Start of year checkup and Tax prep

I'm one of those DIY tax guys.  My father was before me and I hate paying for something I can do myself.  I could do it all paper, but I do like to make things easy for myself.  I used to use the free online tools for H&R Block or TurboTax, but I haven't qualified for those in awhile.  These are mostly for simple tax returns.  I use H&& Block for no particular reason.  My wife used to TurboTax before we met.  They are basically the same so pick whatever you like.  Unless one doesn't work for you I would recommend sticking with one so you get an understand of the software year after year. What I like to do during this time of year is look for the software at discounted.  I look on Amazon, newegg, costco etc.  I can usually get the software for around $25 or 40% off.  No point in paying full price. This also was a tax write-off.  It may only be now if you use the standard deduction. 

 

 

Start a folder if you don't have one to keep all your tax docs either at your home or on your computer.  Best would be a encrypted thumb drive that you backup. You can either buy one, or use software like BitLocker or  Veracrypt.  This is also a great time to backup all you legal documents and HSA receipts. Copy this information to a external HDD and put it in a safe or lockbox. 

Check your IRA contributions either finish up your 2020 contributions or 2021.  This year we pulled back on contributing to our IRAs to build up more into our cash savings.  After this checkup I will pick how much I will put into an IRA this year.

Check on your investments across all your account and see where your are sitting.  I like to be around the 85-75 % in stocks and 25-15% in bonds.  With this crazy year it is sure to be out of wack.  

Check where your Net-worth is at.   This is usually pretty simple.  Add up everything you own. Including cars and homes. Then subtract everything you owe.  If its a positive number. Great. If its better then last year Even better.  If 2020 got in the way.  That is OK 2021 will be our year.  

What I also like to do is see what my net worth is without House or cars. One because car value decrease so much every year and your house is a place you live and your are unlikely to sell it and not replace it with something close to the same value.  Then compare with previous years if you can otherwise write it down in google docs for future reference.  I use Personal Capital for this so it is very simple to get.

Also a great time to look at your insurance (home, car, and life).  If you don't have a will start getting that done. I've been very bad at this and very over due. 

 

Lastly since it is the beginning of the year it is time to reevaluate your budget.  Make sure it still make sense and look how well you did over the year. Adjust accordingly or see if you can trim it a little more.

 

Lastly talk with you spouse if you have one.  This is a great time sine you've done all the work to talk through everything and to make sure you are both aware of your goals.  It is very important you are both aware of the state of things.  You spouse doesn't have to be onboard with FI/FIRE, but they can't be against you. If they are things will no go well for either of you.  I will say hope is not lost if they are not onboard and there are ways to continue the path and still be happy together.

Last of all. Give yourself a pat on the back. You made it 2021. Barely.

HYOSA - Saving account

 HYOSA - High-Yield Online Savings Account

 

I've been using an online savings account for about 20 years now. I switch because my bank was providing a tiny .01% interest rate and I wanted something that would provide value and protection from my checking account.

 

I like having access to a savings account that I can get to my money within a couple of days or next day for a fee.  Some may say you don't need any cash in a savings account and invest that money.  I believe having 6 months expenses saved in these three categories is a good safely net for everyone.

Between Checking account (enough to cover monthly expenses with some buffer) and Savings about two months in chase to building interests and only touch for emergencies.  If I've done my math correctly thats about 3 months of saving in cash very accessible.  The last bucket for the next three month is investing is a safer allocation.  I put mine in Vanguard  LifeStrategy Moderate Growth. Yes the expenses ratio is a little hire then straight index fund, but it gives a good balance of US Stock, International Stocks, and bonds.  Basically 60/40 which is conservative in my mind. I fill them up like you would a bucket I fill the checking once that is filled all the spillover goes into the online savings account.  From there the rest goes into my saving investing until I reach the 6 months total.  This works the same for taking money out.  All money comes out of checking.  If you miscalculated you checking or an "emergency" happens you first pull from the online savings.  Only pull from the investments bucket if needed for that emergency not to fill up the online savings. This is because it will be a taxable event and you will having to pay taxes on any income made.  At this point you stop added to the emergency investment account and fill up the checking then the online savings.  Everything else after that is your to using for other investments.

