March 2017 Atypical Life Income Report

Welcome to the third monthly income and expense report from the Atypical Life family. We are pleased to share this with all of you, so that you may have the inspiration to achieve financial independence and freedom from the man sooner. As an atypical family, this income and expense report will look very different to most family budgets, however, it is 100% real and is achievable under the right circumstances.

I share my finances to inspire others to reach for freedom earlier. I hope to show from my income and expense reports:

  • Income can be generated in multiple ways. The regular 9-5 job is not the only way to make money and is also the best way to be a slave to the man.
  • Lowering expenses is really the path towards financial freedom. The lower your expenses, the more you can save. Also, with lower expenses, it takes fewer savings to live on.
  • It is possible to have low expenses.
  • Becoming an expat is a great way to financial freedom
  • To keep me accountable.

Tracking Your Money

Keeping track of your money is the number one way to reach financial independence. We track all of our income and expenses and then analyze it all at the end of the month for you.

Using Personal Capital is the best way to aggregate all of your accounts into one nice easy view. With your accounts spread across so many different platforms, it is hard to get a whole picture of your finances. Personal Capital gives you a view of where you are, if you spent too much, saved too little, or went into debt. Keeping track of your Net Worth on Personal Capital is super easy.

The best part of Personal Capital’s service is that it is free! It fits in perfectly with our frugal sense and allows us to track and reach financial independence faster. Check out their retirement planner to estimate how far away you are from retirement. It is one of the best I have seen for those of us pursuing FIRE.

If you haven’t started tracking your finances, it is not too late to start. Give Personal Capital a try and you will soon be on your way to being a personal finance guru.

Income

IncomeAmount
Bonus$6,020
Company Match$1,112
Expat Income$1,266
Gifts Received$50
Interest$4
Investment$725
Salary (Mr. Atypical)$6,467
Salary (Mrs. Atypical)$131
Total$15,775

March was another great month for us in the Atypical household. We had our regular salary and our wonderful, but regular expat income. This expat income is a 20% location premium or hazard pay in expat vernacular. It is additional income for us that is grossed up by the company, so we do not have to pay taxes on it.

I was stoked in March when our company actually paid the Short-term Incentive Plan (STIP) at 100% funding this year. This amounted to a 7.75% bonus on my new annual salary. All of the extra funds got saved and invested with 50% going directly to the 401k, ~25% going to taxes and the final 25% paid out to me and invested in the HSA.

One problem with the 401k contribution this month is that it still has not posted. I received my bonus on March 10, and the $3,010 that were “contributed” to the 401k, have still not shown up in my account. I was waiting for the salary contribution posted (around April 7) before approaching HR about this lack of contribution. I am not sure of the company’s intent here, but it seems they are holding on to my money for their own gain rather than paying it out to me on time.

My company has a fairly generous 401k match of 9%, as long as we contribute 6% to the 401k. This goal is very easy for us to achieve, as we contribute 50% of our income to the 401k. There is one caveat to my 401k contributions, though. They are only calculated on salary, expat income is not included, so 50% of $6,466 goes to the 401k each month to ready us for an atypical life of freedom. The 401k matching contribution is free money and we make nearly $6,000 per year from this income source.

March is when all of my VTSAX investments pay out dividends, so we had a $725 dividend payment. The payment for this quarter was very low compared with past payments. Even though I have more investments than I did in December 2016, the dividend payout was down 25% on a per share basis.

Expenses

ExpensesAmount
Business$550
Fees$8
Food$448
Home$325
Insurance$74
Medical Expenses$70
Shopping$427
Taxes$2,730
Travel$890
Utilities$29
Total$5,551

Our March expenses were to be expected and slightly over budget! They were the highest of 2017 so far because of hosting my parents in China for a few weeks.

The bonus we received in January from the local Chinese government got put to further good use this month on a new lens for our Micro 4/3 camera. The Olympus E-M1 that we bought in February is complemented nicely now by a wide-angle Panasonic 7-14 mm f/4 lens. This lens gives us a new perspective to use and will continue to expand the possibilities of beautiful photography for our blogs. Along with that, we improved our blogs with new plugins, so keep an eye out for new formatting. Because the bonus was paid in RMB to a Chinese bank account, we were not able to invest it without the fees and hassle of a wire transfer, so we have decided to allocate it to business expansion.

Because my parents are here, our budget, in general, got overstretched. We are trying to show them a good time and that involves traveling. We took a week long trip to Gansu province where we got to see numerous Danxia formations and got the must do in China done, visited the Great Wall. We are also getting more food out at restaurants as a result of them here. Introducing them to the local food is enjoyable, but certainly more expensive. It gives us a feel for what the cost will be to live when we have kids in the future.

In addition to the business expansion from the Chinese bonus, we treated my parents to covering the flight cost to Gansu and back. Both of their birthdays are in April, and we are so appreciative of them coming to visit, we felt that covering the flight was a great idea.

Our Gansu trip spread from March 28 – April 4, so is split over 2 months again. The portion spent in March was $876, however, half of the non-flight cost will be paid back to us by my parents. because they do not have a free way to get RMB to spend, we are covering all costs and they will reimburse us at the end of the trip via PayPal. Keep an eye out for our upcoming post about our Gansu trip.

Shopping

The shopping budget was over this month at $427. The reason we were over budget again is due to my parent’s trip to China. Because we can’t buy some things in China (I wear a size 46 shoe 13US), we bought them from the US and had my parents bring them to us. This saw the purchase of a pair of Chaco sandals for me, a pair of cycling sandals to replace the ones that I broke last year, and 2 horse riding helmets for Mrs. Atypical. The last one was a mistake due to a website malfunction and we will get reimbursed for the helmet when it gets returned to the store.

Mrs. Atypical and I are very into exercise and use it to spend much of our free time. Since cycling here is not too fun and the air is not too clean (think a thick headache inducing smog 150+ PM2.5) she asked for a bike trainer so she could ride inside. There was no way I could say no to that, so we purchased one that I would ride as well, and she is well on her way to getting stronger because of this purchase. I did not buy the cheapest version of a trainer because tools should be bought to last, and good quality can make all the difference. In the pursuit of freedom, we cannot forget to live and enjoy ourselves.

