Monday, May 11, 2020

1 Year Post-Finale Follow Up

Last updated: May, 2020
Net Worth: $1,229,251
Change from May, 2019: +$202,172

I did not expect to be writing another blog post, but I felt an update would be in order, given all that has gone on recently.

It is mid-May, almost one year exactly after I wrote what I thought would be my final post. A lot has happened since then. COVID-19 struck, killing and infecting thousands and also decimating the stock market and causing unemployment to skyrocket. My wife and I have been lucky in that neither of us has been laid off, although we suspect some sort of temporary furlough may be in my wife's future. Both of us have been working from home for the past month and a half and my daughter's school has switched to online classes, so she is home full time as well.

This new arrangement has taken some getting used to, to say the least.

This is not pretty - but it's not the end of the world either.

As the above chart shows, our stock accounts have declined in value about $150,000 on paper. This actually represents a rebound from the all-time low of mid-March, which was a decline of close to $300,000. Surprisingly, our net worth has manged to remain above $1,000,000, even with this huge decline.

I'm actually eager to buy more shares of index funds, as I think this downturn is a great buying opportunity. I'm torn between building up a cash reserve in case either I or my wife gets furloughed and investing that cash now to buy while the market is low.

What I Learned From The Coronavirus

I am very grateful I had an emergency fund established. It has provided me with a measure of relief, knowing that we have some funds available should our situation really turn south. However, the stock market crash has made me realize I need to adjust my emergency fund philosophy a bit.

Back in 2 B.C. (before COVID-19), my emergency fund consisted of $2,000 cash and the remainder (about $18,000) invested in low cost index mutual funds and a handful of dividend king stocks. Some people say that investing your emergency funds in the stock market is crazy. However, not investing it in the stock market incurs a huge opportunity cost - you will lose out on all the stock market growth for the (hopefully) rare case when you will need cash someday. The concept of opportunity cost has been written about very nicely over at the Early Retirement Now blog in this post. (Also be sure to read the three other posts he links to at the start of that post.)

So what has happened over the past two months is exactly what many people feared - a stock market crash has really cut into the value of my emergency fund. I'll admit I was worried. The market tanked and my first thought was "Shit! Those goes my emergency fund right when I need it the most!"

But when I stopped to think about it, I realized it wasn't so bad. Yes, if I needed more than $2,000 cash, I would be forced to sell some stock at really low prices. Thankfully, I haven't had to do that so far. But did I actually lose money in my emergency fund with this downturn? Here's a screenshot of my emergency fund stock holdings:

As you can see, my cost basis, the amount of money I paid for these stocks ($18,822.26), is still lower than their current market value ($19,346,74). Even after the huge market losses of the past month, I'm still ahead. Even if I had to sell stocks to raise cash after the market crashed, I still would not have lost money.

However, I'm not completely immune to the emotional ups and downs of huge market swings, so I have decided to adjust my emergency fund strategy a bit. Rather than keeping $2,000 in cash, I'm going to keep an amount of cash equal to two month's mortgage payments, because my mortgage is really the biggest monthly expense that I am worried about covering in an emergency. I'm going to go ahead and accept the opportunity cost of keeping about $5,000 in cash. It's a small price to pay for some peace of mind during the next market crash.

And Speaking of Mortgages...

Right before the coronavirus crisis hit, I had started to refinance my mortgage. Interest rates had dropped a fair amount and my back-of-the-envelope calculations showed I could save a couple hundred dollars a month.

I had a 30 year mortgage at 4.125% and decided to refinance to a 5/5 ARM at 2.75% with no points. It's an adjustable rate mortgage, but the rate stays the same for the first five years. My daughter will be going off to college in 2 or 3 years and there's a high probability we will move shortly thereafter, so I'm OK with just a five-year adjustable rate.

The refi process took longer than normal. Banks are swamped with people wanting to lock in lower rates and then, on top of that, the virus hit, slowing everything down more and causing havoc as people were laid off or furloughed. I was asked about three times during the refinancing process to verify my and my wife's employment status. 😀 Anyway, that all wrapped up a couple days ago and now my monthly mortgage is just over $400 less a month than it was. Part of that savings will be going to paying down my car loan and the rest will be invested in the stock market.

One Tesla Is Paid Off!

This month also featured another milestone! We've paid off my wife's Model 3! We managed to pay it off in just about 1 year - we took delivery in March, 2019 and it was paid off in May, 2020! This was well ahead of the four years I had planned.

