Welcome to another Dr. PayItBack monthly checkup! I use this space to remain accountable to our expenses and goals, track net worth and debt, and muse on what was done well and what can be improved.
The days are getting colder and shorter and the nights are punctuated with the cries of our newborn. Even with everything going as perfectly as we could hope for, being short on sleep will put anyone on edge. We’ve been through this before, though, and we know that it’s just another beautiful part of the process.
Budget/Cash Flow
Another whiff on the savings goal, although pretty reassuring that even a ‘bad’ month has us spending less than 50% of net. Several large outlays this month: hospital bills from the birth of Number Two Son ($2,020 with probably a few more to come), registration and lodging for my annual neuromodulation conference ($950 allegedly reimbursable), and prepayment for a new preschool for Number One Son ($630).
Even with all that, I’ve met my first 2019 goal in paying off the short-term (and embarrassing) family loan that bridged us through to my first attending paycheck after fellowship. I said it then and I will say it again now, we are blessed to have as much family as we do who are invested in our success and well-being. I am also continuing toward maxing out my 403b and putting extra toward my car loan.
Net Worth
Going to be honest, a little frustrated with the rate of movement here. Significant gains in assets and net worth, but treading water with regards to debt. There is good reason for this which I will go into, but after all my nom de plume is Dr PayItBack; I feel I should be making a little more headway.
Two of my goals for this year include maxing out two Roth IRAs (personal and spousal) as well as putting $4,000 into each of two 529 plans. All together that requires $17,800 (I already have $1,000 in each IRA and $200 in one 529. I’m hoping to do this in lump sums for simplicity’s sake, and to that end I’m trying to build up a decent amount in my checking account.
For the time being, that means floating some expenses on a 0% credit card, as well as intentionally under-withholding federal taxes (while staying within the safe-harbor) and preparing for a ~$10,000 tax bomb next spring. I’ve been doing this since I started working in August, but I haven’t accounted for it in my numbers until this month.
This all sounds terribly irresponsible when I write it out, but I do think that it will successfully serve the greater intended purpose.
What it does mean is that my debt number is going to stay reasonably constant, probably through 2019. But I expect my net worth to continue to increase by $10-12k/month due to saving and investment.
Wealth Building Goals for 2019
1) Devote 2/3 (66.7%) of my net income to wealth-building: 58.1% running average
2) Max out 403b: $9,830 of $19,000 (51.7% done)
3) Max out backdoor Roth IRAs: $2,000 of $12,000 (16.7% done)
4) Max out 529s for state tax benefit: $200 of $8,000 (2.5% done)
5) Pay off personal family loan: $6,060 of $6,060 (100% done) ✅
6) Build up emergency fund (checking and savings): $16,310 of $30,000 (54.4% done)
7) Put whatever is left toward paying off my car loan at 3.99%
Seems like a very large EF, why?
I keep 5-10k in checking as EF. Rest of discretionary income goes towards student debt monthly.
Great question. I’m pretty averse to not having cash on hand for a number of reasons (both parents lost ‘safe’ jobs simultaneously in the Great Recession; I hated the feeling of living so close to edge when I didn’t have a paycheck for a month after fellowship). It’s more of a medium-term goal so it still comes after retirement accounts and paying a little extra to loans, but it’s definitely something I want to work up to. Represents about 3-4 months of bare bones expenses (fixed living expenses + minimums on loans). I’ll feel more comfortable with a ~$10k E-fund when the loans are gone.
As WCI says, the debt you have accrued IS the emergency you are saving for, so why aren’t you using it to pay it down?
But I’m single so I don’t have dependents relying on my income, so of course it’s easier for me to go all in every month.
At the end of the day though, paying down debt is the same as hoarding cash in EF, when it comes to your overall Net Worth.
I don’t agree that my debt is an ‘emergency’. I’ve been through true financial emergencies, and debt at 1.8-4% interest doesn’t qualify. Cash flow doesn’t matter until you don’t have it.