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NW ~$0. Advice for next steps please!

Posted: Thu Sep 07, 2017 4:48 pm
by TheTurtle
Hello all,

I only recently registered, but I have been a reader here for about a year . Coincidentally, I also finished the Bogleheads Guide to Investing last year, and moved my money to high yield savings, 403b and Roth in the course of the year :D
As of my last paycheck, my NW is now approximately 0!!! :mrgreen: While this sounds bad, the last few years have been consistently in the red, and it took a while to claw my way up here. I know that 'how' NW is calculated is slightly contentious here, all I can say is that all my numbers are internally consistent since as far back as I have Quicken data (~ 2010).
This is mostly an annual checkup: I hoped to get some feedback/criticism/affirmation on my personal finance decisions, without going into the weeds of AA and fund names.

Situation:
Age: 33, DINK, (MFJ as of last year) (finances generally separate, expenses fully split so doing these numbers is easy)
Income: 50k for now, should go up significantly
(a year out of grad school, doing post-doctoral STEM research, income jump expected in 1-2 years)
Renting in HCOL for now and up to couple of years more
Generally LBYM lifestyle with minimal frills (and not just because I have to)

EF: 10k (~4-5 months expense, expenses split evenly with spouse)
Earmarked Savings: 15k (so far) in Ally HYSA for future condo down-payment, I add 1000$ per month
Other Cash: ~11k in 5 yr CD ladder with rungs every quarter, (reason for this in next section)
Old faithful Corolla, paid off, plan to use another couple of years at least.

403b: 10k contributions so far, most of it in balanced index funds (AA 85/15)
Roth: 5.5k- Maxed 2017, Vanguard LifeStrategy Growth, plan to continue maxing this every year

Loans:
This is where things get interesting. I have no formal debt other than CC (paid off monthly in full). I do however have a 'soft loan' (aka gift) from my parents now worth ~50k that I have accumulated over my (many) grad school years. This paid for one year of tuition, moving cross-county for (current) job, and a couple of work trips that were not fully reimbursed, but were great for my career. In many cases after the first year, I did not NEED any help, but the ability to have a small buffer was very useful. Parents are comfortably placed, coasting to retirement, own their home and generally do not NEED the money back. They have said this on multiple occasions. However, I am not OK with wiping this debt off. It's one thing to pay for K-12 and all childhood expenses, but after getting a full scholarship for undergrad and a job after college for a year, I do not plan to let them pay for my upkeep without paying it back. I sent them parts of what I originally owed (~10k) a year ago. The deal now is that every time they visit (international flight, 2-3 week visit), I pay for all flight, accommodation, USD expenses, gifts to take for others at home, etc. Thus I will whittle away at the loan which exists only in my mind.
To be clear, what I owe them cannot be counted in $$$. My responsibilities to them (fiscal or otherwise) will not end when the $ balance is zero. I will just get some personal satisfaction in knowing that I was able to pay back every cent.

So after all this mental accounting, my NW has now crept up to ~ $ 0. I realize that my cash fractions are pretty high, but if I want to pay down my soft loan, I would need some amount of cash available above and beyond normal monthly/annual expenses. Second, given the fact that I might need a new car in 2-3 years, might need to relocate, and might put down a condo down-payment, might start a family, in about the same time-frame, I thought this was the prudent thing to do. I considered using a taxable account with low choices, but given the amounts involved, timescales and general uncertainty (the good kind of uncertainty) about life in the next few years, I thought it better to keep Roth & 403b for retirement only, and keep the rest in cash/cash-like buckets. Does this sound right, or should I be doing something different? So far I have taken all my HYSA/CD/403/Roth advice from this forum, and I have been very satisfied that it was always the sensible thing to do. Thank you all for a year's worth of education and advice. I hope to continue learning, and maybe one day help others out in the same way.

Spouse does things along parallel lines. I know things start to merge soon, but I have presented a financial snapshot which I think is mostly my personal assets & liabilities.