Medical

Our insurance for the month is on an accrual basis because we paid for the year entirely in December. We dropped our company sponsored health insurance that cost us $250 per month and the company $750 per month in favor of a local insurance company that was ~5300 RMB or $890. This covers us for all medical expenses in Greater China and also qualifies us to use the supercharged investment vehicle, the HSA.

We had our first medical costs of 2017 this month with the purchase of 12 months worth of birth control. China has it right because birth control is over the counter. There is no way they could have maintained the one-child policy for years without easy access to birth control. In the US, the government has put up barriers to access which does not make any sense.

Home

Our home cost remained at $325 and will remain at exactly that level until we finish the contract up in China. Our internet was paid in full this month for the following year. For the service (fine during the day, slow as dirt at night), the price is reasonable at $255 for the year or $21 per month.

Food

Our grocery and dining budget ballooned this month from my parent’s visit to $427. With $335 spent on groceries for the month, it is evident that we were stockpiling ingredients for the month ahead. I purchased 10 lbs of butter in preparation of baking wonderful Western sweets. Since we get the butter delivered, I thought it was better to stockpile before it gets hot here to stop melting during delivery. I am always happy that the cost of food in China is so low beside our splurges for sanity’s sake on butter, sugar, and chocolate!

The HSA Experiment

Our HSA, currently residing at HSA Bank, incurs a fee of $2.50 per month for a balance under $5,000. We will incur this fee and an additional $3 per month on that account, so we can keep all of our HSA money invested at TD Ameritrade and buy VTI, the best possible investment vehicle. VTI is the ETF equivalent of my favorite mutual fund VTSAX, Vanguard Total US Stock Market Admiral Shares.

My second month using this platform was much more successful than the first month. I did not make the same mistake as I did in February with incorrectly moving funds from HSA Bank to/from TD Ameritrade. I was able to put an additional $3,500 into the HSA bringing my total investment to $5,000 for 2017.

The investments made into the HSA will save us a good amount of taxes for 2017. At the 25% tax bracket, if assumed the HSA contributions are taken off the top, it is $1,688 in tax savings. I will be in the 15% tax bracket after all of our savings so, even there our tax savings are $1,013. These savings help to accelerate our path to financial freedom.

Taxes

Everybody hates taxes. They eat away at our income and we never even get a chance to see it. Taxes were 49% of our expenses for March totaling $2,729.

There are 2 certainties in life, death and taxes. ~Benjamin Franklin

Our taxes for March were extraordinarily high because of the tax withheld on the bonus. I initially thought it was way too high because they withheld 25% federal income tax from it, however it ended up correct. Because it is additional income above the estimated tax that I pay on my normal salary, it is taxed at my max tax rate of 25%. The 25% income tax was levied on the entire bonus, even though 50% of it went to the 401k in pre-tax contributions. Due to the expat package, I do not pay real income tax, but estimated income tax to the company, the accounting is done differently. The tax rate should probably be 15% since my saving plan for the year will put me in the 15% tax bracket but is not worth arguing.

After doing a review of my tax situation, I approached my tax preparation company about reducing my estimated taxes for 2017 and the future. I showed that I would save into pre-tax investment vehicles:

  • $18,000 to the 401k
  • $5,500 Mr. Atypical Traditional IRA
  • $5,500 Mrs. Atypical Traditional IRA
  • $6,750 to the family HSA
  • Total Value of $35,750

This is able to reduce my taxable income significantly, and when combined with personal and standard deductions on the 1040, it brings our taxable income very low. The purpose of reducing our tax withholding is because we know best how to take care of our money. The government obviously does not know what is best for me. We can put our money to work as soon as possible by investing in VTSAX and VTI, without waiting for a tax refund at the end of the year. This can gain us upwards of 12 months of growth (or decline…). It also allows us to raise our contributions throughout the year to achieve a healthy total portfolio to pursue freedom sooner.

I would never use a tax preparation company right now if it was not provided by the company. Taxes are not nearly as complicated as they are made out to be. Due to the tax equalization policy that my company implements for us, we have to have a professional tax preparation firm handle our taxes.

Savings

In total, we made $10,239 in March and were able to save the majority of that into investment funds. It was a very successful month financially, but that doesn’t matter if we did not enjoy ourselves. We should not kill ourselves to reach freedom. You should enjoy life all the time, knowing in the future it can be even better.

“Love the life you have, while you create the life of your dreams.” ~Hal Elrod

My parents came to China to visit and we got to go on a wonderful trip to Gansu province to check out the scenery and mountains there. It is nice to know you are loved and that people will travel half way around the world to come and visit.

How was your March? Are you heading towards financial independence as well? Let me know in the comments below.

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March 2017 financial review

Atypical Life 2016 Investments

2016 was a good year for the investments of Atypical Life. We were able to set ourselves up for future success through investing all of our savings throughout the year. 2016 was a breakout year for us because our priorities changed from savings for debt payoff to savings for investing. 2016 also saw huge growth in the stock market worldwide allowing us to get 20% growth in one year. We lucked out that the year with 20% growth finally had money in the market.

With all of the advice out there for where to put your money and when to put it where, it is hard to filter through it and decide on a plan of action for yourself. After deliberating on it, I was able to come up with a plan for the year, even though it changed throughout the year.

Initial Plan

  1. Max out Roth 401k
  2. Max out Roth IRAs via backdoor contributions
  3. Invest all other savings in brokerage account

With a clear plan in mind, we were able to save and invest for the year with a purpose. Each month, I was going to get my paycheck and put it towards these different areas.

