Curve Balls

My sister was diagnosed with breast cancer today. Our suspicions were confirmed. 

Just another reminder that life really does throw curve balls at you. 

The silver lining to this pandemic is that my work schedule is very flexible right now. I can help my sister with her appointments and my mom with her errands more.

2020 is continuing to be a dumpster fire year.

Choosing Pain

I have this horrible personality defect where I would rather do anything other than what I'm supposed to be doing. I guess that's how I initially picked up running as a hobby - - I would rather do something I detested than do whatever task I had to do. 

Running was also a distraction from my miserable life: I was now middle-aged; I was stuck in a horrible job where my employer didn't respect me, yet took advantage of my expertise; I was gaining weight and my health metrics were deteriorating; I suffered from insomnia.  Running gave me a new goal and purpose in life. 

Despite the numerous benefits I reaped from my new hobby (weight loss, better health metrics, better sleep), I still hate running. I wake up at an ungodly hour to run pre-dawn. Running also leaves me low-key exhausted and sore all the time. And I don't care what anyone says... running is HARD. It's hard on my body and my mind. But I run anyways because this is a pain that I choose to undergo; I tolerate the pain/misery of running because I choose to do so. When I choose to overcome laziness and lack of motivation, I am strengthening my mind and body to be prepared for any obstacles life will throw my way. I will have the confidence in knowing that if I can bear the pain of finishing a Marathon, I can overcome anything.

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At the beginning of this year, I made a couple of pretty dramatic changes to my finances: (1) I switched from contributing to a traditional pre-tax 401k to a Roth 401k and (2) I also started contributing beyond the annual 401k contribution limit because my company's 401k plan allows for after tax contributions into the traditional 401k with a mega backdoor Roth conversion. 

Just to illustrate the additional financial "pain" I've chosen to inflict upon myself, last year I contributed $18.8k into my traditional 401k.  This year, I am on track to contribute $19,500 into my Roth 401k plus $12,450 after-tax contributions. (That's almost a 70% increase in my 401k contributions!)

These changes reduced my take-home pay by about 15% which was initially hard.  But I've since adjusted, and to be frank, the pandemic has helped me reduce my spending considerably. I also anticipate that my income tax bill will be higher come April 2021.

The catalyst for this change came about last year when I saw that in a couple of years, I will be eligible to contribute approximately $7500 extra into my 401k for the over-50 catch-up allowance. I freaked out. 

After the initial freak out, I wondered to myself, if I was 50 now, would I be able to contribute the current catch-up limit of $6500?  Around the same time, I learned that my Company allows for after-tax contributions with an in-service Roth conversion. That got me thinking, "Why don't I pretend I'm already 50 and contribute (beyond the $19.5k limit) on an after-tax basis up to $6500?" I took a deep breath and took the plunge.

Due to a serious miscalculation on my part, I ended up contributing almost double the rate of what I was planning on an after-tax basis. 😝  But by choosing to inflict this "pain" on myself, I discovered that I was capable of doing so much more than what I thought I could.  Retirement savings is a metaphorical Marathon - - I choose pain now to get to the finish line faster.

 

Thank You, My 35 Year Old Self

People often joke that their pandemic life isn't different much from their normal life. In many ways, this is true for me, but not completely. Like many people, I've reduced my spending considerably: I haven't traveled anywhere this year; I haven't purchased any new clothes for myself; I've put my gym and massage accounts on hold until next March; I haven't purchased gas for my car as often; and I haven't signed up for any races (10ks/half marathons/marathons). In essence, all my savings are in the non-essential, "want" categories.  The spending on my "needs," i.e., housing, food, insurance and transportation (except gas), are all either flat or slightly up. 

To be blunt, I'm living a life without much fluff and fun right now. And it reminds me when was I in the throes of student loan repayment hell. In my mid-30s, I had a Come-To-Jesus moment when I came to the realization that I was drowning in debt. I made a commitment to attack my student loan and credit card debts the best I could. This meant implementing an austerity lifestyle which included, among other things, an $8.70/day food budget. I remember being holed up in my dark, 1-bedroom apartment day after day, pitying myself for not having any money for fun, travel or shopping. Boy, those were some depressing days.

And now, I'm in my late 40s, quickly approaching 50. My life has considerably improved since then: I have at least 1 year's emergency fund saved, ~$740k in my retirement funds, own a rental property and live in a nicely furnished 2-BR condo in a posh neighborhood. My net worth (including real estate) is now over $1 million. 

Unlike my mid-30s, I now have money to spend without digging myself into debt. But I've chosen not to spend for stuff out of my "want" categories to do a pause-and-reset of my finances. This is a conscientious choice; the Spartan lifestyle of my 30s was out of necessity.  This makes a big difference psychologically and emotionally. 

Ironically, frugality now feels like a luxury because I know the sacrifices will reap rich rewards down the road. Back in my 30s, I wasn't so sure the sacrifices would make any difference in my debt levels, which only fueled my anxiety and misery. Despite this, my 35 year old self soldiered on. So I am using this opportunity to thank my 35 year old self for taking that first step despite all of her misgivings, FOMO and jealousy. I hope to make my 65 year old future self just as proud.