Review of 2016 Financial Activities and Accomplishment

2016 is coming to an end, it’s time to write another end of the year review on major financial decision and accomplishments for 2016.  For previous year reviews, see 2015 review and 2014 review.

I have broken the post into four major categories,

  • Stock/Bond Investment – stocks, mutual funds, stock options, restricted stock units, etc
  • Financial Protection – life insurance, living trust
  • Real estate – deal with all things related to our primary residence, investment properties etc.
  • Major purchase – big ticket items

For each item, I try to give an objective rating on how we did in standard letter grade scale.

Stock/Bond Investments

Our investments is spread over stock/mutual fund, rental properties and company stock options and restricted stocks units (RSU).  I’ll discuss each subcategory below.

Stock/mutual fund portfolio (B)

My general principle here is buy index fund and hold for a long time, this year with the automatic investments all setup, I didn’t have to do much, everything operated as expected.  To remind folks, my allocations is the following

At the highest level 80% stock / 20% bonds.

  • Within the 80% stock allocations, I breakdown the allocations further into 60% US index fund, 30% rest of the world stock fund and 10% REIT index funds
  • Within the 20% bond allocation, I breakdown the allocations further into 70% intermediate bond index fund and 30% TIPS fund.
  • And that’s it, five funds and everything on automatic investing,

From return perspective,  the annual return is just shy of the S&P 500, not bad for very little work and good amount of risk control.  All in all, in the stock investment category, I did pretty well and met all the goals I had set out in the beginning of the year.

Stock option and restricted stock units (A)

My basic philosophy is to diversify and liquidate quickly after stock options or Restricted Stocks Unit (RSU) are vested.   It’s not that I’m not confident about the company I’m working for, I am.  it’s about diversification.  Think about it, we already have so much invested in the company we work for, salary, bonus, benefits, 401k etc. are all tied in with the company.  Definitely overweigh in the investment allocation.  I don’t worry much about tax consequences, I’m sure there are people who will disagree with me.   In personal experience, the ups and downs of stock market could easily wipe out any tax saving.  I haven’t been very good about sticking with this practice and worse after I liquidate I have just left the money in the account in cash.

This year I have been very good about liquidating as soon as those RSUs are granted to me.

After tax 401k plan

My company started to offer After tax 401k plan in 2016, I’ll write up a separate post with more details on this later.  In short, this essentially gives folks who don’t quality for Roth IRA contribution a backdoor to Roth IRA, and the amount is large.  For 2016, the limit is $53,000.  I maxed out on the traditional IRA first at $18,000 to get the deduction now.  For the remaining, I have maxed out the after tax contribution.  Then at the end of the year, I converted all the after tax 401k contribution to Roth IRA, so they would incur no further tax deduction from here on out.

Deferred compensation plan

My company also started to offer executive deferred compensation plan this year, another bonus for high income people to get some tax benefit.  I will write a separate post on this later.  In short, this essentially allows executives to defer a much larger portion of their compensation, and to defer taxes on the money until the deferral is paid.  There are a number of restrictions on this, but after I went through this in more details, it’s still well worth the effort for me.   Both of the after tax 401k plan and the deferred compensation plan gave me another way to reduce the taxes, and I’m definitely taking full advantage of it.

Financial Protection

No major change here.

Living Trust (A)

Setup two years ago, over the course of last couple of years, I have moved all our investment account to trust accounts, and moved most of the investment properties into the living trust as well.  All good here.

Umbrella insurance (A)

No major change here, both personal and investment properties are covered by the umbrella insurance.

Real Estate 

Investment properties (B)

I purchased a duplex in California earlier in the year.  It’s a century old Victorian in surprisingly good condition.  I hired a property manager to take care of the property.  He is early in his career, hungry but not necessarily the most experienced.   I chose him over someone else who was more experienced but not very hungry for business.   I have generally been pretty happy with him.  The property needed some fixing and updates, he was able to get reasonably priced contractors to get them done.  Now to both units are rented out, hopefully smooth sailing from here on out.

I initially made the purchase by leverage the HELOC I have on the primary property as the market was very competitive, this allowed me to put in a cash offer.  Since then I have refinanced for an investment loan for 7 years.

Primary residence (N/a)

No change to our primary residence, still love it.  With our super low 2.125% 5/1 loan coming to an end, I did refinance as a 7 year ARM at 2.577%, still a great deal.

In addition, thanks to the California booming housing market, our property went up in value quite a bit.  I took out a HELOC last year and with the rising prices, took out a bigger HELOC this year, still through DCU (see DCU review xxxx).  It’s a nice rainy fund and fund for additional investment properties.

Major Purchases

Seems like we have most big ticket items we need, and didn’t make many major purchases other than some furniture to update the home now that the kids are older this year.