Roth 401k

The plan for the Roth 401k was to spread the contributions out throughout the year and reach the 2016 max contribution in December of $18,000. The Roth 401k seemed like the best choice at the time because we could save after-tax money and never have to pay tax on it again in retirement. I had lots of feedback from financial advisors that the Roth IRA and 401k is the best way to go because of the tax advantages in retirement. It surely makes it easier when withdrawing money because you know exactly how much you have, but we shall see in a future post which way is truly better.

Needless to say, I switched from the Roth to Traditional (pre-tax) 401k for the tax savings now. By the end of the year, I had saved the maximum $18,000 between the 2 and had only lost out on the tax savings of $2,380 contributed to the Roth 401k which amounted to $595.

Company 401k Match

My company has recently become generous to the 401k match and gives us 9%, so long as we contribute 6%. This is a very high percentage of salary when compared with other company match programs, and is a big boost to the 4% we used to receive. 2016 was the first year for our new matching contributions and it was well received by all employees. It is free money, and we made the most of it amassing $6,825 in matching contributions throughout the year. Anytime we can get free money, we are all over it.

Roth IRAs

The trendy suggestion of the day is the Roth IRAs, so that is what we have been focusing on getting our money into. In the end, the difference may not be that big between the 2, but Roth IRAs are much easier while in retirement.

Moving abroad and accepting the expat package, our W-2 salary sky rocketed because of all the costs the company incurs that make it there. Because our salary might be above the limit for contributions to the Roth IRA ($181,000 for married filing jointly), we decided to exercise the backdoor Roth.

The backdoor Roth consisted of contributions after-tax to our Traditional IRAs and then after a few days/weeks, rolling the money over to our Roth IRAs. This was very easy inside of Vanguard because it was just treated as exchanging money between mutual funds. In this way, we were able to protect our Roth contributions from the possibility of our “salary” being too high. The only downside of this was losing out on pre-tax contributions to the Traditional IRA, but our salary was definitely too high to qualify.

Brokerage

We managed to get our brokerage account funded starting in December 2015, but we started to amass funds here during 2016 with a final account value at EOY 2016 of $98,000. We owned various mutual funds from Vanguard throughout the year, but eventually landed on the Vanguard Total US Stock Market Index Fund Admiral Shares (VTSAX) by the end. Because of our trading and strategy changes throughout the year, we incurred taxable short-term capital gains. This was an unfortunate part of the learning curve of investing for the Atypical Life family, but we will likely never incur these short-term gains again.

Changes to the Plan

After the year got rolling and I started doing more research, I came upon different strategies to save more money. When you are pursuing financial freedom, the recommendations for the masses may not apply.

During my research, I came across explanations of why to contribute to the after-tax 401k. The after-tax 401k is a Roth IRA in disguise. Because we can contribute a huge amount of money here ($53,000 total including pre-tax, Roth, and after-tax), it is a great way to get money to the Roth IRA. We want to get the most amount of money after retirement into Roth IRA for ease of withdrawal and tax advantages. After-tax 401k contributions can be withdrawn and rolled over separately from pre-tax 401k contributions. This allows you to rollover the after-tax contributions to a Roth IRA and only pay tax on the earnings while it was in the 401k.

When we learned the advantages here, it was a no-brainer to start contributing to the after-tax 401k. By EOY 2016 we had contributed $3,800 to the after-tax 401k with plan contributions much higher for 2017. These contributions lowered the amount in our brokerage account, but is money not needed until “retirement” so it can be placed in tax advantaged locations for the time being.

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In Conclusion

2016 saw our net worth and investment accounts sky rocket. We managed 20% gains during the year, but then again everybody did. Because we finally had a good amount of money in the market (>$100,000) gains moved the value up a lot.

I was happy to have a plan for the beginning of the year and know what my path forward was. However, refining and adjusting the plan as the year goes by can lead to future gains. Our adjustments to the plan are positioning us to reach financial and personal freedom sooner.

All of our talk and worry about finances mean nothing if you don’t have the chance to enjoy your money. So get out there, do your investing, and enjoy life.

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February 2017 Atypical Life Income Report

Welcome to the second monthly income and expense report from the Atypical Life family. We are pleased to share this with all of you, so that may have the inspiration to achieve financial independence and freedom from the man sooner. As an atypical family, this income and expense report will look very different to most family budgets, however, it is 100% real and is achievable under the right circumstances.

I share my finances to inspire others to reach for freedom earlier. I hope to show from my income and expense reports:

  • Income can be generated in multiple ways. The regular 9-5 job is not the only way to make money and is also the best way to be a slave to the man.
  • Lowering expenses is really the path towards financial freedom. The lower your expenses, the more you can save. Also, with lower expenses, it takes fewer savings to live on.
  • It is possible to have low expenses.
  • Becoming an expat is a great way to financial freedom
  • To keep me accountable.

Tracking Your Money

Keeping track of your money is the number one way to reach financial independence. We track all of our income and expenses and then analyze it all at the end of the month for you.

Using Personal Capital is the best way to aggregate all of your accounts into one nice easy view. With your accounts spread across so many different platforms, it is hard to get a whole picture of your finances. Personal Capital gives you a view of where you are, if you spent too much, saved too little, or went into debt. Keeping track of your Net Worth on Personal Capital is super easy.

The best part of Personal Capital’s service is that it is free! It fits in perfectly with our frugal sense and allows us to track and reach financial independence faster. Check out their retirement planner to estimate how far away you are from retirement. It is one of the best I have seen for those of us pursuing FIRE.

If you haven’t started tracking your finances, it is not too late to start. Give Personal Capital a try and you will soon be on your way to being a personal finance guru.

Income

IncomeAmount
Company Match$750
Expat Income$1,266
Interest$4
Salary (Mr. Atypical)$6,467
Salary (Mrs. Atypical)$116
Total$8,619

February was another good month for us in the Atypical household. We had our regular salary and our wonderful, but regular expat income. This expat income is a 20% location premium or hazard pay in expat vernacular. It is additional income for us that is grossed up by the company, so we do not have to pay taxes on it.