Because we paid it off so fast, we actually ended up coming out much further ahead than I had hoped we would. We received a $3,750 federal tax credit (which I collected when I filed our taxes last month). At the time of purchase, I figured we would pay about $3,552 in interest on the loan over four years and we ended up only paying $1,084.37 over the life of the loan, which was one year. That means the purchase price of the car was effectively reduced by $2,665.63 (the $3,750 tax credit minus the $1,084.37 interest charges). To put it another way, we were paid $2,665.63 to take out the car loan!

Now, I am going to concentrate on paying off my Model S by redirecting the money we were sending to my wife's car loan to mine. I estimate we should have our final car loan paid off in about 1.25 years.

Net Worth

May 2019
May 2020

Despite the poor stock market performance of the last two months, our net worth still increased over the year since my last blog post.

The gain came from the usual sources you would expect when you are looking over a full year -  a combination of constantly investing some money each paycheck, paying down our outstanding car loans and mortgage, and property appreciation. Slow and steady wins the race.

Back Into Hiding

That's all for now. I'll likely do one really final update in a year or so when my Model S is paid off. Check back then!

Wednesday, May 29, 2019

Net Worth Update: End of May, 2019 (and End Of Blog)

At the end of each month, I post an update of my net worth, including a brief discussion of any notable events that might have occurred. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of May, 2019
Net Worth: $1,027,079
Change from last Month: +$29,192 (!!)

Events Of Note Last Month:

My SQL courses on Udemy generated $56.20 of income. This is my last payment from Udemy and it takes my total lifetime income from my courses to $11,368.76. Not too shabby.

My courses on SkillShare, meanwhile, earned $30.03.

Net Worth Update

We've been flirting with it for months, but now, we finally reached the next achievement:

Our net worth increased by $29,192! We are now officially millionaires!

Sadly, I can't say it was anything specific we did this month to push us over the edge. Turns out, we probably crossed over the one million dollar mark a couple months ago but I never noticed.

About two weeks ago, I received an email telling me the quarterly statement for my wife's retirement plan was available. As I was downloading the statement, I realized I didn't recall seeing this account in I checked and, yup.. I had never added it to Mint, so it was not being included in my net worth calculations. Well, I fixed that mistake!

The value of the account at the time was a tad over $59,000. The stock market has dropped quite a bit since that day, but we were already close enough the last couple months that this "new found" money was enough to get us into the double comma club, even with the decline.

April 2019 May 2019

And That's A Wrap!

With this milestone, I've decided I'm going to stop writing for this blog. My goal has been accomplished - I've got a Tesla (two, even!). My "stretch goal," if you will, was to get a net worth of over a million dollars, which has also been achieved.

I say this is a "stretch goal" because I never really explicitly stated it was something I was striving for, but it's always been in the back of my mind.

Our net worth has increased from the $600,218 it was when I started tracking this figure in February, 2016 to our current value. That's a pretty good-sized increase for three years! I haven't been consciously trying to grow it. Rather, it's happened simply as a natural outgrowth of managing our money better. Creating and sticking to a budget does wonders.

As I looked forward to what I might write about in the future, honestly, there wasn't much that excited me. The next major milestones for me are getting our two car loans paid off. The first should be gone in about one year, then the second two years after that. One of my initial reasons for starting this blog was to provide incentive for me to keep saving for my Tesla. I don't need any such motivation for paying off those loans. I am highly motivated to pay them off ASAP!

Other Topics

A lot of personal finance blogs focus on ways to stay motivated or be frugal. I've never really had a problem doing that, so it's not something I feel I have a lot of experience with.

My wife and I are also fortunate enough to have relatively high-paying jobs. We don't live paycheck to paycheck and don't have to scrape together enough money to make it to the end of the month. Through luck or hard work or (at least in some part) all the societal privileges that come with being college-educated Caucasians, we've never been in that situation. As a result, I don't feel like I can authoritatively tell others in that situation how to live. It's easy to say "save at least 10% of your income," but doing that while you are barely making ends meet has to be real hard and it would be hypocritical of me to tell others how to do it.

I written about many of the financial topics I wanted to - credit cards, stocks and stock options, paying down debt, things to look for to get as much value as you can. Anything else I have to say on those subjects would just be repeating myself. (What else can be said about mutual fund expense ratios besides "they suck" and "get them as low as possible?")

I've even shared some of my darkest secrets here.

The reality is there is nothing difficult or complicated about personal finance. It's easy to make it as complicated as you want. For example, you can dive into annuities or other esoteric instruments. But the reality is no one needs those to get rich. Once you have learned a handful of basic concepts, you'll have more than enough knowledge to increase your wealth.

