Year in Review: Finances

The Year In Review:

• Year In Review: Finances
• Year In Review: Fitness
• Year In Review: Resolutions
• Year In Review: Sleep

I stopped filling out my financial ledger this year. It was probably evident after I didn’t file a financial report last year. It was just too much work (spending maybe a few hours at a time looking through my credit card statements, banking statements when I’m changing up credit cards and adding banks I’m using) for not enough payoff (while I do get to practice my handwriting and look at my finances deeply, I can’t scan through multiple pay periods to see how my spending habits are changing and whether I’m actually properly budgeting).

So instead I switched over to Mint. Yes it’s Intuit and the dark side, and yes I also paid for Mint Premium which costs $5 per month (I’ll go ahead and say it so you don’t have to, BOOOO), but it’s so helpful from the analytics angle. I get to see my monthly spending trends (compared to the previous month), my net worth, a full breakdown of all statements, transactions, and aggregations, which helps with how I should think about budgeting.

Here are some of the major spend items that popped up immediately on Mint:

• Total spending over last 6 months: $37,660.98
  • 31% spend on home (almost entirely HOA fees and mortgage)
  • 17% spend on food & dining (around $6,357.42, on restaurants and groceries and such)
  • 16% spend on shopping (around $6,004.69, mostly on Amazon and Costco)
  • 13% spend on health & fitness (around $5,023.24, mostly personal training and therapy)
  • Remaining 23% on bills, auto, travel, donations, etc.

Here’s some notable trends in terms of spend and income I had over this year:

• I spend a fairly low % on my mortgage + HOA: If I’m looking at % of my total take-home, it’s around 16.2%. I think 28% is the recommended mortgage to take-home income ratio. The HOA fees get me though, and I think my escrow account was running a bit low so the mortgage servicer bumped up my payments or something. In general though, I consider myself incredibly lucky.

  I was at one point considering paying down my mortgage early, so I just don’t have to worry about making payments on a property. Given how my mortgage rate is 2.25%, and inflation’s averaging @ 7-9% for most of this year according to this table, I think it’s in my best interest to stretch out my mortgage payments for as long as possible, since I’ll be paying back the bank in dollars that are worth less. From looking at Zillow and seeing base rent be $2k / month for units in my neighborhood (with no sign of rents slowing down soon), I got a really good deal that’ll benefit me for years to come.

• I spend a shit-ton on food and shopping: I honestly thought that the therapy and the personal training would be the most expensive things I spend money on, but nope. I spent a ton of money on eating out, Factor75 (this fitness-based meal planning service I’ve been using for a few months), Amazon, and Costco. It’s not a bad thing necessarily, but if I want to save I have oodles of opportunity to do so by cutting spend in these areas (and eat healthier and be more financially responsible too).

Overall, there’s a general theme I’m noticing around settling into a lifestyle that suits my income. Currently, I save around half of my income, but it sure doesn’t feel that way given what’s happening in the market. I feel sufficiently motivated to change my spending habits, or I’ll be living paycheck to paycheck.

Those are a smattering of high-level observations. So now what does my financial planning broadly look like, going into a year where 90% of people expect an economic recession? To put it bluntly, it means figuring out ways to optimize my spend. After speaking with a corporate-provided certified financial planner from OneEleven, we came up with the following action items:

• Cash out any investments I’m not confident in: I think most of my investments, though down for the year, are pretty solid. Large cap $SWLGX, index $SWTSX, dividends $SCHD and $JEPI, and emerging market for batteries $LIT are all decent, to say nothing of my 401k accounts. The only questionable investment I’ve made is Schwab Intelligent Portfolios, the robo-advisor account I put $17k in. The CFP mentioned there’s the risk of over-diversification using tools like robo-advisors, where you get exposed to too much risk and not as much reward as a traditional index fund.

  So I cashed that out to take advantage of tax-loss harvesting, and we’ll see what my deduction looks like for next year. In the meantime, I transferred all that cash into my high-yield savings account.

