What is the right level of spending when you’ve met your goals and still have some leftover?

Putting away $36K into DC1’s 529 account (and lowering our emergency fund to less than half of what we need in there before I stop getting paid for the summer) has had the intended effect of making me feel artificially less wealthy.  I’m no longer mentally thinking about things to buy (ex. expensive electronics) other than things we’d be buying anyway on a smaller income (ex.  summer camps that aren’t Interlochen or Concordia).  I’m still doing just-got-paid and making-me-feel-better charitable contributions, but they’re (combined) more in the hundreds/month than the low thousands unlike my first paycheck of the year donating.

I don’t think this money move has got us donating less, but I do suspect it’s got me spending less because I’m back to the default of “if we don’t need it, don’t buy it” rather than an underlying “looking for places to send money to”.  When I see an amount in my savings account that I can’t really comprehend and I don’t know where to put it… it makes sense that when all else fails I might want to spend it.  To be honest– I feel a lot less guilty when I see a reasonable amount in savings that I can understand.  Or when I do have excess money in cash, it is earmarked for something like an upcoming sabbatical.

Sidenote:  If you’re in the 24% tax bracket and ever want to feel artificially low income, just read the case studies in Bogleheads.  So many people with inherited wealth spitting out enormous dividends or salaries above $500K/year.  Even though that’s such a tiny proportion of the population.  If you’re in the 24% tax bracket, you’re still pretty high income.

But what is the right thing to do?  For other people, I war between “If you are meeting your financial needs/goals, do what you will with the excess” and “Nobody needs that much excess.”  I’m fine with Ariana Grande’s panegyric on spending, but not ok with people buying politicians.  And I feel sick (and like getting out pitchforks) when I see the price tags of some of the things that rich people buy and don’t even use.  There’s also the environmental waste of disposable purchases.  And yet, it isn’t my money, so “an it hurts no one, do what you will.”  And yet, I am so strongly in favor of inheritance taxes and higher marginal tax rates.

And maybe what other people should do isn’t as important as what keeps me feeling safe and not squicky.  We probably should replace broken appliances before they start giving me rashes, but there’s something to be said for repairing instead of replacing.  I don’t want stuff we don’t need.  But I don’t regret the iPad Pro purchase which has been great for editing and reviewing other people’s papers, or even the Remarkable purchase though I’ve ended up not really using it.  And I love our Honda Insight with the second level trim.  When I want it, should I got it?  Or should I exercise some self-control and put off the purchase until it’s something we really want?

The best way to curb these spending impulses is to just not have money burning a hole in my bank account.  But should we do that and continue to stockpile money for a rainy day even though we don’t think we want to retire early (still, it would be nice to retire anywhere in the country we want to, not just our current LCOL location).  There’s also the very real fact that the owner of the company where DH works is going to die one of these years (he’s in his 80s) and while we almost spend less than my take-home pay, it would be nice to not have to make any sacrifices while DH decides what to do next.  But this has become much less of a concern since my last raise– we no longer need to have, for example, a full salary’s worth of dividends spitting out each year to cover the gap.  I’m high income on my own even if we’re in a lower tax bracket without DH’s income– we move back to upper-middle-class, which isn’t really a hardship if we don’t get used to higher levels of spending.

When we’re not artificially cash-poor, these are questions we have:

  • Will we keep our ancient fridge until it completely dies?
  • When should we replace our functional computers with faster versions?
  • Should we send our kids to expensive national camps that require plane trips when there’s less-acclaimed versions we can drive to (probably not)?  What if there aren’t substitutes we can drive to (maybe?)?
  • Should we try to pay someone to take care of anything?  But what?
  • Should we eat out more?  Try a meal service?  Eat at the fancy restaurants in town when they’re not paid by my department?  Even though they’re not as good as the fancy restaurants in the city but cost about the same?
  • Should we take more real vacations that aren’t connected to conferences?  But what about the time costs?

And the big one:  Should I hide money from myself?  Or should I be fine with the additional spending that comes with having cash on hand?

If you don’t need to exercise self-control, should you?  When your needs and strongest wants are being met, how do you decide what to spend on?  How do you decide how much to spend on your wants?  How do you prioritize your wants?  What happens to your spending when you get a big income shock?  Do you hide money from yourself?

Should I put lump sums in the 529 instead of dollar cost averaging?

One of the reasons this blog seems to have become a spendapalooza is that there’s really not any obvious place for extra money to go.

