A couple of months ago I was offered a new job in Boise, Idaho. As part of the new job offer, we decided to sell the house in Oregon and buy a house in Idaho. Overall, the process went smooth. We were very fortunate that affordable housing in Oregon is in low supply, so anyone selling a home can find a buyer very quickly that is generally willing to pay a fair price for the home. Because the cost of living is much cheaper in Idaho and we had some equity in our Oregon house, we were able to buy a larger house in Idaho for about the same monthly payment. We were very fortunate in the timing and location of the new job.
I just realized my last post was back in December. I’m not exactly sure what happened; I meant to give myself a small break to enjoy the holidays and the birth of my son, and seven months later I’m finally back at writing. I’ve really missed writing this blog and getting my thoughts out of my head. Over the last seven months or so I have some experiences that I’m excited to write about and share some successes and also some failures. This is my apology and also my re-commitment that I will start posting regularly again.
A few weeks ago, I modified my budgets to reflect the cost of living in Boise, Idaho. While I was doing this, I noticed my takehome pay was significantly less than what I was bringing home when I lived in Oregon. This was very concerning because I took a large salary increase as part of accepting the new position. Where was all my money going?
In order to investigate my lack of takehome pay, I pulled an old pay stub from my previous job and compared it to my current paystub. I then listed all the benefits and taxes I paid from both jobs side by side. This helped enabled me to identify where the differences in pre-tax costs between the two jobs. When I did this, I found two things I was really happy about, and one thing I was nervous about.
The Happy Things
After identifying the disparity between incomes, I noticed that the big gaps are my 401K contributions and my Stock Sharing Plan contributions. At Intel, I was contributing 6% of my income into my 401K retirement account. This does NOT align with Dave Ramsey’s plan…completely. He teaches that until all debt is paid and a savings of 3-6 months worth of expenses is in place, 401K contributions should be 0%. This allows someone to pay off their debts quickly and add a little cushion to live when Murphy comes for a visit. Now that I am at Micron, I decided to contribute 8% of my income towards my retirement. This is a $64 difference. Again, not completely following Dave again. I wanted to start taking advantage of Micron’s 401K match as soon as possible. This will delay getting my 3-6 month cushion in place. Once I get cushion fully funded, I’ll increase my 401K contribution up to 15%.
The other large gap in my pay came from the Employee Stock Purchase Program. Micron allows a percentage of my pay to be used to purchased Micron Stock. This is a great deal for me because the stock is purchased at a discount. Every 6 months, the money I contribute is used to buy as many shares of stock as I can. I am then given that stock to do whatever I want with it. Because it’s sold at a discount, and if I chose to sell it as soon as possible, I earn a meaningful return on my investment. It’s a great benefit that I am taking full advantage of.
Because both gaps are investments and I believe I will see a positive return on both, I’m perfectly happy leaving things exactly where they are at. As long I am able to make ends meet, (meaning I’m able to live without the stock money until it sells) there is absolutely no reason why I should contribute less to my 401K or Stock Sharing Plan.
The Nervous Things
While doing my investigation, I noticed one thing that made me a little nervous. I now pay significantly less in my Federal and State Withholding taxes. I’m not certain why this is the case; I believe it has something to do with the number of dependents I am claiming on my W-4 form. Since I am not an expert in taxes, I think I need to make an appointment with my tax person and make sure I’ll in a good position by the time April 15th comes. If I don’t make any adjustments, I risk having to write the IRS a check instead of getting a refund and that does not sound fun at all.
Several weeks ago, we moved to Boise. (Read all about the move in this post) While we had an understanding that the cost of living between Portland and Boise was 10-30% cheaper, we didn’t know exactly how that was going to affect our budgets. Was electricity going to be cheaper or more expensive, especially with a larger house? Was natural gas cheaper in Idaho? How would fuel costs affect us since Idaho is much more spread out and requires more driving to school or work? A budget experiment, analysis, and implementation was going to take place. This is our findings
In order for the experiment to be effective, I collected four months worth of data. This was easily tracked in our Mint.com budget. I chose four months so I could spot trends and any anomalies that might come up, especially with the activation of new accounts such as garbage, electricity, and natural gas. This experiment also spanned the height of summer and the beginning of fall. This was beneficial because it captured the heat of summer as well as the cooling temperatures in the autumn evenings. The last reason we did four months was that I finally got around to doing it. The plan was going to collect data for only three months, but time got away from me.
After four months of simply paying bills, I was ready to investigate my finding and adjust our budget to our new living conditions. The picture above is my extremely high tech, state-of-the-art budget analysis tool. As you can see, the largest jump in cost is our fuel consumption. This makes complete sense because I travel about 25 minutes each way to get to work. Often, I run into traffic which lowers my fuel economy. Until I grow wings and fly to work, this is an inevitable expense. Luckily gas prices in Idaho are cheaper than Oregon, but I’m still burning a lot more fuel. This will also add more car repairs and maintenance to our vehicles with tires, oil changes, and service milestones.
