  Do you just leave them in a checking/savings/money market account or invest them more conservatively? 

Our Temporary Budget

We’re socking away a lot of money over the next few months. And I think we’ll have way more than we need come March based on a recent closing estimate from our mortgage lender. We use You Need a Budget for zero-based budgeting, and live on last month’s income, so I know at the beginning of the month exactly what we have to spend. We don’t have a “normal” monthly budget; it varies based on our income in the previous month. However, we do have some baselines each month that I then modify as needed.

Income

Our income is after taxes, 401(k) contributions and other paycheck deducted items (like an FSA, health insurance, and my parking pass). Our after-tax incomes will change again next year as we will no longer contribute to an FSA, but to an HSA instead.    This is November’s budget – which means, this is all of the income we earned in October’s paychecks.  The reimbursements is the guaranteed money we get from the FSA for daycare.  We spent the 5k legal limit early in the year (by April based on DC daycare prices), and I already filed the reimbursement, so we get $192.31 every two weeks until the end of the year.  We budget based on two paychecks per month for Dad (although he gets paid bi-weekly), and in those months where we have 3 paychecks, we use that entire paycheck (~$2100) for paying down debt, or putting more to investments, etc.

Salaries 8,625.15
Reimbursements 384.62
Interest 43.00
Total Income 9,052.77

Expenses

Our Expenses are relatively low since we’re not paying a mortgage or most of the utilities (although I keep telling my mom to tell me how much she wants us to contribute to the Internet, Water, and Electricity bills – I’ve just been contributing $50/mth to her checking account).  Many of these expenses are not spent in a month, like car insurance – we pay it every 6 months – but we set aside the money on a monthly basis so it’s there when we need it.

We’ll also be saving less as we start paying on a new mortgage in the March timeframe (estimated principal, interest, escrow is $2200) along with all the other expenses that come along with owning a house – although, there’s a top to bottom warranty for everything in the house for the first year from the builder, so I don’t expect we’ll be spending much in repairs.

We use a VoIP phone line through CallCentric, and we brought it with us – that’s where the “Phone and Internet” line comes in.  We pay $1.50/mth for E911 service, and per minute for all other calls.  We tend to spend about $2 in phone calls since Dad works from home – it’s nice because he uses a softphone to join conference calls from his laptop.  I budget $5/mth which is a bit overkill, but covers are heaviest usage months.

Food
   Groceries 300.00
   Restaurants 150.00
   wine & Beer 60.00
Recreation
   His fun money 200.00
   her fun money 200.00
   entertainment 50.00
Debt (car payment) 500.00
Pets 40.00
Daughter Person
   Daycare 800.00
   Clothing 25.00
   Misc 50.00
   College 50.00
Personal
   Life Insurance 50.00
   Doctor/Dentist 20.00
   Prescriptions/meds 15.00
   Gifts 25.00
   Misc 50.00
   Memberships 80.00
   Clothing 25.00
Transportation
   Gas 300.00
   Car Insurance 100.00
   Repairs & Maintenance 50.00
   Inspection 11.00
   Registration/Property Taxes 25.00
Housing
   Storage 1,014.80
   Utilities 50.00
   Phone & Internet 5.00
   Cell Phones 95.26
   E-mail/hosting accounts 8.00
Charity 20.00
Total Expenses 4,369.06

Savings

We have a separate section for savings – money that we’re not planning on spending in the near future, or are earmarked for a want and not a “need” (although, a lot of the above are for wants as well).  These are things like saving for our new house down payment – and the appliances we’ll need to be buying, money we send to our after tax investment accounts, and money that gets added to the emergency fund.  Right now, the money sitting waiting for moving costs and the down payment is acting as our emergency fund, and anything left after I allocate the rest of the money goes to the emergency fund.   Once we’ve moved and have an idea of where that fund stands in relation to our car payment and investments, we’ll likely throw any “extra” to the car payment or (more likely) the taxable investments.  Until we’ve moved and settled, I’d rather have a large cash buffer though.

