Category: Saving

Adding a New Climate Leader and Evaluating My Net Worth

Happy new year, it’s time to check in on my portfolio! At the middle of 2023, my portfolio consisted of five index exchange-traded funds (ETFs) that fit my sustainable investing strategy. It has been pretty difficult to find investments for this approach, so I have had to learn as I go, stretching some of my rules to fit what is available to invest in. The financial industry is still catching up to the environmental, social and governance (ESG) movement, so some patience is required!

The two troublemakers I decided to keep in my portfolio last year have continued to be unimpressive: the Global X CleanTech ETF (CTEC) and the Global X Wind Energy ETF (WNDY). They have average As You Sow grades of B, but Global X CleanTech still has a gender equality grade of F and Global X Wind Energy’s fossil fuels grade remains at C—both grounds for deletion in my strategy. Though their expense ratios are favorable at 0.50%, they are the two worst performers in my portfolio, down 30.8% and 23.6% since addition.

When I searched for possible replacements for these two ETFs, I struggled to find even one that qualified. I began my quest on As You Sow, but the highest-graded ETFs on fossil fuels were severely lacking in all other areas: deforestation, gender equality, civilian firearms and military weapons, prison industrial complex and tobacco. So many had grades of D or F—a far cry from sustainable. I also used AAII’s ETF screener to see if I was missing anything, but the ETFs I found with low expense ratios had abysmal As You Sow grades.

Finally, I stumbled on the Etho Climate Leadership U.S. ETF (ETHO). It has an average As You Sow grade of B, with a gender equality grade of C. It has an expense ratio of 0.45%, which is below my 0.60% threshold. However, it has an expense ratio grade of C compared to its category. I’m trying to invest in ETFs with expense ratio grades of A or B, but I’m choosing to make an exception in this case. Ultimately, this expense ratio is lower than that of my two deletion candidates, meaning it will cost me less to hold it. Etho Climate Leadership also has decent five-year performance but significantly underperformed the market last year along with most stocks and ETFs.

Since I could only find one ETF to add to my portfolio, only one ETF will be deleted. The worst of the two, Global X CleanTech, has got to go! That gender equality grade of F has been dragging it down for too long, and it’s not even helping my portfolio’s performance—what’s the point?

Though I said in my blog post about reprioritizing my goals that I would invest another $2,000 in my Charles Schwab brokerage account if I made changes to my portfolio, I discovered that I should have enough between the proceeds from removing Global X CleanTech and the cash balance in my portfolio to invest an amount in Etho Climate Leadership that is equal to my other holdings. I’m choosing not to add more money this time because I’m also funding some other short-term goals. However, at my midyear portfolio review, I will invest more money into each position regardless of whether changes are made since I’ve been so consistent with my saving.

Speaking of saving, when I was evaluating my portfolio, I also calculated my net worth. I have been tracking my net worth on a quarterly basis consistently since October 2022. Since then, my net worth has increased by a cumulative 45.6%! I have added around $10,000 to my net worth, and I’m excited to see how the next year goes. Time to get even more competitive with myself!

Given all this traction I’ve made on my overall finances, I wanted to see how my net worth stacked up. According to The Hill, as of November 2023, the median net worth for those under age 35 is $39,000, while the average is $183,500. My net worth is below the median for my age range but not by so much that I couldn’t surpass it before turning 35. This gives me some idea of a goal to set for my rate of saving and increasing my net worth going forward.

Wishing you all a prosperous 2024!

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The Year of Financial Thinking: 2023 in Review

“Life changes fast. Life changes in the instant.”
—Joan Didion, “The Year of Magical Thinking”

It’s that time of year for everyone to compile their end-of-year list of tax and personal financial moves. AAII’s Tax Guide is now online for those who want to get a head start. My check-in is going to be a little different, with emphasis on the personal.

