Our financial situation as of 6/1/2018 couldn’t be better.

Hi, everybody. Quick note: I’m still working up my series on why the 401(k) is a scam. I’ll have it out soon.

Meanwhile, let me ask you something…do the constant 150-ish point swings in the Dow look unusual to you? And do they bother you?

I bring up that question because I first started investing when the DJIA was here:

Back then a one-day downturn of 150 points AKA 4% would’ve had people freaking out…not jumping off cliffs or anything, but still extremely uncomfortable. So while I endorse a “set it and forget it” approach to investing, it’s hard not to watch the indices. I tend to check them at the close of every day simply out of curiosity, but it’s not been since the housing bubble that big swings–and I mean several hundred points–have caused me any angst. This is naturally in part because post-2008 there’s been a huge run up.

Now: I’ll most likely get comments below to the effect that “Well, that run up is making you over-confident, and you’re being naive if you think the [insert type of crash here] isn’t going to wipe out 60% of your net worth at some point. I hope you have a dumpster picked out.”

I do, actually. It’s one of those pink ones meant to signify breast cancer awareness. The wife’s a breast cancer survivor, after all, so we’re excruciatingly aware of breast cancer and might as well do our part to spread the word.

But in terms of defense of our financial security, here’s an example. Big swings are a major reason we paid off our house. As long as we can come up with $3,500 a year to pay the tax bill we’ll be OK, if you want to call it that–or at least not looking for a pink dumpster to move into–and as for the rest, we can also do what we did in 2007-2008: tighten our belts and get involved in the barter economy and have BBQs with friends instead of going to the movies and so forth. Even maybe finding part-time work.

And so these 150-point swings? Well, check out our numbers for May:

In terms of my financial situation articles this is an all-time high, but we’ve peeked through $2,500,000 several times inter-month…meaning we’re now down $75K from our highest net worth.

Yawn.

Apart from that we haven’t had much change in the specific details of our situation, but I’d like to hit one thing.

I’ve mentioned that we started credit card churning to take advantage of the various travel bonuses. We’ll be spending the month of July exploring Ireland, and thanks to these bonuses the trip has cost us less than half of what it would if we’d paid cash instead of using miles, points, and so forth.

Well, we’ve also started churning checking accounts to take advantage of the signup bonuses. You’re familiar with how it works, I’m sure…a bank in your area will run an ad to the effect that if you open a checking account with them, fund it with $X, maintain a daily balance of $Y, and make Z number of debit card transactions, they’ll grace you with $300.

So since I started that in January we’ve gotten or are due to get $2,400. I estimate that I’ve spent less than twenty-four hours opening and managing these accounts, so do the math. And since from bank accounts and credit cards we’ve gotten [quickly throws together an estimate] roughly $6,000 total in cash at an estimated $100/hour…well, since I look at credit card/bank account/travel hacking as a hobby, it’s clearly a damned lucrative one.

Bank account bonuses are, however, taxable as interest income–thus complicating our 2018 position. Obviously we prefer not to incur a liability, and we accomplish that via loss harvesting and so forth.

This begs a question: the amount we’ve placed in these accounts varies, but on any given day it’s between $5K and $10K, and do I think it’s a problem having this much money tied up?

Actually it’s not tied up at all. We can at any time close an account if we need the $$$ it contains, but all that’ll happen is that we’ll forfeit the bonus. Since my money market account at Vanguard is only paying…what, 1.9%?…in interest, I’d rather be earning these bonuses.

So look at it like this: all that’s happening is that we’ve spread our emergency fund across several accounts instead of one, and consequently we’re earning much more than we would’ve if we’d parked it one place. That’s IT.

And that’s it for this update, too. Again, look for an upcoming article on why the 401(k) is a scam, and until then I’ll leave you with a traditional Irish blessing a drunken college buddy laid on me one time: may the road rise to meet your face. Which isn’t a blessing at all, or traditional Irish, but it’s as good a joke to close on as any. Thanks for riding along.

Author: ER Dude

Sick of your job? After a thirteen-year career, Early Retirement Dude fled corporate America for good. You can do it too! Visit http://EarlyRetirementDude.com or email EarlyRetirementDude@gmail.com.

4 thoughts

  1. Whew, yeah not a bad run up lately. I’ve been seeing some new heights lately as well, but I think I’ve been more excited about seeing those high numbers haha. We recently started churning credit cards for travel hacks too – seems like a great next step to lower a few costs.

    1. It’s been cool, yeah, especially in the context I mentioned. The housing bubble almost put an ugly end to our FI and RE both. Nice job on the highs…keep ’em up. And do you have any hacks that are your particular favorites?

  2. I think the classic is Irish blessing is
    “May the Road Rise to meet You
    May the wind be at your back.
    May the sun shine warm upon your face;
    The rain fall soft upon your fields
    And, until we meet again,
    May God hold you in the palm of His hand”

    Having a paid off house is a great comfort (I don’t care that the math says it is suboptimal use of capital) not having to live in that pink dumpster if the markets crash is worth it.

    On bank offers.
    I have taken advantage of them too ,but you really have to read the small print. I was refused a bonus once because I had previous received something from the same bank years ago. On the plus side I am still using the Samsung tablet I got 6 years ago from that same bank. One tip that has worked out well for me is to call and ask for the bonus interest rates quoting the offers from another bank. I have been lucky that they will normally match it for a short period of time (3-6 months), once that expires I find another offer and repeat.

  3. Good one, ER dude. These run ups and rundowns are par for the course in our FIRE journey. I’ve always found it useful to evaluate this as net worth / fully amortised living expenses. “Fully amortised” means you assign a monthly cost to all those periodic expenses. Say, you buy a car worth $21k every 7 years, then its monthly cost allocation would $250. I do this for every major expense category (such as mobile phones, eyeglasses, appliances, furniture etc) with a life beyond 12 months. For those within 12 months, they are included in monthly budget. I’ve found this way, I have peace of mind even if market volatility takes away $100K in a short period. As painful as it may feel to look at portfolio balance then, you feel better knowing the above ratio is still over say, 40. Adequacy of wealth is relative to expenses anyway.

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