But there actually is one place for extra money to go– the kids’ 529 plans.  (A 529 plan is an awesome way to save for college or vocational school such that the earnings are tax-free.  But, it’s a good idea to max out your retirement before setting money aside in 529 plans because retirement accounts aren’t included in college financial aid calculations and you can take out loans for college but you can’t for retirement.)

In the past, I’ve always said, “and the kids’ 529s are on track to pay for the school of their choice [by the time the graduate college].”  What I mean by that is that we’ve been putting away $750/month in the accounts, even in the summers when I don’t get paid.  (It used to be $500/month, but we increased it when we paid off the mortgage and stopped paying for daycare.)  But we haven’t *actually* put enough money to be able to cash flow the remainder of the cost of (a four-year private) college yet.  We’re just on track to.

Over the next 4 years before DC1 starts college, $750/mo works out to $36,000 (actually a little less than that since it’s November, but it’s an estimate).  Over the next 8 years before DC1 ends college, it would be $72,000.  (That’s a LOT of money!)

We could just put in $36K (instead of $9,000) over the course of this year and then either start contributing again once we know where DC1 is going to college or not based on the cost of hir chosen school.  (Given hir struggles in English, it is likely that HMC is out, but also out with HMC is its insanely high $72K/year tuition.  I told DC1 we could get hir a unicycle anyway.)

Doing it this way loses some dollar-cost averaging benefits, but it gains the benefits of a longer period of untaxed earnings.

There are some wrinkles to doing BIG 529 account transfers.

The first is that even though the account is a custody account and doesn’t actually belong to the child, it still is subject to the annual gift tax.  For 2019, the amount that can be given annually without tax is $15,000.  Each parent can give that amount, so a married couple can give $30,000 in one year.  $36K is more than $30K, but there’s a loophole with the 529.

This wrinkle has its own wrinkle:  An individual or couple can give a larger lump sum, so long as the total given in that five year period is still less than 5 times the annual exclusion.  So DH and I *could* give $150K this year so long as we didn’t contribute again for another 5 years.  (Of course, that’s a moot point because we don’t actually *have* $150K to give, but you get the idea.)  That means when DC1 actually gets into college, we should be able to continue to contribute to hir 529 without penalty.

So our plan is to do a lump sum of $36K this month to DC1’s account (this gets rid of all our excess cash and digs pretty deep into our emergency fund, but the emergency fund doesn’t actually have to be full until May since we can cash flow most emergencies when we’re both being paid).  Then we will stop contributions to hir account entirely.  We will continue as normal with DC2’s account (contributing $750/month) until we build up excess cash and I start to feel like forcing DH to buy all the Apple products again.  At that point we will re-evaluate and decide whether we want to do a lump sum to DC2’s account or if we just want to increase the monthly contribution.  I’m sure I will post about what we end up doing.

In ~4 years when we know where DC1 is going to college, then we’ll decide whether or not to start contributing to that 529 plan again, and we will have a better idea about how much DC2’s account can bear without going over.

Grumpy Nation, I don’t have a good question for this post.

The problem with buying an Apple Watch and why we finally gave our 12 year old a smart phone

I heard somewhere that the Apple Watch detects heart attacks and then notifies authorities.  This is not actually true.  But I thought it was true.  DH works from home alone and my second biggest fear is that he’s going to have a heart attack at home and his life could have been saved if people had been around to get him medical attention (my biggest fear is similar but involves semi-trucks and crossing the street).  So I decided that an Apple Watch would be a good thing for DH to get, especially after reading a bunch of highly compelling stories about people whose lives were saved by the watch.  After additional research, I did find out that the newest version of the Apple Watch, the Apple Watch 5, is very good at fall detection and will alert authorities and I have instructed DH to attempt to fall (in addition to chewing the aspirin I make him keep at his desk) should he feel a heart attack coming on and is unable to call 911.  This is only somewhat tongue-in-cheek (yes, I do make him keep aspirin at his desk).  Version 5 also has better detection of heart problems that aren’t heart attacks, so if it’s a heart problem that has some warning signs that would be nice too.  So even after I found out that the heart attack thing isn’t true, I was sold on him having one.

It turns out, if you buy an Apple Watch 5, you’re going to need a new iPhone to go with it (because your iPhone 6 isn’t compatible).  You find this out after you get the watch in the mail and have to decide whether to upgrade the phone or return the watch.

