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’ve already done a 2020 retrospective post to close out the year, so my focus here will remain on December specifically as well as a look ahead to the upcoming year.
Budget/Cash Flow
Somewhat unsurprisingly for holiday season, this was one of our highest-spend months of the year, though admittedly the largest individual outlays were for personal purchases. The biggest expense was a new M1 MacBook Air ($1,270) which I am super happy with and which in my mind obviates the need for a desktop computer or a pro-level laptop. We made another hopeful hotel reservation in Wisconsin for this summer for a family reunion ($990). And I was able to snag a PlayStation 5 ($520) for some much-needed mental decompression.
The only investment for ourselves done this month was $1,000 into our taxable account. I’m hoping to start making larger automated contributions to this in the new year, as I’ll expand on below.
We did open Roth IRAs for our two boys as they have served as models for dozens of pieces of promotional materials for my wife’s budding photography business. I don’t think that this is something that we will be able to add to consistently every year, but it is nice to get them that head start at least.
PayItBack Progress
We finally dipped below $150,000 for our total debts! It took 11 months to go from $200,000 to $150,000; I’m guessing that it’ll be over a year to get to 5 figures if our rates stay so low and we keep making minimum payments. Can you tell I’m just making up things to say here because this is always the most boring part of every update?
Net Worth
December wasn’t quite as gangbusters a month for the markets as November, but we still managed to inch forward. Our finances are certainly getting more complex, with a new category added seemingly every month now. We also have money at more institutions than I would like (Ally, Wells Fargo, Vanguard, Fidelity, and our 529 servicer), but they all have their reasons so I don’t see a good way to consolidate at the moment
Financial Independence
Financial Goals for 2020
1) Devote 2/3 (66.7%) of net income to wealth-building: 69.8% ✅
2) Max out 403b: $19,500 of $19,500 (100% done) ✅
3) Max out backdoor Roth IRAs: $12,000 of $12,000 (100% done) ✅
4) Max out 529s for state tax benefit: $16,000 of $16,000 (100% done) ✅
5) Pay 2019 tax underpayment: $0 remaining ✅
6) Pay off all carried 0% APR credit card balances: $0 remaining ✅
7) Pay off Dr. PIB car loan: $0 remaining ✅
8) Pay off Mrs. PIB car loan: $0 remaining ✅
9) Pay off Mrs. PIB student loans: $21,336 remaining ❌
We met or exceeded every one of our financial goals for 2020 with the exception of paying off my wife’s student loans. As I’ve alluded to, this was less of a failure than a course correction. It just didn’t make any sense to dump money into a loan sitting at 0.65% interest. The main concern with this line of thinking is that the money will then be spent rather than redirected to other productive purposes, but obviously that didn’t happen given our wealth-building percentage. Floating out the loans a little longer has given us the freedom to save and invest for other goals.
Financial Goals for 2021
1) Max out 403b: $19,500
2) Max out backdoor Roth IRAs: $12,000
3) Use taxable brokerage in addition to 1) and 2) to save 20% of gross pay for retirement: $44,500
4) Max out 529s for state tax benefit: $16,000
5) Save 20% down payment for a $450,000 house: $90,000
6) Finalize estate documents
I’m trying to keep things simple for 2021. My focus is on maintaining a reasonable savings rate for retirement, saving enough for college in 529s to maximize our state deduction, and keeping a large portion of our savings conservatively invested and liquid so that we are able to pull the trigger on buying a house when a good opportunity comes along. I’ll be renegotiating my contract in about a year, and I suspect we will make a housing decision at that time.
I also need to get our estate plan in order. I’ve paid for the services of Thoughtful Wills, but I haven’t gotten around to actually meeting with them and getting it done. Life, disability, and umbrella insurance are all taken care of, so this is the last piece of that puzzle.
Great blog! You may have mentioned this elsewhere but I couldn’t find it. With whom did you refinance your student loans to get such low rates?
I refinanced with Earnest about a year and a half ago to a 5-year variable rate of 2.5%. Rates have plummeted across the board to where they are now.