We saw our annual inflation adjustment to the salary this month. This year was actually the largest inflation adjustment I have ever had at 2.16%. It usually is exactly 2%, so I was happy to see them round up the numbers to an even $77,600 annual salary. They missed the adjustment to our 20% hazard pay, but I expect that to be made up in March in the next paycheck.

My company has a fairly generous 401k match at 9%, as long as we contribute 6% to the 401k. This goal is very easy for us to achieve, as we contribute 50% of our income to the 401k. There is one caveat to my 401k contributions, though. They are only calculated on salary, expat income is not included, so 50% of $6,330 goes to the 401k each month to ready us for an atypical life of freedom. 401k matching contributions is free money and we make nearly $6,000 per year from this income source.

Expenses

ExpensesAmount
Business$1,170
Fees$44
Food$216
Home$325
Insurance$74
Shopping$252
Taxes$1,065
Travel$393
Utilities$283
Total$3,822

Our February expenses were on track and on budget! They were higher than January, but that was expected because we had a couple of lumpy expenses.

The bonus we received in January from the local Chinese government got put to good use this month on a new Olympus E-M1 mirrorless camera and Olympus Pro 12-40 mm f/2.8 lens to help grow our blogging and photography businesses. Along with that, we improved our blogs with new plugins, so keep an eye out for new formatting. Because the bonus was paid in RMB to a Chinese bank account, we were not able to invest it without the fees and hassle of a wire transfer, so we have decided to allocate it to business expansion.

I managed to keep the shopping budget down to below $300 again this month, which was a huge success. Partly, this is accounting because we are counting the new camera as a business expense and not a shopping expense. However, we kept our expenses low by not purchasing frivolent goods. Our shopping consisted of a ~$100 gift to our personal driver as a thank you gift over the popular Chinese holiday, Chinese New Years. We also had the expense of repairing our other Olympus camera because the shutter locked shut in Indonesia. These 2 expenses combined to be $200 out of the total $250 for the month. After nearly 5 years of spending upwards of $600 per month on “things”, I am extremely happy to be able to so quickly reduce this amount. It may be because we have finally acquired most of the things we need, or that I am finally pursuing freedom with the attention it deserves.

Our insurance for the month is on an accrual basis because we paid for the year entirely in December. We dropped our company sponsored health insurance that cost us $250 per month and the company $750 per month in favor of a local insurance company that was ~5300 RMB or $890. This covers us for all medical expenses in Greater China and also qualifies us to use the super charged investment vehicle, the HSA.

Our home cost remained at $325 and will remain at exactly that level until we finish the contract up in China. Our internet was paid in full this month for the following year. For the service (fine during the day, slow as dirt at night), the price is reasonable at $255 for the year or $21 per month.

Our grocery and dining budget was pretty low for the month at only $210. We were traveling for 5 days out of this month, so those food expenses are included in Travel expenses. Comparing our extrapolated January spending of $183 to the extrapolated value for February of $256, we see higher expenses, but we were not trying to run out before vacation either. I am always happy that the cost of food in China is so low besides our splurges for sanity’s sake on butter, sugar, and chocolate!

The HSA Experiment

Our HSA, which has finally been successfully moved from MyBenefitWallet to HSA Bank, incurs a fee of $2.50 per month for a balance under $5,000. We will incur this fee and an additional $3 per month on that account, so we can move it to TD Ameritrade and buy VTI, the best possible investment vehicle.

During my first month using this platform, I made a mistake. I was not vigilant while transferring funds between the HSA and Investment account and accidentally withdrew $2,000 from the investment account leaving me a ($1,700) deficit in the account. When I got the email about a cash balance debit error, I was especially confused. I had never heard this term before, but after review on the HSA Bank website, I figured out what happened and promptly replaced and added more funds to TD Ameritrade.

My first foray into investing on TD Ameritrade was successful, but I am a huge fan of mutual funds. I much prefer them over ETFs because you can just add however much money you want, not having to buy whole shares at a time. The TD Ameritrade platform is very busy and seems to be optimized for day-traders and those few that spend tons of time trading stocks. For those of us that are pursuing freedom, we must remember:

Keep it simple, stupid. KISS

Taxes

Everybody hates taxes. They eat away at our income and we never even get a chance to see it. Taxes were 28% of our expenses for January.

There are 2 certainties in life, death and taxes. ~Benjamin Franklin

After doing a review of my tax situation, I approached my tax preparation company about reducing my estimated taxes for 2017 and the future. I showed that I would save into pre-tax investment vehicles:

  • $18,000 to the 401k
  • $5,500 Mr Atypical Traditional IRA
  • $5,500 Mrs. Atypical Traditional IRA
  • $6,750 to the family HSA
  • Total Value of $35,750

This is able to reduce my taxable income significantly, and when combined with personal and standard deductions on the 1040, it brings our taxable income very low. The purpose of reducing our tax withholding is because we know best how to take care of our money. The government obviously does not know what is best for me. We can put our money to work as soon as possible by investing in VTSAX and VTI, without waiting for a tax refund at the end of the year. This can gain us upwards of 12 months of growth (or decline…). It also allows us to raise our contributions throughout the year to achieve a healthy total portfolio to pursue freedom sooner.

I would never use a tax preparation company right now if it was not provided by the company. Taxes are not nearly as complicated as they are made out to be. Due to the tax equalization policy that my company implements for us, we have to have a professional tax preparation firm handle our taxes.

Savings

In total, we made $4,621 in February and were able to save the majority of that into investment funds. It was a very successful month financially, but that doesn’t matter if we did not enjoy ourselves. We should not kill ourselves to reach freedom. You should enjoy life all the time, knowing in the future it can be even better.

“Love the life you have, while you create the life of your dreams.” ~Hal Elrod

We enjoyed Indonesia and hanging out with friends in China. Indonesia was an amazing break from work and recharged my batteries both mentally and physically.

How was your February? Are you heading towards financial independence as well? Let me know in the comments below.