HYOSA account are great and bad at the same time. The interest rate usually changes by a few points monthly e.g. 1.1% to 1.0% usually not enough for you to care, but like now they are around 0.4% which is sad since last year it was 1.5%.  Still better then the 0.01% from the traditions bank savings account.

I have heard from allot of people that there really isn't a point in having a savings account and anything about your monthly expenses could be in an investment account.  There is something to say about using a money market account for your online saving, but I like the ease of transfer encase I need the money quickly while online saving usually have a higher return.  Also since it is part of the emergency fund I want it isolated from other account being able to access.  Only my checking has access this account accept maybe auto deposits from work. You can make the same argument for those who say it should all just be invested into the market.  I can easily see that if you have significant stock pile to invest/invested in a taxable account this could work.  The problem I have is if your investments went down by 20% would you still be able covered for an emergency and be able to pay taxes on the selling of your investments.  I personally like to be a little more cautious then only having a checking account and investments only.

Really if you are working to build any kind of savings you can be wrong.  Last year was a reality check for everyone. Hope for the best and prepare for the worst.

Stocks - ing stuffers - investing for fun

 Look investing/STOCKS can be fun/exciting/scary/to big/ whatever adjective you want to add.  Look most people that invest are not expects and are self thought.  I am on of those. Have I done well Yes. I have done poorly Yes.  Even the experts don't seem like experts most of the time.

I think it was around 2008 I really started to seriously invest which happened to be when I actually had more then a couple of pennies to invest. Which was probably around 10 thousand or so.  That was a lot of money for me. I did what everyone should do listen so some random advise for a friend. Wait no you shouldn't. Really you shouldn't.  Anyway he came over to my cube at work, because that is the best place for investing advice and said hey did you hear VISA is going to IPO soon. I was like WOW that is cool I know what Visa is and I work at a company that works closely with visa. So I put all my 10k into the IPO. Hindsight it was a good investment Visa is a very solid company and in 2008 the economy wasn't the best so it by pure luck ended up being a very good investment.  I wish I could tell you I've kept that money in for the entire time and have $189,090, but I don't.  I haven't figured out how much I've actually made, but I know I've cashed out some and reinvest in other things or paid for life with it.  The point of this story is that every dog has his day and a broken clock is right at least 2 times a day.  Just because I got lucky and made a good investment doesn't mean I was a genius or any better then the next person. My failures/missed opportunities are much bigger then any victories I've had.  10 years ago I found a conversation with a friend saying I was going to invest some of my Visa stock into in either Apple or Amazon. Spoilers I picked Apple and it was gone up and amazing 964.16% in the same time Amazon has gone up 1714.98%. As you can see even in victory I had a defeat. Investing in stocks will always leave you with the what could of been feeling. This is the same if you trying to play the buy the highs and sell the lows game. 😋

To be completely open here is a list of Stocks/Investments I've got right.

• Visa 14+ years
  
• Apple 10+ years
  
• Tesla 1 year
  
• Google 10+ years
  
• Disney - 1 year
• VTSAX - 10 years
  

Here is a list of stocks I bought and sold before any kind of income or lost money on 

• At&t - over 15 years ago
  
• BRK.B - over 14 years ago
• Netflix - over 10 years ago - made like $100 on there big dip
  
• Lulumon - over 15 years ago

 

As you can see I hit big in some places and missed in so much more.  I've never invest a lot of money I need that money to live life at that point in time.  Example would be Tesla I invested in Tesla because of there market position and diversification of the company. But I wasn't sold on the hype of company and the CEO seemed to be causing the company harm. So I invest 1 in one share. Now that one share has done well, but it crashing or taking off wasn't going to change anything. 