Next stops on the mental accounting train:
NW = 0 without counting my old car as a depreciating asset (next month :P , baby steps)
One comma club
Sum of liquid assets and liabilities = 0
Retirement savings > 50k
.. and so on

A non-actionable side-note: In the very far, uncertain, yet possible future when I have kids graduating college, I will fund them a little bit more than absolutely necessary for them to get by. I was fortunate enough to not to need a choice between retirement saving, EF, and daily expenses after grad school, and I think this was huge for peace of mind and allowed me to focus on my work.


Cheers :sharebeer
TheTurtle

Re: NW ~$0. Advice for next steps please!

Posted: Thu Sep 07, 2017 7:36 pm
by 5th_Dimension
Congratulations on your $0 net worth, and welcome to Bogleheads! :sharebeer

I remember getting to the $0 net worth level. It took four years of hard work to dig myself out from under the debt, it felt great!

Onward and upward! :happy

Re: NW ~$0. Advice for next steps please!

Posted: Fri Sep 08, 2017 2:13 pm
by Olemiss540
Congrats on the milestone!

You seem to be on the right path, only obstacle in your way is life style creep and patience!

ONLY change I would make is to get those finances fully combined. While money is the largest cause of divorce, I have found it's effects can be quite the opposite when two partners are working/sacrificing/communicating towards the same common goals. May have to make some short term personal sacrifices, but long term the rewards are wonderful.

Re: NW ~$0. Advice for next steps please!

Posted: Fri Sep 08, 2017 3:01 pm
by fishmonger
Main question I have is about your emergency fund - you say $10k is 4 or 5 months of expenses? But you rent in a HCOL area?

And congrats on getting to zero!

Re: NW ~$0. Advice for next steps please!

Posted: Fri Sep 08, 2017 3:02 pm
by Dendritic Tree
Congratulations, keep up the good work! You should have a party to celebrate. When my wife and I finally claw our way up to $0 NW (massive student loans), we're going to invite our friends over for a "zero party". We've been talking about it for years. Still have years to plan it...

Re: NW ~$0. Advice for next steps please!

Posted: Fri Sep 08, 2017 4:20 pm
by Meg77
You're definitely on the right track! Focus on getting your income up and hoarding cash for now, in addition to getting any 401k match and maxing your Roth IRA. As you said there are a lot of unknowns in the next few years that may cost some $$. Maybe look at getting a Health Savings Account started at your next enrollment period. Other than that keep on keeping on and investing (not financially but in general) in your new marriage.

:sharebeer

Re: NW ~$0. Advice for next steps please!

Posted: Fri Sep 08, 2017 4:40 pm
by Pajamas
Congratulations! This is as important a milestone as joining the two comma club! :beer

Re: NW ~$0. Advice for next steps please!

Posted: Sat Sep 09, 2017 8:19 am
by timmy
Nice work. If you stay diligent, you'll find that your NW climbs pretty fast.

Re: NW ~$0. Advice for next steps please!

Posted: Sat Sep 09, 2017 8:24 am
by bberris
I wouldn't be too hard on yourself; you invested in your education which will have a very good return.

But if you are dead, that money went to waste. Do you have term life insurance?

Re: NW ~$0. Advice for next steps please!

Posted: Sat Sep 09, 2017 8:31 am
by tibbitts
bberris wrote:
Sat Sep 09, 2017 8:24 am
I wouldn't be too hard on yourself; you invested in your education which will have a very good return.

But if you are dead, that money went to waste. Do you have term life insurance?
That's a good point I hadn't thought of. At that age insurance for a healthy person should be cheap.

Re: NW ~$0. Advice for next steps please!

Posted: Sat Sep 09, 2017 4:38 pm
by TheTurtle
bberris wrote:
Sat Sep 09, 2017 8:24 am
I wouldn't be too hard on yourself; you invested in your education which will have a very good return.

But if you are dead, that money went to waste. Do you have term life insurance?
OP here. That's a good point, and I will look into it very shortly. Thanks!
I know term life is the better option, but where should I start looking for something affordable for term life and /or disability insurance that still allows for pre-existing conditions. Not a life threatening condition, fully under control, and minimal expenses, but would show up as a deviation from 'healthy' in a medical exam.
I currently have barebones coverage with employer.