Monday, July 1, 2013

Six down, six to go


The first half of 2013 is in the books, and it's been decidedly mixed.  In no particular order, here are a few highlights and lowlights that come to mind:

--Last night, I celebrated the close of June with a plumbing emergency that kept me up until 2:00 a.m.  There was a blockage elsewhere in my building, but it caused my kitchen sink to erupt with really foul black water.  The eruption became so bad that the water to all of the apartments in my line had to be shut down until an emergency crew came out to fix it.  A. was fantastic:  He bailed nastywater with me and then refused to leave until the plumber arrived, even though it was getting really late by that point.

--Work is still unstable.  I really don't know how it's going to play out in terms of my job being relocated.  Odds are increasingly high that we'll also end up with a massive reorganization and although I don't think I'd lose my job out of it, that's certainly something that will impact who I work for and what I do.

--I'm working a ridiculous amount, not less than sixty hours per week since February, and usually more.  That said, I'm not leaving my employer voluntarily:  I have too many years in the pension system, and that makes it a very expensive decision.  There's one exception, though:  If my job moves to another state, I'll take severance and be done with it.  I'm pretty burned out, and I don't want to leave New York.

--My will and trust are set up and I moved all but about $1300 of my assets outside of real estate into the trust.  (I'm leaving my apartment out for now both for tax reasons and because my co-op is incredibly difficult about this, but the rest should be done in the next few weeks.)  I'm waiting to see what my employer offers in the way of long term care insurance during our next annual enrollment before I do anything further about that.

--I paid some stupid tax this year:  I filed my taxes in March, and not only did I not get a refund, I ended up paying out of pocket for the taxes on the $12,000 I converted from a regular IRA to a Roth last year.  That was painful enough, but I totally forgot one important piece of information when filing:  I sold a dog of a mutual fund for a significant loss last year with the intention of offsetting my taxes for the IRA conversion, but guess what?  I forgot all about it!  I had to refile my taxes, and that was another $200 I paid to my accountant.  I ended up getting $500 back from the IRS, but New York State still hasn't sent me a check for the nearly $400 the refile is supposed to bring.  I'm still out of pocket on the conversion fees, but I keep reminding myself it'll pay off later, when I start cashing it in and don't owe taxes on the growth.

--I saw a web posting for a larger, sunnier apartment for sale in my building, and that gave me the upgrade bug.  I agonized over it, but finally concluded that this isn't the time.

--I also have the renovation bug:  There's a long, long list of mostly cosmetic changes I want to make to my apartment, but none of them are cheap.  The question then becomes whether it makes sense to invest in an apartment that I don't think is going to be my lifetime home, or just plan on selling as is and upgrading when the time is right.

--Part of the reason I want to change my living environment is because A's coming up on the end of his lease, so the question of whether or not we move in together is going to come up again.  It already did, briefly, and we agreed not to discuss it just yet.  He's not crazy about my apartment, and I'm sure that my urge to change my living environment is driven in part by wanting a home where he wants to live with me.

I know that potentially furthering a romantic relationship is a TERRIBLE reason to make changes in a place that's totally paid for and one in which I've been really happy up until now.  It would also result in putting myself at financial risk at a very bad time, given that I don't know what's going to happen with my job.  I also suspect that A's not totally ready to take that step in our relationship, and truthfully, I go back and forth myself on whether it's really something I'm ready to do.  We don't want kids, and at 44 and 46, there's really no compelling reason for us to ever think about marriage.  We're each pretty set in our ways as well, and we both need a lot of emotional space.  While moving in together (assuming we moved into my place) would be great for us financially, I'm not sure we'd be happier with each other or happier in general for it.  That's potentially a big contrast to where we are now: We drive other nuts from time to time, but we're very much in love and the time we have together is precious. Stay tuned if you want to see how this shakes out, I guess.

Reviewing the financial aspect of the past six months, it's been an overwhelmingly good start to the year.  Despite the nasty thump the stock market took in the last two weeks of June, my net worth is up considerably.  I started the year at about $735,000 and ended it at $852,000, excluding real estate. Here's where the (rounded) $117,000 increase came from:

--Deferred 401(k) match:  $4500
--Savings, including 401(k) and IRA:  $30,500
--Investment returns:  $82,000

The calculated return is a little over 11%, but since my net worth also includes cash and bonds, my actual return from the stock market alone is closer to 15%.

