Mid-year 2018 update!!

By Josh  June 30, 2018

Can you believe that 2018 is already half over? It’s been a really busy year for me so far (details below), so time has just been flying by! I started this blog on January 5th 2018 with a post about writing down goals so you can track them, and I figured 6 months later it was time to follow up on my progress. So here they are again, with individual updates below:

  1. lose weight, obv
  2. achieve 1/4m NW
  3. draw down my travel miles/points through actual travel, not point expiration
  4. give up unhealthy/unproductive habits (especially driving for Uber)
  5. actively meet new & interesting people (Hello #FinCon18)
  6. begin a creative pursuit

1. I do not have good progress to report on this one. I actually have no idea what my starting point was for 2018 (bonehead move, Josh). But I recently started a new job that provided an opportunity for a Health Reimbursement Account (up to $500/yr in tax-free money to spend on health-related costs), but I had to go through a health assessment and have blood work done to set a baseline. I weighed in at a whopping 365.8 lbs. That’s 40 pounds more than Vince Wilfork and 30 pounds more than William “Refrigerator” Perry. So obviously this has sparked a renewed vigor in my daily actions to try and move the needle downward and make my weight loss goals to achieve that free $500. Wish me luck!

2. I have made progress this year on my net worth goal of $250,000, but in the past month it seems to be disappearing. I reached $245k in late May, but sit around $235k right now. Main culprit appears to be that Zillow has dropped my house value by $11k in the past 2 months. I also missed a few weeks of getting paid while I was between jobs.chart

3. Speaking of being between jobs; I was able to draw-down some of my travel points balances on a 13-day trip around the US from April 30-May 12. I had to turn in my work vehicle and computer equipment to headquarters in Tallahassee, so I decided to start my “Freedom trip” and used various points/miles from Delta, IHG, Hilton Honors, Hyatt, and JetBlue. I spent less than $217 out of pocket for a trip to Tallahassee, Atlanta, Los Angeles, Seattle (by train), Boston, and back home to Fort Myers, FL. Across those 5 programs, I spent a total of 206,940 points/miles, keeping in mind that not all points and miles are valued the same. I estimated a total cost savings of $3,596 by using points & miles. And I still maintain almost 700,000 across various programs for future travel!

4. After writing a 3-part series on the ups and downs of driving Uber as a side hustle, I picked up the habit again. I did it, in part, because Spring Break is the busiest time of year here in Southwest Florida, and also because I knew I had the job change coming up and needed to stash some extra cash to help ease that transition. I’m happy to say I’m now done with Uber (caveat: I turn on the app during my ~1 hour commute, each way, which earns me enough to cover my fuel expenses).

5. I’m still super stoked for #FinCon18 but I have been trying to meet new people in other settings, as well. I recently had the opportunity to attend a national conference of the Association of State Floodplain Managers (yes, I’m a total geek), and I gave a presention on a one-of-a-kind project I worked on for the past 3.5 years. Having that platform, while slightly terrifying, provided an opening for me to share how much I love being an expert in my field and that I relish in the opportunity to help others. I had people from all over the country come up to me throughout the rest of the conference and try to pick my brain or otherwise engage in conversations about their own programs. It was such a great week, even though it was Phoenix, in June!! I’m also getting ready to attend the annual ESRI User Conference in San Diego on July 9-13. I have never been to this conference before, so it will be eye-opening and another opportunity to meet complete strangers.

6. Creative pursuit!! As you can now see, I have migrated this simple WordPress-hosted blog onto my own domain! www.joshovermyer.com belongs to me for the next 10 years, and I just paid to migrate it to a business page on WordPress for the next 2 years, so I am going to have to put some more effort in over here now. I should have the extra time, now that I’m done with Uber (again, for emphasis). I also still have some amazing creative ideas for items to bring to FinCon, so I will need to explore ways to make those ideas in my head become a reality. If anyone wants to help me make my sparks of creativity become actual things, I would love to talk to you about them.

Roth or Traditional IRA?

By Jover Originally drafted July 11, 2016. Posted March 10, 2018

Congratulations! You’ve decided to put your retirement future in your own hands and open an Individual Retirement Arrangement (IRA). But which should you choose, a Traditional IRA or a Roth IRA?