Emergency Fund 883.71
Investment 300.00
Moving 2,000.00
New “stuff” (House) 1,500.00
Total Savings 4,683.71

If you made it this far, you are a saint. I know there is a lot of room for improvement, but we’re limited in what we can do at my mom’s house as far as buying in bulk to save on the grocery budget, or using less gas (because she’s far away from everything). I’m hoping to lower our expenses somewhat once we’ve moved and settled, along with selling several things and bringing in some extra money.

Our House has a Foundation

I drove past our new home site after work the other day, and the walls of our foundation/basement look to be completed. It was getting dark and my phone took horrible pictures, but I was able to lighten it up and you can sort of see our “house” as it stands now.

There are 4-5 houses in mostly the same stage of construction on the street. The lumber has been delivered for one of the houses, and it looks like ours is just one step behind it. The sales guy said that once the lumber arrives, the house goes up quickly, yet they’re still estimating that we’ll be ready to move in in March. I’m new to the home building process, but I don’t see why it wouldn’t be done earlier than March if it goes quickly once the lumber is delivered.

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Detailed Financial Picture – November 2014

October’s Numbers

As of November 4, 2014, we are $14,500 in debt without a mortgage to speak of (yet).  We currently have $519,313.87 in assets.  Our retirement accounts are at $410,727.21. Our Net Worth is $504,813.87, up from $491,961.16 last month (2.61% increase).

October was nice to us on the investment front.  I took a week without pay in October because of our two week vacation – University policy only allows them to “front” me 5 days of PTO, so the rest was unpaid – which was fine with me.  But that also meant that my gross pay was affected, which affected my 403(b) contributions and match.

I’m happy that our net worth is back over half a million dollars – and hopefully continues to grow!

We’ve signed the final paperwork for our new home, which will increase our net worth by ~$370,000 and with an expected mortgage of about $296k – just over half of our previous mortgage.  Because we don’t borrow the money until the house is finished, we can’t lock in rates yet.  If we were to borrow right now, the rate would be about 4.2% (with no points, discounts, etc).  I’m hoping that the rates are still low in February/March when we have to lock in our rate.  Then we have to decide about paying points, escrowing, etc.

We’re getting a 55k discount on options from the builder for using their lender: the fees aren’t horrendous and the rate is in line with others we’ve gotten quotes from.  But at the same time, I’m willing to almost immediately re-finance if I can get better terms elsewhere (and/or better service).

Debt (in the order we’re paying it down):

  • Line of credit (8.75%): $0.00
  • Chase (4.99% for life): $ 0.00 
  • Student loans (aggregated 4.21%):  $0.00 
  • Car loan (0%): $14,500 (-500.00)
  • Mortgage (4.125%): $0.00 

Total paid off in October (not counting the mortgage):  $500

October 2014 Early Retirement Progress

We contributed $4,381.19 this month to our retirement accounts  We gained $9,654 in investment gains this month.

This month has a slightly decreased contribution since I took a week without pay to go to Europe this month.  So that affected my gross pay and my retirement contributions.  It was worth it though!

We’re again in the positive for investment gains this month, and hopefully that continues for the remaining two months of the year.  We’re still increasing our account balances mostly via contributions rather than investment gains, but that’s to be expected with the amount we are contributing.  Some months, the gains are larger than what we contribute, and sometimes they’re less.  They’re averaging less than we contribute though.

I also discovered a disadvantage to Vanguard as my 403(b) provider – they don’t generate monthly statements, unless I’m willing to have them be generated and mailed to me – so I’m winging it on the investment gains in my 403(b) account.  Taking the end of month balance and subtracting my known contributions.  Otherwise, I’m happy with Vanguard.  I have a meeting with a “free” financial advisor on campus on Tuesday – not sure how that will go, but we’ll see.  I was able to specifically type in what I’d like to talk about, so we’ll see.  I’m going to go in with my Personal Capital “printout” as well as my work laptop, and have my latest Fidelity statements.

