Peace, Love & Spreadsheets

At the beginning if 1994, if you invested $1000 in an S&P 500 fund, you might have been sad the next year. You invested at $482 per share. A year later, your shares were worth $470 and your $1000 portfolio was only worth $985. If you'd given up and sold those shares, you'd have lost money.  But let's say you didn't... in fact you decided to try again and invest another $1000. You buy in at $470 and wait a year. Good news - by 1996 your $1000 is worth $1350! And your 1994 "loser" shares are worth $1319 - you're ahead! You just had to stick it out another year.  Of course, a 35% increase in one year isn't normal, that's oddly good. But a 2% decrease isn't normal either - most of the time, the stock market grows from the beginning to end of the year. If you want to predict what this next year will be like, you can't do better than a dart board. Will 2024 be another 2008 (bad) or a 2021 (great)? If you take the average of all these years, y...

Every January I'm exhausted from holiday materialism and looking forward to the annual No Spend Month trends. Seriously!  Reasons to do a No Spend Month 1) Saves you some money! 2) Teaches you what your baseline needs are - how little money could you live on if you suddenly had to cut your budget for reasons outside your control? 3) Inspires you to find strategies that might really save you money in the long run - cheap meals and  entertainment, automatic bills you can unsubscribe from. It's a reset. Rules for the no spend month 1) You can buy food, but I'd recommend looking at the USDA Cost of Food Reports for your spending limits on food. You'll find that the Low plan doesn't give you budget to eat out, and if you can make it on Thrifty you're even better.  2) You can pay your bills and anything you're legally required to pay, obviously. 3) You can donate to charities. One reason I budget so carefully is that money is precious in our world. I budget so I ...

I love the book "The Simple Path To Wealth" because it lays out this investment strategy: 1) Find a whole market index fund with a low expense ratio. It says VTSAX, but I'm in FZROX because I use Fidelity. 2) Invest in it. 3) Done. You might hear some people talk about S&P 500 funds. Good for them. I brought up a comparison chart between two fidelity funds with a lot of history. FSKAX is an S&P 500 fund. FXAIX is an index fund. Here is the difference between their performance over 11 years.  The end result? 229.63% vs 221.91%. Let's say you had $10,000 11 years ago. You'd have... $22,963 if you'd invested in FXAIX (S&P 500)  $22,191 if you'd invested in FSKAX (whole market) That is a $772 difference - $70 a year. And that's just a snapshot on the one day I picked. Since these funds both fluctuate and go up and down themselves, either one could easily change by 4% on a given day and it doesn't make a huge difference long term.  So my con...

 The summer after my senior year of high school, I had $1000. I'd saved up babysitting and summer job money. I had a meal plan at school and not much to buy, so my family helped me invest it in a mutual fund. I was hoping that when I got out of college and needed to really start life, that fund would be my first down payment on a car, deposit on rent, wardrobe for an office job. Four years later I graduated and my $1000 had grown to... $600! So I swore off investing for a really long time. Now, I could say more about that particular fund and the fees involved, but I now understand more about why my fund did so poorly. Here's what the S&P 500 looked like while I was in college: That's a pretty bad 5 year snapshot. I didn't pick the WORST time to invest... 2000, right at the top of the dot com bubble. But I didn't pick the best time either. So what does that mean? Am I bad at timing? Is the stock market an losing enterprise? To answer those questions lets look at ...

 I hear frequent complaints from the world that financial literacy isn't taught in schools. It is, actually, but it's hard to get students to pay attention to issues that seem so far away from them. They haven't signed up to buy a house, they have no practical income, anything that comes in is disposable, so who pays attention? If there WAS any way for me to teach a 101 course in financial literacy, here are 10 assignments that I think might help. 1) At the beginning of the course - pick 10 stocks to track in the stock market. They should be companies that you know. What are their prices? At the end of the course, how did your stocks do? Would you have made more investing in these stocks, or a whole market index fund like VTSAX or FZROX?  2) Review the USDA cost of food site . What is the cost of food for everyone living in your house? 3) Find an adult who will share a single credit card statement with you. What were their total purchases? What were the largest expenses? Wh...