Closing thoughts and Next Year

Over the course of last few years, I have been making conscious effort to put our financial matters in order, and get a good return on our nest egg.  I’m happy to say, all these efforts are paying off nicely.  I don’t spent much time on these matters, most items on autopilot.

Next year, it’s about maintaining.  On the stock investment side, it’s mostly on auto-piloting, I spend just a couple of hours a month reviewing the statements and allocation.  On the real estate investment side, depends on how the market goes, it could be another slow year.

 

Review: Amazon Prime Now

Another service I tried recently is Amazon Prime Now.  In the company’s own description on what is Amazon PrimAmazon Prime Nowe Now.

“Skip the trip and shop for tens of thousands of daily essentials and gift items through the Amazon Prime Now app. Two-hour delivery is FREE and one-hour delivery is available in most areas for just $7.99. Prime Now is available from early morning to late night, seven days a week.”

Similar to Google Express, it’s trying to solve the last minute and last mile problem of online shopping.  Overall, I was pleasure with my first experience with Prime Now and would use them again.   Continue reading

Review: Frontier Airline

Frontier-Logo1

Over the holiday break, we flew from San Fransciso to Denver for a week long ski trip and used Frontier airline for the first time.

Overall verdict:

Do not recommend unless the airfare is significantly below (at least $100 each way lower) major airlines .  Many hidden fees and bare bone service. Continue reading

How did I do against the goals I set out in 2014?

At the beginning of 2014, I post my financial goals for the next few years, now that it’s has been two years, it’s a good time to check in and see how I did again these goals

sold a houseI. Real Estate
Monitor residential investment property

 Towards the end of last year, I’ve narrowed my focus to two areas.  For area I, I’ve kicked this off in the new year by interviewing several real state agents.  One of them is looking promising, too early to judge at this point.  Let’s see how she turns out.    For area II, I have some more work to do.  
For area I, I put in two offers, unfortunately with the fast rising real estate market in the last couple of years.  I was out bid both times.  🙁
For area II, i purchases two condos in the past two years.  The returns are slightly less than my expectation, but given the current market, they are both good buys.  And both properties has appreciated about 10-15% since my purchase.  Not bad.

Research commercial investment property

 I don’t know much about commercial real estate, need to do some research and learning. 
 
I didn’t have much time to research on commercial properties, remains as a to do.

negotiate real estate commissionII. Major Purchases

 I can’t really think of any big-ticket item we need to purchase, though I doubt I will stay true to it.  For now, none planned.
We ended up purchasing a timeshare from Hilton, not really an investment, it’s a splurge.  With two young kids, we like to stay at condo with full kitchen and nice amenities, Hilton Grand Vacations was a good option for us.  If readers are interested, I can do a post on this.


III. Investment (stocks, mutual funds etc.)

 With the stock market returning a whopping 30% last year, I do expect the market to revert to its means and pull back in the coming years.  As such, I like to 1) Rebalance portfolio to take a more conservative allocation 2) Monitor the market daily and be ready to liquidate as needed.

On rebalance portfolio

 As of now, I have most of my liquid asset sitting in stock, definitely too high of a concentration.  I plan to buy 10-20% bond to achieve a more balanced portfolio.  I also hold too many different kind of mutual fund, many of them overlapping, I need to do some rationalization there.
 
I did do quite a bit of consolidation of my accounts, and clean up my mutual fund holding quite a bit.

Better cash management

capital-one-360I don’t have much cash reserve right now and need to set aside a rainy day fund.  Looking at the pathetic interest rate that is offered by the banks right now, I will use capital360 (formally ING direct) for cash.  It has consistently offered rate on the high-end, right now at 0.75%.  I have been using them for a number of years, very easy to use.  

Check on this one.

Regular monitoring of stock market

 While the gains take many years to build up, market correction can wipe out many years of gain in just a few month.  I looked at my investment history over the past 15+ years, the 2000 an 2008 correction pretty much wipe all gains in the preceding year.  The easiest way I found to monitor is through my iPhone, I mostly monitor the stock market index and a few selected stock I hold.  Each day, I spent two minutes looking at it and the related news.  The apps i use are:  stocks and yahoo finance. 
My investment philosophy has changed a bit since then.  I subscribe to John Bogel‘s investment strategy.  Buy index funds and hold, and leave it alone.

Invest in 529 plan for kids

Utah Education Savings Plan (UESP)
I signed up for a 529 account when my son was born and put side some money for him, but haven’t done that for my daughter.  I use the highly rated UESP (Utah Educational Saving Plan), the return has been very good (actually better than my own stock portfolio) and I don’t have to do anything.
Right on track with this, each kid has their own account.  We need to put in some additional money to meet the rising cost of tuition.