When you get a new iPhone 8, you’re going to need a new SIM card to go with it (because your old iPhone 6 SIM card isn’t compatible).  Fortunately, unlike the iPhone 8 ($450 plus tax), the SIM card is only $5 (plus $4 s/h plus tax).  You also find this out after you get the new iPhone in the mail, but by this point you’re committed.

DC1 is going to get the hand-me-down iPhone 6, which is surprisingly beat up (surprisingly because mine is still in really nice condition).  Turns out it’s only worth about $60 resale which is just a little more than we’ve been paying for DC1’s crappy flip phones.  DC1’s current crappy dumb phone has been driving us crazy because it doesn’t get very good reception at hir school which means zie leaves us voice mails that we can’t understand and zie doesn’t get our texts when we need to pick hir up.  It also has such a terrible battery life that I went and bought hir an external battery. Zie has lost or washed so many flip phones at this point we assumed this one would not last long, but it’s been a few months.  Zie will still have it as a back-up when zie inevitably loses the iPhone.

We are going to have to have a long talk about proper smart-phone use and internet addiction and all those other lovely things, but it will be nice for DC1 to be able to use an electronic calendar and to actually get the texts that hir orchestra teacher tends to send in the middle of the day.

Do you have a smart watch?  If applicable, when did your kid get a smart phone? 

We bought all the things: Will I run out of ways to be obnoxious?

So over the past year or two we’ve bought two cars, renovated the kitchen, shared the expense for a new fence with our neighbor, and bought a new clothes washer.  We’ve subsidized family vacations to not-so-fancy midwestern destinations and we’re going on an anniversary trip (to Portland!) next summer.  I also bought an iPad pro and a Remarkable for quasi-work purposes (the iPad pro seems to be the winner so far for editing other people’s papers, and I’ve been good about not using it for goofing off).

Since October we’ve bought the aforementioned clothes washer, donated a TON of money to various educational causes (including $2K+ to DC2’s school, the + because they had a couple fundraisers that we donated to separately), sent money to various political causes, and I made DH buy an Apple watch because he works from home alone and it can detect falls and irregular heart-beats and notify people about them.  (Really I started the campaign to have him buy one because I thought it could detect heart attacks, but it turns out it can’t.  Still, the other health metrics seem more useful than nothing.)*  DH is buying himself a 3D printer (he’s been avidly reading gasstationwithoutpumps among other sources in anticipation), though maybe that shouldn’t count since he’s been saving up his allowance for it for a long time.  We also bought $200 worth of Scholastic books and a new tall bookcase to replace DC1’s short bookcase (hir old bookcase is going back into the hallway) for $500.  And we paid the full property taxes in one fell swoop and I transferred 10K over to Vanguard taxable.

Really only the property taxes (and technically the Vanguard transfer before it) made a dent in our savings.  This is because in October we both got a bunch of large delayed reimbursements (I think something like 9K (!) worth– did you know you can just rent an ultrasound for like $500/mo?), late summer salary, and my first paycheck on top of DH’s paychecks.  So we were super flush with cash after having a somewhat careful September and then the bills for a lot of these won’t be due until after we get paid again.

I don’t really have a point to this post, but it’s been weighing on me and I had to tell someone, and who else to tell besides the grumpy nation?  I am going crazy buying all the things, but a lot of this buying was also delayed spending.  So it feels like a lot, but maybe it isn’t because other people would have renovated that kitchen a decade ago, bought a new clothes washer the first time it broke instead of repairing it multiple times, regularly gone on vacations, and have bought a watch to replace that 20 year old Casio calculator watch a long time ago instead of just replacing bands and batteries.  (Me, I’m still rocking a 20 year old Timex that I love.  I think you can get the same model new for under $40.)  But let’s be completely honest, we’ve been spending a lot.

What I’m wondering is if after this spurt of buying things we’ve been putting off buying or thought would be nice to have if I’ll settle down again into not spending frivolously or if this is a new normal.  I can’t really think of anything else I want… I mean we’ve kind of exhausted useful Apple products.  Maybe my next big purchase will be a crown for when my third molar finishes cracking (dentist thinks no earlier than next year, but definitely in my future).  Or maybe I’ll see something new I want and just get it in my best Ariana Grande style.

Will the obnoxious posts end?  What money things will I blog about if they do?  Do you delay purchases and then spend when you’re flush or do you spend more evenly?