 In 2018 when I had some credit card debt, I realized something very important: The PURCHASES line on your credit card statement tells you all you need to know. It's not always the most obvious line, but it tells you if you SPENT more than you MADE last month. If you want to save money and pay down debt, you need to predict what the PURCHASES line will be. If you want to keep track of how much you spend, it means getting your statement every month and recording the PURCHASES line. That's my spending spreadsheet. It's really boring. I do not break my budget up into 50 categories. Once a year or so I might download all my credit card transactions as a CSV file for analysis, but most of the time  I don't. I just know that we can spend about $50/day on food and stay within our budget. On the 1st day of each month I add a new line to my budget spreadsheet.  Column 1: Date Column 2: Total Purchases made on my "charity" credit card (they're all auto bills, so the...

If you're a spreadsheet nerd, there are few applications more fun than mortgage math! You can project out your mortgage balance every year. See how many payments you'll shave off if you throw extra on the principle every month. See how many payments go away if you throw a tax refund at it one year. There are lots of ways to do it but here's how I set mine up. First, use the PMT function to find the basic loan payment. This doesn't include taxes or insurance.  =PMT(rate/12, years * 12, loan amount, 0) For example, to figure up monthly payments on a 6% loan for 30 years to pay off $200,000: =PMT(6%/12,30*12,-200000,0) = $1200 That $1200 will be your baseline payment. Of course this does not include taxes, insurance, or any other costs of owning a home (repairs!) but it covers the mortgage.  Using our same example numbers: A B C D 1 Month Amount Interest Payment 2 1/15/2024 $200,000.00 $1,000.00 $1,200 3 =A2 + 365.25/12 =B2 + C2 - D2 =B3 * 6% / 12 $1,200 You...

Tax brackets scare people. They think that as soon as you're in the "24% tax bracket", your entire income will be taxed at 24%. They think that if you're $1 into the next one, you'll lose money. This is not true. Tax rates only affect the income in that tax bracket. In other words, if you go $1 into that 24% tax bracket, you're going to have to pay 24% of that $1 in taxes. Not 24% of the rest of your income. The rest of your income is taxed at 10%, 12%, and 22%.  For example, here is the 2023 Married Filing Jointly schedule: Rate Range Tax 10% $0 - $22,000 10% within bracket 12% $22,001 - $89,450 $2,200 + 12% within bracket 22% $89,451 - $190,750 $10,294 + 22% within bracket 24% $190,751 - $364,200 $32,580 + 24% within bracket 32% $364,201 - $462,500 $74,208 + 32% within bracket 35% $462,501 - $693,750 $105,664 + 35% within bracket 37% $693,750 and plus $186,602 + 37% within bracket I like to think of it as chunks. Let's say you make $11...

How much should a family spend on food? Each month, the USDA publishes an index of the price of food , to be used for government programs that feed people, budget estimates, and now you! There are different ranges, from thifty to liberal. My family uses the Moderate plan to set our food budget, and then we know what portion of our "needs" is allocated for food. This calculator lets you enter how many people are in your family, and tells you the recommended budgets. For example, if you're a single parent feeding three teenage sons (egads) enter a 3 in the 14-19 year old male range, and 1 for yourself in the adult range. It is based on August 2023 prices. The prices do not change dramatically from month to month. Privacy note: As with all my calculators I do not save any numbers you put in this form. It's all you, all on the browser side. Child    Your family    Thifty    Low-cost    Moderate...

