Why We Switched to Roth 401Ks

It started with a couple of posts on The Wealthy Accountant.

These are articles that are worth reading in their entirety, but caused me to reconsider what was previously an unyielding vote in favor of pre-tax contributions.  Some of these are in the category of “stop complaining when you’ve already won,” but in combination, they were compelling enough to cause us to switch to Roth 401Ks in mid-2020.

 

We already save enough.

I will never feel like I am able to save “enough”, but in 2020 we were able to hit all of the items on my savings order of operations.  Even with a return of childcare costs in 2021, we will likely manage to meet all of these goals again.  With our mortgage refinance in 2020, the actual return on mortgage prepayments is minimal. The ~$10K extra we pay in taxes feels less painful than in previous years; it is no longer a choice between college savings or mortgage principle reduction.

It’s also worth noting here that we wouldn’t qualify for expanded child tax credits or COVID stimulus payments with the additional tax deduction.  I am glad for our high incomes and don’t begrudge others these benefits.  

 

We may not be able to keep income super low in early retirement.

2020 was eye-opening in terms of the limits of our frugality.  Our food spending was 50% higher.  We had house repairs, including replacing an air conditioner.  We got a dog (worth. every. penny).  And we had some non-COVID medical issues.

Better bloggers than I have discussed the myth of level spending in [early] retirement, perfectly illustrated in those spending spikes.  Health coverage is another enormous question mark that will greatly affect retirement spending/income; it’s possible we could need 50% more income than my current estimate.

The more we spend, the more we need to pull out of retirement funds, and the more we are on the hook for taxes.

 

We don’t have a viable drawdown strategy for early retirement.

We’re close enough to FI that I started a spreadsheet to figure out how we would pull money out of accounts and the tax implications.

Turns out, optimizing our retirement income is trickier than I planned. Managing our Roth basis, cash accounts, and rollovers for a Roth conversion ladder showed me one glaring error in our strategy: we don’t have enough Roth basis or taxable investments/cash to cover the first five years of spending. Yes, I know about 72(t) withdrawals, but I have commitment issues and 15-20 years of required income is… terrifying.  The easiest path is to increase the amount of money we save in more accessible accounts.

 

There’s a tradeoff between a lower percentage tax, but a higher dollar amount of taxes.

This was not exactly intuitive to me, but each variation of the spreadsheet I ran gave the same answer: we pay more total dollars in taxes over a lifetime by opting for the traditional 401K.  There are exceptions, notably if we can keep taxable income very low or if we die before the age of 76.  Given that my two greatest early retirement “fears” are a.) having to be very frugal, and b.) running out of money when we’re in our 80s, these exceptions are interesting but not a problem.

Also worth noting that my calculations didn’t consider that…

 

Required Minimum Distributions (RMDs) will get us.

Most of my FI-related calculations focus on laughably conservative assumptions – usually growth is only a percent or two above inflation, with worst-case spending assumptions.  Adjust as needed until I’m skidding into Age 100 with $100,000 left to my name.

There is the other end of the spectrum, though, where the market returns 8% and we have tens of millions of dollars by the time we’re in our 70’s.  This is totally a problem where we have won the game and should stop complaining, but it is a mathematical tradeoff that absolutely deserves a place on this list.

 

This was the right decision for us in late 2020 and for 2021.  It may not be the right decision in future years, and it may not be the right decision for you. Have you considered switching from traditional to Roth accounts?  

 

 

 

Pandemic Check-In

I have a number of posts in draft right now – overthinking/optimizing Roth vs. Traditional 401Ks, my meal planning process, etc.  Nothing that matters in this weird world we’ve been living in for over 2 months now.

I just keep thinking about the Sunday in March where I decided to work from home – how I was worried that I was going to be seen as hysterical, overreacting.  By Wednesday, leadership was talking about how to implement telework for the whole company.  By Friday, reduced staffing and/or telework were in place for everyone the following week.

We are the lucky ones – Chad and I are still working (from home), and our financial situation has improved without the massive payments to daycare.  Of course, the added anxiety and stress have reminded me why I never minded that $30K price tag!

We’ve had other spending categories creep up – groceries, takeout (+tips), yard care – but nothing to the tune of that $2000-3000 per month.  We’re trying to increase spending where we can to support local businesses, which so far has meant a lot of takeout (with 50-100% tips) and paying for yard work we would otherwise have done ourselves.  It’s hard to overcome my frugal principles, especially for outdoor work that we’re clearly capable of doing, but these are easy changes.