Most of my investing funds are from the initial 10k I started with and I follow the boglesheads of buy and hold.  Really I stared with Visa and Apple and only sold to diversify.  Any addition funds I add to my portfolio all goes into the index funds.  When I get dividends I usually put those into a stock.

Remember there is a lot to investing and you can get very deep into it.  You will not get rich doing it. Only the lucky or the once in a generation gets wealth from picking stocks.  If you have the itch or just like have a little fun. Do it, but set a max you will invest into stock like I did. My initial 10k was my max the rest doing into index funds or savings. 

Some quick stats from yahoo finance in 2018 the richest 1% owns 50% of American stocks. From Money.com the riches 10% owns 84% of all stocks.  The best quote I've read is "When you are buying a stock someone else is selling it, and when you are selling a stock someone else is buying it." - Unknown So based on the stats it is a good bet that someone wealthier than you is buying when you are selling and selling when you are buying.  This can be fun enjoy and learn.  Nothing is wrong if you are learning and improving.  If you have the itch scrach it and maybe you will make some money or have something to talk about with you friend on the time you almost became rich. 

Cooking on the cheap

 Ever since I moved our of my parents house, which was shortly after graduating college and starting my career.  I started to eat healthier.  I wouldn't of called it better just healthier as at time time a 20 something single guy can.   I didn't know it at the time, but it was very FI.  I only need a couple of ingredients and only a couple of appliances.   My breakfast if I had it was cereal Cheerios. Lunch and dinner was rice usually whole gain, with a protein (chicken, streak, shrimp), and veggie (frozen mix bad).  That was it no seasoning. To go along with running I got into good shape and saves a lots of money.  Now I did go out with friends and co-workers for lunch/drinks and such, but otherwise simple.  

Fast forward almost 20 years and here we are.  Lets talk about a real life not some post college living on the cheap, but lets talk about practical cooking and practical expenses.  

First lets talk about what appliance you need to have.  I used to say a rice cooker, but the more modern and more practical is a instant-pot.  Air-fryer. This can pretty much replace a microwave and oven.  Not only does it save on electricity compared to over it has so many uses.  A mixers like a nutribullet. The reason for this, is to mix smoothies or chop stuff up.  Good set of knifes. You can get away with just that, but to make your life quicker get a microwave, pots, and pans. You doesn't need much more especially for a family of 4.  If you feel like these are to small. It maybe time to rethink how you make dinner and portion sizes. Think appetizer sizes not thanksgiving sizes. 

A quick look

1. Instant-Pot
2. Air fryer
3. Nutribullet (mixer)
   
4.  Knifes
5. Microwave
6. Pot/pan/stove

Everything else is extra convenience.  Over and grill are also great things to have, but you can live without and find yourself not using very much. 

We all know cooking in bulk helps save money and your time, but what to do with all the bulk. You can freeze it, you can just eat it through the week, or like many make it,eat it, and throw away because you go tired of it.

Making old like new.  Ok we all get tired of left overs. Here what I like to do to mix it up. 

• Add different sauces I prefer buffalo. 
• Put it in a tortilla (make a burrito or quesadilla)
  
• Add the ingredients to a calzone
• Make a soup or stew
• Make them into a sandwich
  

Living in a bubble

The past year has change our way of life.  From a FI stand point it has helped us look at our spending and decide what is important. This is mostly due to the fact we don't know what tomorrow will be.  Something I've been reluctant to do is cancel my gym membership. One because I had a grandfathered price and two I've had it for 20 years.  But after not going for 9 months it was time even through for 3-4 months they didn't charge me.  Here are things I've done in the bubble to reduce cost. 

 The funny things is about doing these is it is something I should of always done or do every couple of years.

I've done things to cut back.  