2014 Totals

So far, for 2014, we’ve contributed $36,074.26 (90.19% of the new goal of 40k), and we’ve gained $25,599.46 in investment gains (126.35% of our planned total).

2015 IRS contribution limits

In case you missed it, the IRS published their 2015 contribution limits for 401(k), 403(b), etc plans.  The new limit for 2015 for 403(b) plans (what we have) is $18,000 per year.  I’m inordinately excited that we will be increasing our contributions to match – that’s $36,000 of our dollars that will go to our employer plans next year.  We’re already maxing out the matches, so we won’t get any more from our employers though.

I’m also happy to hear that the Roth IRA phase-out AGIs have been adjusted for inflation and it’s extremely likely we’ll fall below the phase-out range this year, so we’ll be able to contribute.  I’m still going to just save up the money and dump it into the accounts in January/February 2016, just in case we’re close.  But just the tax-deferred contributions should lower our taxable income to below the phase-out range. Add to that our mortgage interest, and/or the standard deduction, and we should be good.

Do you max out your tax-deferred retirement plan at work?  If not, what are you waiting for?

September 2014 Early Retirement Progress

Now that it’s the middle of October, I should catch up on this. My only excuse was that we’re on vacation – currently in Vienna, Austria (and pouring down rain).

We contributed $4,787.72 this month to our retirement accounts  We lost $10,095.63 in interest this month – a little less than we gained last month.

We have all of our employer offered tax-deferred accounts maxed out at this point. I have about $300 going towards Loyal3 and my taxable Fidelity account per month. Next year, I would like to also save enough to contribute to two Roth IRAs, but it may or may not happen. In the past our AGI has been too close to the limit to even think about Roths, but this year, with 35k going towards 403(b) plans, we might make it (although, we won’t have as many deductions going forward either, so it may be a wash). I’ll try to save the money anyway and we’ll just have to contribute it all at once in that magic time frame between January and April 15.

Watching the markets, this month may wipe out any gains for this year, but we’ll see…

2014 Totals

So far, for 2014, we’ve contributed $31,693.07 (79.23% of the new goal of 40k), and we’ve gained $15,945.46 in investment gains (78.70% of our planned total).

Detailed Financial Picture – October 2014

September’s Numbers

As of October 9, 2014, we are $15,000 in debt without a mortgage to speak of (yet).  We currently have $506,961.16 in assets.  Our retirement accounts are at $396,992.38. Our Net Worth is $491,961.16 , down from $507,579.11 last month (3.08% decrease).

This is a short update as we’re enjoying ourselves in Zurich today.

I used the proceeds from our house sale to pay off our line of credit – I got hit with a $36 interest “fee”, but we were just floating the money until the house sold anyway.  We have no mortgage (or house) any more, so that affects our net worth significantly.

We “spent” about $44,000 in seller’s costs to sell the house (concession and broker’s fees), so that’s where most of the drop comes from.  Considering that, I don’t think we did too bad.  The house sold for less than we bought it for – but it sold for list price and we didn’t have to do any repairs to it after inspection.

That leaves us with our car payment for the next few months.  Because it’s at 0% interest rate, we’re not planning on paying it down quickly until we’ve moved into our new house and see what else we have to spend money on. We’ve already got the down payment for the house, now we’re just saving up for the closing costs.  That’s where all of our extra money will be going in the next few months.

Debt (in the order we’re paying it down):

  • Line of credit (8.75%): $0.00 (-8,000.00)
  • Chase (4.99% for life): $ 0.00 
  • Student loans (aggregated 4.21%):  $0.00 
  • Car loan (0%): $15,500 (-500.00)
  • Mortgage (4.125%): $0.00 

Total paid off in September (not counting the mortgage): – $8,500