Month: January 2016

The Smallest My Paycheck Will Ever Be

The new year brought a new saving perspective. In the course of a week, with a quick consultation with the trusted voice over at Our Next Life,  I drastically changed my saving strategy for 2016 and beyond.

It all started with a random tidbit of information I found on Reddit. I should have learned it years ago, but it never mattered until a cold day in early January. I was shocked to learn that Traditional IRAs have income limits. Did you know that traditional IRAs or tIRAs have income limits? MAGI limits to be exact. I had no idea. I always knew that Roth IRAs had a phase out income level, but I was completely unaware that tIRAs also carried a cut off.

To make matters worse, the tIRA closes the door to saving awesomeness at an earlier income than the Roth! This was not good news. Here I was concerned about the Roth limit, when I could lose the ability to contribute to a tIRA altogether.

This is also where I had to come to terms with my own anchors. Attending law school and doing well in law school meant I (at least initially) had my sights on the greenest pastures: Big Law pastures. 1st year associates in my city, when the market was good, made between $100,000 to $120,000. The available data when I entered law school showed the market at its best. Fresh out of law school? Sure, here’s 6-figures!

It took a long time for me to accept that Big Law was not the place for me. Too long, in fact. When I took my current job, I consciously accepted that I was not going to be making Big Law money. I don’t make Big Law money.

The trouble with this is that my anchor was still Big Law money. I didn’t think I was making very much money. When I read that I should contribute to a Roth during my low income years, I thought “This is it! These are my low income years.”

However, when you put our income together, Hubs and I make more than a pittance. If we don’t change course, we could miss tIRAs altogether. With this information in hand, I decided it was time to change direction

Old Plan:

  • Max HSA
  • Max Roth IRA
  • Contribute as much as I can to my 401k, slowly increasing the percentage.

New Plan:

  • Max HSA
  • Stop Roth IRA
  • Max 401k!!!!

  • Make determination in 2017 to contribute to tIRA for 2016.

I save roughly the same dollar amounts in the old and the new plan. However, by having it come out pre-tax, I should have a little more to contribute to the House Fund. I hope I can contribute to and max my tIRA for 2016. We’ll see. The House Fund needs all the help it can get.

.. And as the title suggests. Today’s paycheck, my first check with the full maxed 401k contribution taken out, is the smallest my paycheck will ever be. It’s only looking up from here.

As an extra bonus, my 401k match contribution, my first 401k match ever, is deposited today. It is the most excellent saving day. 

Have you ever missed the mark with your assumptions? When was the last time you evaluated your saving strategy?

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Looking ahead…

The first 28 years of my life came with easily definable goals. Most of them were school related.

I started school when I was 3. From there, I was continuously in school until I graduated college. I graduated in December of 2009 so I had a whole 9 months off before I started law school in August of 2010. I graduated law school in May of 2013, but then I transitioned to studying for the bar exam. I took the bar exam in August 2013. From then until March 27, 2015, my main goal was to pay off my student loans. I had 23 years of education and I was looking forward to doing something else. I felt that so long as I had these loans, I was defined by my education.

Today, my life is free from formal schooling. I’m not in school, just out of school or paying for school.

This is a time of transition.

I’ve done a lot of thinking over the last 9 months. I keep reading, absorbing and applying what I can to my life.

The unfortunate truth is that I don’t know what I want right now. 

I’ve found a few things that feel good, but nothing has captured my attention, work ethic or drive like a traditional learning environment. I’m really good at school, and nothing has stepped in to fill that void.

With a void to fill, I’ve been trying several things. I’ve thrown a lot of things at the wall to see what sticks. Nothing has stuck, but a few things have been sticky. Warm gummy bears, so to speak. Here are a few things I’ve been dabbling in.

Assessing stuff with purpose and keeping what’s important.

aka Minimalism, Intentional stuff keeping or using the Kon Mari method

I have an unhealthy relationship with stuff. My grandpa was a real Hoarder. My mom, traumatized by his behavior, would prefer to own nothing. Living with both of them growing up, my relationship with stuff is not a good one. For an extra bonus of fun, I hate throwing stuff away.

Those factors came together to impact my current collection of stuff. I don’t have a lot, but what I do have, I either have a strong emotional attachment to or I can’t get myself to throw it away. I’ve got a lot of work to do in this area. Thankfully, I plan to move this year so it’s a perfect opportunity to evaluate my stuff.

(Every time I write or say the word Stuff, I think of this clip. )

Starting FIREs

Having my financial poop in a group has inspired me to look toward my financial future. If Hubs and I keep up this saving pace, FIRE is on the table. No, the table isn’t on FIRE, but (F)inancial (I)ndependence (R)etire (E)arly.

I’ve been playing  around with my saving and investment strategies. Things look good. Perhaps 10 years good. However, I don’t want to sit around for 10 years to hold my breath. I want to optimize for FIRE and effectively forget about it for the next 9 years.

Crafts of all kinds: Sewing, knitting, coloring! Oh My!

I taught myself to sew using a sewing machine! I made an adorable rice heating pad to keep warm at work. I knit my sister a pair of mittens and I spent some quality time coloring with my Momma. I’ve enjoyed all my crafty time, but it hasn’t sparked me like it normally does.

Coloring accident

Coloring accident

(Yes, I’ve learned that colored pencils are far superior to crayons.)

Perhaps I’m putting too much pressure on myself. There is no reason I can’t simply be me right now. Whatever it is, I hope this ho hum phase passes soon.

