“It was the best of times, it was the worst of times … it was the spring of hope, it was the winter of despair.” – who else but Dickens.
One reason why I’m a history fan is because it helps put things into perspective. It helps us understand ourselves as human beings, and appreciate our lives. We’ve been incredibly fortunate this year. We’ve been healthy, and we held on to our jobs. Many others have not been as lucky.
Perhaps there’ll be no better time then now to reflect back on what we could’ve done to position ourselves better. We could start looking for better jobs, for greater stability and pay. Both these will require us to be really, really good at what we do. So we need to keep learning to make ourselves the best we can become.
We must save. This year has shown us how helpless uncertainties can make us. The least we can do is to save as much as can, while we can. If you’re two income household like we are, can you save one income? Can you live in a smaller home, or move to a cheaper city? If you flip burgers, does it make more sense to move out of San Francisco. Texas probably consumes more burgers anyway. Could you do with one car? A cheaper car? As a country, housing and automobiles are our biggest expenses, so a handle on those go a really long way.
I’ll add one more to this list – daycare.
Our savings were very small just a few years ago. The gains on those felt insignificant. But we kept saving. We are every-day people making regular income. But for the last two years, we made more money from the market then we saved. In other words, it feels like we now have a third person in the team working harder than we do.
We trailed the S&P 500: 15.18% to 16.26%. The trailing has to do with our allocation, which is 86% stocks, 10% cash, and rest in bonds and other unclassified positions. Perhaps we should track our performance against Vanguard’s Target Retirement 2045 Fund (VTIVX) which is 89.5% stocks (but at 16.30% YTD, we trailed it as well).
Our stock positions are in: 90.8% S&P 500 tracking index funds: VTSAX / VTI / FXAIX / Wells Fargo’s variant (no ticker), 5% VYM, 3.4% VGT, and 0.7% VTIAX.
We have very small positions in VTIAX and VBTLX. VMMXX holds our emergency fund and is currently 10% of our net worth. The yield on this is abysmal (and I should really move this elsewhere).
All said, our current savings is almost 53% in retirement accounts (401K and Roth IRA) and the remaining 47% in non-retirement accounts.
We track our dividends even though we aren’t dividend investors (other then the 5% invested in VYM). It is just nice seeing them come. We averaged $394 in monthly dividends this year.
We saved almost the same amount as we did last year.
We spent $69,509 in 2020. $32,525 (46.8%) of that in mortgage. And $36,9936 on the rest. In other words, it wouldn’t take much to live if we didn’t have a mortgage.
We live in a small townhome in Denver, drive a Honda fit (my wife occasionally takes Uber/Lyft). The biggest change for us this year has been the arrival of our daughter. We expect to pay over $20,000 in part-time day care in 2021. Day care is expensive.
Our plans remain unchanged for 2021. We’ll max our Roth IRA and 401K accounts, and invest the remaining funds in our taxable accounts, primarily VTSAX. Should we have any money to spare, we will also buy more VYM, VTIAX, and VGT every time they fall by 1% or more.
We also started a Colorado 529 plan for our daughter. All of it in VTSAX.
Financially, it’s been a good year for us. We were disciplined with our savings. We didn’t sell when the market fell in March, and kept dollar cost averaging through the year. Covid has made us appreciate the pursuit of FI even more. If everyone stocked up on their savings, like they did food and supplies this year, we would all ease our difficult times considerably.
And as we age, we will all find it increasingly more difficult to compete with the younger and smarter generation. Our jobs are not guaranteed. So it is paramount that that we act now when we can – get better at what you do, and save. Only the fit will survive (well).
Summer is around the corner, and I have a lot of hope for 2021. May we all be better tomorrow than we are today. Happy New Year.
Leave a Reply