Tuesday, January 8, 2013

Did anyone notice this?

Apparently, the fiscal cliff deal included a provision to allow existing traditional 401(k) accounts to be converted to Roth 401(k)'s.  Like the traditional IRA conversion, which allows people who exceed income limits for contributing to a Roth IRA directly to back-door fund Roth IRA's by contributing to traditional IRA plans and then converting them into a Roth IRA, taxes on the traditional IRA are paid up front, and then future growth is tax-free.

You can read the details here.  As always, the caveat is that a Roth isn't appropriate for everyone:  It makes sense primarily for individuals who expect their retirement incomes to be higher than their working incomes.  In addition, the benefits are skewed towards the younger generation in that longer time horizons until the retirement mean more opportunity to take advantage of the power of compounding.

I've put this on the list for things to ask my accountant about at tax time. My employer has offered a Roth 401(k) for several years, and just under 50% of my 401(k) is already in Roth accounts.  My traditional 401(k) has close to $200,000 in it and the tax bite will be a big one, certainly five figures.  Before doing any kind of a conversion (which isn't available yet anyway), I need to be sure it makes sense.  Hopefully the decision will be a lot clearer for other people!


Sunday, January 6, 2013

Spice girl

Living in a small space in New York, I do relatively well at keeping my clutter to a minimum.  I have a few ongoing hot spots that need regular maintenance, (front closet; drawers with workout clothes), plus a couple of other spaces that I really don't touch as often as I should.  On Friday, I decided to tackle the worst offenders in this last category, one of the kitchen cabinets and the bathroom medicine cabinet.

I knew I had some expired spices in the kitchen cabinet, but I wasn't really prepared for what I found.   I had expired spices, all right:  ALL of them, aside from two that I know I bought in the last few months.  While I don't think expired spices are harmful, they're not going to help me cook the way I want to because the flavors will have degraded.  In addition, just the thought of knowingly using expired spices is off-putting.  Most really weren't that out of date (I would use anything expired less than six months ago, since the food banks I volunteer at use that as a benchmark for safe consumption), but the worst offender was really, really bad:  It was black mustard seeds that I bought while traveling in Europe in . . . 1994.

Yep, 1994.  

In my defense, I haven't used the mustard seeds as well in so long that they might as well have not been in there for ten years or more.  Same goes for a couple of the other second-worst offenders.  There's no point in having them there in any case, though, so I tossed them along with all the rest and recycled the containers.  

I've decided that my strategy for spices will be to rely on fresh herbs when it makes sense to do so (i.e., when I can use the entire bunch without throwing them out), and otherwise rebuy dried spices slowly, on an as-needed basis, and in very small quantities, preferably in bulk.  I've read mixed information about whether keeping them in the freezer is beneficial or not.  I suspect moisture could become a problem, but as long as I keep them tightly closed, I doubt it'll be a major issue.  In any case, what I was doing before clearly wasn't a good use of cost or space, so this is an area where I need to make a change if I want to plug a financial leak.

The bathroom cabinet was more distressing.  When I have long-term prescriptions, I tend to reorder them as soon as I can, whether I actually need to or not, so that I can have the cost covered through that year's flexible spending account.  As my medical needs changed or failed to keep up with the amount of inbound medication, however, expiration became a problem here as well.  Expired medication I got rid of on Friday included prescription acne treatment (no longer needed), asthma medication (no longer needed), asthma inhalers (which I do need, but four out of six inhalers expired long ago), and stacks of cream for a bad bacterial skin infection I had quite a few years and doctors ago.   

The waste on prescriptions bothers me:  I have medical insurance and I'm grateful for that, but my co-pays are high for brand-name medicine, and most of what I described above doesn't have a generic equivalent.  Going forward, I can't think of any way around this other than not stockpiling beyond what I need for the next few months, regardless of what's left on my prescription.  In the meantime, I'm considering it an expensive lesson learned.


Wednesday, January 2, 2013

Looking forward, looking back

Happy new year!

