Category Archives: Finances

Asset Allocation

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Image courtesy of iosphere/ FreeDigitalPhotos.net

Image courtesy of iosphere/ FreeDigitalPhotos.net

As I turn 35, I just spent a good chunk of time updating all of our investment accounts.  I recently read All About Asset Allocation by Richard Ferri and decided that my haphazard investment selections needed to change, and I needed to really focus on what we wanted.  We want to retire when I turn 50 (exactly 15 years from now), with approximately $2.4 million in assets.  Now, that’s a lot of money, and I’m basing it off the 85% rule – we’ll want 85% of our current salary in retirement, then multiply by 25 for a safe withdrawal rate of 4%.  I’m hoping that we can work to reduce that number closer to $1.5 to $1.6 million (and also the retirement age!) as we work through our debts and lowering our expenses.

We’ve been very aggressive investors up until now – only about 5% in bonds, the rest in equities of varying types – but with a 15 year horizon, we want to start being a little more conservative.  I learned a lot about assets and their correlations and statistics in the book, and I took a look at what we were doing – we had a halfway decent allocation for our very aggressive model, but it could be improved.

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Saving Money with Baby – Baby Led Weaning

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baby led weaning

Daughter Person with her first non-formula meal – peaches

Another way to save money with baby is baby led weaning.  Baby led weaning is much more common outside of the US, but it’s got a growing group of proponents in the US as well.

We couldn’t do a “pure” baby led weaning approach because it made daycare (and grandma) nervous, and so we had to make some purees to send to daycare with her.  But, we never bought a jar of “baby food” or a box of rice cereal, so Daughter Person’s solid foods were just part of our normal grocery budget.  We’d just give her some of whatever we were eating.  Our purchase of fruits increased when we started feeding her solids, but that was about it.

What is Baby Led Weaning?

Baby Led Weaning (or BLW) is when you go straight from breastfeeding or formula to “adult” solid food, skipping the rice cereal and purees that are baby’s most common first foods.  You feed your baby regular food that you’d eat yourself.  There are some differences though – for example, you wouldn’t give a baby meat until they’ve got some teeth to be able to chew it, and you tend to need to overcook veggies so they’re soft enough.  You can find more information about BLW and some recipe ideas online.

Our Experience

Daughter Person turned 6 months old in July, so we had it pretty easy: we started with peaches – plentiful, in season, and most importantly soft.  We sliced peaches up into thin strips, and initially removed the skin from the slices, but we learned very quickly that the skins helped her hold onto the peach slices as she was eating them.  We moved onto pasta, steamed carrots, green beans, avocados, kiwi, mangoes, lentils and beans.  Daughter Person didn’t get any teeth until she was almost 10 months old, so we were semi-limited in what we could give her up until then.  Anything we thought she could gum was fair game (Cheerios are very gum-able by the way).

Once she had her teeth, we started giving her more variety: chicken, beef, pork, slightly less cooked veggies.  She learned to use a spoon and fork pretty early because we gave her the opportunity.  By the time she had teeth, we were just giving her tastes of what was on our plates – spices and all.  Yes, it makes a mess for a while – although I’ve seen pictures from parents who went the puree route and it’s about the same amount of mess sometimes!

Daycare and grandma had concerns about her choking. When they first start eating, they have trouble keeping the food to the front of their mouths, so they look like they’re choking when they’re gagging.  You really do have to learn the difference between choking and just gagging.  They do eventually get the hang of it and stop giving you heart attacks every time they eat.  We pureed some food for her, and sent that in with her to daycare – she really didn’t like it.  One thing our daycare did let us do was highlight on the school menu what she was and was not allowed to have, so we highlighted everything we thought she could handle at the time – and I think she was the only baby in the infant room on the full daycare menu (most others switched in the toddler room 12mth+).

Warnings

There are some precautions to take while using the baby led weaning approach.  If you or other family members have an allergy, hold off on those particular foods until you’ve gotten the OK from your pediatrician.  Only introduce 1-2 new foods at a time so you can catch any allergic reactions (just like with purees).  Don’t feed them choking hazards (grapes, nuts, hot dogs, popcorn, etc – your pediatrician should have a full list).  Finally, be comfortable with the equivalent of the Heimlich maneuver for babies/young children.  We never had to use it, but it never hurts to be prepared.

