Early posting this week! This post was originally scheduled for Saturday 4/1. But that would conincide with April Fool's day and I hope you will agree with me - your financial future is no joking matter.
Welcome to the March 2017 edition of the FPMD Net Worth Update - a quarterly post where I put my money where my mouth is and tell you all about how I manage my finances. Over time, it has become the most popular series on FPMD. I talk the talk, but do I walk the walk? You be the judge. Here is what I've been up to for the last 3 months.
- Cash - I am still holding onto more cash than I'd like. Although I did use a good chunk of it to pay off most of my outstanding credit card debt. The goal is to eventually find a place to park the remaining balance - preferably in a tax-advantaged account. Any suggestions?
- Emergency Fund - depending on where you look, people usually recommend a emergency fund of 3-6 months' worth of expenses. I'm in a relatively safe financial situation thanks to residency. So I went with 3 months' expenses. I hit that target recently and am no longer contributing to the fund. I hold my emergency fund in a Betterment Account, which I reviewed previously.
- Roth IRA - best overall retirement investment vehicle. Read this post if you want to know why. A big change last year was that I switched my IRA provider from Capital One (formerly Sharebuilder) to Vanguard, essentially transitioning to completely passive investments (index funds). I am proud to report I maxed out my contributions at $5,500 for 2016. My goal is to do the same in 2017.
- Roth 403(b) - I started investing in my employer's Roth 403(b) plan in September of 2015. There is no employer match but the other benefits were enough to win me over (See A Change of Heart - Future Proof Investing Update). I was able to max out my contributions in 2016 at $18,000. Currently I'm on track to do the same for 2017.
- Health Savings Account (HSA) - I started contributing to my employer's HSA plan in January of 2016. With the help of a generous employer match, I was able to max out my contributions at $3,350 for 2016. For 2017, the IRS increased the annual limit to $3,400 and I've adjusted my contribution schedule accordingly. If you are curious why I switched from a traditional medical plan to an HSA, see my previous posts here and here for the benefits of an HSA.
- SEP IRA - this is a new addition this quarter. I discussed why I started an SEP IRA in this post. Some of you may wonder why I didn't choose a solo 401k instead. The main reason is I wanted to take advantage of the tax deduction for the 2016 tax year and a solo 401k needs to be established before the end of the calendar year.
- Car - I went with the Kelley Blue Book value for my 2009 Honda Fit which is a very optimistic estimate as the car has quite a few cosmetic blemishes. I'm not a "car guy". To me, a car is just a tool to get from point A to point B. Whether my attitude toward cars will change in the future is a mystery but for now, I'm perfectly happy with my trusty Fit.
- Credit Cards - I'm a big fan of financial guru Dave Ramsey however I disagree with his attitude toward credit cards. I believe there are responsible ways to use credit cards and I routinely take advantage of credit card rewards and bonus offers. I paid off most of my outstanding credit card debt in the last 3 months. The balance you see above represent my month-to-month spending activity. It's a little higher than usual due to fellowship interview expenses.
- Student Loans - I'm currently making income-based payments on the REPAYE plan. See why I switched to REPAYE here - I Switched to REPAYE and I Like It. My overall goal remains unchanged with the intention of eventually qualifying for Public Service Loan Forgiveness (PSLF) in 2024. Loan balance reported above reflect principal + accrued interest. Since I'm going for PSLF, this enormous number should eventually become $0 in 2024. But until that happens, I'm keeping the whole balance on the books.
My net worth increased by 23% in the last 3 months - a result well above my expectations. I credit investment automation for the progress - because the money automatically goes into my Roth IRA, Roth 403b, HSA, I never have the opportunity to think about ways to spend it! If I can keep up the pace, I may even reach Net Worth Zero before I finish residency. Now THAT would be an accomplishment worth celebrating.
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