*Update:  it turns out our iphones are just a little bit too old for the newest Apple watch (we didn’t get the S version when we bought our phones).  So DH has to decide if he wants to get a new phone or return this watch.  And if he returns this watch, does he get an older model Apple watch or not.  He probably won’t get an older model.  My guess is we’ll either return or DH will finally upgrade phones (his is falling apart a bit and we have been thinking of passing it down to DC1 since DC1’s current dumb phone works only about half the time we need it to work, though that has its own concerns).   There was another item in the initial draft of this post that got returned as well– I bought a pair of fancy European shoes off Zappo’s, but when I got them one of the two didn’t fit and had all sorts of stitching problems(!) so I sent them back and decided I really do have to go to a store to try on expensive shoes, but there are no such stores nearby so… I’m not sure what I’m going to do for my brown dress shoes need given my half boots are really worn down in the heel.  DH is thinking an iPhone 8 (same size as his current 6) for $450 instead of an 11 for $700 or 11 Pro for $1000, so that’s almost frugal (not really).

The diminished mental load of having a lot of money: An obnoxious post

DON’T FORGET TO VOTE TUESDAY NOVEMBER 5TH!!!!

Back when I had just graduated from college, my former roommate and I had gotten a bill for missing furniture that we’d never gotten in the first place (our room was too small to fit an easy chair they’d tried to deliver).  I had called up and complained and gotten the charge revoked.  My roommate’s father had just paid her half.  I don’t remember the exact amount but it was definitely over $100.

At the time I did not understand how someone could just *do* that.  If nothing else, the principle of the thing.  I’ve spent most of my life keeping track of things.  Billing discrepancies, missing reimbursements, accidental overcharges.  Even though I hate calling places, I would protest mistakes or make DH protest them.

And now… I just don’t.  I don’t notice them as much and when I do notice them, if the amount is small enough and not likely to be repeated I don’t call.  I do make DH keep track of our internet bill out of principle, and I would make him do the same for the cell if Ting wasn’t such a great company, because those companies would regularly cheat us.  In fact, shortly after starting this post our internet bill went up somewhat randomly, and DH called and… they refused to budge or let DH talk to a manager or anything.  We only have two internet providers in the area (this is down from 3– the major competitor no longer provides internet, only tv) and the other option is pretty bad, so this company feels like they have a monopoly on us.  Old us would have switched out of sheer annoyance at not being allowed to talk with a manager (or at least gotten far enough along in the cancellation process that they offered us a deal).  But right now we don’t want to deal with the hassle.  Maybe this summer.  Or never.

This is a pretty new phenomenon for me… maybe half a year old, give or take.  This is the first time we have money and really nowhere to put it.  We’re not saving for a car or a house.  We’re not saving for leave or so DH can quit his job.  We have a full emergency fund.  We’re maxing our our retirement.  Our mortgage is paid off.  Our college savings are such that depending on where the kids go we might be over-saving (though fortunately with two children we can adjust after we know what DC1’s situation is going to be).  We’ve way upped our donations.  We can cash-flow the kinds of vacations we go on with DH’s family.  And our next “it would be nice”s are so far away that there just doesn’t seem to be much point– we’re not going to quit our jobs and move to a house we’ve purchased in a West Coast city any time soon because we can’t afford a house out there without high-paying jobs and we don’t have those jobs in West Coast cities.  That certainly doesn’t seem worth scrimping and saving for.

I like this diminished mental load.  I like not worrying about things.  I like being able to say, “Enh, it’s just money.”  I like being able to think, “maybe they need the money more than we do” (NOT something I think about our terrible big chain internet provider, but something I do tend to think about say, restaurants, or the piano teacher if she makes a billing mistake).  I like having a lot of money.

Don’t let people say money can’t buy happiness.  It can and it does.  Having more than enough (without going insane with stupid things because you want to keep up with the Trumps or whatever) decreases stress tremendous amounts as you go up the income ladder.  Yes, there is some point where you hit diminishing marginal returns on that de-stressing, and we’ve probably hit that point, but with every increase there’s been more and more we can just not worry about.  First the price of groceries, later the price of gas, now the price of letting small* billing mistakes go.  Not keeping track of these things is such a gift.

*Disclaimer:  I do still keep track of BIG billing mistakes, which is why I got big influx of late reimbursements in early October.

Are there things you just don’t worry about anymore because you can afford it?  What do you wish you could just ignore?