We now have a toddler that will eat many things most “kids” won’t eat:  stir fry, salads, and lots of fruits and veggies.  We still don’t give her the choking hazards, except grapes, but otherwise, she eats exactly what we eat for breakfast, lunch and dinner.  Sometimes she doesn’t want to eat that particular meal that particular night, but that’s a different story.

Saving Money with Baby – Home Birth

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One of the major costs of a baby is the pregnancy and giving birth.  A home birth is an option that some people should consider in order to save money.  Daughter Person was born at home with the assistance from midwives.  They charged $3500 to my insurance company, and I paid $20 – for *everything* from the midwives.  There are some “hidden” costs that you learn about as you go along, but they did not exceed $1200 (and some of it was reimbursed by my insurance).

A home birth is not for everyone.  It’s only available to “normal” pregnancies – anything high-risk means you have to begin working with an obstetrician (twins, gestational diabetes, high blood pressure, breech baby, etc).  There is no pain medication available – and I know that’s important to many people.  There is always the risk of an emergency, and you’re not already in the hospital.

There are also definite benefits: you’re at home, someplace you are comfortable and “relaxed” – or as relaxed as possible while in labor.  There is no “going home”, because you’re already home.  I was out and about visiting the afternoon after Daughter Person was born (not the best idea in hindsight, but *shrug*).

Why did I choose a home birth?

It wasn’t for any financial reason – we had excellent insurance, and I would have paid about $500 total for a hospital birth – although, I’ve heard that an epidural is considered “elective” and insurance doesn’t cover it, but I can’t confirm that.  I did a home birth for the simple reason that I *hate* hospitals.  I am extremely needlephobic, and just the thought of getting blood drawn “just because” was enough to keep me from getting pregnant to start with.  Until I found my midwives (Birthcare & Womens Health).  They offer an introductory session every month, and I attended and asked questions.  I could get by with 2 needles total – assuming everything went well, and we decided to take the risk.  The fear of needles was stronger than the fear of labor pain – and for any woman who’s given birth, that gives you an idea of how much I hate needles – I still would rather go through labor again than have blood drawn.

Safety of Home Birth

There are many differing statistics on the safety of home birth – and much of it depends on the skills of the midwives.  As any couple who’s been pregnant can tell you, there are *many* things that can possibly go wrong during a pregnancy and birth, and you can’t necessarily be prepared for all of them – whether at home or in a hospital.  So many women choose a hospital on the off chance of something going wrong – they’re already in the hospital.  Home birth midwives focus on reducing the risks that something will go wrong – that’s why any high-risk pregnancy cannot attempt a home birth.  There are also backup plans in place in case something does go wrong.  My midwives work closely with an obstetrician who will take emergency cases.  If anything had started going wrong, I would have been transferred to the closest hospital via ER.  If I had decided that *I* wanted to be in the hospital for any reason (like pain medication), we would transfer to the obstetrician’s primary hospital.  Luckily, I made it through pregnancy and delivery without any major issues (although there were some close calls).  But home birth midwives are aware of the risks, tell their patients ahead of time and let their patients decide.

Hidden Costs

There are some “hidden” costs to home birth that are not easily available.  The first is that my midwives required that we attend a natural birthing class: $175.  The second is that we have to provide a majority of the disposable supplies: $85.  The final cost is that the midwives work with a birthing assistant (also a nurses’ assistant), and we have to pay for their services.  Our birthing assistant charged $800.  80% of this was reimbursed by my insurance company, but it’s also a cost that we paid up front.  So our total costs including the midwives (assuming no insurance) would have been $4,700.  That’s a lot less than the quoted $30,000-$50,000 average for a hospital birth.

The Experience

One question I get often when people hear that I gave birth at home is “how was it?”.  I won’t go into details, but it was both long, hard and empowering.  I didn’t really notice the midwife checking vital signs periodically, and I was relatively comfortable at home.  I could eat what I want, when I wanted, I could get in the shower if I wanted, I could pretty much do anything I wanted within reason.  After Daughter Person was born I felt very empowered and strong.  I had really done that.  The midwife stayed around until 4 hours after Daughter Person was born to make sure everyone was OK, and then we were left at home as a new family of three.   Not to say that women can’t feel this way with a hospital birth, but that’s my experience.

Daughter Person did have to go into the NICU when she was 3 days old, but not for any reason related to the home birth – she developed severe jaundice and needed a blood transfusion.