A Traditional IRA allows an individual to invest money pre-tax. That is the one true time when you can “Pay Yourself First”, even before Uncle Sam gets his hands on part of your paycheck. Investments grow tax-deferred, and you pay ordinary income taxes when you withdraw the money in retirement.

A Roth IRA is an account whereby the individual invests money after tax has already been paid. The same contribution limit of $5,500 still applies (in 2018), so why invest after-tax dollars? Upon the age of 59.5, all of the money in a Roth IRA can be withdrawn tax-free, because taxes were already paid in the current year, none are due on the investment dollars, nor the growth on those dollars.

So how do you decide which is right for you? It depends on your outlook.

If you expect tax rates to go up in the future, or you will have more income that puts you into a higher tax bracket, it might make sense to pay the income taxes today and invest in a Roth IRA for tax-free retirement dollars later.

If you have a high salary today and plan to live on less income in the future, a Traditional IRA is the way to go, to lower your taxable income in the present and pay taxes in a lower tax bracket in the future.

If you aren’t sure what to think, it is possible to split your $5,500/year investment into both. This year I already maxed out my IRA contributions, with $3,000 going into Traditional IRA (to lower my current taxes) and $2,500 into my Roth IRA (to give me tax-free withdrawals in retirement).

Another consideration is what types of investments you will be making with each account. Some investments such as stocks or REITs pay dividends, which may be treated as taxable income. Consult a tax professional to see what is right for your preferred investment choices.

Some people prefer the Traditional IRA because $5,500 of your annual income can go straight to the account and you’ve met your annual maximum contribution and will reduce your taxable income by $5,500. On the other hand, one must earn $6,160 before taxes (assuming 12% for this example) to earn $5,500 after taxes for the maximum Roth IRA contribution, and there are no tax benefits in the current year.

There are income limitations for Roth IRA contributions, which vary depending on marital status. Some people have figured out a back-door Roth conversion from Traditional IRA contributions, but taxes must be paid in the year of the conversion.

A final word on the Traditional vs. Roth IRA battle royale is that there is no wrong decision. In fact, it may be useful to employ any of the different combinations explained above, including contributing to a Traditional IRA during your working years, and then using a Roth IRA conversion ladder as your income shrinks in retirement. Many Early Retirees use this strategy to combine the tax benefits during their working years with the tax-free income benefits during early retirement.

Financial products I use

By Josh March 4, 2018 but will be maintained periodically

[Caution: Many of the links below are referral links. They will not cost you anything extra, but I may earn some commission ($$ or travel points) if you click them and sign up for the products that I use and love!]

Banking:

JPMorgan Chase – I signed up in November 2016 and was awarded a $300 bonus for opening a Chase Total Checking account. I avoided monthly fees by maintaining at least $1500 daily balance. I also signed up recently for a Chase Business Checking account for my side hustle, to keep my business and personal finances separate. I got a free $300 for that, as well.

Charles Schwab High-Yield Checking: I signed up in February 2018 to receive a $100 bonus. This required me to also open a Charles Schwab brokerage account, with a minimum of $1,000 balance. The AWESOME thing about Charles Schwab bank is they refund ALL ATM FEES, including FOREIGN ATMs, which makes this a must-have for world travelers. The account also pays 0.20% interest, which is very high for a checking account.

Fifth-Third Bank: I signed up in February 2018 to receive a $200 bonus for depositing $500 for a minimum of 60 days. I actually put $1500 into the account to avoid an $11/month fee. Fifth-Third is based in the Midwest, but they have a lot of branches here in Southwest Florida, so it made sense for me to open an account with them for the benefit of their brick & mortar locations. I also had my car loan with them in August 2017-November 2017, so I already had my online account set up with them, which made for a very easy sign-up.

Hancock Whitney Bank (Obscure): I signed up in January 2018 to earn a $300 bonus on a $250 minimum account balance. The offer required using the account’s debit card at least 5 times, so I deposited a total of $300 to allow for up to $50 worth of spending on the debit card. I signed up online when I thought my job was going to be transferred to Tallahassee (400 miles away), but I recently found they have branches as far south as Sarasota, so closer to 75 miles away from me. I’ll still likely close this account in the fall, since my job did NOT get moved to Tallahassee, and I actually took a new job in May 2018 closer to home.