If you enjoyed this post, please share it on Pinterest!

financial review February 2017 Atypical Life

Why I Decided to Share Our Finances

Sharing your finances, your income, your expenses, and your lifestyle with the world is seen as taboo. We all grow up hearing that it is unacceptable to ask how much money someone makes. But if we all started to share our income and expenses with each other, I believe we can liberate ourselves and help each other grow towards the atypical life of freedom.

When I shared Atypical Life with my parents, the first comment was:

Do you really want to share all of this information online? What about your family? Who is your target audience? ~Pops

I appreciate my dad’s input and understand where he is coming from. In his generation, it was seemingly unacceptable to share one’s income, even with their own family. I never learned how much money my own dad made until he was retired. I will not share it here, since sharing income is a very personal decision.

I hope to answer his concerns below.

Do you really want to share all of this information online?

scary man
What the media wants us to think all people are like.

Of course I want to share my finances online. The world is full of people that are scared by the media. The media does their best to make the world seem like a scary and unsafe place to live. The internet is only full of trolls and those trying to steal your personal information, right?

I am an optimist and do not believe all of the scare mongering that the media likes to put out. People are good at heart. I have no qualms about sharing my finances online. I have an engineering degree from a renowned university and make a reasonable salary for that degree. I have taken the chances that have been afforded to me and have been rewarded for taking those chances. Why is this something to hide?

If we all were to share our finances online, then we would be able to better compare how we are doing against the rest of society. Is the job we are doing underpaid in comparison or are we living the good life with a good company paying above average wages? This question and many more could be answered if we had access to the information that I want to provide to all of you.

The human resources department of every large company does market research to determine wage levels and set pay grades. This allows them to make sure they do not “pay you too much”. It goes to show, the information is out there and shared anonymously between companies, but is not available for the public, to do their own fact checking.

glassdoorGlassdoor is a company that allows you to share your income and job titles anonymously. This website is a great way to post your income levels for all to see, if you don’t want people to know your identity. You can contribute to the benefit of all by sharing your income and job, so we all can do comparisons across industry and the economy. It is also a good way to research prospective companies since you can leave reviews on the company culture and other information that is not easily available online.

Why I Share my Atypical Finances

I want to share my financial information to help people. Living the atypical life is great, but being able to help others achieve the atypical life is truly exciting! Through this blog, detailing my finances and tips on how to live the atypical life of freedom, I hope to inspire more to pursue freedom on their own terms. I will share my income while I am employed by my company along with the other benefits of employment.

The second part to sharing my finances is sharing my expenses. There are 2 reasons I want to share my expenses:

  1. to help my readers see that low expenses really are possible.
  2. to help keep me accountable and lower my expenses further.

mr money mustacheMr. Money Mustache was the first financial independence retire early (FIRE) blog I came across and he inspired me to pursue the atypical life of freedom. One of the main takeaways is that the lower your expenses, the less money needs to be saved for early retirement, and the more money you can save each month. These 2 effects compound together to bring freedom super quickly. By sharing my expenses with my readers and the world, I hope to inspire you to reduce your expenses as I reduce mine in the pursuit of freedom.

As seen from my 2017 goals, I hope to lower my monthly expenses by $300 per month on miscellaneous expenditures. By blogging about my monthly income and expenses I hope to control my own habits, so that we can live the atypical life of freedom from the man sooner.

By sharing my investment strategy and investment contributions, I hope to educate you about investing. Investing is always shrouded with mystery and portrayed as something best left to the experts. I hope to share my own journey through investing and show the endpoint that is super simple. I will be sharing all of the information that I wish I knew, when I started out on this journey 7 years ago. By sharing this information, I hope to shorten the length of time to investment enlightenment for all to follow.

Identity Theft Concerns

I am not concerned about identity theft. Atypical Life is anonymous (obviously my name is not Atypical), and will certainly stay that way until at least I leave the workforce. Sharing my income, expenses, and investments is just sharing values. In order for identity theft to happen, a thief would also need account numbers and lots of my personal information that is not available. Because of this, I am not concerned.

Atypical Life Target Audience

I will answer my dad’s final 2 concerns here. My target audience is all of my readers and the public that wants to know about freedom.

I hope to help people through my openness about finances and share with others our story about how we achieve freedom.

I would love to share Atypical Life with my family, however, there is the concern that they may be jealous because of the income level I am at after only working for a few years out of college. I understand the concern here, and will likely share this only with my family that I think would enjoy the read and learn something along the way. There really is no reason to be jealous of my income because it was all earned and deserved. Because of my engineering degree, my starting salary out of college is significantly above the average college graduate, but actually low to median for engineering salaries. This coupled with my acceptance of an expat assignment in China has allowed us to pursue an atypical life.

In Conclusion

Yes, I will share my finances here on Atypical Life. Sharing of our finances both income and expenses, I hope to inspire my readers to reduce their expenses, increase their income, and achieve the atypical life of freedom sooner. Sharing your finances online and in general is a deeply personal decision, and I believe the benefits to ourselves and society greatly outweigh the risks.

Thanks Pops for sharing your concerns and helping me to realize that freedom is paramount. blog post text

Do you have a blog? Do you share your finances online as well? Why or why not? Let me know in the comments.

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January 2017 Atypical Life Income Report

Welcome to the first monthly financial review from the Atypical Life family. We are pleased to share this with all of you, so that you may have the inspiration to achieve financial independence and freedom from the man sooner. As an atypical family, this financial review will look very different to most family budgets, however, it is 100% real and is achievable under the right circumstances. So let’s begin.

I share my finances to inspire others to reach for freedom earlier. I hope to show from my income and expense reports:

  • Income can be generated in multiple ways. The regular 9-5 job is not the only way to make money and is also the best way to be a slave to the man.
  • Lowering expenses is really the path towards financial freedom. The lower your expenses, the more you can save. Also, with lower expenses, it takes fewer savings to live on.
  • It is possible to have low expenses.
  • Becoming an expat is a great way to financial freedom
  • To keep me accountable.

