2023 Financial Planning

Time to get going for 2023. The 401k limit was raised from $20,500 to $22,500, so update your contribution as needed.

I think my goals are similar to last year, I’m basically on auto-pilot at this point.

  1. Max 401k
  2. Contribute $32k to brokerage
  3. Pay an extra $4k on the mortgage
  4. Exercise 3,000 options in my company stock - I did this last year and I think I forgot to include it in my 2022 post
  5. I’m still working through my priorities for home projects but I think 2023 will include a new porch, new HVAC, and a water heater, and that’ll be something like $45k-ish. The price of lumber is plummeting and that will save me a ton on the porch.
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Add another 40k to my checking account.

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  1. max 401k
  2. max HSA and leave it alone
  3. pay extra $5K on one of the large loans we have
  4. pay for the work at the home without upsetting the above

Fine goals, but when people ask me about this, I tell them to add to their brokerage account and AVOID paying off the mortgage.

Is your mortgage less that 6 or 7 months old? If it is older, I presume it is at a much lower rate than would be available today, which protects you greatly from inflation.

I say add all $36 to brokerage accounts and $0 extra to the mortgage.

I guess here’s a list of my goals, which are mostly similar to others.

  1. Max 401k and 401k “ketchup” because I am over 50
  2. Add $X per month to brokerage account (i prefer not to be exact, but it’s a figure that is written down)
  3. Add 10k to youngest kid’s 529 plan
  4. Save the majority of any bonus I get
  5. Acquire a new vehicle (SUV) for myself, as my current one is old and tired and I have been waiting out replacing it b/c pandemic and supply issues (will require dipping into savings)
  6. Rebalance portfolio to a better asset allocation than it has been for a few years. Investigate switching brokerage houses.
  7. Not touch the life insurance cash balance and let that grow
  8. Buy something like a jet ski
  9. I have a budget. It’s in Excel (of course). Live by the budget. Review the 2022 budget vs actual. and plan 2024 budget.
  10. Update will, trust, and all account beneficiaries

OK, I don’t think I really want a jet ski. But I want to spend some money on myself. I am recognizing the need to reward myself for my work efforts, and not squirrel away every possible dime. I need to spend some money taking care of myself and having some fun, and I have not done that for years. Most of the last decade I have been putting kids through college and “free cash flow” has been tight. Maybe it’s a vacation. Maybe it’s scuba lessons. Maybe it’s a bicycle or a bike trip. It cannot be a TV or a computer because I do NOT need to encourage myself to do any more sitting around on my ass. Last year I bought some furniture - a couch and loveseat. That’s fine but it’s not like that helped me enjoy life any better. Suggestions welcome.

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I may do this. I plan on being retired or something close to retired in 6 years or so. Want to pay off the house so I can keep my income lower, so if I don’t pay extra now then I will pay it all off in 6 years.

I get the concept, but it’s an incomplete thought.

I don’t know the magnitude of the numbers but which is preferable?

  1. In 6 years you have 1Million in assets and $0 in debt
  2. In 6 years you have 1.15Million in assets and 100k in debt?

Suze Orman spouts off that choice number 1 is the only way to go. Her advice “YOU MUST RETIRE WITH NO MORTGAGE” and for most of the plebs in her audience maybe that is a decent goal. But that advice ignores some advantages of judicious use of good debt:

  1. A fixed rate mortgage is the best inflation protection you can have
  2. You can expect more long-term return on investing that your mortgage rate. Right now, I could get a higher CD rate than my mortgage interest rate
  3. Your assets (left side of BS) will be higher giving you more choices down the road

The question is not “I will have $1million in assets and do I want $0 in debt or $100k in debt?” The question is “what is the best leverage ratio I could have at retirement given that I want to maximize my net worth until then?” In my example, 1.05M net worth is more than 1.0M.

Student loans, car loans, and for goodness sakes credit cards… pay that crap off. Variable rate mortgages - pay them off too, Long term fixed rate mortgages, on the other hand, are your friend.

I would at least have to refi. My current payment is about $3k and I don’t want that kind of payment after I’m retired. It would require me to have a higher income, which means higher taxes, and higher health insurance premiums. I’d be on an ACA plan at that point.

  1. Max mega backdoor roth 401k
  2. Continue contributing $10k/month to brokerage
  3. Increase donations by $1k over last year
  4. Finish basement
  5. Buy 2nd vehicle

We have our 2nd kid expected May/June, which we’ll also be putting in daycare at 6 months. These next few years are going to be expensive…

  1. Max out 401k
  2. Max out HSA
  3. Max out Roth
  4. $1-2k/month to brokerage
  5. New car
  6. My “Save for large vacay abroad” 2022 goal has turned in to many smaller, still significant, trips in 2023
  7. Buy a big, fat (lab grown) rock
  8. Maintain charitable contribution amount from 2022
  9. Save any excess for future house purchase when rates are more reasonable
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IFYQ. If you are in your child bearing years, then I am much older than you.

I will tell you my experience is that kids generally don’t ever get cheaper until they are college graduates, with jobs, and have permanently (you hope) moved out.

Oh, I’ll also be buying a car this year, and that will make my goals a bit more ambitious. Current car will go to my son, so no trade-in. I have some cash saved but not enough to pay cash, particularly if I buy a nicer car.

I could not agree more with those saying to examine your rates and invest accordingly. I consider two major assets of mine to be my 30 year 2.75% mortgage and about 60K in wife’s student loans at 2.875%.

Had we been paying extra to those, we would probably be done by now with them….instead we have an account that has 240% of the initial amount of both loans.

is your company hiring? that’s some serious socking it away

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We’re both around 40, so started having kids late. Infant daycare is a good chunk of change that gets more reasonable as they hit 2, 3 and school age. I’m sure there will be plenty of other expenses though.

I got a good payout in 2020 when our company sold and was too nervous to dump it in the market all at once. In hindsight, I would have been much better off investing immediately.

I’ve continued to lower my 401k contributions.

Focus on the now is more important

  1. Max 2 HSAs
  2. Around 20k to 401ks split between 2 of them
  3. Pay an extra $12k on the mortgage (don’t @me)
  4. Contribute about $5k to an ESPP
  5. Again contribute $10,800 to a brokerage
  6. Get gutters on the home, repave driveway, deck re-stained, at least get quotes for basement remodel

The usual:

  1. Max 401k
  2. Max HSA
  3. Defer 15% of pay and 100% of bonus, to be paid out in 5 annual installments retire pre-social security.

Decided not to contribute more to a Roth IRA, although lately I think my 401K elections have been 100% Roth is plenty.

the great Re-fi heist of 2021 was good for many of us. at 2.7%, current mortgage is getting min payments until maturity.

even if I move, i might keep this house since the debt is just so cheap.