Credit Cards:

Chase Sapphire Reserve (This card has a $450 annual fee, but many people find it is more than worth it, based on the benefits). Don’t let the $450 annual fee scare you, since it offers an annual $300 travel credit that offsets 2/3 of that fee. Other benefits include Priority Pass Select membership that allows you to use over 1000 airport lounges around the world, free Global Entry or TSA Pre-check ($100 or $85 value), primary rental car insurance, excellent travel insurance and price protection coverage that come with all Visa Infinite cards. Earns Ultimate Rewards that are worth 1.5c each in the Chase Ultimate Rewards Travel portal. 3x earning on Travel and Dining expenses, with 1x on everything else.

Chase Freedom – no annual fee card that earns 5% cashback on a difference spending category every quarter, up to $1,500 per quarter ($75 cashback).

Chase Freedom Unlimited – no annual fee card that earns 1.5% cashback on every purchase, every time. This is a great card to use for any spending that is not covered by a bonus category on another card. Pair this card with a Chase Sapphire (Preferred or Reserve) to make the cashback value worth more (1.25x or 1.5x).

Southwest Rapid Rewards Premier – This card ($99 annual fee) is also from Chase, and earns Rapid Rewards for free flights on Southwest Airlines. The sign-up bonus changes throughout the year, from a low of 40,000 points to 60,000 points. They also have a Plus card and a business version, and some people sign up for 2 cards back-to-back to earn the minimum of 110,000 points required for the Southwest Companion Pass, which allows a companion to fly FREE (only pay September 11th security fee of $5.60 each way) for the remainder of the calendar year in which you earn the Companion Pass, AND ALL OF THE NEXT YEAR! Woo hoo free flights!

Starwood Preferred Guest by American Express – This card and hotel program may seem obscure at first, but the program is excellent! Starwood and Marriott are completing a merger soon, which converts all Starpoints into 3 Marriott Reward points, and you can redeem these points at over 10,000 hotels worldwide. In addition, points are transferrable to several airline programs at attractive rates, including a bonus of 5,000 points when you transfer in increments of 20,000. There’s currently an excellent redemption offer through Marriott where you can purchase a 7-night stay and earn 120,000 or 132,000 airline points from several of your choosing, but those offers are getting more expensive on August 1, 2018.

Hyatt card: The main perk of this credit card is that for an annual fee of $75, you get a free night certificate, good for any Category 1-4 Hyatt hotel. For example, you could get one night at the Hyatt Regency Dusseldorf (in Germany), that has nightly rates up to $1,598, or $605/night on average. The card also comes with a sign-up bonus of 40,000 points, which could be used for up to 8 nights at a 5,000/night Hyatt hotel, but a more common redemption would be 2 nights at 20,000 points each. You can get this card AFTER 5/24 status with Chase.

IHG Card: IHG or InterContinental Hotels Group is a large chain that includes Holiday Inn, Holiday Inn Express, Crowne Plaza, Hotel Indigo, InterContinental, Staybridge Suites, Candlewood Suites, Even, avid, and Kimpton, among others. The major pluses on this card are the ability to get it AFTER 5/24 status with Chase, and a free night certificate for any property in exchange for the $89 annual fee. Also comes with Platinum Elite benefits as long as you hold the card.

Investment accounts:

Vanguard – because most of the funds you want to buy are Vanguard funds anyway. Why pay some middle-man when you can invest directly with them? I’m all about the VTSAX (Total stock market index fund – Admiral Shares) with 0.04% fees.

Betterment – I used Betterment for a few years while I was slowly building up my account balances and wanted their globally-diversified set of 12 index funds, balanced however you choose between stocks and bonds (I did 90/10). But once I decided to take a more active role in my investments, it didn’t make sense to pay 0.25% to Betterment when I could get the same funds for 84% lower fees with Vanguard. But it’s a great place for beginners!

Charles Schwab – One of the requirements of my High Yield Checking account with Schwab was that I set up a brokerage account with a minimum of $1000. Trading fees are $4.95, which is better than other brokerages I have used in the past (almost a decade ago, though).

Fidelity – I just signed up for this one this week, for a $200 bonus offer. Fidelity, Schwab and Vanguard are the three titans of the low-cost investing world. Now I have some money with all 3.

