Sunday, January 8, 2017

Savings and Retirement 2016

Even though our spending went way up in 2016, our income did, too, and our overall cash net worth increased by $47,000 or 32%.

Where did those gains come from? The vast majority of it was in our retirement accounts.

We contributed just under $17,000 to our accounts (includes pre-tax and Roth IRAs) and our employers matched almost $4,000. And we had nearly $25,000 in market gains. So more than half of our growth happened because of retirement savings that we did prior to 2016. That's pretty cool!

Next year, we are set up to max out my 403(b) as well as our Roth and an HSA (total savings of around $35,000). We've never attempted to match a pre-tax account before so we'll see how that goes. I'm a bit nervous to see how much of a bite it takes out of my paycheck but we've run the numbers and it looks like we should be fine. And it will be very exciting to see the numbers grow! I just hope that it's another good year for the market.

Friday, January 6, 2017

Women's Money Week: Identity Theft #wmweek17

There are two kinds of identity theft: one is true identity theft, where a person has your information (birth date, social security number) and is actually masquerading as you, opening new accounts, using your social security number to file taxes and get a refund, or otherwise actually stealing your identity. Usually this is done by someone close to you (sorry) or when you fall for a phishing scam and provide your identifying details by phone or email to someone you don't know.

The other kind is where your banking or credit card information is compromised and the thief has enough information to make purchases using your information but isn't trying to, say, get a mortgage in your name and then skip out on the payments. These thefts often happen en mass (hello, Target, Sony, and many other major business data breaches) and the information gets shopped around the black market. It feels personal if you're out the money but it really isn't.

The steps to prevent each type of identity theft vary, but the underlying principles are the same.

1. Protect your information. Don't give out information unless truly necessary. I decline to share my email address or phone number when asked by cashiers (if I want coupons, I have an email address that I use for that purpose). Definitely never give out information unsolicited - if your credit card company, bank, or the IRS calls you and asks you for a bunch of information they should already have, hang up and call them back at the number that's publicly listed for them (NOT one that they give you) and see if it's a legitimate call. Don't leave statements lying around your house for people in your life to see. Use tough security questions that people who know you wouldn't be able to guess.

2. Practice good security hygiene. Your bank account and your email account should have different passwords. Full stop. Actually, you should not repeat passwords across any accounts that are likely to be linked. We've started auto-generating all of our passwords for additional security and storing them in a password-protected and encrypted password storage system (we use KeePass; others are OnePassword and Last Pass). One good tip for creating hard-to-crack passwords is to think of a sentence like "That's no moon" as a trigger and then use that to come up with a shortened secure word like "Th4t5n0Mo0N!". Hard to crack, easy to remember. Also, enable 2-factor authentication on any account for which it's available - this is where you get an email, text, or phone call with a code when logging in from a new device. It's available on most of the types of accounts that are likely to get hacked (email, Facebook, Twitter) and you can register each device you regularly use so you don't have to do it every time you log in - but someone without access to your phone won't be able to log in to your account.

3. Use a credit card instead of a debit card for purchases. Two reasons: one, debit cards take money immediately out of your bank account, so if someone goes on a shopping spree with your card, you are out that money straightaway, probably before you even notice. And two, a federal law in the US called the Fair Credit Billing Act means that your liability for credit card fraud is limited to $50 (which in my experience the credit card companies usually waive). With a debit card, depending on how soon you discover and report the card missing or stolen, there is no limit to your liability, meaning if you wait 60 days to figure out something is wrong, that money is gone. Use a credit card for purchases whenever possible to get that protection. Assume that your card number will be compromised at some point, whether by a skeevy waiter or a mass data breach at a big box retailer, and protect yourself accordingly. (Pay the full balance of the card monthly to avoid carrying debt - you can treat a credit card like a debit card in that if you don't have the money to pay the bill, you don't buy the thing.)

4. Keep an eye on your credit report. Pretty much the only way to find out about new and unauthorized accounts is to take a regular look at your credit report and make sure everything you see there is accurate. You can get your report for free once a year from each of the reporting bureaus through I pull from one of the bureaus every four months, so I can stay on top of things.

Thursday, January 5, 2017

Where It Went 2016

2016 2015 % change
blog $26.75 $40.50 -34%
business $67.38 $46.68 44%
car jeep $151.40 $669.95 -77%
car mazda $962.47 $1,882.43 -49%
Car Toyota $6,966.71 $6,866.73 1%
cat $0.00 $169.26 -100%
cell phones $1,727.49 $1,529.95 13%
charity $392.63 $454.18 -14%
clothing $2,875.17 $1,183.10 143%
Daycare $23,432.95 n/a 234329400%
dental $790.33 $2,814.55 -72%
electric $1,090.66 $1,178.40 -7%
electronics $2,419.67 $17.23 13943%
Entertainment $2,179.78 $989.82 120%
food  groceries $6,707.67 $5,234.81 28%
food  other $3,606.54 $3,178.88 13%
gardening $201.63 $175.76 15%
gas $673.66 $727.39 -7%
Gifts $764.97 $1,185.30 -35%
helicopter/robot $109.75 n/a 1097400%
house $17,458.10 $19,199.83 -9%
household $2,671.79 $2,206.51 21%
hygiene $94.22 $380.43 -75%
insurance $892.48 $1,224.96 -27%
internet $806.80 $803.13 0%
medical $3,680.87 $4,407.81 -16%
sewing/quilting $0.00 $52.48 -100%
school $900.00 $270.00 233%
transportation $102.69 $140.00 -27%
travel $1,359.76 $1,167.03 17%
water & trash $897.84 $919.73 -2%
Total $86,028.16 $59,116.83 46%

Notes: YOWZA. A 46% increase in spending in one year?! A difference of almost $27,000?!?!