We are still millionaires, which seems deeply unimportant (though I still checked!).

I drained our donor advised fund for donations to food banks and family shelters.  The DAF ended up being the most comfortable way for me to give money – I can keep hoarding cash to settle my anxieties but do what I know is “right” with those funds and replenish them later. Though it represents years of our charitable savings, it felt like such an insignificant amount of money.

Our new neighbors don’t believe in the coronavirus (or vaccines, but that’s a post for another day), so their kids have been relentlessly pursuing ours for playmates.  We are still trying to enforce social distancing, even though our other neighbors have given up.  I can’t tell if we’re the crazy ones or not.

We were supposed to go to the Outer Banks with family next month, and I have no idea if that’s a good idea or not. No refunds.

With Virginia beginning to open up, I am wondering when we will have to go back to the office.  Our daycare and schools are still closed, and it’s interesting how my company management never includes childcare in their list of considerations for a return to the office.

It’s startling how this has started to feel like a new normal.  I’m getting used to working at home, the kids are getting used to us being at home, and our managers at least accept some decreased productivity in the short term.  It will be interesting to see how normal changes after we’re back to work… I used to share an office with 2 other people!

 

2020 Goals

Savings order of operations:

1. Max out tax-advantaged accounts: 401Ks, HSA, Mega Backdoor Roth, and Backdoor Roth.

2. Contribute $4,000 to the kids’ 529s.

3. Make additional mortgage principal payments – possibly reducing our cash cushion a little bit to accomplish this.
I’m interested in having the option to recast our mortgage in case of job losses.  With interest rates creeping lower, it doesn’t make sense to keep such a large cash position.  This is more of an emotional decision than one based strictly on the numbers.

4. Create a sinking fund for a new car.
Husband’s car is turning 8 this year. In theory, it should have plenty more life left. In reality, we don’t always get to chose when a car must be replaced so it makes sense to start setting the money aside. I plan to simply bookkeep this amount as part of our cash savings.

5. Other miscellaneous goals if we, by some financial miracle, make it this far down the list: fund a SEP IRA, contribute to taxable investment accounts.

Non-financial goals:

6. Delete all social media apps from my phone.
There are a lot of reasons this is a goal, but suffice it to say that each platform (Twitter, Facebook, Instagram) contributes to a lot of anxieties and time-wasting.  There are better things I could be doing, both on a screen and in real life.

7. Read 60 books.
I’ve had a goal for about 10 years to read 50 books per year.  I’ve been able to do it every year, which means it’s probably too easy of a goal.  I suspect that this will give me motivation to choose books more frequently, though it’s also possible I will be panicking by June.

8. Create a comprehensive “In Case of Emergency” document.
This will include account logins, regular bills, etc.  I created a very rudimentary version of this for my parents when Husband and I took our big trip last summer, but it would be nice to have something more thorough.

9. Set up some kind of estate planning.
We don’t have a will, and I think even some of our retirement accounts don’t have Kiddo #2 set up as a beneficiary.  This is the year to correct that, as well as to set up some necessary legal paperwork.  Just in case.

10. Cook at least 130 meatless dinners.
I was able to cook slightly more than 100 vegetarian dinners (~2 per week) in 2019, so this is just increasing the difficulty slightly.  This actually proved to be a difficult goal to balance with a goal of eating healthy (we compensate for a lack of meat with lots of cheese) and creating meals my kids will actually eat (I would eat Indian food every night, but the kids… not so much).

11. Bring less than 50 non-vegetarian lunches to work.
This is a repeat of a 2019 goal.  I think it wouldn’t be too difficult to bring in only vegetarian meals, but one meal per week is a good compromise between a vegetarian lifestyle and not wasting food.

12. Some eco-friendly goals:

• Use cloth napkins, mesh produce bags, unpaper towels, and reusable sandwich bags as often as possible.
• Remember to bring the reusable shopping bags to the grocery store.
• Sign up for a composting service.

I’m trying to balance my desire to use reusable items with an equal desire to not run out and buy a whole bunch of stuff.  Some of the solution is just being better organized (like remembering to bring the shopping bags we already own into the store instead of leaving them in the trunk of the car).  Paying for a composting service ($15/month) feels very silly when we should be able to do it ourselves, but the service will let us compost meat and bones so that extra value + the saved work for us feels worthwhile.

