Financial Update – June 2018

Each month I will post an update on my finances to both give you, the reader, some insight into my situation and to give me markers of my progress on my financial journey. My updates consist of two parts:

  • Financial Progress Table – Tracks net worth progress.
  • Spending Table – Compares monthly spending to an average (for me) “bare bones” budget, keeping me accountable for additional expenses.

For now, monthly updates include only my personal net worth and spending. As my fiancé and I combine our finances, updates will shift to cover going values instead.

Financial Progress

Each net worth goal in the Financial Progress table is broken down into undisclosed units of money. My current goal is to reach “Financial Freedom.” By the time I reach this goal I will have:

  • A retirement account that can support us when my fiancé hits 65
  • Two college savings funds funded for four years of in-state public university tuition, room, and board
  • An emergency fund for six or more months of living expenses
  • Sufficient liquidity for my fiancé and/or I to make a career change with one to two years’ runway
  • A mortgage less than two times my gross salary without bonuses

Once “Financial Freedom” is achieved, the focus will then working be towards “Financial Equilibrium”, where the income from investments covers all our ongoing expenses.

June 2018

Spending

I’ve created a “bare bones” budget which represents the average minimum amount I can expect to spend each month. This is the minimum amount I need to comfortably live in case of a job loss, emergency, etc. I expect to frequently go over my “bare bones” budget in a number of categories (here’s looking at you, “Groceries & Dining”), but I want to remain accountable to myself when I do so.

For privacy reasons, there are two things I do not include in my spending updates: my monthly mortgage and charitable donations (pegged at 10% of my net income).

June 18 spend.png

Monthly Summary

I spent a lot of money and my net worth went down due to lack of income. Oh well. No big deal. There are things I’m way more anxious about than money right now.

Summer is finally here which means it’s time for travel! I visited my brother in Chicago for his graduation and I got really lazy about taking public transportation so I spent approximately $200 just on taxis alone.

I also booked our flights to Dublin for our honeymoon this fall, so that took up another $600 or so after using up our Amex points. I’m kind of annoyed by the personalized pricing mechanisms that make ticket prices escalate between searches for the same itineraries. I usually can just clear my cookies or use a VPN to see base level prices but it is a hassle.

Credit card related pro tip, though: If you want to liquidate your Amex points for 1 cent/point, just book some travel and ask for a refund within 24 hours. The refund comes back in the form of cash instead of points.

Other overages came in the form of food (obviously), thrice annual water bill, and a new scanner so I could use some of my free time to finally digitize all the papers I’d been storing for years. I also had to shell out $100 to pay for my SDIRA that houses my Lending Club account. Just one more way that my P2P investing experiment has been super disappointing.

Notable things that happened this month include:

How were your finances in June?

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Should I Think Less About FIRE?

My funemployment, as I suspected, has been far too short.

One of the surprising things I’ve found is this time has been how little I have been interested in money lately.

On an average day, I can spend my time reading books, going on walks, traveling to nearby towns I haven’t visited before and wouldn’t normally venture to. I have been singing a lot lately, something I haven’t done in years, and feel enthusiastic again about learning new things.

Without the obligation of employment hanging over my head, I am fully capable of letting go of my money anxieties. I’ve started to remember the core-YAPFB, the one that I haven’t really known since I graduated college. Core-YAPFB is super chill, not particularly ambitious, but is a pretty happy gal that likes good food, good friends, and good stories. I really like core-YAPFB. Rarely does core-YAPFB compulsively check Personal Capital, project out her FI/RE date, optimize her money-making and money-saving ventures, or even really care about running up her $ numbers.

That is, except when thinking about going back to work.

When I start thinking about work, my FIRE-obsessed brain goes into overdrive. If I let myself ruminate on it, the prospect of what has to be done, getting in the good graces of my colleagues, etc. is stressful. I’ve trained the pathway in my brain to go from the thought of work to the thought of work stress to the though of “oh my gawd I can’t do this for forty years” to FIRE.

But clearly, since I haven’t even started my job yet, work itself is not the issue. Rather, it is my method for dealing with low-level anxiety, i.e. obsessing about FIRE, that is the problem.

I find that when I am fully invested in my work, I am actually very good about both keeping my spending down and not even really thinking about FIRE. FIRE is something that instead occupies my mind during periods of high (often self-imposed) stress and ennui. Rather than directing my energies toward productive activities– getting what work I need to do or improving myself in non-financial ways– FIRE takes over what spare cycles I have, and often to a somewhat detrimental effect.

Given that I have the rough structures in place for FIRE– automatic retirement and investment contributions, rough outline of a budget, and the like– it really is a waste how much I think about FIRE when I could be focusing on literally anything else.