I have learned a LOT from personal finance books. Some good, some bad, all of them fairly easy to summarize!   The Simple Path to Wealth: Your road map to financial independence and a rich, free life by JL Collins  Summary: Invest in VTSAX. It's a whole market index fund. It will have its ups and downs, you have to accept that, but it gradually goes up.  I'd add: I love this book, but I must add that FZROX works just as well if you're at Fidelity. It's the same thing and has no minimum to invest and no expense ratio.   All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren  Summary: Divide your income up into a simple 3-part budget. 50% for needs, 30% for wants, 20% savings and debt repayment. Use the USDA cost of food website to determine what portion of your food budget is "needs". I'd add: I love how simple this budget is and it really helped me figure out tough questions... how much can I afford for a car? How much should I be savi...

Sorry Dave Ramsey fans, I like my credit cards. In fact, I use them to separate out and organize my spending. Credit cards let you download spending information for free, offer points and rewards back, are widely accepted and build my credit. Before you even think about a credit card... I'll admit, I did have to get out of some credit card debt once, I'm not perfect. I wasn't paying enough attention and had gotten into the habit of paying MOST of the balance but not quite the whole thing. The balances climbed up, and I was paying interest. I got out of debt by sitting down with all my statements and looking at one number: PURCHASES . Credit card statements are loaded with fine print and they can be overwhelming with everything you've bought, but the number that matters the most is "how much did I spend last month" - it actually matters more than the balance! If your purchases are more than your income, you are going into debt. If your purchases are less than w...

It seems to be very rare for two partners to make the exact same income, so here is a calculator that gives you three ways to split your bills. From my experience in person finance groups, relationships are MUCH happier when both partners have similar discretionary/spending budgets. You both have as much money towards hobbies, it's an equal sacrifice to buy the other one a gift. But budgets are very personal so I'll try to present the math on three methods and avoid judgement! For the incomes on these I don't care if you enter per paycheck, per month, per year. It's all based on ratios anyway. Fixed expenses/bills will "default" to 50% of your total because I'm a big fan of the 50/30/20 budget. But I also don't care, enter what you want. Privacy note: As with all my calculators I do not save any numbers you put in this form. It's all you, all on the browser side. Income 1 Income 2 ...

Experts are all over the map on emergency funds. $1000. 1 year of expenses. 5% of every paycheck. All nice ideas, but it helped me more to think of the types of emergencies I'd like to fund, and the types of savings I'd like to have, and go from there. To summarize, I keep: $3000 small emergency checking account pad 3 months CD for big emergencies 3 month CD for emergencies or car buying Everything else in taxable brokerage What are my likely emergencies?  First, I went through my bills over the last year and looked at unexpected things that I HAD to pay for. Vet bills, car repairs, a new refrigerator when ours failed. If you don't have a house, car, or pets, your bills will be a lot smaller! I tell people they shouldn't ever get a pet if they don't have $1000 in the bank. Even a guinea pig can get an infection that requires a vet visit and antibiotics. If you want something to play with that you're not forced to maintain, get a Nintendo.  I totaled all these up...

 When I was having babies, I came up with what I called "the billboard theory" of pregnancy health. At the beginning of my pregnancy I was overwhelmed with information. Someone said I could only eat certain kinds of fish, someone else said I couldn't have deli meat, my aunt said she couldn't go to monster truck shows because of emissions, I was like crap there are 1,000,000 things to know! Down the street from my house there was a billboard. It had a picture of a baby, and basically said "Don't drink alcohol when you're pregnant." I was like okay. Got it.  I realized that there will always be a million controversies and ways to debate everything, but the world does settle in on agreeing to SOME things. And those things will be so big, you can't miss them. So don't worry about the weird new little closet opportunities you might be risking or missing or sweating... when in doubt, pay attention to the big thing. Which is also why I invest in FZR...

Do you get paid bi-weekly? This simple calculator will help you translate that to a monthly or yearly budget. I faced this challenge too - bills due every month, paychecks falling on totally different days. I maintained at least a paycheck's worth of padding in my checking account just to be safe, but using this method I knew about what I could put on my credit card and still be able to pay it off. The first step to using a credit card is to know, in advance, what you can put on it. Two paychecks is one way but it's nice to know what those two extra checks work out for you too. Privacy note: As with all my calculators I do not save any numbers you put in this form. It's all you, all on the browser side. Income amount?       example: 1500 How often?     Weekly (52 checks per year) Bi-weekly (every other week) Semi-monthly (24 times per year) Monthly (12 times per year) Annually (...