Why we didn’t open a Chase bank account to get a $1K bonus

IF YOU CAN EARLY VOTE:  GO DO IT!  (Don’t forget regular voting day is Tuesday, Nov 5th!)

Somehow the fact that DH and I are high income has been made known to credit card and bank companies.

Chase banking has been trying to get us to open an account for a couple/few years now.  Usually they’ve offered something like a $200 or maybe $300 bonus offer which we don’t even look at because it’s not worth the hassle to us.  But most recently, they sent a $1,000 welcome bonus offer.

  1.  Open a new Chase Sapphire bank account by mid-November
  2. Transfer $75K NEW money to checking/saving/J.P. Morgan investments (but not cds or retirement or 529 accounts) and hold it for 90 days

We’re not going to be switching our investments to J.P. Morgan when there’s Vanguard and plenty of other lower-cost brokers out there.

If the balance drops below $75,000, a $25/month fee will be assessed each month.

So, ideally we would drop $75K in and then remove it and close the account after the $1K deposit on day 100 or 101 (they say the deposit will occur after 90 days).  This sounds like a hassle, but for $1K we could probably deal with that hassle in a way that we wouldn’t for a mere $200.

But is it really $1K?  No– we have to be aware of the opportunity cost of money.  $75K is a lot of money and it has to come from somewhere.  Unless we’re saving for an unpaid leave, I don’t keep that much in cash (I try to keep a slush fund of $30K in my primary emergency fund which covers the summer even with slow reimbursements or potential DH job-loss).  Selling stocks would trigger tax implications in addition to requiring too much thinking (though I could theoretically undrip dividends– though those are generally quarterly so I may have missed my chance).  I can probably get $75K by temporarily moving our primary credit union emergency fund (we don’t really need that money until summer), moving money from our online high interest secondary emergency fund, closing out our Wells Fargo account (it’s useful for ATMs when traveling and for checks), and then using my next two paychecks, overdue reimbursements, and overdue summer salary.

Ok, let’s then assume that I have gathered all 75K and instead of putting it into the stock market, I decide to go with the risk free alternate option to put it in my Capital One online savings account that pays 1.90% APY (which we opened up because they gave a $200 bonus AND had a good interest rate AND we already had a capitol one credit card).  Holding onto that in my already existing Capitol One account for three months provides total interest of $356.81 according to this online calculator.  Of course, I would actually need to hold it a little longer to make a direct comparison (it takes time to transfer money, time to get the Chase match, time to close an account etc.), though probably not a full additional month (another month in that savings account would bring in $476.13 total), so it will be more than that, say $400 (which is about a third the difference between 4 months and 3 months added to 3 months).  If I were instead to look for the best online rate out there, there’s a 2.75 rate (that may or may not be real) on one of those bank rates websites.  Three months of that would provide $516.18.

How much does the Chase savings account that they want me to put $75K in earn?  .01% APY.  Which is practically nothing.  That’s even less than our Wells Fargo account.  Three months of that is $1.88.  Four months is $2.50.

And, of course, we have to pay taxes on that $1K, minimum 15%, so at least $150, making it really only $850 of free money (though any other method of earning interest will also be subject to tax).

So, yes, there’s a big one-time cash infusion for opening up one of these Chase bank accounts, but it has to be with the strategy of closing it as soon as possible because the interest rates are so extremely low and the minimum required balance to avoid fees is so high.  And it is not worth even $600 to gather together money from all those different sources (while hoping an actual emergency that can’t be cash-flowed doesn’t occur), open a bank account, deal with the paperwork and hassle and so on, then remember to close the account and deal with all the attendant hassle of doing that, and then figure out where to place the money after.  Heck, I might pay $600 to avoid all that potential stress.

Now, I’m not planning on actually putting all those reimbursements and incoming checks into a savings account, not even a fancy higher interest online savings account.  I probably should sit down sometime and figure out a long-term strategy for our money now that we’re doing all the obvious things, but I’m not sure it’s going to be any better than putting money into a broad-based index fund of one kind or another every couple months (is it time to look into munis?  Maybe?).  So until I actually figure out what we’re going to do, that’s what we’ll be doing– keeping our emergency funds full and shoveling any excess money into Vanguard taxable.  Doing so does have higher risk than a Chase savings account, even at .01% APY, but we can chance it.

How much would a bank have to give you as a bonus to make you willing to switch?