I’m having a difficult time making any quantifiable metrics for this goal.

13. Some kind of clothes spending budget, details still TBD.
I would like the majority of my purchases to be secondhand, but allow a small number of needed/wanted new items as well.

2019 In Review

Like all financial nerds, the end of the year is a fun time for me. A time to see how plans panned out, a time to set up projections & goals for the new year.

This year had some notable financial changes.  Husband’s company laid of their engineering staff as they were running out of money.  He found a new job making considerably more money, though he had to return to full-time hours which hit our quality of life hard.

I didn’t end up blogging as much as I expected (though my handwritten journaling hasn’t been affected), so many of my non-financial goals never got shared.  Something to work on for 2020, as I’m repeating many of those goals and have another opportunity to share them.

I completed the items on my 2019 Savings Order of Operations, with minor adjustments:

• We ended up over-contributing by a small amount to Chad’s 401K due to a midyear job change… this excess deferral will have to be withdrawn before we file 2019 taxes.
• I ended up pulling some money out of my HSA due to a belief that we’d be unable to fully fund our Roth options this year.  I’m not entirely displeased with the decision (poor receipt retention + multiple HSA accounts has made paperwork for this somewhat of a headache), though I doubt I’ll repeat it going forward.
• The pass-through deduction on sole proprietorships nearly negated the benefits of the SEP IRA, so I haven’t contributed this year.
• Mortgage prepayments, and the seeming inevitability of our mortgage brought that goal to a higher importance than contributing to a taxable investment account.  I suspect that will continue to be true in 2020.

My spending projections were fairly accurate, with a few miscalculations:

• We spent more on gifts than projected.  I am actually fairly happy about this – it is consistent with my money values .
• We were well under projection on childcare – the daycare rate drop when Kiddo #1 started kindergarten was delicious.
• For complicated reasons, I had to offload all of my stock shares from my previous employer.  I ended up putting about $16,500 into our Donor Advised Fund, in addition to other donations we made.  I am extremely happy with this choice, though it will be a few years before we are able to repeat such a feat. 2020 donations will come from the DAF, especially since I think we will not itemize taxes.

Total spending was at $133,000, with the increase over projections driven almost entirely by our increased charitable donations.  Our “bare bones” spending (i.e. total spending, not including mortgage payment, childcare, travel, or charity) was just over $45,000.

Our net worth grew an astonishing 30% this year, and just like that, we’re over THE net worth milestone.  It’s hard to take it seriously, though, since it can easily be undone by a market correction.  I remain forever scarred by 2008.

The Inevitability of Our Mortgage

Those who’ve read our spending projections post may have noticed that our housing costs are a bonkers $50,000 per year. This is only slightly less than the planned total annual spending (minus healthcare) that I use in our 4% calculations to plan for early retirement.

In some ways, I’ve been a realist about our housing.  I accepted when we bought our house that it was a decision based on emotions and not rationality.  Living in one of the richest counties in the US meant taking on a half-million-dollar mortgage for a house that seemed run-down compared to the newer, nicer houses bought for half the price by family members in lower cost of living areas.  But we wanted the space and the yard, so we bought a house.

I also have to acknowledge the enormous privilege of being able to buy a house at all, and to have the incomes to afford a half-million-dollar mortgage (while eating avocado toast, even).

And of course, the payments are so high because we already have a 15-year mortgage.  At an amazing rate (3.125%).

Traditional financial wisdom says we should take our time paying the mortgage down.  The rate is ridiculously low, and I think I just read that the stock market is up 18% this year.  We actually have a CD at the moment with a rate of 3.1%  (though rates are about a percentage point lower now).  That’s why prepayments were pretty low on my list of savings priorities for the year.

And yet, I want that mortgage gone.

I’ve been spending time with a spreadsheet, trying to figure out how to shorten the timeline OR lower the payments enough so they feel more manageable.

The problem then becomes this: to cut the mortgage timeline down requires massive amounts of money.  To pay it off in 5 more years, we’d need to send $50,000 extra PER YEAR.  Realistically, we just don’t have that much extra money without sacrificing tax advantages, college savings, and cash cushions. (I know enormous cash cushions are a bad idea.  You can bite me – I will have an extra-large emergency fund until I die.)

I should note here that I don’t do well with goals that have long timelines.  Even 5 more years is stretching the boundaries of my imagination.