Tracking Your Money

Keeping track of your money is the number one way to reach financial independence. We track all of our income and expenses and then analyze it all at the end of the month for you.

Using Personal Capital is the best way to aggregate all of your accounts into one nice easy view. With your accounts spread across so many different platforms, it is hard to get a whole picture of your finances. Personal Capital gives you a view of where you are, if you spent too much, saved too little, or went into debt. Keeping track of your Net Worth on Personal Capital is super easy.

The best part of Personal Capital’s service is that it is free! It fits in perfectly with our frugal sense and allows us to track and reach financial independence faster. Check out their retirement planner to estimate how far away you are from retirement. It is one of the best I have seen for those of us pursuing FIRE.

If you haven’t started tracking your finances, it is not too late to start. Give Personal Capital a try and you will soon be on your way to being a personal finance guru.

Income

January was a good month for us in the Atypical household. We had our regular salary and our wonderful, but regular expat income. This expat income is a 20% location premium or hazard pay in expat vernacular. It is additional income for us that is grossed up by the company, so we do not have to pay taxes on it.

IncomeAmount
Bonus$5,196.00
Company Match$569.70
Expat Income$1,266.00
Gifts Received$100.00
Interest Income$4.93
Misc. Income$170.94
Salary$6,330.00
Total Income$13,637.57

Bonus Windfall!!

We finally had our windfall of a bonus that we have been expecting since July last year. This bonus was paid by the local government here in China as a talent award to individuals working in the area that applied for it. We had to put a lot of effort into the acquisition of this award, but $5,196 is worth the effort when it can bring us closer to freedom. The money was all deposited into a Chinese bank account, so we cannot pull it out for investing. The question now is how to treat this bonus? I think we will use it to double down on our pursuit of freedom with investment into blogging and self-employment.

My company has a fairly generous 401k match at 9%, as long as we contribute 6% to the 401k. This goal is very easy for us to achieve since we contribute 50% of our income to the 401k. There is one caveat to my 401k contributions, though. They are only calculated on salary, expat income is not included. 50% of $6,330 goes to the 401k each month to ready us for a truly atypical life of freedom. 401k matching contributions is free money and we make nearly $6,000 per year from this income source.

The company I work for also has a health promotion program to help them bring down healthcare costs. This program works on points from pedometers and other health monitoring inputs to give us a maximum earning potential of $1,000 per year for the 2 of us. We both wear Garmin watches to track our steps, sleep, and exercise. I use it also to track some of my bike rides that then get uploaded to the company tracking website for bonus points towards our award. All of this is to say, I withdrew $140 from the program in January.

Expenses

Our January expenses were on track and on budget!

ExpensesAmount
Fees$2.50
Food$117.54
Home$325.00
Insurance$73.91
Shopping$288.36
Taxes$1,065.46
Travel$839.86
Total$2,712.63

I managed to keep the shopping budget down to below $300 this month, which was a huge success. January is my birthday, so we usually blow by that amount on birthday presents which we need to cut back on. This January I got birthday presents of long lusted after tools for bike repair. For those of you that are into bikes, I got a Taiwanese equivalent of the Park Tool TS-1.1 truing stand for wheel building and I also got a nice torque wrench and bits for bike repair. I also got several other cycling tools to fill out my bike shop worth of tools.

Clothes shopping this month were for Mrs. Atypical. Our vacation that started in January and went on into February was a bike touring trip to Indonesia and she needed some new cycling clothes for comfort on the long days in the saddle. There will be a separate post about our wonderful and relaxing trip to Indonesia. Needless to say, we spent a total of $780 there during January and the rest of the trip cost rolled over into February.

I do accrual accounting for our personal finances. Basically, this means, that if I paid for flights to Indonesia in December, they show up as expenses when they are actually used. So half of the expense of flights to Indonesia are in January and the other half are in February. This type of accounting is typically done in large businesses where it is required by law and not by individuals, however, I feel it makes the most amount of sense. We should account for things when they happen, not when they are charged to the credit card.

Our insurance for the month is also on an accrual basis because we paid for the year entirely in December. We dropped our company sponsored health insurance that cost us $250 per month and the company $750 per month in favor of a local insurance company that was ~5300 RMB or $890 for all of 2017. This covers us for all medical expenses in China and also qualifies us to use the supercharged investment vehicle, the HSA.

Our home cost remained at $325 and will remain at exactly that level until we finish the contract up in China. I was able to negotiate a housing cost into our contract of $325 because that is what my rent had been since I started working for my company out of college. The expat contract tries to keep your expenses the same as when you were living in the USA, so if I had owned a house in the US, I would not have to pay the company rent on my apartment in China. I cannot complain about rent of $325 to live in an over-priced ritzy-glitzy $1,000,000 high-rise apartment. It also includes all utilities besides phone and internet.

Our HSA, which has finally been successfully moved from MyBenefitWallet to HSA Bank, incurs a fee of $2.50 per month for a balance under $5,000. We will incur this fee and an additional $3 per month investment fee on that account, so we can move it to TD Ameritrade and buy VTI, the best possible investment vehicle.

Our grocery and dining budget was pretty low for the month at only $118. This has to be taken with a grain of salt, though, because we were traveling for 12 days out of that month. So an extrapolated spending would be $183, which is still amazing. We received lots of Christmas gifts in January, since our mail forwarding service is very slow to arrive to China, and in them we received all of the candy we could dream of! Sweets are definitely one of the top missed items living abroad in China.

Taxes

Everybody hates taxes. They eat away at our income and we never even get a chance to see it. Taxes were 40% of our expenses for January.