2012 was a year of ups and downs in many different ways.  On the positive side, I finally started feeling secure enough about my job to challenge how we do some things in the organization, and the ideas I've been bringing forward are starting to gain momentum at the executive level.  I also was able to hire four people for my team, and that's huge.  Being able to be a job creator is one of the most satisfying things about my job.  We have so much work to do that I'm expecting to be able to hire between one and three more people this calendar year, but it's a balancing act:  I'm always mindful that if I tip the balance too far, I'll have to let people go, and that's something I really don't want to do.

Another job-related boost was that after the hurricane, traffic got so bad that I finally announced to my boss that if anyone's looking for me on two particular days of the week, they'll have to look at home because that's where I'm going to be.  In reality, it has to be a bit more flexible than that, but working remotely more has improved my quality of life greatly.  It's also in keeping with my organization's drive to reduce real estate costs, so I'm hoping to make it a full-time, permanent gig in the next few years.

In the meantime, my relationship hit the twelve-month mark in late summer and is still ticking along really well, and I'm incredibly happy about that.  My significant other changed jobs to one with a horrible commute (so he's looking again) but with a ton of additional responsibility and pay.  He also finished an Ivy League Master's degree a couple of months ago while working full-time.  I met his entire family at a family wedding in the fall, and that really was a wonderful experience as well.  It didn't motivate us to hurry things along as far as our own status is concerned.  We're in our 40's, we both need a lot of space, and neither of us wants children, so there's no real point to getting married.  (As of yesterday, though, we wouldn't get killed in taxes if we did eventually decide to take the plunge.)

On the financial front, I watched the whole fiscal cliff debacle avidly.  I'm not looking forward to going through this again in a couple of months when spending comes back around, but I absolutely believe the economy would have tanked today if a compromise agreement hadn't been reached.  As for the agreement itself . . . well, you know what they say:  Compromise is the art of making sure that nobody's happy.  As it is, the major indexes closed 2-3% up today, and I'll take it.

My own personal finances were mixed.  My one goal for the year was to hit $65,000 in savings, and I missed that by exactly $2000.  I know the main culprit:  My mom gave up her townhouse for assisted living, so I'm paying monthly rent in a shared house in my hometown at the rate of $200 per month, or $2400 per year.  I totally don't begrudge her this, or the money I spent on six cross country flights last year:  She slowed down drastically and lost the last of her vision in the last several months.  The more I can do to make this time count, the better.  Despite having missed my savings goal, however, my investment returns did really well, especially my 401(k), which was up 18% for the year.  As a result, I reached and slightly surpassed my goal of a total net worth of $735,000, not including the value of my home.

I realize that the goal of $735,000 is kind of a chimera:  It's a goal that relied on really solid stock market performance, and that's mostly out of my hands.  I can only control what I can control, and that's making sure my portfolio is well-diversified and that I max out 401(k) and IRA, and save as much as I can otherwise.  I like having high-level goals, though, and I finally feel like my next major financial milestone is in sight:  As long as we have decent (not stellar) returns in the stock market in the next couple of years and I keep saving more than half of my net income, my portfolio excluding real estate might actually hit a million by the end of 2014.  (It's already there if you count real estate, but I don't include my primary residence as part of my investments.  Just a personal preference.)

I said it was a year of ups and downs, and there certainly were a few less than bright moments.  As I mentioned above, my mom is really slowing down.  She's 86 now and has a very strong interest in life and will to live, but she's lost most of her mobility, along with her sight.  I've never seen her tire as easily as I have in the last two weeks.  Several of my friends lost parents who were much younger than my mom this year, and that makes me all the more keenly aware that anything could happen at any time.

Another not-so-wonderful experience this year has been one of the more serious running injuries I've had.  I did a solid marathon in May after a miserable experience in 89 degree weather in Boston, but I ended up doing my third marathon in 2012 as a combination of walking and slow running after tearing some abdominal muscles (don't ask; it was a gym injury) and creating a series of microfractures in one of the important bones in that general neighborhood.  The injury was diagnosed in July and I'm still dealing with it today.  I'm doing less running and more spinning and weightlifting, but without question I've gained weight and I'm not happy about it.  I have three marathons on deck for this year, and I'd really like to run them decently.