I’m happy to answer any other questions you might have about my home birth.  Feel free to comment or e-mail me directly: mom at 3isplenty dot com.

Saving Money with Baby – Cloth Diapers

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Daughter Person in a cloth diaper at about 6 months old

Daughter Person in a cloth diaper at about 6 months old

Now that we’re almost out of diapers (at least during the day), I wanted to post what I think we saved by going with cloth diapers over disposables. Daughter Person has been in cloth diapers ever since we brought her home from the NICU.

She had a horrible reaction to the diapers they put on her in the hospital, and her whole diaper area looked “burned” the entire time she was there. We had already bought the cloth diapers prior to her birth, but that week in the NICU really hardened our resolve to stay with cloth.

Costs

I bought 24 newborn BumGenius diapers for her first few months.  I bought them new for $12.95 each ($310.80), and resold them for $10 each on eBay when we were done with them (-$240.00).  We have 32 of the one-size pockets (BumGenius), which I bought for ~$16.50 each ($528.00) – I bought them in multi-packs 🙂  I’ve also bought new inserts for 25 of them for $15 shipped free on the slow boat from china ($15).  I’ve also bought 25 “refresh” kits to replace the velcro on the larger diapers, they’re $1 each ($25).  I’ve not started reselling the diapers yet, but I plan to, and they’re going for about $7-$10 each on eBay depending on condition – I’m going to guess we’re at the $7/diaper side.  So far, I’ve spent $638.80 on regular cloth diapers.  We went straight to undies for potty training, and we use cloth swim diapers as well ($14.95 each, and I’ve bought 3 – $44.85).  We have three wet bags for her diaper pail ($16.50 each), and two travel wet bags ($11.95 each).  For all Daughter Person’s cloth needs, we’ve spent $757.05.

What would we have spent on disposables for the same time period?

Assuming that we used store brand diapers (which may or may not have worked for us, I have no idea), I’m going to use Target’s prices for their brand.
We changed Daughter Person 12 times per day for the first three months, and she would have been in size 1-2 diapers: that’s 1,080 changes at .14 per diaper: $151.20

We changed her about 8 times a day until she was 1, and she would have been in the size 2-3 diapers: that’s 2,160 changes at .14 per diaper: $302.40

From a year until 2.5 years, she was changed about 6 times per day, and she would have been in the size 3-4 diapers:  that’s 3,240 changes at .16 per diaper: $518.40

Finally, for the last month, we’ve been in undies and diapers at night and nap.  We change undies about 5 times per day, and she’d be in pull-ups:  that’s 150 changes at .34 per pull-up: $51.

Not to mention the swim diapers we’d have had to buy through all this, we’d have spent $1,024 on just regular diapers.

That’s a difference of $266.95 and we haven’t even sold our cloth diapers yet (an estimated $224.  And this is just for one kid!  We’re not having another, so those are pretty much our final costs for the cloth diapers.  If you had more than one kid, you’d save even more.

Practicality

Using cloth diapers is a bit different than disposables (but not that much!).  We have to wash them every 2-3 days.  It involves a cold rinse, hot wash, then low dry, and that’s it.  It’s just two-three extra loads of laundry per week, which wasn’t that much considering we were already doing all the laundry for her (and my) clothes.  There was some cost to the laundering, but I don’t think it was that significant, and we could have line dried to keep it lower.

We found a daycare center that was willing to work with us using the cloth.  We stuffed the inserts into the diapers when we did laundry, and from then on, it was just like a disposable diaper – except you don’t throw away the old one.  They’d put them in a bag and we’d take them home to wash, and bring in the same number the next morning.

Poop is one reason many give for not using cloth.  There are multiple options here.  1) babies who are exclusively breastfed (not Daughter Person) have water soluble poop – nothing special needs to be done, just toss in the wash. 2) liners – you can buy liners which catch solids and you throw them away – we didn’t use those either. 3) a diaper sprayer (or toilet): you rinse off the solids into the toilet, then wash the diaper.  We used a sprayer to rinse off the big pieces of solids as soon as we removed the diaper, then put the wet diaper into the pail.  Daycare left the solids in the diapers for us to rinse when we got home.  It’s really not that bad.  Especially since you end up covered in poop anyway, no matter what diaper you use!

Cloth diapers are not for everyone, they take some planning ahead and easy access to washing facilities.  Dad preferred the cloth diapers to the disposable ones she was in in the NICU (so did I).  I think they’re just easier to use – and they certainly look more colorful!

