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2017 was the year we Warckens got super serious about investing. I wrote about the motivation for that in my New Life Resolutions post, but the abridged version is that I witnessed my stepfather dying of pancreatic cancer and to quote myself: “… nothing, and I mean nothing will inspire you to get your own finances in order like trying to sort through someone else’s at the end of their life.” We’re not working until we die and we’re not depending on the government to take care of us when we can no longer work. The word of the day is: Proactive.
I read a ton of book and blogs, and listened to hundreds of podcasts about investing and retirement accounts and financial independence and early retirement, and implemented as much as I could but obviously I’m just a human and I make mistakes like everyone else. But I always say: “You learn from it and you move on.” I’d like to share some of said mistakes so you don’t have to make the same ones, and also some of our wins… so you can make the same or better ones.
Fails:
*We didn’t fully fund either of our 401ks. This is the year I found the Mad Fientist, and he has shown me the error of my tax-sheltered contribution ways. I’ve always aimed to contribute the magical Dave Ramsey 15% to our employer-sponsored accounts, which I continued in 2017, which is great, but we’re not waiting until we’re 65 to retire. Per company policy, Greg can only contribute 40% of every paycheck, but I can contribute 100% (we both get 3% matches). Instead of each of us contributing the max amount of pre-tax income, I let it get taxed then transferred it to our taxable Vanguard accounts. I should’ve put the IRS maximum into mine, and 40% of all of Greg’s paychecks into his, and invested the leftovers into our taxable account. #FIREproblems
*After working for the company almost two years in Montana, and again for over a year in Oklahoma, we realized Greg was eligible for a 401k even though he works ultra part-time. Bone heads. If you’re unsure, call your HR right now to see if you’re eligible for a retirement account. Obviously we opened it posthaste and started contributing right away.
*We initially invested in four different taxable Vanguard Investor index funds- VFINX, VEXMX, VGTSX, NAESX. I should’ve done more research and invested in just one Admiral fund to save a ton of expense fees. Again, I’ve seen the errors of my ways and now we’re 100% invested in VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) with 0.04% expense fees, as compared to its $3k minimum Investor Shares counterpart (VTSMX) at 0.15%. That may not seem like a lot of money, but G and I plan to live on 4% of our investments, so that extra 0.11% we’re saving will go a loooong way. This is obviously also a win.
*I went through all the expense fees on our retirement accounts and realized we’d been massively over-paying in my Roth IRA and Greg’s 401k. My highest fund came with hefty 1.58% expense fees, just to manage the account. If G and I live on that 4%, that’s over a quarter of our living expenses going to someone else. Bogus. I changed Greg’s investments to the cheapest fund Fidelity has to offer- the 500 (ticker FUSEX, which I just love) at 0.09%, and I transferred my Roth IRA to Vanguard and am now invested 90/10 in VTSAX and VTIAX at 0.04% and 0.11% respectively, which are obviously a lot better than that other 1.58%. If these numbers and letters are frightening and confusing, see my recommendations for a few books to learn more about investing. I should be able to lend a few from my Kindle, so let me know if you’re interested.
*I spent far too much time manually updating our finances and not enough time actually adding to those finances. In 2018 I’m focusing much more on automation, and have started building spreadsheets to make that a lot easier. I just built my first spreadsheet last December, can you believe that? I’ve always used spreadsheets of course, but that was the first time I used formulas and my mind was blown. Turns out I’m a real computer simpleton. But now I’ve made a ton of sheets for us and anyone who wants them. I’ve got monthly expenses, total investments, total net income, interest-bearing debts and interest-yielding savings. And I’m going back to when we first combined our money in 2013 and updating every year until now. I. Love. Spreadsheets. So this is also a win. And please let me know if you want one- I’ve got them on Drive and Excel. 🙂
Wins:
*We maxed our Roth IRAs. This is borderline fail, as contributing to a traditional IRA is more conducive to early retirement, but… okay, it’s a win. For 2018 we both opened traditional IRAs, which we plan to max out again.
*We invested 100% in stocks. Not that I was trying to time the market, but it sure worked out in 2017.
*After getting a question about it answered on the Money Tree Investing podcast, and a lengthy discussion with the mister, I came around to the idea we don’t need so much cash lying around. While I’m happy to have that potential volatility in our long-term stocks plan, I am a nut about never having to depend on anyone for anything so I want a lot of short-term money readily available. We keep an entire year of expenses in a money market, along with next year’s max IRA and HSA contributions. Our travel fund could easily last six months in case of an emergency, and we’ve got enough to replace my car, Greg’s truck, and our travel trailer sitting in a separate account. But like, my dream trailer is an Airstream Classic 33FB and those things start at $156,400, so… I was planning on loading that account just in case we came across a sale or something. Me and Greg’s lengthy discussion consisted of him telling me I’m out of my mind (he’s right, of course), so I settled for 1/5th of that, but there’s a dealer here in Tucson who has a 2018 for sale and it’s just a 20 min bike ride away. WE’RE GOING.
*We made Greg’s income totally fun money. Some people might call this “F. U. Money”, but I prefer “fun” because it’s nicer and I made a resolution to stop saying the fuck. He’ll contribute the max 40% into his 401k, but everything else is going into our travel fund which means Mama Bear really needs to step her employment game up.
*I sold my 12 yr old, broken binoculars back to the store where they were bought for $75. And promptly bought the same pair brand new for $250 on sale + 8% back from TopCashBack with free one-day shipping. Mega win.
*G and I each returned a pair of flannel-lined jeans to Eddie Bauer, both with rips in the flannel. G’s were at least two years old, but I had just bought mine a couple of months before. They didn’t have our sizes in store, so they took the jeans and mailed us a check for $130.22. Except now those jeans aren’t available online either. This is a win/fail.
*We started a side hustle savings account. Not just for side jobs, but for any money we come across unexpectedly. I found a $10 bill on the ground at DTW. It went into the side hustle account. Okay, it went into my wallet but I transferred $10 from checking to savings. Anything we earn from giving plasma, Ibotta, Checkout 51, Job Spotter, Walmart Savings Catcher, and cash back portals is going into the account. I just want to see how much side money we can make outside of our real jobs this year. My goal is $7900, or enough to fully fund our HSAs for next year.
I worked a lot in 2017 (almost nine months!), and the market was hot, so fortunately the mistakes we made weren’t completely detrimental and the things we did right helped increase our net worth over $72k from this same time last year in spite of spending nearly $10k on some dope vacations and another $19k on living expenses. Obviously that’s not due to our actually making $101k, but because we invested just over half our income and put everything else we didn’t spend into savings. Things are really looking up in 2018 even though I don’t have a job yet, but between giving plasma, Job Spotter, and online surveys, I think I could keep us afloat. Shit! I forgot about the Airstream.
I love learning from other people. Any financial fails or wins you learned from last year? Please share!