  Given the current APY, I should be getting around $94.62 per month in my savings account and a liquid 6-month rainy day fund, which could stretch further if necessary by cutting expenditures to the bone. Not bad, $1200 from interest next year assuming I don’t make any withdrawals from that fund and interest rates hold steady, and a tax deduction on a $2k loss. It also means I don’t have to aggressively save, and can instead aggressively invest $3k per month into e.g. SCHD and SWTSX. It sounds like making the best out of a bad situation.

  • Liquidate Schwab Intelligent Portfolios brokerage account and deposit savings
  • Set up a schedule of depositing $4,000 into brokerage accounts each month, $2,000 in $SWTSX and $2,000 in $SCHD.

• Cut out any prepared foods and look more into cooking next year: I asked my CFP if $600 per month for one person is a reasonable food budget, and he went NOOOOOOOOO. In comparison, he spends around $500 per month feeding a family of five. So yeah, I really need to cut down on my food spend. But how? I hate cooking most times. I cook mostly for special occasions, like parties and dates. Usually when I cook it’s pretty terrible LOL.

  So that’s why I purchased a sous vide machine, a vacuum packer and bags, and an air fryer. I’ve been sous viding chicken using these resusable bags and a hand pump, but I can’t wash the insides of the bags properly and I got sick the last time I ate the chicken. So um yeah nope, going to lower my activation energy by using the vacuum packer instead. I’ll need to budget a few hours a week to go to Costco and vacuum seal some chicken breast, rosemary, salt, and pepper every week or two weeks. Then I can buy some pre-chopped brussel sprouts from Trader Joe’s and then toss that into the air fryer every day. Add some quinoa in the rice cooker, and voila, healthy meal with very very little effort. If it gets boring, I can purchase a spice rack in order to bring out my spices from the kitchen cupboard, and maybe try some different things each time (instead of rosemary, maybe Old Bay or the steakhouse seasonings).

  • Set up a schedule every two weeks of going to Costco, purchasing chicken breasts, and vacuum sealing with salt + pepper + other seasonings before freezing.
  • Add in a habit in my new year’s resolutions of using my air fryer and rice cooker to make brussel sprouts and quinoa more often.
  • Withdraw $100 a month for coffee (using a cash budget reduces the ease and increases the pain of spending money on luxury items like coffees).

• Max out my HSA: So apparently, I can pay for my therapy costs using HSA dollars instead of after-tax dollars. That’s $3,850 I could be spending before-tax vs. after-tax. Since it rolls over, and provides health benefits by retirement, my CFP said it’s pretty much a stealthy IRA, and there’s documentation on the Internet to back that up. So that’s an easy dunk.

  • Configure Zenefits to max out my HSA.
  • Change my therapy provider to use HSA funds instead of debit card.
  • Consider looking into maximizing FSA funds (which reset every year and do not roll over) if funds for therapy are insufficient.

• Separate out any business expenditures if there are any into a separate banking account: I was chatting with my CFP around my business ideas and he asked if I separated out my business expenditures from my personal expenditures. I told him I didn’t and he said that’ll be really inconvenient come tax season, because you’ll have to sort out which expenses are personal and which expenses are for business. He said if I keep them separated out, then I can just keep it separated and then load it all at once into QuickBooks for an accountant to take care of.

  I strongly doubt I’m going to go all out in terms of getting a business bank account and all that, because I strongly doubt I’m going to get any VC funding based out in the D.C. area working on some tiny app.

  • Apply for a AmEx Blue Business Cash card, and tie it a “business” (i.e. NOT personal) checking account.
  • Switch over payments for “business” expenditures to AmEx Blue Business Cash.
  • While I’m at it, apply for an AmEx Blue Cash Preferred card, I get 6% cash back on supermarkets.
  • While I’m at it, close out my AmEx Gold card (I have no idea how to maximize my usage of points) and switch over credit cards to Blue Cash Preferred.
  • Max out my usage of points on AmEx Gold