Knocking down the payments via a lump sum + recast is an option, but it’s about a 1% return.  That is, a $5000 lump sum payment will decrease monthly payments by $50.  This doesn’t move the needle for us on an annual basis, and it doesn’t make a huge difference in, say, dropping down to one income.

I still don’t know if or when we’d retire early (I just want to know we can), but it seems pretty clear that we can’t with our current mortgage.  Even accepting the risk and saving “only” the $420,000 balance represents many extra years of savings… and remember, I really do best with a 1 to 2-year timelines.

Like Revanche, I’m accepting that there are other, higher priorities for our money.  But still, the inevitability of keeping the mortgage is eating away at me.

This is what my mortgage is saying to me every time I try to think of a way to pay it down.

Lessons Learned from 10+ Years of Expense Tracking

I started blogging about personal finance in 2008, but I’d been tracking my spending since almost immediately after I start my first Big Girl job.  Those first few years of budgets were not very detailed – at that point, Chad and I were living together (in sin, as my Catholic great-Aunt was fond of reminding us at the time) but not married, my taxes were uncomplicated (W-2 + standard deduction), and my focus was on debt payoff, not savings.

(I have a thought that someday,  I will go back through those old budgets and tax returns so that I can see a full picture of my taxes, savings rate, etc. over time.  I have a strange idea of “fun.”)

Still, there’s enough data there that I can cobble together a reasonable timeline of expenses, savings, and income.  Today’s focus will be spending, mainly because a.) That’s the data I have most readily available, b.) No one wants 20,000 words on my full financial picture, at least not all at once, and c.) Though I have no shortage of money topics to talk about (7 years is a LONG TIME to only talk about money to yourself), I might as well wring out as many blog posts out of a topic as possible.

If you ignore my apparent inability to use Excel charts (oh hai random-40000 down there at the bottom), you can see that I used to spend WAY LESS than we do now.  BUT. Prior to 2010 or 2011, these really only include my living expenses. 2010 – 2012 was when Husband was in grad school and we lived on only my income + a tiny grad student stipend (he started working full-time again in mid-2012). Kiddo #1 was born in 2014, we bought a house in 2015 (that spike is the six-figure down payment), and Kiddo #2 was born in 2016.

So, holy heck, right?  Did we just start going crazy once we were DINKs again in 2012?

Well, yes. But also, no. There’s a lot of housing and kid-related costs built into those numbers. So while it looked like we had tripled our spending, we also had some major life changes. But also – yes, there were definitely areas where we started spending more. Let’s dig into that “Other” category.

“Debt” here refers to a car payment I paid off in 2007 and student loans that I paid off in 2014. (Mortgage debt, of course, has already been removed as “Housing”).

What are these unusual expenses?

• Travel
• New furniture (we moved in 2013 and bought a couch and dining room set, and we bought more when we moved into our house in 2015)
• Charitable giving (simply because it tends to be very variable)
• Car purchases (2012 and 2016)
• A Yoga Teacher Training I took in 2013.

Standard includes expenses we pay for every year:

• Utilities – These increased as we moved – to larger homes or as previously-covered utilities became our responsibility, and in 2013 when we splurged on unlimited data plans (SO UNNECESSARY BUT SO AMAZING).
• Food – We’ve added more people! I also feel like we’re eating better than we did before having kids (way fewer cereal-for-dinner nights).  When we only had 1 kid, we went out to eat A LOT, but it has calmed down now since we’re being more conscious and also because entertaining 2 kids in a restaurant is NOT ENJOYABLE.
• Gas/Auto maintenance – We were able to carpool for a while, but Chad’s new job was in the opposite direction from my job. May decrease slightly for 2019 as my new job is closer to home.
• Gifts – Increased slightly, lots of weddings, lots of younger cousins graduating from high school/college. Decreased when we stopped doing family gift exchanges (except for kids).  This is one area I might look to increase in future years.
• Medical – Again, more people (and the new ones go to the doctor a lot more often). Plus we now have a HDHP.
• Household/Toiletries – Increased, especially since we’ve added maintenance responsibilities. This may also include a slight increase from buying the kids toiletries.

And while a lot of this seems like little more than, “Wow, I am pretty anal about tracking myexpenses,” it’s also an opportunity for me to be mindful about our spending and how it changes.

E.g. When I see that our food spending increased by $2000 after we had kids, I have to examine the drivers – am I buying more convenience &/or snack foods now?  Is that consistent with my values as a working mom?  I think the answer is yes, since I am trying to claw back time that is better spent with my kids rather than chopping up lettuce by hand.