Tomorrow There'll Be Sunshine...

Rather than start repeating myself, I'm going to close the door here and move on to something else. I'm not sure what yet.

Thanks for reading. I hope this blog has been useful, educational, and at least somewhat entertaining. I've enjoyed sharing my experiences and had fun writing the blog. I hope you had fun reading it. I hope you find success in your financial journey and I hope that you will eventually find your way to the land of hope and dreams.

Grab your ticket and your suitcase
Thunder's rolling down this track
You don't know where you're goin' now
But you know you won't be back
Darlin' if you're weary
Lay your head upon my chest
We'll take what we can carry
And we'll leave the rest
Big wheels roll through fields
Where sunlight streams
Meet me in a land of hope and dreams

Wednesday, May 22, 2019

Work - Now With More 401(k)!

Last year, I wrote about how I willingly went to work for a company that did not offer a 401(k) plan. At my previous company, I was contributing 19% to a 401(k), so when I took my new job and lost that option, I just started putting 19% of my pay into a regular brokerage account for saving.

Unfortunately (or fortunately, depending on how you look at it), my salary was high enough to disqualify me from contributing to any kind of IRA, so I just put it into a regular, taxable account.

A year later, my company now offers a 401(k) plan! In the competitive, tech-centric job market of the Seattle area, if a company wants to attract and retain good talent, it needs to offer such a basic benefit and the lack of a retirement plan was a serious drawback when it came to hiring.

To my surprise, they plan they came up with is surprisingly good.

  • They offer a Roth 401(k) option, which I took. (But keep in mind, the company match portion still goes into a regular non-Roth 401(k) account.) 
  • Employee contributions are matched 20% up to the first 5% of your salary.
  • The plan investment options are pretty good. There are several low cost mutual funds available, including some Admiralty share options from Vanguard funds. There are also retirement date target funds.
  • Employees are automatically enrolled at 3% of their salary unless they opt to change that.

This is actually a double win for me. As I mentioned in the above linked post, when I accepted this job, I was able to get an additional $5,000 salary because of the company's lack of a 401(k). Now that they offer one, I get both benefits!

I enrolled and am contributing 5% - just enough to get the full company match - and I'm continuing to save 14% to the brokerage account I was contributing to before. This was simply to let me retain some flexibility.

While my company's 401(k) plan offers good choices, I like having access to that additional 14% of my pay at any time. I can also adjust that amount more easily as my budget needs change. I have a wider range of investment options outside of the 401(k) plan. Yes, I may be paying a bit more in taxes, but that is the price I have to pay for the increased flexibility.

Wednesday, May 8, 2019

Video Recording Issues

My Tesla software was upgraded a month or two ago and one of the new features I got was Sentry Mode. When this mode is activated, the car will monitor its surroundings while parked. If a threat is detected, such as someone leaning on the car, attempting to break in, keying it, pulling a hit-and-run in a parking lot, etc., the car will start recording video using its cameras, as well as display a warning on the large screen. If that doesn't deter the offender, the car will eventually start blasting classical music. It's sort of a car alarm on steroids.

I've been turning Sentry Mode on pretty much whenever I park my car outside my house now and, occasionally, when I get back in, I will see an alert telling me some sentry events have been recorded. When I get home, I plug the USB drive into my computer to see what happened.

This is how I noticed that my cameras seem to be malfunctioning. The recorded video is often glitchy and corrupted.

Here's an example from my front camera:

This doesn't only happen to the front camera. I've also seen it happen from the left camera.

And here is another issue I've seen with the left camera. The picture degrades over the course of the 1 minute recording:

Sometimes, the recording from the left camera is simply an empty file.

At this point, I'm not sure if the issue is with the camera or something related to the video recording process. Autopilot, which uses the cameras, seems unaffected. I've tried two different USB drives for the recording media and the problems do not go away.

A discussion at Tesla Motors Club seems to point to the problem being related to the USB drive the files are stored on. One person said he got rid of the problems by using a drive with a metal housing and he thought it might be related to better heat dissipation. I can't say I've noticed if my drive is hot when I take it out, but it's possible.

It's also possible the quality of the USB drive is an issue. Drives that have a faster write response time might not have problems. I've been using cheap USB drives I received for free as promotions from somewhere or another, so who knows what their quality is. I ordered one that the poster at TMC said worked, a device from SanDisk, which is a reputable company. We'll see how that works.

In the meantime, I've scheduled a service appointment for June 1, so if the new USB drive doesn't fix the problem, we'll see what Tesla says.