• Refinanced Mortgage
• Changed cell phone carriers
• Cancelled Gym memberships
• Stop eating out
• Change car/home insurance
• Cancelled kids jump house subscription
• Cancelled various subscriptions like RoadRunner and Consumer Reports
• Ski passes

 

Most of these are permanent changes, but there are some if 2021 is better I will probably pick back up.   

What I have found living in a bubble is that my life really hasn't changed.  Beside not traveling to see family and kids sports life isn't that different.  I still get my exercise and for the most part living a full and healthy life.    I can't deny my kids life have changed a lot.  For one they are not going to in-person school and they are not hanging our with friends.  The couple of neighborhood friends don't want to wear masks and our kids do.  We have been exploring other options for them to hangout with friends like online game (minecraft) or going to friends parks that wear there mask.  To me it doesn't matter if you believe masks' work or not, but if you get in a routine with your kids then they will be good at wearing them when they have too. Think wearing a seat belt. 

Living of a bubble has forces be to think outside of the box to have my family have a fun and exciting life.  This goes true in protecting our lifestyle and prepare for the good and the bad.  For Halloween we created a haunted basement for the kids. It was fun and different. The loved it and didn't miss not trick-or-treating.  The hardest part of getting used to a new lifestyle in the bubble is not letting emotions take over.  The market has been crazy and I for one have been spending a lot for time reading articles on COVID and the market.  COVID looks bad and the market looks good.  How long will this last or do we have a COVID proof market. IDK and know one does.  My strategy is to just keep investing. I may shift things around a bit (re-balance), but otherwise what does up must come down.

I for one will feel weird once the world is mask free and things head back to closer pre 2020.  Let hope all the good habits everyone came up with stick.  Remember checking up on your finances and reducing your membership and change to lower cost services is always good.  Keep it up. O and keep washing those hands.

Silly thoughts on inheritance

 I was watching a video on nest eggs on how much income you would have in retirement if you had 4 million dollars and did a 5%, 4%, 3%, and 2% with draw.  The 2% withdraw was something like 80k a year.  

This got me thinking. If you did a 2% withdraw of you $4 million and you started at the normal retirement of 65 and lived until 95. You of of spend $2.4 million of that $4 million. Let just say you stick with a 60/40 split 60% stock and 40% bond with an avg 6% return. When you die you could have ... drum roll $13.8 million.   👀

OK now your dead and lets say your spouse was so broken hearted they died the same time. So you are 95 and lets say you had kids when you were 30.  So now your kids are 65 and about to retire and your grand kids are 35.  You leave your inheritance to your two kids. They both get $6.9Million.  That goes on top of whatever retirement they have saved which very well could be there own $4 million. Now I know 4 million is a lot of money for retirement and most will be happy if they get to a million, but it goes to show you that there is something to say for having to much.  In the scenario above one of two things should of happened either they should of retired earlier or took out a higher % in retirement. For many that is easier said then done.

It is sometime are to retire or spend more then you have ever done. You could be saving to donate to a cause you care about.  Everyone is different, but don't forget to enjoy the simple things before your time is up.  Get out; see thing and do things before you can.

Halloween good clean fun. Being safe

 We are not doing the tradition trick or treating.  We feel it isn't in our families or neighbors best interest this year. We did carve pumpkins and have Halloween costumes. We are going to have fun with the holiday just without all the people interactions.  

What we are doing and not only will it be safer, but also we don't have to buy tons of candy.

We will be setting up a haunted basement.  Using blankets we have around the house and tarps.  Having spook sounds and the traditional spaghetti worms and grape eyes.  We are also creating a whole bunch of decorations from balloons and streamers. Something fun that they will remember.  We are also doing to have the knock on the door and the wife and I will put on different costumes for them to "trick or treat".

The second part of the plan as been Harry Potter.  We have been reading then Harry Potter the Philosophers Stone. This is the illustrated version. They are really into the story and on Halloween we will watch the movie with them for the first time. 

Overall this wont be the traditional Halloween, but it should be one they can remember and enjoy.