Hurricane Sandy didn't really impact me directly other than losing transportation for a few days, but I can't write about lowlights for the year without mentioning it.  Many of my friends and colleagues went through an awful time, and there are still plenty of people suffering.  Unfortunately, I'm afraid this is the new normal for this part of the country.

Finally, this is really not horrible, but rather so-so:  Like everyone else in the work force, I'm officially paying 2% more of my salary to payroll taxes for Social Security, which completely nullifies this year's pay raise.  I actually don't think funding Social Security is a bad thing, though, given that I have a rather vested interest in seeing the program remain solvent.  Since that's the only tax hike I'm facing following the fiscal cliff negotiations, I'm actually fairly okay with it.

Since I think I do better with formal goals articulated, I put together a mini-list for 2013.  Here's what I'm aiming for this calendar year:

Save $65,000
Between losing my pay raise to taxes and paying rent in a place I don't actually live, it's going to be a stretch but I think it's a worthwhile challenge.  I have the advantage of being able to cash out 100,000 air miles this year, so I'm not going to be spending as much on cross-country trips this year as I did last year.  This goal also includes maxing out 401(k) and IRA at the higher 2013 limits and doing an IRA conversion to a Roth as soon as I make the deductible IRA investment.

Create a revocable living trust
This is a huge area I've neglected in my financial planning, on the grounds that I don't have any dependents.  I have enough saved up that it makes sense to structure my (eventual) estate so as to avoid probate, though, so I signed up for my corporate legal program so I can access estate planning services without paying through the  nose for them.

Save for periodic expenses in advance
Like everyone else, I have expenses that hit only in certain months (charitable contributions, homeowner's insurance, and so forth).  I usually end up shorting my investments for that particular month to cover the expenses, even though they are perfectly easy to anticipate and plan for in advance.  For 2013, I documented all of the expenses I can think of that hit only once or twice per year, along with the expected cost. Since I now have a clearer idea of what to expect and when, I'm going to divert any money I can squeeze out of my not-so-formal budget each month to savings so that I can build up a reserve fund to cover these periodic expenses, while maintaining effective dollar cost averaging for investments.

Don't buy any work dresses
It's a weaknesss.  I have plenty; I don't need more.  I just need to fit into the ones I have a little more acceptably.

Lose eight pounds in January, and four thereafter
I should add that I'm a little scared to weigh myself, but I will tomorrow.  This goal sets a progress rate of about two pounds per week through January, which should be achievable through activity, sensible eating, and using a tracker to capture calories in and out with a daily baseline of 1500.  A few mini-goals that devolve from this one include not buying ice cream at home since it's a major trigger food for overeating; limiting alcoholic drinks to two per night, two nights per week; and limiting sweets to once per week, with a conscious effort to avoid junk sweets and save the calories for the good stuff.

Work from home twice weekly
This is a work-life balance issue.  It's harder than it sounds, but I really want to stick to this schedule.  I'm more productive, I save money on transportation even though I spend more on electricity, and I just feel better having a reprieve from a really awful commute.  I'll continue working remotely for a week at a time  while I'm visiting my mom, but I start my workday at 3:45 a.m. local time when I do that, and that's harder on me than the daily commute here in New York.  A mini-goal that devolves from this one is to get to bed by 10:00 p.m. (10:30 p.m. latest) the nights before I work in the office, since I have to get up before 5:00 a.m. those days.

Run three marathons
I'd like them to be good ones, so I'm really trying to put this injury behind me.

You'll notice the absence of a blogging goal.  I'm feeling the itch to write more, so it may be that I end up posting more this year than I have in the last couple of years.  No promises, though.

Here's hoping that everyone had a tranquil end to 2012, and that 2013 brings joy and happiness to all.


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