Or it’s an opportunity to explore how it could or should change in the future – Do I want to commit to spending more – on organic versions of our favorite foods?

And I’m hardly the first to write about the myth of stable spending, but I certainly see it in my sample set. Of course, if we retire early, we may not choose spendy vacations or new cars or handmade furniture – it certainly seems possible to maintain a consistent spending rate.   I’m sure there are people who do – Mrs. Frugalwoods, for all the controversy about transparency, certainly has joyful simplicity down pat.  I fear I am not so noble, and I worry about feeling constrained in retirement. Ultimately, I believe these “unusual” expenses will occur, whether they come in the form of vacations or home repairs.  It only makes sense to anticipate them.

Do you track and examine your spending (maybe not over 10 years)?  If you’re of a FIRE mindset, how do you plan for unusual expenses that might crop up after retirement?

Is it worth it to pay more for used?

As I said in my last post, I took a hard look at my spending on clothes last year, particularly on lower-quality fashion brands. I mentioned that Old Navy fits me fairly well, and it’s also incredibly inexpensive.  It’s also where I often shop for kids clothes since it’s easy to optimize sales and coupon codes to get clothes items for $2-3 apiece, shoes for $7-8, coats for $20.  Add in credit card rewards and Swagbucks gift cards, it’s possible to outfit my kids for pretty close to free.  This can be helpful when your kids are hell-bent on staining every item in their closets, as well as when your childcare costs are 5 figures.

But the niggling voice in the back of my head tells me that it shouldn’t be possible to pay nothing for these clothes – the obvious answer is that my frugality is subsidized by unfair labor practices and environmental effects.

The answer for a grown woman whose only “growth” comes from her office mate’s peanut butter pretzel stash and other office goodies is simply to stop shopping.  Not so workable of a plan for a two- and five-year-old.

I’ve searched on eBay in the past for clothing.  For single items, forget it.  I knew I could spend far less than the $10 per item (for Old Navy clothes, even!).  Mixed lots in one size were a better bet, and I managed to buy Ellie’s shorts for the summer this way – in a lot of 7 pairs. But there are usually a couple of questionable items in any mixed lot (gifts from relatives without kids, I always assume!), so I came up with my own math equation:

($Cost of lot) / (# of items I would actually want) = $Cost per item

And if the resultant Cost per Item was below my threshold (e.g. what I could buy a new shirt for), I’d bid.  The problem – and I swear I’m not trying to brag here! – is that most of the used clothes, even in mixed lots, came in well above that threshold.  Forget it, I’d think, I could buy new shirts for that price!

But here’s the thing – the more I hear about the effects of climate change and think about the future of the world and specifically the future of my children, I find myself wanting to vote more with my wallet, even when it’s not the frugal thing to do.  I’ll start paying for a composting service – not as cheap as doing it myself, but the benefit is I’ll be able to compost meat and other similar items (and it will force me to actually do it since I hate wasting money).  I’m trying to opt for more meatless meal options, even though it means I’m paying more for prepackaged items since I don’t have a good stock of easy vegetarian meals.

So why shouldn’t I pay more for used clothes?  Especially now that our hand-me-down options have dried up (my kids are taller than their older cousins, and my sister’s babies are adorable little chonks right around the same size as mine).

I’ll still plan on being cost-conscious, and I’m not saying I’ll never buy new items again (and trying to stop my mom and MIL from shopping is a lost cause at this point).  But there may only be a short window of time before the kids start worrying about clothes.

What do you think?  Are you a fan of used clothes (for your kids or yourself)?  Any other options for kids clothes that I haven’t thought about?

 

Mindful Money: Breaking Down My Personal Spending

About once per quarter, I attempt to make Chad talk about money.  I show him our net worth, share how we’re doing according to projections, and ask him questions about what he’d like our priorities to be – e.g. if he wants to pay down the mortgage or try a Mega Backdoor Roth.  He doesn’t usually care, except for the net worth numbers.  Last year, I mentioned how much he had spent for his personal spending.  He did not believe me, and insisted I was just tracking the wrong things.

We don’t have allowances, but the numbers are tracked and I try to include them in our spending predictions.  And I was able to show Chad EXACTLY where his money was going.  (Golf, apparently, is an even more expensive hobby than yoga!)

