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.
January was an eventful month for our finances. My family was involved in a (thankfully largely injury-free) motor vehicle accident that totaled one of our cars. The stock market shit the bed, flirting with correction territory (near 10% loss at its lowest). Despite all this I was able to execute the plan of front-loading most of our investment accounts, exposing us to more ‘time in the market’ and freeing up cashflow for the rest of the year.
Budget/Cash Flow
Well.
I make a good salary, but buying a new car with cash is still enough to bork the monthly cashflow numbers. This is the first month that our spending has exceeded income since July 2019, the month before I started work as an attending.
Even still, good things are happening:
- I’ve nearly maxed out my 403b with only two paychecks
- We’ve maxed out our Roth IRAs (via the backdoor, which lives on to fight another day)
- We’ve maxed out our intended 529 contributions for our two boys
- We’ve contributed $10,000 to our taxable brokerage, which I hope to do every month in 2022
This drained a good bit of our cash cushion from the end of last year, which was always the goal.
PayItBack Progress
Most (all?) loan private loan companies switched their benchmark rates from the LIBOR to the SOFR this month. I’ve been trying to read up on it and can’t find much on the implications for existing loans, but closest I can find is that there will be very no change vs. maybe a small rate reduction. There’s been no change to my rate yet, but we’ll see what the next few days bring. Either way, rates remain well below 4%, which I have set as our trigger to think about paying them off more aggressively. So minimum payments prevail again.
Net Worth
This is all pretty ugly. The S&P — which controls most of our investing destiny — was down 5.3% in January. That combined with the outlay for our new car meant a net worth drop of over $35,000. Compare that with March 2020 where our net worth dropped a measly $1,450.
I’m going to have to steel myself against this sort of volatility as our investments grow and our asset allocation remains aggressive, so this month was good practice.
Financial Independence
Another chart ruined by our decision to buy a car in cash. Impressively, our FI date still remains within this decade, even with the skew of this recent spending outlier.
Financial Goals for 2022
1) Max out 403b: $18,391 of $20,500 (89.7% done)
2) Max out backdoor Roth IRAs: $12,000 of $12,000 (100% done) ✅
3) Use taxable brokerage in addition to 1) and 2) to save $120,000 total for retirement: $10,000 of $87,500 (11.4% done)
4) Max out 529s for state tax benefit: $16,000 of $16,000 (100% done) ✅
5) Continue to pay minimum on student loan as long as rate remains <4%
6) Finalize estate documents ✅
7) Purchase a house
Love to see the progress and glad your family is alright from last month’s accident. My wife is an intern this year so its been fun to look at your journey and see what the future may look like!
Would you be able to put together a post on the mechanics of the backdoor? How you went about figuring out how to complete it originally, any resources you consulted, and the services you utilized?
Thank you so much for putting these together and looking forward to following along as our journey unfolds!