1. What goals did I achieve this year?

The year 2023 was not an easy one for most. I began the year reviewing my portfolio and my credit card habits, thinking I would be able to conquer the overspending of the holidays and get myself back on track. Though this didn’t happen immediately, I successfully did my taxes for the first time since I started investing. Taxes were my biggest anxiety about investing, because we all know nothing related to the government is easy. I managed to not commit tax fraud, and I no longer dread what 2024 tax season will bring. I also reached a behavioral goal of mine: looking at my brokerage account so infrequently that I saw it in positive territory more often than not.

2. What surprised me about my finances?

In 2023, I discovered that saving consistently is more important than saving the “right” amount each month. I became a little competitive with myself, so when I couldn’t put away the full amount allotted for savings in my budget, I still saved as much as I could from what I had left over. Because of this, and higher interest rates, I am significantly closer to reaching my short- and intermediate-term goals through my high-yield savings accounts than I was at the beginning of the year!

3. How did my relationship with money change this year?

Before this year, I had a lot of fear around money: running out of it, not saving enough of it, spending too much of it on rent and retiring with only enough for cheese and crackers in my later years. It took a while, but I discovered that money is malleable. When I wanted to make a large purchase but my usual means of spending weren’t available to me, I got creative and built room in my budget to take out a loan. Likewise, I lowered the goal amount I will put in savings until the loan is fully paid off. I granted myself so much freedom in this decision, and it enabled me to improve my current life while still improving my future.

4. What would make me and my money happier in the new year?

Now that I have my finances in consistent good standing, it’s time to take advantage of good ol’ compounding. By staying invested in the stock market through index exchange-traded funds (ETFs), the money my investments are making will continue to make money on top of that. Gaining more traction on my goals is my top priority for 2024, even if it means cutting back on spending in some areas. Though I am doing well on my short- and intermediate-term goals, my long-term retirement goal could really use some more attention—and money!

How was your 2023 in finances? Though it was a rough year for humanity and the majority of stocks, what are you looking forward to in 2024?

Reprioritizing My Goals With High-Yield Savings Accounts

About one year ago, I began my journey through the AAII PRISM Wealth-Building Process. Created by AAII Journal editor Charles Rotblut, PRISM is a five-step method for aligning my investing decisions with my goals. Though I went through the entire PRISM Process, I have recently been thinking about how I want to spend my money next year. This caused a shift in my goals, so in the words of Ron Weasley: “She needs to sort out her priorities.”

When I last performed the first step of PRISM, my short-term goals included amassing enough for ongoing lump-sum investments in my portfolio of index exchange-traded funds (ETFs) and saving up for international travel. My intermediate- and long-term goals were eventually buying property and funding my retirement.

I revisited the Prioritizing Your Goals worksheet, which makes it easy to visualize and plan for how much I’ll need for each of my goals.

In an exciting turn of events, my favorite band the Kills is releasing a new album this week, which means a tour next year! In their words, “it’s been a long time coming.” I’m planning to travel to see some shows so I can visit friends. International travel is still folded into the estimated cost, but I’m not sure if it will be as extensive as I previously planned.

At the beginning of 2024, I plan to do another portfolio assessment to see where my investments are at. If I make any changes, I will invest another $2,000 in my Charles Schwab brokerage account. However, if I don’t need to make any changes based on my strategy, I will be leaving my portfolio as is. That’s what makes this goal a lower priority than traveling, it’s more flexible. Sometimes the best thing to do with your investments is nothing!

I’m also planning to move next year. My current one-bedroom apartment has served me well for most of the pandemic, but I’m ready for a change. A new place in a new area (with a dishwasher 🤞) is in order. My estimated cost for moving includes first and last month’s rent, a security deposit/move-in fee and what I’ll need to pay the movers. I’m inflating this estimate a bit to account for the ridiculous rent prices I’ve been seeing.

Buying property in this economy has proved to be extremely difficult, so I changed my time horizon for this goal from three to five years to a range of five to 10 years from now. Who knows what the future holds, I could be living on the moon in 10 years! But I’m sure someone will still figure out how to charge me property taxes 😅.