So I am going to add a new goal to my list for 2018: No more thinking about money unless (a) it is part of necessary maintenance to keep financial systems going or (b) relates to building a system in earnest for a specific and well-defined financial issue. No more idly beating myself up for spending too much on food. No more browsing /r/financialindependence out of boredom. Either decide to really adopt a system to fix already identified problems or move on. And if my anxiety brings me back to thinking about PF and FIRE? Use that energy elsewhere for something more important. Start building that life I want to live now.

Do you get overwhelmed by FIRE or PF-obsession? 

 

Financial Update – May 2018

Each month I will post an update on my finances to both give you, the reader, some insight into my situation and to give me markers of my progress on my financial journey. My updates consist of two parts:

  • Financial Progress Table – Tracks net worth progress.
  • Spending Table – Compares monthly spending to an average (for me) “bare bones” budget, keeping me accountable for additional expenses.

For now, monthly updates include only my personal net worth and spending. As my fiancé and I combine our finances, updates will shift to cover going values instead.

Financial Progress

Each net worth goal in the Financial Progress table is broken down into undisclosed units of money. My current goal is to reach “Financial Freedom.” By the time I reach this goal I will have:

  • A retirement account that can support us when my fiancé hits 65
  • Two college savings funds funded for four years of in-state public university tuition, room, and board
  • An emergency fund for six or more months of living expenses
  • Sufficient liquidity for my fiancé and/or I to make a career change with one to two years’ runway
  • A mortgage less than two times my gross salary without bonuses

Once “Financial Freedom” is achieved, the focus will then working be towards “Financial Equilibrium”, where the income from investments covers all our ongoing expenses.

May 2018

Spending

I’ve created a “bare bones” budget which represents the average minimum amount I can expect to spend each month. This is the minimum amount I need to comfortably live in case of a job loss, emergency, etc. I expect to frequently go over my “bare bones” budget in a number of categories (here’s looking at you, “Groceries & Dining”), but I want to remain accountable to myself when I do so.

For privacy reasons, there are two things I do not include in my spending updates: my monthly mortgage and charitable donations (pegged at 10% of my net income).

May 2018 spending.png

Monthly Summary

I’m free!

I expect June to be pretty wan in comparison to the accelerated financial progress I’ve experienced the last few months. I don’t feel any different yet for being unemployed, in part because I did some thinking, planning, etc. for my likely new job over the weekend. However, I am now forcing myself to disengage. This is my funemployment and I’ll play Civ V as much as I want to!

Because I spent May trying to tie up all the loose ends, I was pretty engaged with work. I think this is part of the reason why my spending overall was pretty decent since I tend to overspend when I am stressed and anxious about work, but not when I’m focused and busy.

I spent a lot on taxis this month, first going to jury duty (which was inaccessible by public transit) and then frantically rushing to interviews so as not to be late. With the exception of that and food– always with the food— I was pretty low key.

Notable things that happened this month include:

  • Went to jury duty for first time
  • Last full month at old job; did the hustle for a new one
  • Attended fiancé’s cousin’s first communion
  • Finished my last full month of work at my old company
  • Got job offer I think I’m going to take (after some negotiation, of course)

How were your finances in May?

Will Changing Careers Destroy My Dreams of FIRE?

My interview last week went really well. There’s a very good chance I’ll be getting an offer from the company, I think, based on the conversations I had with the hiring manager. This role is a good opportunity to get my foot in the door in an industry I’ve been wanting to transition to for a while. And the company itself, while it’s early days yet and I’m sure in time I’ll find it doesn’t hit all my criteria, seems to be a pretty good one with low turnover and good growth. At the very least my commute would be significantly easier, and for that alone the transition might be worth it.

The biggest hesitation I’ve had making this leap has been, obviously about the money. As part of this career change, I’ll be taking a big pay cut. Probably 20% of my pay if I’m lucky. Also, as a smaller company, they are missing a lot of benefits I’ve gotten very accustomed to in the corporate world like retirement plans with matching and maternity leave, etc.

savings.png

Using rough estimates of what the company will offer based on my discussions with the hiring manager, the average pay for this role in the market, and the maximum I’m willing to take in terms of a pay cut, I expect our household savings rate will drop significantly from 64% to 55%. If I manage to negotiate up the cash compensation to just a “mere” 20% pay cut, our savings rate will only drop to 60%.

Luckily fiancé recently started working again after a six month period of unemployment, so in a sense it won’t feel like our financial progress will be changing that much at all since I never really got “used to” a 64% savings rate. However, the new set up requires that both of us be working in order to maintain a >50% savings rate. Once we have kids, for instance, if we do day care or if fiancé becomes a stay at home father, we’ll be hovering 30-40% savings rate territory. Not terrible by any means, but a huge difference if our goal is FIRE. Like, a ten year difference.