Have you ever found yourself stuck in a rut? What got you out of it? Any words of advice?

December 2015 Net Worth Update

 Happy New Year! Are you having a lovely 2016, so far? The market has been all over the place, but that just makes our charts more interesting. Who wants boring charts? I don’t want a boring chart!

December was quite a whirlwind! Vacation, a new employee to manage, Christmas, and TWO dentist appointments. It was a heck of a month, this is true. But it also came with one heck of a schedule. I’m excited to have a little more routine, come January.

Fun Fact: I did not work a full work week during the entire month of December.

Week 1: Vacation, where this happened.

A splashing sea lion and the back of my head!

Week 2: Vacation + 2 day week, and this happened

Off to Hogwarts!

Off to Hogwarts!

Week 3: 4.5 day week – Took a half day off to wipe out my HSA at the Dentist. … I don’t think you need a picture for this. I had a new mouthguard fitted ($400!) and spent the rest of the afternoon coloring with my Momma.

Week 4: Merry Christmas! I had a 3 day week surrounded by 5 family Christmas events! Oofda! That’s a lot of family! It was surprisingly lovely. No fights, not a lot of politics, good food and smiling faces.

Week 5: Happy New Year’s Eve! I had another 3 day work week and another dentist appointment. Orthodontic, actually. I went to get a new lower mouthguard (The Bruxism is strong with this one!) but my current one fits so well, they didn’t want to replace it. I’m proud to proclaim that it’s been ~15 years since I got my braces off and 9 years since my last orthodontic appointment and my retainers fit so well, you’d think they were brand new. My orthodontist was incredibly impressed.

Enough about my teeth, it’s time for the numbers!

[flashback]

December 2014: I owed $15,908 on my student loans and $13,302 on my car. I calculated that if I hadn’t been throwing extra cash at my loans, I’d have just over $40k left then and roughly $36k still to pay today!

December 2013: My student loans came due! All $45,33o of them. I made my first payment of $525 on December 23, 2013.

I started getting closer to what I wanted in a job. I took a sharp turn after passing the bar to think for myself. It took about 4 months of meetings, coffees and interviews to figure that out. So if you are looking for a job, be patient and figure out what you want! Find the right place for you!

December 2015: Look at all the updates!

Screen Shot 2016-01-09 at 11.04.13 PM

Assets!

Retirement: $24,633 (+888)  Not the best month. This was a three paycheck month so I had a little help. I landed just shy of $25k invested but I am excited to break through that barrier with gusto in 2016. 

Taxable: $8,269 (-$216) An update! Finally! I have this invested in a mutual fund and the share price took a huge tumble in the last few days of 2015. Like a 9% tumble. OUCH! This account didn’t end up where I wanted, even with an incredible boost from dividends. I had my best year for dividends yet!

Auto Value: $11,400 (-$1,600)  Two negatives in a row! This is not a good trend. Oh well. I don’t plan on selling my car anytime soon, so this number doesn’t matter. I set myself up for monthly updates from KBB and I’m excited to see how this number bumps along. $1600 seems like a big drop, but who knows. I’d rather be aware of it than bury my head in the sand. 

House Fund: $17.009 (+1,327) I am so excited to announce that I’ve started to save Thing 2!! Yippee!  It was not quite the progress I had hoped for with 3 paycheck opportunities to save, but it is a great milestone nonetheless. December’s saving was plagued by expensive credit card payments. I had the rest of the trip to pay for and some other miscellaneous expenses. I will sacrifice house fund progress to ensure I never pay a drop of credit card interest. This, I promise you.

Round Two Progress: (What is Round Two? check here!)

  • Baby Saver: $2125 
  • Middle Saver: $7953 (Loan value: $5828) ✔
  • Thing 1: $16,453 (Loan value: $8500) 
  • Things 2: $24,953 (Loan value: $8500) >>In Progress<<
    • JOY! $17,009 saved, $7944 to go!
  • Big Momma: $45,330 (Loan value: $20,377)

HSA: $5,503 (+196)  This account isn’t supposed to be this high. I made a boo- boo. So you know those medical bills I was strategically delaying over the last 2 updates, well, I actually forgot to pay one. I wrote out the payment slip and had it all ready to go in the mail. But then with such a crazy schedule over the last two weeks of the year, I forgot to mail it! It didn’t get in the mail until 2016! Bad Kate! Once that bill hits my account, I should get back to regular growth in this account. 

Car Fund: $351 (+76) 3 paychecks AND I crossed $1 in interest. Things are really looking up here. This account would be even more impressive had I not raided it so many times to buy during the dips. 

Liabilities!

Student Loan: $0! Happy 9 months student loan free to me!

Car Loan: $8,723 (-$373)  Under $9k! How exciting, especially in the face of a $1600 drop in my car value. Having this debt paid off at a normal speed has been a bit odd, but I’m enjoying the self control to leave it alone. 

Overall:

  • Net worth: $58,442. Up $1,044 from last month. 

I’ll be honest. This isn’t where I want it to be. I was expecting to break through $60,000 this month. I was on track to hit it before the market tanked and I updated my car value. I don’t want to be disappointed in this number because I don’t have anything to be disappointed about. I can’t control this and this is a good lesson to learn while the numbers are small.

  • Net worth increase: $121/day

The final number! Over the year, my net worth increased $121 per day! I achieved my goal of $100/day!

And there you have it, my final net worth update of 2015!

How are did you finish out the year?