My high-yield savings accounts are the primary investing vehicles for funding my short- and intermediate-term goals. My SmartyPig account is designated for my short-term goals: travel, investing and moving. I’m currently earning a 4.25% interest rate on my savings in this account, and SmartyPig has a goals feature that helps to gamify the saving process. I keep rounding up on what I think I’ll need just in case. So if I have money left over after paying for my highest-priority goal, it’s like a little gift I’m giving my future self, and the money will go toward my next short-term goal that needs to be funded.

The other high-yield savings account I have with LendingClub is for my solitary intermediate-term goal: buying property. With an interest rate of 4.50% on this account, I’ve saved about 25% of my goal. Though it’s designated for buying somewhere to live, I’ve been thinking of broadening the category for this account. If I choose down the line to not buy, I could use the funds saved up in this account for paying my rent. I could also use it to buy or rent a studio space for making art that’s separate from where I live.

I didn’t change anything to do with my retirement goal. For now, it will sit there looking at me like a joke until I can allocate more of my paycheck to my retirement account. Technically, my investment portfolio is also going toward funding my retirement since I’ll need all the help I can get. Even though this long-term goal feels so far away, I don’t want to lose focus on it just because I’ll always have more short-term goals. Hopefully, everything I’m doing to save while still being able to live my life and enjoy what I have will result in a retirement I don’t have to fear.

Check out AAII Retirement Investing for planning insights at every life phase.

Retiring Early: Memoir or Fiction?

AAII just launched a newsletter called AAII Retirement Investing, so I’ve had “retirement brain” for a few weeks. Specifically, I have been thinking about how people could possibly retire early, based on the Financial Independence, Retire Early (FIRE) movement. Back in 2019, the AAII Investor Conference featured a presentation by a couple, Tanja Hester and Mark Bunge, on how they retired around age 40.

Why retire early?

One of the benefits that draws people to retiring early is being young enough to do all the things you would otherwise be doing when your knees and back are in worse shape than they are now. If you want to travel the world, why wait until it’s more difficult to breathe and move? It’s a nice idea, but when I think about the possibility of retiring early, I could see myself taking a “retirement break” and choosing to work when I’m older and sitting down is more the vibe. (Although it would be more difficult to reenter the job market at an older age.)

If you have a lifestyle in mind for your adult years that doesn’t involve working full-time, there are ways you could “fake” an early retirement. You could work part-time for a while or do some other kind of work that requires less commitment, like freelancing. This is something that many parents do when they have kids, splitting their time between life and work. The hard thing about working part-time in the U.S. is that no employer is required to provide health insurance to part-time employees. There are some companies that offer health coverage at the part-time level, usually large corporations like Starbucks and Costco.

How do you retire early?

The first thing you have to do for anything close to an early retirement is save—big time. Many in the FIRE movement suggest saving up to 70% of your income. This is no easy feat, especially for people early in their career just starting to make enough money to make ends meet. Essentially, you will be uncomfortable and living below your means as much as you can for a while so that you can be comfortable for the rest of your life. It’s up to you to decide if it’s worth it.

But it’s not just saving that gets you to an early retirement, you have to invest those savings wisely. Those who retire early likely make a large salary from the start of their careers, but it’s not necessary. Like any financial goal, if you can stick to a disciplined plan, you can make it happen. You have to really want it, and you would have to forgo the majority of everything else you could possibly want in the meantime. What do you really value? It might help to look around your dwelling and determine what you would save in an actual, non-retirement-related fire. I would grab the linen sheets off my bed and my poetry collection (some of the books are out of print and would be hard to replace). OK, I would probably also bring a laptop and my phone, but we can pretend 😂.

An article by AAII Journal editor Charles Rotblut discusses “Five Major Considerations for an Early Retirement.” One of the more complicated parts of retiring early involves having health insurance even when you’re too young to qualify for Medicare. The Affordable Care Act (ACA) is something of an answer to this problem, but some have struggled to keep their plan with turnover and health care reform. Especially now that we are living in a world where viruses can spread anywhere and anytime, making sure you have health coverage prior to age 65 is more important than ever.

