Portfolio and Other Updates – Q2 ’22

I accepted a new job a week into our new home. It was a though call – leaving a comfortable job (and a good manager). But I’d been with the old job for over five years, and not having any managerial aspirations meant that there wasn’t any place higher to go. I was also not in the right industry. In that, I was measuring things no one should really care about, like internet speed.

After two years of promising interviews, I finally had an offer from the city – if there were jobs left and right, as was written all over the place, I did not see them. I have a title that fits what I do, and launches me in the direction I want to take. So even though the pay is only marginally better, the growth potential is superior. Most importantly, I’m working with such diverse and relatable metrics like crime rates, water treatment and cost of french fries.

The job comes with a 457 and a 401a plan. We also have a high deductible health plan that makes us eligible for the HSA. These can significantly lower our taxable income.

While this is great every year, it is particularly beneficial this year. We sold nearly 100K of VTI for our down payment, generating roughly $27K in capital gains. This translates to ~ 5K in taxes (per smartasset calculator). We’d really like to lower this, while simultaneously investing in our retirement accounts because:

    1. We want to keep investing, particularly now when the market’s down
    2. We’ve maxed our retirement accounts for the last 4-5 years, and don’t want to break this good habit, and forgo this incredible benefit
    3. We want to lower our taxable income
    4. We have rental income (a few hundred dollars this year, if that). I’m not sure how that’ll impact our taxes.

However, there are a few obstacles:

    1. We need money for our day to day expenses.
    2. We’ve been planning of a vacation in India and Nepal for later this year, since last year – so there’s no turning back now.
    3. We used up our emergency fund for down payment, some furniture and home repairs.
    4. Our rental property needed some repair. We are counting on it paying for itself now that these are done.
    5. Unexpected expenses.

I half thought of taking out a HELOC to cover some of our expenses. Then I came across this post:

How I Borrowed Over $250,000 at 0% Interest

I’ve decided to sign up for a 0% APR credit card to fund the rest of the year. This should allow us to contribute to our tax saving accounts and lower our taxable income. We’ll pay off the credit card next year, and then cut it up. The post explains this strategy in detail if you’re curious.

I haven’t calculated how much this will save us. But I think it is prudent to do whatever one can to hold on to ones capital in this economic climate.

Our investment portfolio is down by 15.23% (as of 07/21). We continue to maintain an aggressive position with ~98% in stocks. Our investment portfolio is approximately 50% of our net worth, the remaining 50% is in our primary home and rental townhome.

Ideally, we’d want most of our net worth in our investment portfolio – the more the better. But ~85% per Ilyse Glink on this Morningstar podcast (at around the 34 minute timestamp) feels about right.  I listened to this super episode many times, and thoroughly appreciate Ilyse’s tact/views/advice/wisdom.

Our stock portfolio is 86% broad market index funds (VTI, VTSAX, FXAIX).

I rolled over my 401K (with my old job) to an IRA (at Vanguard) a few weeks back. The process was surprisingly simple:

    1. I completed the 401k to IRA rollover form in Vanguard. Vanguard emailed me my IRA account details that I needed to provide my 401k administrator (Principal, in my case).
    2. I called my 401k administrator and told them that I wanted a “direct rollover”. This basically means that they’ll mail the check directly to Vanguard, and not to you – thus ensuring there is no tax consequence of any kind. The call lasted a friendly 6 minutes.
    3. Principle mailed Vanguard the check with the entire 401K amount within 2 days.
    4. The amount showed up in my Vanguard account in about a week, but I could not use it for another week.
    5. Once the amount became available for use, I immediately put it to work even though the market has been falling – into VTI and VYM (there’s something about dividends that I like).

Our (extremely optimistic) goals for the rest of the year (we’ll most likely miss them, but we’ll give them a shot):

    1. Max Mrs. Gofi’s 401K and my 457 ($20,500 * 2 = $41,000)
    2. Max our HSA ($7,300)
    3. Get a 0% APR credit card to fund our expenses for the rest of the year
    4. Start building an emergency cash fund, if possible

We’ve had big changes this year – a new home, a new job. However, our financial plans for the next couple of years remain the same:

    1. Max our pre-tax savings accounts – 401k ($20,500), 457 ($20,500), 2 Roths ($6,500 * 2), HSA ($7,300) for a total of $61,300. Given our new home payments, we’ll be happy if we save half those. However, once our daughter starts kindergarten in 2025, that should free up daycare costs (~$21,000).
    2. Build an emergency cash fund – we experienced high unexpected expenses this year, so we want to be prepared.
    3. Once we hit those, we’ll buy VTI with what we can spare – we want to build up our non-retirement accounts.
    4. We’d like to buy a hybrid SUV at some point. We love our Honda Fit, but the interstates feel rough and unpleasant. There’s also a small desire to hit the ski towns in the winters.

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