 

Fidelity changes their 529 plan expense ratios

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Right after I mail the paperwork to transfer Daughter Person’s 529 from Fidelity to Virginia’s plan, I get a letter from Fidelity letting me know that their expense ratios on the index funds were dropping to 0.09% – doh!

Now I have to seriously do the math on which plan is better for us.  Virginia allows up to $4000/year tax deduction for contributions – and they carry over from year to year (ie. if we contribute $5000 this year, we can take the $4000 deduction this year and $1000 next year – until it’s all used up).  We have a state marginal tax rate of 5.75% and $4000 isn’t likely to drop us into a lower bracket.  Right now, we contribute $600/year, reducing our taxes by ~$35/year, if we contributed up to the full $4000 (which is possible in the future), we’d reduce our taxes by $230/year.

The difference in expense ratios is 0.37% for our selected plan vs. 0.09% for Fidelity – so a difference of 0.28% – It’s current balance is about $5000, so that’s a difference of $14 in fees just this year, and that will increase as we go along – but the fee decrease doesn’t come close to the reduction in taxes we get.  Since I’m pretty sure we’re going to be contributing more than $4000/year on average over her school life, we’ll be able to bank quite a bit, even with the higher fees on the Virginia plan.  We can also reduce our expense ratio with the VA plan to as low as 0.24% by selecting another investment plan.

What do you think – am I doing the math right for figuring out our reduction in taxes?

Detailed Financial Picture – August 2013

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July’s Numbers

As of August 7, 2013, we are $462,205.24 in debt (that includes the mortgage).  Without the mortgage, we’re at $40,324.11 in debt.  This includes a credit card, student loans, and an auto loan.  We currently have $959,190.24 in assets (including our house).  Our retirement accounts are at $311,342.61.  Our Net Worth is $496,985.00 (includes house and mortgage), up from $474,731.14 last month (4.69% increase).

This month’s numbers are estimates on the retirement accounts, since my company’s 401(k) provider has changed, and I don’t have access to the new account yet (we’re supposed to get our initial username/password in the mail this week).  The last balance I have for the account is from July 30, missing the nice run up on the 1st and my July contributions.  They’ve assured us that our money remained invested during the transfer, but I can’t verify that.  The plus side is that we’re moving from the crappy Mass Mutual to an ING run plan with slightly better fund selection.  Dad’s former company used ING and I liked their interface.  So, the value in our investment accounts is lower than I know it is, but since I don’t know what the current value is, I’m using the last known good value.  Next month’s numbers should show the actual value.

Holey Moley did the stock market run up really help our investments (and net worth) – they were up 4.77% this month, the largest increase to-date, bringing them to a 21.13% increase for this year (so-far).  That’s not a bad return (it’s also not calculated completely accurately, but it’s close enough).

Dad cashed in several matured savings bonds last month and “donated” $600 to the debt, and I cashed one in on the 1st that just matured.  I took $150 for myself, and the rest went to the general fund – most of it went towards paying off the Chase card.

We still haven’t gotten HOA approval for fixing our wood trim yet.  I’ve tried calling the management company twice now, but I only get someone’s voicemail – maybe she’s on vacation (her message didn’t say).  But we have a *lot* of money sitting in our savings account earning a piddly amount of interest, and it’s making me antsy not doing anything for us.

I’m going to set ourselves a mini goal for the rest of the year.  Our assets should be at least $1,000,000, and our net worth should be at least $500,000.  I know this is somewhat subjective because if the stock market decides to go kaput, so will this goal.  But we’re going to keep chipping away at debt and contributing to our investments no matter what happens.

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

  • Line of credit (8.75%): $0.00
  • Chase (4.99% for life): $ 5,253.99 (-554.45)
  • Student loans (aggregated 6.55%):  $13,060.12 (-143.84)
  • Car loan (0%): $22,010.00 (-490.00)
  • Mortgage (4.125%): $ 421,881.13  (-662.31)

Total paid off in July: $1,850.60

Shopping for a Freezer Cooking Session

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I arrived back home on a red-eye flight form San Francisco this morning, so I slept in and didn’t go to work (hey – I was “working” on the flight home!), so I went grocery shopping for our freezer cooking session.  I had already put together the shopping list in plan to eat, so I was ready to go – along with other errands that needed running.  I first looked at the All You grocery circular tool, and discovered that boneless, skinless chicken breasts – of which I needed almost 30 lbs – were $1.99/lb.  Not the absolute best I can do ($1.98/lb), but better than Costco – and hey, it was at the local Wal-Mart – which is our “normal” grocery store.  So, I stopped there first, to check out the quality of the chicken breasts as well as buy the rest of the items I needed in smaller quantities.  The quality looked good, so I bought them out of chicken breast packages (6 5lb packages).  I also picked up almost everything except the other meats and the hard liquor we need (blackstrap rum for a molasses/rum chicken).

