For the first time since we’ve made a concerted effort to pursue Financial Independence, we have to temporarily reduce our after-tax investment purchases of VTSAX this November.
An RV road trip vacation in September and our 10 year marriage anniversary weekend in Yosemite in October, sucked out all the buffer we had in our checking and saving accounts—and actually left us chasing our credit card balance in October. Not good.
Minimal cash in my bank means more market exposure, but look at my balance on 11/4/20…Too low for my personal comfort.
The numbers took a big hit after the mortgage, car insurance, and a few miscellaneous bills came in.
Not an emergency fund kinda guy, but…
While I don’t believe in having a big emergency fund (by that I mean more than a month saved up), I do believe in having a cash buffer in our checking account. I view my taxable investment account as my emergency fund. We have about 2 years of expenses saved in this after tax Vanguard account.
*Will I pay capital gains tax if I have to sell? Of course, but this is a hit I’m willing to take if there’s a true emergency.
I need my cash working for me, not sitting around waiting for what if scenarios. Keeping only $3k-$4k (just under a month of bills) allows me to have more cash exposed to the stock market. If an emergency does occur, I have credit cards that will hold me over while I sell assets to pay for the emergency.
Refill
To refill this cash buffer we are drastically reducing our weekly investments of VTSAX by 80% for the rest of November. Our 401k’s will stay maxed out. Only our after tax money will be affected by this correction.
In hindsight, what I should have done to avoid getting this cash low was to reduce my investments prior to and during the vacation. It was a lack of planning on my part that got us to this point. I thought I could ride out the low balances, and maybe we could have, but psychologically I couldn’t do it.
Flexibility
When I sat down with my wife to present the case for FIRE back in March, being flexible in our investing was part of the deal. We both agreed that we would save as aggressively as possible, but also have flexibility so we could enjoy life and do things. Vacations and special anniversaries take priority over investing.
While it sounds easy to be flexible with our investments, it still stings a bit to pull back. We’d maintained a nice 7 month run of buying a set amount every week in our taxable account.
But we are grateful we have the privilege to be flexible because we have such a high savings rate. We run the money, the money does not run us.
Maintenance
Our finances were humming like a well oiled engine. But all engines need maintenance and fuel tanks refilled. And this is how I see our planned reduction in investing; we are doing routine maintenance for the good of the money engine.
We should only have to do four weeks of reduced VTSAX purchasing till our buffer is in fine order and we can get back up to cruising speed. What I’m happily surprised with is my wife’s nonchalant attitude to getting to such a low cash balance. In the past, I think this might have freaked her out, but I think she’s accustomed now to our lean method of living.
October Finances
Here’s our monthly expenses for October. We don’t follow a budget as long as we pay ourselves first (VTSAX/VFWAX). Still, there are line items for where the money goes. Keeping track of expenses is critical.
My expenses are broken up by Hard and Soft expenses-(more explanation here).
You can see I’m in the red by quite a bit. Nearly $1000 over.
Here’s a few things that put us over on the soft side:
- Halloween costume shopping–not that we went trick or treating (just for my daughter’s birthday party)-$80
- Gas spent driving to Yosemite to stay in the same hotel we stood at when we were married-$140
- I chopped down a tree in my front yard. Needed to buy a new chain for the saw and dumping fees for the green waste-$75
- Mrs. Disengaged also participated in a remote Ruth Ginsberg 5K run-$30
- My dog needed to refill his flea medication-$96
Our internet bill is too high as well. $100 is outrageous for internet! This is Xfinity Comcast and it’s stupid high. The problem is we have a limited choice of service providers due to our location in an unincorporated part of our city. AT&T just became available and I plan to switch as soon as my mortgage refinancing has gone through (because they credit check).
My daughter’s first ETF!
I also purchased (1) ETF of VTI at $177 for my daughter’s 7th birthday! I did this in a Vanguard UTMI account. As of this writing, she’s up $6 dollars and very proud of that. I plan to do the same for my 3-year-old daughter next year on her birthday.
-Happy Savings!!!