 

 

Soured on P2P loans

By Jover Originally drafted July 11, 2016, Published March 4, 2018

A couple years ago, there was a scandal at leading Peer-to-Peer (P2P) lending platform Lending Club(Referral link, if you read this post and still think it might be worth it for your investment portfolio). I won’t go into any more details here, but this news was the final straw for me as I had already been contemplating my exit from P2P loans.

My P2P experiment began in April 2015 with a desire to invest some money that is not directly correlated with the Stock Market. For those of you who are unaware, P2P loans are made by groups of investors, each contributing $25-50 each, and the borrower pays back the loan with interest. Investors reduce their risk by investing across dozens or hundreds of loans, and can decide to take the profits as they come in, or reinvest the proceeds into new loans, similar to Dividend Reinvestment plans. The idea is that your money grows more money; rinse and repeat.

So that’s why I invested with Lending Club, and I have had 366 loans in the past 3 years. Unfortunately, I have already had 70 loans “charged off” which means the borrower defaulted on the loan and Lending Club was unable to collect any payments for a period of about 4 months, so they and their “advanced collectors” deemed the loan unrecoverable. I also have 4 loans that are 31-120 days late, so many of those will also default soon.

Some of my individual loans have been paid back early, in their entirety. 132 of those loans, to be exact. Most are still making steady monthly payments and progressing as expected towards $0 balance. But I have been disappointed and pissed off by a few that have taken out a new loan (up to $40,000 is now allowed) and summarily filed for Chapter 13 Bankruptcy. Others have taken out new loans to purchase expensive cars, and never made a single payment or only attempted to make a few before giving up.

P2P loans are unsecured (no collateral provided), so it is possible to lose your entire investment ($25 at a time). Lending Club advertises that no investor with at least 100 loans (minimum $2500 invested) has had a negative return, so the bad is outweighed by the good.

In the personal finance blogosphere, it is easy to get wrapped up in the idea that everyone is working to make progress on their debt goals, investment goals, and retire financially free. But the real world is still full of people making a lot of money mistakes and/or downright awful people looking to take advantage of the opportunity for an unsecured loan that they can decide to never pay back. I have made loans to people who make more money in a year than I make in 10 years, and they defaulted. I guess lifestyle inflation can really catch up to people, even those making a half-million dollars a year.

Not factoring in adjustments for loans that are late or on their way to default, I’ve earned about 1.52% on an annualized basis, which is not great (barely above my risk-free 1.5% interest in my savings account at Discover). But if I click the toggle button, it shows an adjustment down to 0.92% currently. Lending Club has data on historical losses from each category, such as loans in the Grace Period are likely to experience loss 28% of the time, versus late 31-120 days are likely to experience loss 74% of the time.

Due to these factors, I have begun withdrawing the principal and interest being paid on a weekly basis. I would rather work on paying a little extra on my mortgage than to continue investing in P2P loans with a chance of losing my entire investment into any individual loan.

The 4% Rule is 100% Safe

By Josh, February 28, 2018

If you’ve stumbled across my site and haven’t heard of the Trinity Study and the 4% Safe Withdrawal Rate, go ahead and click over to Google to read about it. I’ll wait…

For the rest of you, we’ve all heard about the 4% rule as a safe withdrawal rate in retirement. Something like 97% of portfolio balances end up being positive after any scenario of stock/bond performances in the past 100+ years when using a 4% withdrawal rate. Close enough for me, I’d consider it 100% safe, because I love rounding. 🙂

So why do I think the 4% rule is safer than you might think? First, it assumes that you will never make another dollar of earned income for the rest of your life. It’s like saying that you retire one day and spend the next 3-4 decades sitting in a rocking chair, sipping lemonade, and reminiscing about days gone by. I don’t know about you, but when I think about retirement, I think about spending more time on hobbies I enjoy, possibly teaching some classes, and/or spending my time with other creative endeavors. Some of these things will be volunteer, while others might earn me some kind of paycheck or royalty (if I write a book or something?) I might start buying items on the cheap at local garage sales and then selling them for more money online. The possibilities are endless when you aren’t chained to a desk chair for 40 hours a week, 52 weeks a year!