IV. Financial Protection

Setup Living Trust (In progress)

Glad to report, it’s all done.  I’ll write a separate post on this subject.  It’s not so bad, not as expensive as I had thought, and didn’t take as long as i thought.

How did I do again the big picture? 

Before I get into the specific goals, let me talk about what’s my ultimate objective.  Ultimately for me, it’s going to sound like a cliche, it’s about having the financial freedom.  For me, the goal I like to achieve is that in 4 years, I want to be in a state that I have to work to maintain our current lifestyle.  By then, my kids will be older and I like to be more involved in their schools and daily lives.  I like to reach a point where I don’t have to work.  Knowing me, I will probably continue to work, at least in some part-time capacity.  However, knowing that I don’t have a work would make all the difference. 
 
We are doing pretty well on this front.  I initially set a dollar target for ourselves which we will achieve sometime next year.  So in that sense we are ahead of schedule.  However, as I spend more time on this subject, I adjust the dollar figure to be higher, and also added a passive income criteria to go along with the dollar figure.  With the revised goal, i think it’ll take about 4 more years to reach the new goal, most on that later.
In closing, I’m quite happy with our progress towards financial freedom.  Keeping this blog up has been a good reminder of how I’m in the quest for financial freedom.

Kids are expensive (extra-curricular activities costs)

kids are expensive

kids are expensive

It’s the end of the year, I’m doing a year-end summary of our household finances.   One category that stood out is extra-curricular activities for kids.  We have two kids (9 and 5), both are in public school, so we are not paying private tuition.  As both my husband and I work, they also attend after school daily.  Similar to other kids their age, they are enrolled in a few extra-curricular classes.

I was surprised when I tallied up all the activities and their cost, while they are mostly are group classes, the cost does add up quickly.  The grand total for two kids comes out to be $1830 a month.

Detail break down

Son (9 year) Daughter (5 year old)
Afterschool care $420/month Afterschool care $420/month
Transportation to afterschool $120/month Transportation to afterschool $120/month
Piano: $41/week per 30 minutes private lesson $180/month Piano:  $30/week per 55 minutes group lesson $135/month
Group sports $80/month Gymnastics (group lesson): $80/month
Swimming (semi-private):  $40/week per 30 minutes  $180/month Art (group lesson) $95/month
 Total for son:   $980/month Total for daughter: $850/month
_____________________________
Grand total for two kids:  $1830/month
This just goes to show kids are expensive and bayarea is an expensive area.  I know friends of ours live elsewhere in the country pay far less for their lessons.

Car buying: To hybrid or not to hybrid

hybrid carTo Hybrid or Not to Hybrid, that is the question.

A couple of years ago when I shopping for a new car, this is one of the decision I needed to make.  I was considering a Lexus and the hybrid version costed about $3000 more, in this post, I will outline what thought process to decide whether to hybrid or not.  I had a Toyota Prius before that was quite happy with the hybrid model, particularly for the fact I didn’t have a modify my behavior.  Lexus didn’t have a plug hybrid version, so I didn’t consider that option.   Continue reading

Review: Getting a HELOC from DCU

DCU HELOC BankingWe have built some equity in our house thanks to the housing appreciation in the bay area.   I decided to open up a HELOC (home equity line of credit) to have easy access to the equity.  In this post, I’ll talk about why I decided to get a HELOC, how to select the lender/bank process, and subsequent application the process, and finally our experience with using it.   Continue reading

Review: Trying out Curbside Service @ Target

Shop_curbsideWhen I was in Target a couple of weekends ago, I saw an Ad for Curbside service and they were offering $10 off $20 purchase for new customers.

You guys know me, something could save me time, and the initial purchase is half off, why not give it a try?
Continue reading

Save on tax: After Tax 401K with Roth IRA Conversion

My company has recently started to offer after tax 401k option.  As I have been looking for all ways to reduce taxes, I did quite a bit of research on this topic and want to share my findings.   Let me start with the bottom line first, “For high income individual/families, this is an awesome to increase your contribution in Roth IRA.”  I won’t cover the virtues of Roth IRA here, there are ample materials on this topic already.   Continue reading

2014: Review of Major Financial Decisions

On the last day of 2014, I thought this would be a good time review the major financial decisions and accomplishments for 2014, and see how many of the 2014 goals we were able to hit.
As with the 2013 review, I have broken the post into four major categories,
  • Stock Investment – stocks, mutual funds, stock options, restricted stock units, etc.
  • Financial Protection – life insurance, living trust
  • Real estate – deal with all things related to our primary residence, investment properties etc.
  • Major purchase – big ticket items

For each item, I try to give an objective rating on how we did in standard letter grade scale.    For this year, the focus was on investment and financial protection, so we will start with these.

Continue reading