Our electricity is also more expensive in Boise but there is a logical explanation for that difference. In Oregon, we had solar panels on our roof that kept our electricity costs very low. We did have to lease the solar panels which cost $26 a month. By adding both of those costs together, we get close to the cost of electricity in Idaho. I also think we forgot to pay our electricity bill the first month so I’m going to watch this bill and see if we can get a more consistent number.
Now that our budgets accurately reflect our real costs in our new house, we are ready to settle into a financial routine of paying our bills and adding to our savings goals.
Several months ago my family and I decided to make some pretty large life changes.
It all started shortly after I graduated from the University of Utah. As part of the program, I had the opportunity to work with a career coach. He informed me that recent college graduates are the most marketable at getting a new job. If you remember, my last annual review, it didn’t go too well; I needed to find a new job. I could find a new internal position and try to overcome the poor review or find a new company and start a new chapter in my career. My coach and I thought it best to look outside of Intel first and see if there were new opportunities I could take advantage of.
To spare you the gory details of job hunting, phone screens, in-person interviews, initial job offers, negotiations, and final acceptance, I was offered a job at Micron Technology making $80,000 a year. My new role would be a Supply Chain Planner. At the time, I didn’t know exactly what that role would entail, but it would be a great opportunity with a growing company. I had several friends that worked at Micron and they spoke very highly of it.
I am extremely grateful for the last seven years I was able to work at Intel. My time there was a fantastic way to start and build my career. The people I worked with were very talented. It was inspiring to work with them every single day and they motivated me to strive to do my absolute best.
The hardest part about moving to Boise was saying goodbye to all our friends in Oregon. After living there for seven years, we had developed life-long friendships. We had developed the relationship with one family that we didn’t need to knock on the front door when we went to their house, we just walked right in. Our children got along great together. They were the hardest to say goodbye to.
Boise was going to have some distinct advantages that we were really excited to benefit from. First of all, their school system was far more robust than Portland’s. Test scores were higher, more grants were awarded, and the teacher ratings far surpassed those of Portland. Now that our children were starting school, we wanted to make sure they had access to a great education. Boise is also about 30% cheaper than Portland. With the new position and the salary increase, coupled with the lower cost of living, our income was going to stretch even farther in Boise.
We were very excited to start a new chapter in our lives by moving to Boise; saying goodbye to Portland was bitter-sweet. However, we felt that moving was best for our family and this was the best time to take advantage of the opportunity. We can’t wait to see what new challenges and prospects await us.
Have you ever heard the expression, “not all animals are otters, but all otters are animals”? In my 9th-grade geometry class, my teacher, Mr. Power, would say, “not all rectangles are squares, but all squares are rectangles.” The same principle applies to mutual funds and index funds. Not all mutual funds are index funds, but all index funds are mutual funds.
I used to be a big believer in mutual funds. I USED to be, but that has completely changed.
I have just accomplished another baby step in Dave Ramsey’s 7 step program. I have $1,000 in cash; step 1-check. I have paid off all my debts except the mortgage; step 2-check. Now I’m working to build up my 3-6 month emergency fund. I’ve calculated I will need $22,000 to survive for 6 months without an income. So far, I have about $14,800 in my savings account so it’s about 67% complete. My goal is to deposit $500 a month to build up that savings account. Mint.com projects I will achieve my goal by March 2020 if I only deposit the $500 a month. I bet I can easily beat that projection. I’m expecting some stock dividends as well as some annual bonuses from work. I’ll do my best to make quarterly updates on my progress to reach the full $22,000 to keep myself accountable and focused.
I recently read this short article on CNBC.com about paying off debt. The majority of the article contains quotes from Kevin O’Leary. For those not familiar with Kevin, he’s become very popular on his role on Shark Tank. He made most of his wealth from co-founding a software company that eventually became The Learning Company. It is estimated that he is worth $400 million. I would say he knows a thing or two about being financially successful.
The article was basic and consistent with other financial advice. Ideas like, save for the long term, plan for retirement, be thoughtful about a mortgage, and pay off debt quickly. These are all fantastic ideas that I love.
The key message for me, that completely flies in the face of many financial advisors I’ve listened to is this: “There’s never an incentive to stay in debt. Life is unpredictable. What happens if you’re laid off or incur unexpected expenses elsewhere? Your once-manageable mortgage is suddenly going to seem not so manageable.”
In my last post, I discovered my student loans status changed to “In Grace” because I graduated from MBA school. I didn’t know exactly what that meant or what effect that would have on my finances so I decided to call the company and find out.
“In Grace” is pretty self-explanatory. The loan is structured in a way that I have 6 months after graduation before I start making regular monthly payments. What I didn’t know was the point I would be charged interest on those loans. During “In Grace” was that when interest was being charged? Was it after that 6-month grace period? I had to find out.
I wanted to give a quick update to where I sit in trying to become financially free. This helps to keep me accountable and also gives an idea of where I’ve come from and where I’m heading. I’ve included some relative numbers so the rest of this post is understandable. I hope it’s obvious this isn’t my total financial situation. I have a 401K and Roth IRA, but those aren’t relevant for this discussion.
Savings Account: $46,000; Checking: $14,000; Chase: $3,000; Student Loans: $41,000; Intel Stocks: $19,000 Continue reading Quick Update as of September 2018