So long and short of it: Am I giving up FIRE to pursue this career change? Yes and no. For just a little while, I want to prioritize the now-me versus the future-me. If I angle this thing right, I should be back on a good career and income trajectory in 1-2 years. Sure, I may not hit all the dates on my FIRE plan. But really this stuff is all about flexibility and optimizing happiness along the way. Hopefully, I’ll be doing just that.

Is it worth it to take a pay cut in order to change careers? Any tips on how to negotiate maximum possible pay while still resigning to a pay cut in this sort of scenario?

Financial Update – April 2018

Each month I will post an update on my finances to both give you, the reader, some insight into my situation and to give me markers of my progress on my financial journey. My updates consist of two parts:

  • Financial Progress Table – Tracks net worth progress.
  • Spending Table – Compares monthly spending to an average (for me) “bare bones” budget, keeping me accountable for additional expenses.

For now, monthly updates include only my personal net worth and spending. As my fiancé and I combine our finances, updates will shift to cover going values instead.

Financial Progress

Each net worth goal in the Financial Progress table is broken down into undisclosed units of money. My current goal is to reach “Financial Freedom.” By the time I reach this goal I will have:

  • A retirement account that can support us when my fiancé hits 65
  • Two college savings funds funded for four years of in-state public university tuition, room, and board
  • An emergency fund for six or more months of living expenses
  • Sufficient liquidity for my fiancé and/or I to make a career change with one to two years’ runway
  • A mortgage less than two times my gross salary without bonuses

Once “Financial Freedom” is achieved, the focus will then working be towards “Financial Equilibrium”, where the income from investments covers all our ongoing expenses.

april 2018

Spending

I’ve created a “bare bones” budget which represents the average minimum amount I can expect to spend each month. This is the minimum amount I need to comfortably live in case of a job loss, emergency, etc. I expect to frequently go over my “bare bones” budget in a number of categories (here’s looking at you, “Groceries & Dining”), but I want to remain accountable to myself when I do so.

For privacy reasons, there are two things I do not include in my spending updates: my monthly mortgage and charitable donations (pegged at 10% of my net income).

april 2018 spend.png

Monthly Summary

Second to last month of upward net worth trajectory, woohoo! I managed to squeak in some extra money into my Mega Backdoor Roth IRA this month and will be adding more aggressively during the next. Right now my income has been helping me keep up with the slow-rolling bear market, but soon that will no longer be true.

The crunch continues at work and should be going until middle of May. I’ll be so glad when this slew of deadlines is finished and I can finally start transitioning my ongoing responsibilities to my coworkers. I’m so ready to be done.

In terms of spending, I feel like I did okay this month. I don’t know, for some reason I was under the illusion when I started blogging my monthly spending I’d be closer to my “Bare Bones” numbers? Austere I am not, obviously.

Notable things that happened this month include:

  • The sun finally came out for spring. Unfortunately, so did my allergies.
  • Revamped my resume in earnest and started applying for new positions.
  • Work, work, work toward the finish line.
  • Took Little Sis for some pool/air hockey/bowling for her birthday.
  • Attended a joke science conference with fiancé.
  • Made significant progress on wedding planning, including caterer booking and selecting outfits (or at least patterns, fabric) for the big day.

How were your finances in April?

My Staged Plan For Unemployment

Six weeks and counting until I leave my job. Time flies by quick.

I’m waist-deep prepping for work deadlines that wrap up right before I leave so I’m in adrenaline rushed, get ‘er done mode. Even though the burnout part of my brain is ready to check out, I’m doing pretty well at making sure all the big things go smoothly. I want to make sure my teams are in a good place by the time I depart. I haven’t told most of my colleagues I’m leaving yet. We’re all in a crunch so I’m waiting to announce until things slow down around mid-May.

There was a period that I considered contracting for my company part-time. With Fiancé’s new job, I’d be able to make enough for us to live on pretty readily. I’d still be open to the possibility if it works out, and management seems to be on board, but the bureaucracy doesn’t seem to be able to get it together in time for us to have a contract in place by the time I leave. And I refuse to stick around in limbo all summer hoping that changes.

So I’m now outlining the plan assuming I won’t be contracting and I won’t find a new job before I leave. Originally I drew it up still relying on a separate finances model. (Honestly, I’ve been putting off combining my finances with fiancé because of my upcoming unemployment. I really hate the idea that right when we merge our financial lives, I’m no longer contributing to the family pot. He’s been very supportive about everything– pointing out that I’ve contributed the lion’s share while he’s been unemployed before and that I’ll probably be back to work again soon. Still, it feels weird and vulnerable and while I like that we can rely on each other, it’s very scary to loosen my grip and feel less in control.) But I’m coming around to basing things off our proposed joint budget.