At the start of the year, I thought there was a very long-shot chance at hitting a million before the end of December.  I still think it's a long shot, but perhaps not quite as long as it seemed six months ago.

Meanwhile, I'm about $2000 behind on my savings goal of $65,000. Part of that is the result of the tax event I triggered with my IRA conversion and subsequent idiocy about the loss I forgot to write off, but not being as careful as I should be about spending has a lot to do with it.  I'm trying to buckle down harder on this one in the second half of the year, but I'm not as focused as I was when I had the really concrete goal of paying off my mortgage.

All in all, there's been more good this year so far than bad, and I'm slowly learning to live with uncertainty, which is a hard thing for a carefully calculated risk-taker to do.

I do believe that better days are coming.  I have to.

How was the first half of your year?


12 retorts:

Karin July 3, 2013 at 2:31 AM  

Hi FZ

Thanks for your updates! I've been following your blog for ages (five years+) and enjoy reading about your adventures. Hey, may I ask a personal question? I'm curious about why – given that you've already worked and saved so hard – you still insist on living so frugally. What's it all for? Are you planning to retire by fifty? Start a charity? Run away to a circus? Die a very, very wealthy woman? Don't get me wrong, I've been poor (www.getrichslowly.org/blog/2012/04/29/reader-story-escaping-poverty/) and I've been comfortable, and I'd choose comfortable hands-down. But I'm only a couple of years older than you, and after many years of frugal living am now able to work just thirty hours per week, and to spend the rest of my time volunteering, cooking, gardening, reading, watching movies ... doing fun stuff.

I'm not criticising you – each to her own, I say – but would be interested to hear your thoughts. You certainly seem to punish yourself for making occasional financial slip-ups, and overspending. Maybe it is time to be a bit more forgiving ... allow yourself to work less, spend more, and stop feeling guilty about it all?

All the best for the second half of 2013!

Cheers, Karin

frugal zeitgeist July 3, 2013 at 8:12 AM  

Hi Karin! So nice to hear from you.

I'm not super, super frugal the way I used to be anymore . . . maybe I should do a post about that. :-) I'm more interested in spending in ways that are meaningful to me, so when I clamp down on spending, it's really applicable to the not-meaningful categories. That said, I know I could be a holy terror about spending very easily, so remaining focused on the big picture goals is important.

About those big picture goals: I have two. The first and most important is an AWESOME early retirement. Assuming I stay with my current employer, if I clock out for good at age 56, I'll get a really nice pension from age 60 onwards. Whether I end up staying with my employer or not, however, my target net worth number for retirement is between $2.5M and $3M, excluding real estate. That should allow me to live comfortably and do all the traveling I can't do now because nearly all of my vacation time goes to spending time with my mom (also a topic for another post).

My second big-picture goal is to upgrade my apartment in New York to one with two bedrooms, hopefully two bathrooms, and a heck of a lot more natural light than I have today. When I do that, I want to pay cash. Unless the housing market takes a major dump again (and New York is somewhat insulated in those situations anyway given that co-ops assess that buyers have solid financial standing before allowing them to buy into the building), an apartment meeting those specs is unlikely to cost less than $1M.

That said, I think you're right that I tend to beat myself up about spending a bit more than I should, and that's something that I'm sure is exacerbated by the instability at work. Running away and joining the circus sounds like a pretty good idea!

I'm glad you've achieved balance; I love hearing that it's possible. Hope I can say the same before too much more time passes.

Karin July 3, 2013 at 10:50 PM  

Hi again FZ – thanks so much for sharing your thoughts on this, and for not being offended that I asked ;-)

Sounds like you have it very well planned. My family has a lot less longevity than yours, which is part of the reason I’ve already opted for the slow lane in my mid-forties. Neither my father nor several other relatives made it to their sixtieth birthdays, so it is important (to me) to live life to the fullest now. While I have a healthier lifestyle than my dead relatives did I still bear their dodgy genes, so am wary of putting things off for too long. You never know how long you have (and I’m particularly aware of that this week – one of my colleagues just died at 49).

Anyway, enough of this morbid stuff! Thanks again for elaborating. Sounds like I may have inspired you to write an extra blog entry … or several … I look forward to seeing them! Oh, and I know what you mean about meaningful spending. The older I get, the less stuff I have, but the nicer the stuff is. It is an absolute delight to be able to buy things that perfectly suit my tastes and size, rather than simply acquiring clutter for the sake of it.