After running some other errands, I went to Costco to get the rest of the meat – and a bunch of things we’d been putting off until the beginning of August.

Wal-Mart grocery receipt

Wal-Mart grocery receipt

At Wal-Mart, almost 100% of what I bought was for cooking, there were a few spices that Dad needed for his pickling habit, and some Picante sauce for our taco nights (and we really didn’t need an entire box of Chardonnay for cooking, but Dad requested it).  I ended up spending $141.94 at Wal-Mart – for a cart full of stuff.

 

 

Costco receipt

Costco receipt

At Costco, almost everything I bought was not related to our cooking session – not even all the meat.  I have a particular fondness for Filet Mignon, so I tend to buy some at Costco when I go – very high quality and not too expensive ($13.99/lb).  We also bought some ground beef for a BBQ we’re hosting next weekend, and anything left over will become tacos for dinner.  Our total Costco bill was $257.97, but only about $99 of that was related to our freezer cooking session.

Tomato-Basil Soup before its blended

Tomato-Basil Soup before its blended

We’re going to have an estimated 280 servings (140 meals) out of all of this.  Tonight, we started the Tomato-Basil soup – which is the only recipe we have to actually cook before freezing.  This picture shows it before it’s made its way into the blender.

Changing our 529 investing plan

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I’ve been researching fees and tax strategies, and I’ve decided to move our 529 plan from Fidelity to our state’s direct plan (Virginia inVEST).  The fee is .02% higher for the aggressive portfolio I selected, but the up to $4,000/year with unlimited carryover deductions on state taxes more than makes up for the fee.  There are also a *lot* more investment options in the Virginia plan than there are in the Fidelity NH plan.  I’ve opened up the account and made the initial deposit, but I need to file the paperwork (on paper!) to transfer the old 529 account into the new.  I didn’t realize that you could transfer 529 plans until I started researching it – I figured we were “stuck” with the initial choice (which I admit to having selected Fidelity because all of our other accounts are there).

I like Fidelity, their 529 plan is very easy to manage and I’m keeping my other accounts there, but the tax savings of moving were too enticing.  We currently contribute $600/year of our own money plus whatever Daughter Person gets for her birthday/Christmas (is usually another $600 or so from various grandparents).  We intend to increase that significantly (into the $400-$500/mth range) once our debt is paid off so that we can completely fund her college for at least an in-state school.

I know that there are differing opinions on whether we should pay for her college or not, but we feel very strongly that we should pay for her undergraduate education at an in-state school.  If it comes down to it, we’re going to prioritize retirement over college, but hopefully, we plan better than that.

Median Net Worths Too Low?

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I was playing with the millionaire calculator over at CNN, and I found the Net Worth calculator. According to it, we have a significantly higher net worth than others my age (25-34 yr olds have a median net worth of only ~$8.5k), and somewhat higher than others in my income level ($77k-$99k income levels have a median net worth of ~$301k).  Even if you half our net worth to account for a  two person household, we’re still much higher than our age group, and not much lower than our income group.

That got me thinking – I don’t think we have enough to retire on (by a long shot), and while net worth isn’t always the best predictor of being able to retire, it’s a number that usually gives an overall view of your financial health.  I know we’re better off than many in our peer group, but I don’t see us as financially healthy yet.  If I don’t think our net worth is “good enough”, then more than 50% of the folks in our peer group are not doing very well at all.  Granted, we live in a very high cost of living area, and that skews things which I don’t think CNN takes into account (it didn’t ask me anything about geographic location), but I’m not sure that those differences would drastically change the numbers, since theoretically the averages include both high and low-cost of living locations.

Do you have a Net Worth goal? Or are you just wanting to increase your Net Worth to watch it increase?  Do you think Net Worth is an accurate predictor of how “healthy” a person’s finances are?