Introducing a staged approach

Because this period of unemployment is going to include my first real summer in the six years since I graduated college, I really want to make the most of the time to decompress. But in order to make that happen, I want to set boundaries so that I feel free to really enjoy this time and not rush myself into hasty decisions going into my next job.

According to my monthly net worth projections (based on my monthly tracking), I’ve done pretty well enough adding to our cash position that even if I stuff most of my upcoming paychecks into my Mega Backdoor Roth 401k, we’ll be sitting on more cash than we would typically want or need in our emergency fund. How freaked out I plan to be will be based off of where we are in terms of that cash position: well above normal emergency fund, getting close, at or below, or in the red.

Here’s my unemployment in four potential stages:

Stage 1 – Guilt-free decompression

  • Primary goal: relax.
  • Spend money as I would normally.
  • Put together revised resume and LinkedIn. Otherwise, no obligation to search for jobs.
  • Only accept job offers from companies that align with my values as well as my professional and personal goals. No accepting low-balls or any position I don’t feel 95%+ about.
  • Duration: until 1/3 of “excess” cash position is spent, approximately two months (June 2018 – July 2018)

Stage 2 – Strategic workforce re-entry

  • Primary goal: get a good job.
  • Spend money according to joint budget.
  • Apply for jobs in product management. Use variety of avenues — recruiters, LinkedIn/Glassdoor/Indeed/AngelCo, Meetups, alumni networks, personal network
  • Accept job offers that align with professional and personal goals.
  • Duration: until remaining “excess” cash position is spent, approximately four months (August 2018 – November 2018)

Stage 3 – Aggressive workforce re-entry

  • Primary goal: get a job.
  • Spend money according to joint budget but cut personal allowances.
  • Apply for multiple types of tech or tech-adjacent roles- product management, software engineer, data analyst, QA, technical writing. Continue using variety of avenues. Use side hustles to supplement income while waiting for full-time work.
  • Accept job offers which meet minimum salary requirements, that I could deal working at for 1-2 years.
  • Duration: until half of emergency fund is spent, approximately nine months (December 2018 – August 2019)

Stage 4 – Drastic times call for drastic measures

  • Primary goal: stay afloat.
  • Revise joint budget and cut personal allowances.
  • Apply for work within and outside tech. Continue using a variety of avenues. Get in touch with temp agencies. Beg for my old job back? Use side hustles to supplement income while waiting for full-time work. Consider renting out second bedroom to roommate or on AirBnB. Investigate strategies for tax-effectively liquidating assets as needed (brokerage > half retirement > home > rest retirement).
  • Accept any non-illegal job that’ll keep household afloat.
  • Duration: ???

I refuse to write out a stage 5 plan. I’ll worry about it if we get there. Here’s hoping I stay in stages 1 and 2!

What would you do if you left your job? Would you start finding a new job immediately? At what point and by how much would you lower your standards during unemployment? What would you cut first?

How Much Is Liquidity Worth?

Here’s my first world problem of the day:

My company offers post-tax 401k contributions. I have never contributed to my 401k post-tax, thereby paving the path toward a Mega Backdoor Roth, because my employer hasn’t allowed for rollovers from my 401k. Which means I’d either have to not invest those contributions for a long time or instead deal with super annoying tax stuff on the post-tax gains being rolled over from a Traditional to Roth account that I didn’t want to bother with.

But then I realized: I’m leaving in less than two months.

Which makes Mega Backdoor Roth contributions a lot more approachable and a lot less rife with confusion.

The catch, though?: I’m leaving in less than two months. Which means I might not have a salary until who knows when. Which further means liquidity is at a premium. Which means maybe I should favor getting my salary in cash to sit on like a greedy dragon rather than stuff it into my retirement fund for favorable tax treatment.

That said, fiance did just finalize his job offer, so we’re probably in decent shape for a while? We can’t live just off his salary, but a back of the scratch pad calculation indicates his pay plus our emergency fund will last for about three years assuming we more or less follow our joint budget plus personal allowance plan. My last few paychecks would add another six months or so to that runway. That’s assuming I don’t make one red cent (but also that we don’t face any truly expensive emergencies). I can’t imagine being unemployed for that long given how strong the job market is right now, particularly for tech.

On the other, other hand, if I take the cash now, then fiance can contribute correspondingly more money into his pre-tax 403(b) when he starts his new job. Which brings us to the old “take the tax break now or later” debate.

I think I might take the middle-of-the-road path and dump half my pay into Mega Backdoor Roth and the other half keep in cash. If by Q3 I have decent job prospects, we’ll up fiance’s 403(b) contributions so we can utilize both our pre- and post- tax investment space.

Anyway I’m interested in hearing some opinions on the matter:

How much do you value liquidity? Would you go for the Mega Backdoor Roth contributions, pre-tax 403(b) contributions, or stockpile some cold hard cash?