Happy July 4th to you!

frugal zeitgeist July 6, 2013 at 1:02 PM  

Oh gosh, Karin - there was nothing at all to cause offense. You raised some good questions and points worth thinking about.

I understand why you're taking the time to enjoy life now, and I think I would make the same choice under similar circumstances. It reminds me of a saying I've always liked: It's not the years in your life that matter, but the life in your years. I actually would like to clock out at about age 75 or so. Based on what I've seen with my parents, things can get really ugly rather quickly after that.

You've nailed it . . . having fewer things that are just perfect is so much better than having a lot of things that aren't quite right.

I'm about to go out of town for a couple of weeks, but I'll try to get a post up during that time. Thanks again for your thoughtful comments.

Deb,  July 9, 2013 at 12:10 PM  

Hello! I have to be honest...when I read how much you have acquired in savings I felt depressed and full of anxiety. I am married and my husband is your age but we have only been able to save like 500,000 and that is counting every last penny. We do have our house paid off. We have two children but I am very conscious about where our money goes....tracking every expenditure etc. I am a school teacher so neither one of us has a high paying job.....that being said....I feel overwhelmed right now. My current struggle besides not being able to save as much as I would like, is trying to figure out the fine line between saving and not enjoying life fully?? Does that make sense? My husband thinks we can afford to "live a little" and not always be so stressed about every dollar but I also feel like we don't have enough saved up. What to do? Thoughts? I would appreciate a fresh point of view....thank you so much.

goldsmith,  July 10, 2013 at 1:40 PM  

Hi FZ! So good to hear from you again, although I am really sorry to hear about the overwork and the uncertainties around your job. I don't want to bore anyone with yet another gloomy update from this gloomy little island (Ireland), so will limit myself to two things:

(a) The eyewear in the video is even worse than the hairstyles! Did we ever wear glasses like that? (Um, yeah, I did, and I believed I was cool. Say no more...)

(b) I am curious what you mean when you say "I have too many years in the pension system, making this an expensive proposition" - would you lose your pension if you left? Surely your employer cannot do that to the extent you are already vested? For example, in my workplace, I am vested for 14 years out of a maximum of 40, and those entitlements would remain even if I left my job tomorrow. But maybe US pensions (for those who still have them) work differently. Thanks in advance for any clarification you might want to give!

frugal zeitgeist July 15, 2013 at 6:34 AM  

Hi Deb,

Without knowing anything about your goals, your age, or your savings/investments, I think $500k and a paid off house with two children is amazing, and certainly significantly more savings than most people with children. I do understand about struggling to draw the line between saving and life: This is an ongoing area where I struggle as well. I think it's a lot harder where kids are concerned. It really is important to give your kids happy memories, and where spending will further that goal, I think it's a very good thing to do as long as it fits into your overall plan. Happy to chat over email if you need more of a sounding board.

Goldsmith - Haha! I saw a picture of my boyfriend wearing glasses from that era. That's exactly what they were like, and he also had a mullet. When he got a new pair of glasses recently, he was thoughtful enough to text pictures to me so I could pick the winning pair. We went with rectangular European style frames. :-)

Regarding the pension: I keep what I'm vested in if I leave my employer, but if I do that, I lose a huge amount of future growth. Also, leaving before 30 years means that my pension benefits pay out five years later than they would if I stay for 30 years. That's a lot of money to leave on the table. I think my next post will be about my pension. . . hope to get that up before the end of the week. Thanks for the idea and for your thoughtful questions.

Anonymous,  July 16, 2013 at 2:07 PM  

Thanks FZ for responding! It is amazing how thorough and conscientious you are......Love it. .....(and I thought I was a Type A example....lol). Being a teacher, I am frustrated at how educational systems are not doing enough to prepare young people to handle themselves financially......so I am curious how did you get so aware, knowledgable, educated about handling your money so thoughtfully and efficiently?

Thanks, Deb

frugal zeitgeist July 16, 2013 at 4:44 PM  

Deb, I share your frustration that schools don't do enough to prepare kids for financial reality. I wish I had known a lot more at a much younger age. That said, I almost never comment on blogs, but I lurk around a few. I am amazed by many of the smart, resourceful, savvy 20-somethings bloggers out there who learned how to hustle early on and have turned blogging into a viable secondary income.