TaxesAmount
Federal$350.00
Medicare$102.44
Social Security$438.02
State$175.00
Total$1,065.46

After doing a review of my tax situation, I approached my tax preparation company about reducing my estimated taxes for 2017 and the future. I showed that I would save into pre-tax investment vehicles:

There are 2 certainties in life, death and taxes. ~Benjamin Franklin

  • $18,000 to the 401k
  • $5,500 Mr. Atypical Traditional IRA
  • $5,500 Mrs. Atypical Traditional IRA
  • $6,750 to the family HSA
  • Total Value of $35,750

This is able to reduce my taxable income significantly, and when combined with personal and standard deductions on the 1040, it brings our taxable income to around $20,000. The purpose of reducing our tax withholding is because we know best how to take care of our money. The government obviously does not know what is best for me. We can put our money to work as soon as possible by investing in VTSAX and VTI, without waiting for a tax refund at the end of the year. This can gain us upwards of 12 months of growth (or decline…). It also allows us to raise our contributions throughout the year to achieve a healthy total portfolio to pursue financial and personal freedom sooner.

I would never use a tax preparation company right now if it was not provided by the company. Taxes are not nearly as complicated as they are made out to be. Due to the tax equalization policy that my company implements for us, we have to have a professional tax preparation firm handle our taxes.

Profit

In total, we made $10,953 in January and were able to save the majority of that into investment funds. It was a very successful month financially, but that doesn’t matter if we did not enjoy ourselves. We should not kill ourselves to reach freedom. You should enjoy life all the time, knowing in the future it can be even better.

“Love the life you have, while you create the life of your dreams.” ~Hal Elrod

We enjoyed Indonesia and hanging out with friends in China. Indonesia was an amazing break from work and recharged my batteries both mentally and physically.

How was your January? Are you heading towards financial independence as well? Let me know in the comments below.

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The Best Investment Allocation

The best investment allocation is the one that gives you the most amount of freedom to live the life of your dreams. Throughout 2016 I worked through my investment portfolio spread out across Roth IRAs, 401ks, and Brokerage accounts to come to my personal consensus for the optimal investment portfolio for the needs of pursuing the atypical lifestyle of early retirement.

Initial Portfolio

When I first started investing, I had no idea what I was doing. That pretty much sounds like every other investor that starts out when they first get a paycheck. We just put money in and everybody says it will grow, grow, grow! I started with an allocation of only US Growth all in one high expense mutual fund. With my first $3,000 investment, I was not really able to tell what fluctuations really did to the balance because it did not rise and fall much at all.

For the first 4 years of investing, I pretty much had a flat-line investment growth. Where was my growth? Was I doing something wrong?

At the beginning of 2016, I decided to make a change in asset allocation to try and gain more growth. It had taken nearly 4 years to build up to where I had enough money saved in investments to actually have multiple mutual funds, all of which would be Admiral Shares at Vanguard. More in the future on Vanguard, expense fees, and mutual funds in general. Needless to say, Admiral Shares at Vanguard have a minimum investment of $10,000 each, so I needed at least $100,000 to have a 10% allocation in a certain area.

Arriving into 2016, I owned a smattering of different investments, some US Growth, some dividend, some all-in-one Lifestyle funds. With investments scattered all across the board and no real plan, I decided I needed to make a plan and start to follow it to achieve success in the confusing arena of investing.

Advice From Around the Web

I decided that the best way to go about this was to aggregate the recommendations from multiple sites together and look at them. I had no real idea of what a good allocation would look like. I had heard:

US stocks, but you need international exposure.

Don’t forget the bonds. Bonds are safe.

Bonds alone are not enough, don’t forget international exposure here.

Don’t put all your eggs in one basket, you need alternatives.

So what are all of these recommendations? Let’s first take a look at the recommendations I received from the Wall Street Journal, Wealthfront, Future Advisor, and Personal Capital.

[table id=6 /]

Wall Street Journal from Paul Merriman

The Wall Street Journal was by far the most aggressive allocation that I found, with no allocation to bonds. Bonds are the “safe” bet in the investment arena because they are not tied to company value, therefore are much less volatile. While living in the US, I figured that more weight to the US was reasonable, however, the Wall Street Journal from Paul Merriman advocated for equal weight of foreign market mutual funds and US market mutual funds. With 10% weighting for emerging market, it brings it to 40/50 US to foreign market mutual funds. The 10% remaining was to be invested in REITs, or Real Estate Investment Trusts.

“REITs gives you exposure to the real estate market which has strong growth potential.”

That sounds very clique, but after enough people have said it, we really start to believe it. Here at Atypical Life, we try to take what people say and put it into perspective to what really matters for achieving freedom.

Wealthfront Recommendation for Mr. Atypical Life

WealthfrontWealthfront is an investment advisor and one-stop investment management company. I made an account there, so they could give me their recommendation for best allocation. With this, there is no commitment to give them your money. The advice is free and they hope you will join them and let them do all of the “hard work” of investing and balancing.

Wealthfront gave an even more aggressive asset allocation, in my view, than the Wall Street Journal did. They said 35% in the US market, is good and that 50% should be held in companies outside the US. The remaining 15% were to be split 5/5/5 in dividends, bonds, and natural resources. The consolation on this split is that it is only 6 funds as opposed to the 9 funds recommended by Paul Merriman.

Future Advisor Recommendation for Mr. Atypical Life

Future AdvisorFuture Advisor is the same type of service as Wealthfront and many of the other investment management services that will manage your money that you give to them. They also give free advice when you open an account and connect your investment accounts to them. They analyze your portfolio and give recommendations based on your point in life and retirement goals.

Future Advisor had a shotgun approach to investing. More is better, right? I have simplified the recommendation for the table above, but they recommended 12 different mutual funds or ETFs with a maximum of 16% balance in any one investment. This seemed like a very complicated approach to me, especially when the goal is to gain freedom, not to weigh myself down with another responsibility of maintaining complicated investment accounts. For a do-it-yourself investor like me, the more funds the more complicated and difficult to manage. If you let an investment management firm manage your investments then there is no worries about more funds.

Of all the recommendations, Future Advisor gave me the highest allocation to bonds which is surprising, with the amount of funds they suggested. They suggested TIPS, which are US Treasury bonds, foreign and US bonds. The 3 bond funds together weighted to 20% of the allocation.