Well, it's not really all that surprising when you consider that $23,432 of it was childcare expenses (six weeks in daycare + seven months of full time nanny) which we had never had before. That leaves a $3,479 lifestyle inflation that we experienced after doubling our income in 2016. Half of which I spent on work-appropriate clothing after three years as a stay-at-home mom. 

We actually decreased our spending in some key areas: house (only one major appliance replacement in 2016!) and cars (sold one car, no repairs on one of the remaining ones).  Our entertainment and electronics spending went way up. We got some home automation stuff and two new cell phones but the biggest chunk of that was a very nice camera that we bought used from a friend, which should last us for years. Our entertainment budget was mostly stuff for the kids (a museum membership, indoor playgrounds) and I also got a membership at Massage Envy. We can bring both of those categories down for next year but I think it was also kind of a fluke so I'm not too worried about it. 

We've been able to max out our Roth IRAs again this year, we starting contributing to an HSA (instead of just cycling money through it as we had medical expenses), and we were able to save a bit as well. Overall, I'm very happy with how this year went. 

Previous Years: 2010201120122013, 2014, 2015

Monday, January 2, 2017

Women's Money Week: Goals #wmweek17

I used to do monthly financial goals as well as New Year's Resolutions. I used to have savings targets and sinking funds and ways to help me measure and track my goals.

I've moved away from that in recent years, in large part. Partly it's that we are much more financially comfortable so I don't "need" to meet those goals in order to survive. Partly it's that we got busy with kids and so I pay less attention to my daily spending than I used to. And partly it's that our goals are boring now: retirement and college funds. It was more interesting to be saving for a house downpayment or a sunny beach vacation than it is to set my 403(b) contribution and forget it. I can review the allocations once a year but there's just not as much incentive to fully participate, and in fact, paying too much attention to the market makes me anxious and makes some people make shortsighted decisions like pulling out after a big loss and missing out on the rebound gains (I've never done that, but when the market was crashing in 2008, I really wanted to. I'm glad I didn't!).

Still, when I actually stop to think about it, the kind of retirement savings we are doing right now IS very exciting. We are past the point where we need to save for retirement (meaning, if we stopped contributing right now, we could retire on time with enough to live out our expected lifespans at a reasonable standard of living). But that means that everything extra that we save for retirement either moves our retirement date up sooner, or improves the standard of living in retirement (hello, permanent cruise life!), or creates wealth for us to pass along to our kids. Shouldn't that be more exciting than saving for one measly vacation?!?!

I hope so. We are taking steps to feel a financial pinch thanks to retirement savings in 2017. We're maxing out my 403(b) and HSA contributions (~$18,000 and $6,750 respectively) and are still going to try to max out our Roth 401(k)s as well ($5,500 each, so another $11,000). That's a total of $35,750 into retirement savings*, which is about a third of my income. We also have our regular lives to pay for and want to build up our liquid emergency funds as well. It might feel kind of tight, which is good - I think feeling that pinch is what helps me stay focused on meeting our goals.

As for college savings, right now all monetary gifts that the kids get go into 529 accounts but we're not funding them out of our own pockets. There are no loans for retirement the way there are for college! And we have lots of options right now for what our financial assistance might look like (maybe we cash-flow those payments, maybe we pull out Roth contributions, maybe they get scholarships). Once we have a sense of our maxing out retirement feels, we add a college savings goal.

How have your financial goals changed? What are your goals for 2017?

* Technically, an HSA is not a retirement account. But it is the only account that is triple-tax-advantaged (pre-tax contributions, growth is tax-free and distributions for medical expenses are tax free). If you can cash-flow your medical expenses now (when you have income) and keep the savings until retirement (when you have no more income, and medical expenses tend to rise), you can bask in that tax-free goodness.

Sunday, January 1, 2017

Women's Money Week: Financial Organization #wmweek17

I've had a financial organization system for longer than I've had this blog. It went through a number of changes while I was single, and then a big change when Peanut and I merged our finances, and every year we tweak it a little and make it a bit better. Here are the components:

1. A tracking system. I've used everything from a piece of paper in a notebook to our current Excel spreadsheet that uses a pivot table to calculate our monthly spending by category. For me, tracking spending is the most important component of a budget or financial organization system. If you don't know where your money is going, you can't tell it what to do. We don't have a budget but we do track every dollar we spend, and it helps us meet our goals.

2. A filing system (or two or three). We have one small filing cabinet for paper stuff, but mostly I use email as my filing system. I set up filters in gmail so that all my financial documents go to one folder, and I set up electronic delivery for every bill, statement, and financial paperwork that I can. Email is keyword-searchable, so it's a lot easier to find something there than wonder, did I file it under C for Car or T for Toyota or I for Insurance? We also have a lot of things filed away in an offsite backup program, like digital copies of tax returns and other important financial paperwork. Some stuff just has to be paper though, so we do manage

3. A goal. It's hard for me to stay excited about money when we don't have a goal. It's easy for me to cut back on my spending or save when it's for a downpayment on a house or killing a student loan bill. It's much harder for me to save whatever's leftover at the end of the month without a "reward" in sight. (This is why I try to max out pre-tax savings first!)

And one warning: a financial organization system should not be overbuilt. I tend to overbuild my tracker in a mean way. For a while I was juggling multiple checking and savings accounts due to freelance work, as well as multiple trackers and it's just so complicated. It doesn't need to be that complicated. I recommend the fewest number of accounts that you can get away with (including retirement - keep rolling those babies into an IRA!) and the simplest method of recording your spending. It makes it easier to use and therefore more likely to be used.