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.
I think it was Jesse Mecham, founder of You Need a Budget, who said “there is no such thing as a normal month”. Point being, spending is not smooth over the course of a year, and there will always be the odd oversized expense that blows one of your budgeting categories out of proportion. The trap that a lot of people fall into is discounting these apparent ‘one-off’ expenses and mentally removing them from their concept of how much money they need per month. This is problematic both for cashflow, as well as for projected savings requirements.
All that said, this month is perhaps a little less normal than usual.
Budget/Cash Flow
Oh Dr PayItBack, you’ve finally done it. You’ve succumbed to lifestyle inflation and grown into your attending paycheck after less than a year. Well, maybe not quite.
February and March will see some last year’s chicken’s coming home to roost, whereby I finally pay the 2019 taxes that I intentionally deferred to free up cash flow last year. State taxes make up the largest nonrecurring expense this month ($1,850). I thought about counting it toward my ‘wealth building rate’, because it does technically increase my net worth, but that seems like cheating.
Other notable contenders include Airbnb charges for vacations in the spring and fall (total of $2,200), a new Apple watch after the front fell off ($450), some educational expenses for MOCA and professional society membership (total of $590), and a new dining room buffet ($310).
March will be even more bizarre with a giant federal income tax bill, and I will also have a newly increased life insurance premium, having increased my coverage to three $1,000,000 policies laddered at 10, 20, and 30 year terms.
PayItBack Progress
A lot to be proud of here! We are officially without car payments for the first time in 5 years, having paid off the rest of my wife’s loan with a single lump sum of $7,810. We also paid about $5,000 toward our student loans, which I expect to start scaling back some with interest rates so ridiculously low. I’m trying my best to stay true to my namesake, but it’s very hard to justify dumping loads of cash into a sub-2% interest rate loan.
Net Worth
Pretty painful to look at here. The end-of-month market correction has made for a lot of ugly net worth posts, and mine is no exception. Only a $2,300 increase in net worth on the month, even with $13,000 reduction in debts. And I suspect it’s going to get worse before it gets better. But that’s the price of participating in the greatest wealth-increasing vehicle in modern history.
Financial Goals for 2020
1) Devote 2/3 (66.7%) of net income to wealth-building: 53.2% running average
2) Max out 403b: $3,528 of $19,500 (18.1% done)
3) Max out backdoor Roth IRAs: $0 of $12,000 (0% done)
4) Max out 529s for state tax benefit: $0 of $16,000 (0% done)
5) Save an additional amount to achieve 20% of gross salary: $0 of $28,500 (0% done)
6) Pay 2019 tax underpayment: $6,900 remaining
7) Pay off all carried 0% APR credit card balances: $18,960 remaining
8) Pay off my car loan: $0 remaining ✅
9) Pay off Mrs. PIB’s car loan: $0 remaining ✅
10) Pay off Mrs. PIB’s student loans: $27,950 remaining
Overall an odd month, but still a baby step in the right direction despite below-average returns. Here’s to the accumulation phase, and to time in the market!