Future Advisor’s investment services and advice go far beyond asset allocation. They give helpful advice in fund location, taxable vs tax-advantaged, and fee minimization.

Personal Capital Recommendation for Mr. Atypical Life

Personal Capital logoPersonal Capital is my personal favorite financial tool for account agglomeration and overall financial health monitoring. They allow you to see all of your investment accounts and bank accounts in one place and have the best interface for visualizing investment asset allocation. They also offer advice for free. If you want to give them the freedom to manage your accounts that is an option as well, though it is a paid option. The rest is free of charge and a wonderful service.

Personal Capital had a conservative approach to foreign investment with a 60/25 split for US / foreign market allocation. Since we are US citizens, albeit we don’t currently live there, I think it makes since to have a higher proportion of our money in the US economy. I believe in it and Personal Capital obviously also believes that foreign markets may be over rated.

When we analyze fees, for 2 equivalent funds, one in the US and one foreign market, the US fund is always cheaper in the US. My 2 favorite funds for this comparison are the Vanguard Total US Market Admiral Shares and the Vanguard Total International Market Admiral Shares. The US is 0.05% expense ratio while the International fund is more than double at 0.12%. It just goes to show that for a believed better return, investment companies charge a higher premium.

Although, Personal Capital advised 85% in the 2 above assets, the remaining 15% are in 3 additional. Bonds are split in 2 with foreign and US bonds along with 10.5% allocated to alternative investments. These could be REITs, gold, natural resources, etc.

Mr. Atypical’s Asset Allocation Decision 2016

Come March, I had done my research and decided on an asset allocation. Looking at the above recommendations, I did not understand the complexity of many. Why would they need 9+ funds to cover only 5 areas? I wanted to use the KISS method (keep it simple stupid). With an allocation allotted between 5 different areas, I can choose 1 fund that encompasses that area and then set and forget. Once I am invested in these funds I can just add money to them each month and then at the end of the year, I can rebalance to try and keep the asset allocation where I decided was the best target.

For me, I decided 50% US total market, 20% foreign market, 10% emerging market, 10% REIT, and 10% bonds was the best allocation. To arrive here, I looked at all of the recommendations and then averaged them together. I knew that the less funds the better for trying to balance my money, so I went with my favorite investment carrier Vanguard, and chose their Admiral funds for my allocation.

I bought into the marketing and put 10% in emerging markets, even though the total international fund includes those same businesses that are included in the emerging markets fund. This double weighted them and probably brought the allocation closer to 50/50. Hindsight is 20/20, and looking back now, owning both a International Total Market and Emerging Market Fund is useless. I also bought into the REIT craze and put my money here for a while. “REITs have higher dividends.”

Mrs. Atypical and I live abroad in an apartment that is supplied for us, so we wanted a safe investment in bonds to save for our house purchase when it comes to settling down back in the US. Who knows when this will be, but 10% of our money in bonds is more than enough to ensure a good buffer for volatility in the stock market when our time horizon for saving is long.

Thoughts on my Allocation Decision

After deciding on this asset allocation, it took a little time for adjustment to the new allocation. Since I track all of my investments manually with Gnucash as well as use Personal Capital, the more investments and accounts the more complex the picture.

Is complexity a good thing?

I began moving money around between funds trying to rebalance too often. When I added money to the Vanguard accounts, I was not sure which fund to put my money into. I already put a forecast together of end of year account balance with estimated contributions, so I knew where to put my money. However, when it came time to put money in different accounts and maintain the desired asset allocation, I was sorely inept. This ineptness caused multiple taxable moves from gains throughout the year, that brought my tax liability higher than needed since I should just be holding these funds until the time I need the money.

Then stepped in Mr. Jim Collins.

I read his blog, specifically the Stock Series, and after approximately 6 months of investing in my new asset allocation, I took a step back and looked at the learnings and explanations from the Stock Series.

Mr. Collins recommends the KISS method.

Keep It Simple Stupid. ~anonymous

His Stock Series is 30+ posts now, but condensed down to 4 bullet points, here are my takeaways from the Stock Series:

  1. According to Mr. Collins Vanguard is the best place for your funds. Check. Even my 401k got migrated there this year thanks to my company.
  2. People are emotional, and inherently stupid with money. Totally Agree.
  3. KISS. Invest in VTSAX. That is all you need to know. Will do.
  4. If you question this recommendation because everybody says “investing is complex”, refer to rule #3.

The Best Investment Allocation

VTSAX is the Vanguard Total US Stock Market Index Fund Admiral Shares and has an expense ratio of 0.05%. So for every $10,000 you have invested in this fund, the cost is $5 per year. It encompasses all of the asset sectors that are generally recommended to be invested in. This is the easiest way to get everything you need, minimize your risk, and minimize your time commitment all in one super low cost mutual fund.

Vanguard

But companies on the US Stock Market aren’t international?

Just look in the news to see Apple, Google, Exxon, and many others internationally. Just because a company is based in the US doesn’t mean you do not have international exposure. We have the US market covered, the international market covered, the emerging market covered, REITs covered, and alternatives covered. The only lack from VTSAX is in bonds. If you feel you need bonds in your portfolio for piece of mind, then do it.

The Trinity Study and many others show growth rate is barely effected with a bond allocation from 0-20% of total portfolio. I settled on an allocation of 90% VTSAX (or equivalent in 401k) and 10% bonds in the form of VBTLX, which is the Vanguard Total Bond Market Index Fund Admiral Shares. The 10% in bonds is to save for my home purchase in the future. Throughout the year, I will only contribute to VTSAX and then once per year I will rebalance to keep the bond percentage around 10%.

If you have made it this far congratulations. The optimal investment allocation is:

80-100% Total US Stock Market
0-20% Total US Bond Market

 

optimal investment allocation

Keep it simple. You will thank me later. We have more important things to worry about, like our freedom. Let’s lead the atypical life and invest with the optimal investment allocation.

For much more detail and my inspiration for this allocation and recommendation:

Jim Collins’ Stock Series

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