Another reason the 4% rule is 100% safe is that you don’t just withdraw 4% on January 1st and hope that remaining 96% grows back to its 100% self again throughout the year. For example, and for simplicity’s sake, on January 1 you withdraw 0.33% (1/12th of 4%) to live on for the month of January. February 1 you do the same thing, and so on. The beauty of this is that 99.67% is still in your account after January 1, which is 3.67% higher than if you withdrew 4% of your account balance all at once. The money only makes money when it is still in your account!

Reason #3 is that you don’t have to ALWAYS withdraw 4% each year. Maybe you don’t have any big travel plans this year, you don’t need a new roof on your house, and you don’t need a new car this year. With a paid-off house and no travel expenses, it may be possible to comfortably live on 2-3% for a given year.

The fourth reason that 4% safe withdrawal rate is 100% safe is that it does not factor in any Social Security or Medicare coverage. Some of your basic living expenses and a chunk of health care costs are covered by the Federal Government, even in the bleakest of scenarios for those 2 major programs. You can log onto SSA.gov to see your anticipated Social Security earnings at each given retirement age (62-70) and factor that money into your calculations for how much you need to withdraw to meet your minimum obligations. It is likely that you will need far less than you think you need to withdraw in retirement.

And the final reason is that your living expenses may Decrease, not Increase, as you age. As a newly-minted retiree, most people want to spend on lavish vacations, maybe buy expensive toys (collector car?) or tools for a new hobby (gardening?). But do you have the same energy at 85 as you do at 62? Of course not. By 85, if you still have good health, you may not want to travel the world any longer, or drive fancy cars, and you lost the energy to do manual work like gardening. If any or all of those are the case, it may be possible to live on less than 4% in some of your golden years.

 

The Tweet that Started this blog…

On the evening of January 5th, 2018, I posted this Tweet and it generated higher-than average interest, including a request for a blog post to explain what all of this means:Screenshot_20180201-023011

So, due to a request from Penny at ShePicksUpPennies.com, I’m writing this post on my re-launched blog to help explain what all of this is about, and why I would introduce so much additional hassle into my everyday transactions.

SportClips is my go-to place when I need to get a professional-looking haircut. Sometimes I cut my own. As the name implies, SportClips allows the customers to watch sports while getting their haircut, so their clientele is majority male. They continue the sports theme with their pricing scheme, a standard haircut is the Varsity, while kids are Junior Varsity. The MVP treatment includes the Varsity haircut, plus a relaxing shampoo in a massage chair, and a neck and shoulder massage with a hand-held massage tool.

J.P Morgan Chase (Chase) is my favorite banking institution, but it has very little to do with their brick and mortar locations or their banking procedures. Chase issues some of the most-rewarding consumer credit cards, with their Chase Sapphire and Chase Freedom “families” of cards. The rewards earned with Chase Sapphire (Preferred or Reserve) cards are called Ultimate Rewards, and those points are able to be transferred to nearly a dozen travel partner airlines and hotels. Chase Freedom and Chase Freedom Unlimited only earn “cash-back” value, but if you have a Chase Sapphire Preferred (CSP) or Chase Sapphire Reserve (CSR), you can transfer that “cash-back value” into Ultimate Rewards, and then the points can be transferred to airline partners.

Chase Freedom Unlimited is easy to understand; all purchases earn 1.5c per dollar spent, on every purchase with no limits on the cash-back bonus. Chase Freedom earns 1c per dollar spent, with the exception of a specific category that changes each quarter. Those quarterly categories are worth 5c cash-back, up to a maximum of $1500 per quarter, which means $75 cash-back can be earned each quarter with the Freedom card.

CSP and CSR have access to the Chase Ultimate Rewards travel portal, where the cardholder can book travel directly through Chase, just like they might from other OTA sites like Expedia or Priceline. CSP provides a value of 1.25c per Ultimate Reward point (URs) when booking travel through the travel portal. CSR provides 1.5c per UR in value.

Getting back to the Tweet in question, I used my Chase Freedom card to earn 5% back in the first quarter of 2018 by making the purchases via a mobile wallet (AndroidPay in this case). All of the various mobile wallets work for this category, including ApplePay, SamsungPay, AndroidPay and Chase’s own ChasePay. I just received an email this week that AndroidPay is being changed to GooglePay in the coming weeks. By transferring the 5% cashback value earned on my Chase Freedom card to my CSR (remember, 1.5x value), I effectively turned that 5% category into a 7.5% category for the MVP haircut on Jan 5th. For the $23 haircut and $5 tip ($28 total), I earned $1.96 in value. This compares favorably against a 2% cashback card ($0.52 that I would have earned).