Breaking down his spending was so much fun that I decided to break down my own.

The numbers were not necessarily shocking – I know I buy a lot of clothes, and I already know that yoga is an expensive hobby.  But as I broke the clothing category down further, I started to wonder if the spending was a reflection I liked.

But when I looked more closely at my spending on clothes, particularly on lower-quality fast fashion brands, I was a little troubled. I don’t consider myself a fast fashion consumer, constantly buying and purging based on the trends of the moment.  It’s just that whoever the fit model is at Old Navy  has the exact same body shape as me.  And Old Navy makes the work-appropriate-yet-comfortable-like-pajamas clothes of my dreams: Pixie pants and Ponte knit sheath dresses, pencil skirts, and blazers. (Their jeans + workout clothes are also pretty good). I keep the clothes for a long time. And they’re inexpensive, especially if I shop sales.  For someone whose body is still settling into a post-baby post-breastfeeding shape (final weight still TBD), this is a reasonably efficient way to shop.

Still, there are plenty of imperfect items buried in there, bought because of the price or because it filled a temporary need and not necessarily because of joy being sparked.  And the low price to me comes at a cost to others – environmental impacts and fair wages/working conditions.  It’s a lot to think about, especially when I also want to look cute (I will never be one of those people who doesn’t care about clothes).

Based on this budget breakdown, I did 2 things for 2019:

• decreased my personal allowance (I do SO WELL with a prescriptive budget it’s not even funny), and
• set up an event-based allowed shopping list: cute sightseeing clothes for our big anniversary trip , and dresses/shoes/accessories for 2 weddings we’re going to this year.

I already have plenty of work clothes (the aforementioned work-appropriate pajamas), and can’t remember the last time I had a “I HAVE NOTHING TO WEAR” moment, at least on a weekday. Event-based shopping is not typically recommended, but for me it’s been a little bit more exciting than another cute work blouse. One of the weddings is Black Tie, and if I stop eating my office mate’s peanut butter pretzels, I just may be able to squeeze into a dress I already have (the last time I wore it, I met Bill Nye! It’s a lucky dress!).

I’ll never be as frugal and simple as others out there, but it’s fun to look at these numbers and make sure that they are reflective of what I value.  So far 2019 seems like a better reflection,  30% of it is taken up with a 90-minute hot stone massage I got on vacation, 30% on yoga, and overall lower dollar amounts.

How do you make sure your spending reflects your values – and what are those values? Share in the comments!

 

 

Net Worth Update Mid-2019

Since we bought our house, I’ve found Net Worth to be slightly less of a useful number than more liquid assets, so I started tracking them separately.

Until a house is sold, that’s not easily accessible money.  There’s also the question of realtor’s fees – an immediate hit of 6% of whatever the house sells for.  And with our time horizon for staying in our current house – a handful more years, or until we retire? – I feel nervous even counting on the sales price of the house.

I’m still deciding whether or not I feel comfortable sharing actual numbers (I mean, you could track my #’s down if you really want to know), so what follows is a summary based more on percentages and trends (as inspired by StackingPennies and Revanche), at least until I’m as brave and badass as Save.Spend.Splurge.

I’ve been tracking my net worth for a LONG TIME – it’s fun to see the growth, although I supposed I also have to thank the longest economic expansion in history.  Up until 2009/2010 it’s just my accounts, which might account for the numbers increasing while the stock market was tanking.

The Real Estate values above use the purchase price of our house minus 6% realtor fees and the mortgage balance.

• According to Zillow, our house is now worth about 10% more than we paid 3 years ago, but there’s no guarantee that this will be true when we move.
• I expect this to tick up fairly regularly over time, at least until my ultra-conservative brain decides to take the guaranteed 3% return.  Or until we stop having to spend money on childcare and I can throw that annual $30K toward the balance.
• It accounts for ~15% of our net worth.

Cash & Investments includes everything else: retirement accounts, cash savings, taxable investment accounts, bonds, etc.

• Over 80% of this number is in Retirement Accounts – 85% of that number is in 401Ks, with the rest in Roth accounts. These accounts are mostly in S&P500 or total stock market index funds, with a small % of international, small cap, and bond funds mixed in.
• 11% is in cash, CDs, or bonds.
• We have a comparatively small amount in taxable investments – stock shares from my last company and a mutual fund that Husband invested in early in his career (with a 1% fee, whyyyyyyy!) that would be a substantial tax bill if we sold now.