I think I'm pretty good with money now, but I learned later than I should have. After an impractical college major and early into an impractical Ph.D, I realized that I was going to end up with a crap ton of student loan debt and very few job prospects. In my third semester, I registered for a ton of courses that I could apply to a different degree and then eased out of my program and into a much more practical Master's degree program. From that time on, I pretty much had the religion about money. By New York standards, I make a pretty middle class income, but I have managed to save a lot by being diligent and doing my homework financially - i.e., working out what I could afford to spend on a home myself rather than going by what the bank told me I could afford. It's so important to continually question conventional wisdom: No one else will ever have more interest in looking out for us than we do for ourselves.

I should also add that my parents played a really key role: They grew up in the Depression (do the math; pretty sure I was not planned) and drilled into me early on that you work hard and never ever ever ever run up credit card debt or buy anything that you can't pay cash for except a home and MAYBE an education. They paid for my undergraduate degree and helped me out at two other key times in my life: They intercepted a letter from the bank and paid off my graduate student loans ($25k), on the grounds that they had seen me work three jobs, live on the extreme end of starving studentdom, and rack up fellowship money at every opportunity while I was in school; and they put $20k towards my apartment down payment when it was clear that I wouldn't pass the co-op board financials if they didn't. I am most not proud of those last two things: I was an adult and shouldn't have needed help. The least I can do in return is live the productive, responsible, and independent life they always wanted for me.

That said, one member of my original, not very practical Ph.D program became a well-known academic and bestselling author, and I see him pretty regularly in the media. I don't think I would have been happy in the same career path, but he took the same degree I didn't think I'd ever use and did amazing things with it, more than I ever thought possible. Also, I'm doing pretty well for my age financially, but my sibling (who has ALWAYS been sharp and savvy) retired for good at 46. Makes me feel like a bit of an underachiever!

So, there it is. Some good, some bad, and lots of stuff I would have done very differently if I could do it over again.

Deb,  July 16, 2013 at 9:51 PM  

Thank you for sharing.....amazing how each thing weaves itself into another. I was the youngest of 8 children and an oops baby myself. My mom was 47 when she had me (yikes). Having lost my parents early on I believe has really helped to shape my life....I feel in a way money most surely represents a sense of security (far from what it is in reality) and is a major reason why it is so important to me to be wise with it. It is so true it is not really what you make, but what you do with what you make. I so agree with you that you have to look out for yourself as you mentioned....no one else has such a vested interest. It is just difficult when very few people seem to take the time, effort and mostly unselfish stance to help you learn how to best invest/grow/wisely utilize your money. Most "advisors" seem to just ultimately want to sell their product (I get that they need to earn a paycheck)..... Diificult to get an unbiased review/opinion/ advice where I live in small town Ohio.

Deb,  July 16, 2013 at 9:54 PM  

"Difficult"...ugh.

frugal zeitgeist July 17, 2013 at 6:39 AM  

Wow - 47! My mom was 43 when I was born, and that was unusual at the time. 47 is kind of an outlier even now. Very sorry that you lost your parents at a young age. I'm sure it helped shape the person you became, and probably influenced your own style of parenting as well.

Considering money in terms of the security it brings is healthy, i.e., it's valuable not for its own sake bur rather for what it represents. To me, money represents both security and freedom/self-determination, the ability to one day live life much more on my own terms than I do now.

There's a blog I've never really read, but I love the name because it's so true: Everybody Loves Your Money. You will never get unbiased financial advice from anyone who might profit directly or indirectly from your decisions. A couple of years ago, I paid $250 for a portfolio review from an institution where I hold a big chunk of my taxable investments. Of course they wanted me to move *everything* into that institution, which I didn't do, but the general advice was helpful - i.e., here's the sector where I'm overexposed; here's how my savings rate stacks up relative to my goals, etc. It was good to get feedback on where I stand relative to where I think I stand, but it was certainly not unbiased. Fee-based financial planners (who are unaffiliated with any institution) can also be helpful, although I have no direct experience.

The great thing about the internet is that geography doesn't limit one's access to knowledge. The terrible thing about the internet is that you need to develop a good bullshit filter to recognize information that's helpful versus biased, wrong, or just wrong for your particular circumstances. Other than reading critically, one of the things that helps me the most is playing around with charts and spreadsheets. I like setting up spreadsheets in which I can actually see the impact of making changes to a single variable, i.e. rate of return over time, number of years, monthly amount invested, etc. It's all funny money until you cash it out, but over time, consistent small actions can have enormous impact.

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