Rounding out the Tweet, I frequently use different credit cards to purchase gift cards at grocery stores, Best Buy or Walmart to maximize limited-time offers such as 10% cashback for purchases with ChasePay in December for holiday shopping at Best Buy and Walmart (2 separate offers). Now I am sitting on a hoard of gift cards to restaurants, gas stations, Walmart, Starbucks and Lowe’s. I decided to pick some gift cards out of the drawer and enjoy a meal at Chili’s and a hot beverage (Caramel Apple Spice) at Starbucks without spending any additional dollars on my credit cards.

With one of those 10x offers at Best Buy, I bought $300 in gift cards, earned 10c back per dollar spent, and then transferred that cash-back value to my CSR for 1.5x additional value towards travel. Therefore, I earned $30 x 1.5 = $45 in travel for purchasing $300 in gift cards for future purchases that I will use throughout the upcoming year. 15% back for just knowing how to do it, where and when = win! 🙂

Write goals so you can track them! And changing your mind is OK!

By Jover January 5, 2018

I am not usually a person who sets concrete goals or even writes anything down as a New Year’s Resolution. But thanks to the personal finance community, I actually tweeted a list of 6 goals for this year when Bridget (@moneyaftergraduation on Twitter) asked us to tweet them to her in late December.

  1. lose weight, obv
  2. achieve 1/4m NW
  3. draw down my travel miles/points through actual travel, not point expiration
  4. give up unhealthy/unproductive habits (especially driving for Uber)
  5. actively meet new & interesting people (Hello #FinCon18)
  6. begin a creative pursuit

Boom! #6 is right here. Thank you, Penny (@picksuppennies on Twitter) for the push to just get on it… And this one is related to #4 below because I am now sitting at home on a Friday night instead of driving around random drunks!

So clearly Goal #1 is not personal finance related, per-se, but I’ve got to lose some weight this year. I’m a big guy at 6’5” tall and “299+tax” but laughing about my weight hasn’t made it go away.

But back to my finance-related goals for 2018. I rounded out 2017 with a Net Worth (NW, not like Kanye’s kid, North West) of around $215k, everything included. This was a huge jump ($88k) in 2017. Assuming markets hold up and don’t crash, I foresee hitting this $250k goal easily, but I’m already assuming that we see a drop in 2018… because it HAS to happen sometime, right? 250 shouldn’t be a stretch, but it miiiiight be.

#3 is travel hacking related. I started in March 2016 with the Chase Sapphire Preferred card and have quickly rolled through TEN cards in the past 21 months. I’ll get around to writing a more detailed post (or posts) about this topic later, but let’s just say I have accumulated quite a pile of points at this time. Better get around to using some of them, or else what’s the POINT? GET IT?! lol

#4 deserves a multitude of posts, but for the past 3 years, my main hobby outside of work and the PF Twitterverse has been driving around random strangers, aka Uber. Besides not really paying very much, after all costs are considered, it also led to very dangerous habits such as screwing up my sleep schedule (highest paying rides are after 2AM) and spending additional hours sitting in my car and being sedentary, on top of my already-sedentary desk job. Look for major changes here in 2018.

#5 is probably my most exciting goal/resolution, because I already have plans to blow this one out of the water. FinCon18 is being held in my home state of Florida. (By the way, it is soooo weird to say that I’ve spent more of my adult life in Florida than my native Indiana.) I’m happy to welcome so many of my FAVORITE PEOPLE IN THE WORLD to Orlando on September 26-29th, and I hope to meet so many of you then. I’ve already mentioned this on Twitter, and hopefully some of you will take me up on this offer: Since I live in Florida, I will be driving to the Conference and would be so very happy to provide airport pick-up service to my FAVES instead of relying on random Uber/Lyft drivers or some overpriced Taxi.

I also have a “creative pursuit” idea related to FinCon, but I’m going to keep that one under wraps for the time being. Let’s just say I’m not graphically gifted, but I think I should be able to pull off the idea or get someone else involved to make it happen. But it’s an idea that I think AT LEAST 50% of FinCon attendees will LOVE, so I kinda have to make it happen, at least in concept.