 One of the concepts I love about FIRE is that it admits there's no one perfect number for how much one needs to retire. The FI number depends totally on your annual expenses. History has suggested that if you invest a sum of money in a whole stock market index fund, you can withdraw 3-4% of it or so every year and it will grow to make up for it. This means you need to save up enough so that the 4% pays for your annual expenses.  The FIRE community started dividing up into camps based on how much they needed.  LeanFIRE: Households determined to live off less than $40,000 a year FatFIRE: Households saving up enough to withdraw $100,000 a year It's easy to divide these amounts by 4% (or multiply by 25, same thing) to see the total amount needed. So how can you save up this much? I am going to recommend the FV() spreadsheet function.  value = FV(rate, number of payments, payment amount, starting amount) For example... let's say I have $800 a month to invest. That's over...

 Step 1 to being an investor is to open an account with an investment firm. The big 3 are Fidelity, Vanguard and Schwab. I fell into Fidelity because it's the partner that my company works with for 401K benefits, but it's proven to be really useful and everyone says it's the most user friendly interface. For years I only used it for my 401K, something I set and forget. I didn't even exchange out of my company's matching stock for nearly a decade until the Enron scandal happened and advice spread about the need to diversify one's retirement account. I read that no one should have more than 5% of any one company in their portfolio, but my company matching had always been 50 cents to the $1 in our stock, so my 401K was 30% in one company. Oops! I found the "exchange" button and made a note to think about it once a year. As years went on I wanted to do more than just a 401K, so here's what I found: FZROX In my 20s, I opened a stock trading account with...

This calculator will tell you when you might achieve a FIRE-level of retirement savings, given your current spending vs. savings rate. It's pure math - doesn't take into account variations, inflation, changing expenses, extra social security, taxes or other factors. It's not advice and nobody can predict the future. But numbers can be very helpful. I used popular example interest rates, 4% withdrawl, 5% investment gains, but you can certainly change them. Disclaimers: I like math, but don't trust me to make major decisions. Consult your professional advisor and check all the numbers you can. I do not save any numbers you type into this form. It's all you, all browser-side. I am not a financial advisor and this is not advice. Some say you should never take financial advice from someone who's still working. I'm working. I haven't tested this out at all! I use this as pure inspiration for how much I should be savin...

 Have you asked an innocent question in a personal finance forum and gotten back that most vague response: "it depends"?   I realize it's frustrating. They act like risk is something you KNOW, like, "well I like skydiving so I'm obviously a risky person, so I guess I'll invest my retirement in meme stocks." Or if you're like me, you're worried about losing money, so does that mean you're not risky and don't DESERVE a reward? So let me put it another way. When I say "what's your risk?" what I really mean is "do you have a backup plan?"  MOST of the time, if you invest in a whole market index fund, the stock market goes up. If you can keep your money in longer, it's even more likely to go up.  So let's say you want to invest $20,000 because you want to buy a car in the next couple years.  There's a chance that your investment will grow and you can buy your car next year. If it doesn't, you just have t...

Sum Calculator This calculator will help you answer the simple question of how much you need to save to reach a certain amount of money in so many years. It's pure math - doesn't take into account variations, inflation, changing expenses, extra social security or other factors. It's not advice and nobody can predict the future. But numbers can be very helpful. I used popular example interest rates, 4% withdrawl, 5% investment gains, but you can certainly change them. How much will you spend per year?   example: 75000 Rate of return from your investments?       example: 5 How many years until you retire?   example: 20 How much do you have now?   example: 100000 % you want to withdraw each year?   example: 4   Calculate What you need to retire: What you need save up every month to get there:     ...