We are 40-60% of the way to financial independence… there is a pretty wide range of possible FI numbers depending on how conservative I try to be with our annual spending and withdrawal rate.

Do you track your net worth?  Do you find it to be a useful metric, or is there a piece of it that is more interesting?

Sarah’s Grand Unified Theory of Parenting

I am a person who likes to do things right. Given a goal, whether it’s a simple task like cleaning, or something more abstract like finances, I like to do the best thing. This often means that when I clean, it’s a sweaty, stressful affair where the even the baseboards end up shiny. In my finances, this means I try to earn the most money and spend the least money.

What this also means is that this perfectionism causes paralysis and stress. I can’t clean the house right now because I don’t have time to do a perfect job (and as a result, my house is dirtier than it could be if I just acknowledge that there will ALWAYS be toys on the floor, the couch, and the table). I get stressed about finances – even though we are saving a ridiculous amount of money, there are people on the internet saving 80% of their salaries so clearly we need to STEP IT UP.

Naturally, when I was expecting with my first baby, I wanted to do all the right things. I read a ton of books on sleep training and feeding and discipline and nurturing your baby’s mind. And I vowed to implement it all, even the stuff that was contradictory.

Of course, these things never go as planned. And I wish someone had told me this before he was born:

In parenting, everything you do is wrong.

This is a truth that should be acknowledged before you have kids. And I wish I had known it before my first was born because it is so freeing. After all, if everything thing you do is wrong, then you can pick the best wrong thing for you and your family.

You can feed your kids the best wrong way for your family.
Both of my kids were primarily nursed, but they’ve also both gotten a little bit of formula. Both started solids with rice cereal. We’re not foodies, so most of our meals are pretty simple; we usually have at least one vegetable, but we also sometimes eat dinosaur-shaped chicken nuggets. And sometimes I – gasp – even heat food in the microwave!

You can work or not – both are doing terrible damage to your child.
I go to work, although why did I even have kids if I wanted to have 5 minutes of adult conversation and non-pajama clothes and a sense of personal accomplishment every day? I leave work on time every day, although that is leaning out and is the reason why there are so few female CEOs. Even if I quit, I’d then be depriving my daughter of the chance to see that women can be successful in careers.

You can sleep train in the way that gets you the sleep you need.
Kiddo #1 slept in his own crib after 3 months because we didn’t want to provide him with the loving closeness of co-sleeping. Kiddo #2 slept in our bed most nights, because we didn’t want her to be able to sleep independently.

I couldn’t stand cry it out (I get stressed out if I hear someone else’s baby crying!), but of course that means I am not helping my children develop self-soothing skills. But sometimes my husband let them cry if he was finishing up a shower or a chore, so they’re also learning that no one will respond to their cries.

You can discipline in a way that suits your – and their – personality.
We don’t spank, but we do yell and use time-out, which is simultaneously being way too soft on them while also shaming them and giving them low self-esteem for life.

Dessert and snacks are rarely linked to how much of dinner is eaten or tasted. Which means we are giving our kids food issues because sweets are not special. Sometimes we will withhold dessert or snacks as punishment, which means our kids will have food issues because they see food as a reward.

You can nurture their minds – or not.
We rarely buy toys, because we don’t love our kids, but occasionally we’ll get something they mention, so we also spoil them. They get a ton of toys from relatives, so they’ll never learn creativity and they’ll always be overstimulated.

We don’t generally let them use our phones or tablets, so they’ll never be good with technology, but we also sometimes deploy it as a nuclear option, so they’ll never learn to be bored and they’ll develop ADHD.

We haven’t signed our kids up for Mandarin lessons, which means they will be unequipped to compete in the new global economy and are ising the prime age for language learning. But I am teaching Kiddo #1 how to read before kindergarten, so I’m contributing to the vast achievement chasm between poor and rich kids.

Sometimes we play with them, which will make them dependent on us for fun, but sometimes we make them play alone, which probably makes them feel ignored and unloved.

Sometimes, you can even choose your own wrong thing.
We don’t watch screens on weekdays, but sometimes we do if Mom and Dad are really tired. We don’t have dessert every night, but sometimes we have dessert before dinner. We don’t always get a treat at the grocery store, but sometimes – if we were really good – Mom says OK to that candy bar in the checkout aisle.

What wrong things are you choosing for your family? And be honest – how many of MY wrong choices are you side-eyeing right now?