Retiring early means that everything in your finances and life has to shift. If one thing is happening earlier, everything else has to accommodate for this change. If you crunch the numbers and decide you’d rather ride it out with your 9-to-5 job, then so be it. An early retirement isn’t for everyone, and some following the FIRE ideology also own multiple properties to maintain a steady cash flow. Being a landlord and exploiting people certainly isn’t my dream, but if I figure out a more sustainable way to retire early, I’ll let you know!

Budgeting While Paying Down Debt

Another budgeting blog post, already? Yes, I regret to inform you that I’m getting extra cozy with my budget this fall. Now that my rent is too high for my liking and groceries cost the same amount of money as going out to dinner, it’s time to get real.

I’m also revisiting my budget since a few things have shifted in my expenses and income. My power bill is still going to be in the $40 range in October (the email came through yesterday, thanks to ComEd’s impeccable timing), but I got a call from Xfinity with an offer to lower my monthly internet bill for the next year! I’d rather look up the phone number of who’s calling me than actually answer the phone, but I know when Xfinity calls that it means money, honey! My internet will cost around $61 per month instead of $72, with no change in service. At this point, I’ll take any discount I can get.

My utilities for October still come out to just over $100, but with a lower base price for my more expensive utility, I know I’ll have more breathing room in the winter months.

I checked in with the budgeting zeitgeist for any new tips surfacing and stumbled on this article from the Good Trade. One of the hacks suggests asking your utility company about budgeting plans: “If you have very high electricity bills in one season and very low bills in another, reach out to your utility company to see if they offer budget plans. During a particularly cold winter in a basement apartment surrounded by concrete, our heat bill came out to nearly $400. We were able to pay closer to $120/month through a budgeting plan, rather than $400 chunks in the winter and $80 bills in the summer.”

My most expensive power bill in the summer has been close to $60, while the low end in the winter is around $20. This isn’t quite drastic enough for me to be on a budgeting plan, but if the horrors persist and costs increase over time, it’s something I can keep in my back pocket. It just strikes me as another thing that falls on the individual to take action in order to live comfortably, rather than the companies with the money and services making things easier for their customers from the get-go.

Another piece of advice from the Good Trade is to “make checking your budget a ritual so that it doesn’t cause you stress.” The article recommends having your budget with a side of wine or dessert to trick yourself into enjoying the process. Reviewing your budget more often also increases your tolerance for dealing with it. I wish I could say the same for grocery shopping, but I still have to mentally prepare myself before leaving the house and make sure I don’t accidentally spend $80!

The main reason I need to redo my budget is that I recently took out a loan to buy a new mattress. (It was so worth it, and I’m sitting on it as I write this—getting my money’s worth!) Since I’ll be paying it off each month for the next year, I added the loan payment to my fixed expenses:

Much of the budgeting advice I have found pushes you to prioritize paying down debt whenever you can, and I intend to follow it. Especially since my monthly loan payment will be coming from my checking account, I have to literally be tighter with the purse strings to ensure I have enough funds without overdrawing.

Though it’s not included in my monthly budget, I received a sizable one-time payout from being involved in a litigation claim with a skin care company. I used the brand’s platform that analyzes your skin and recommends corresponding products to treat acne, discoloration, etc. Apparently, my biometric facial data was stored by the website and exploited elsewhere. In addition to the payout, I received a voucher that can only be redeemed for buying the company’s products. I put this payout directly into my emergency savings account and will be sharing the skin care wealth with friends and family. Stay tuned for a post where I figure out how taxes work on this income!

All of these changes led me to make the tough decision of lowering the monthly amount I’ll be putting into savings until my mattress is paid off. My monthly expenses are now over 50% of my income, so something had to give (in September, they were just under 50%). I determined my savings amount by subtracting the loan payment from what I was previously saving per month and rounding it down to $500. However, I have been able to build up my emergency savings with the payout, so anything I save going forward will be allocated to my high-yield savings accounts that are making me more money than my regular savings account.

The more familiar I get with my budget, the more I realize that everything is temporary and in flux, and there’s always something I can do to make the numbers work for me. Now that I have a few different investing vehicles to take advantage of, it makes me feel less trapped by this monthly loan payment. I have the freedom to save a little less since I was consistent with my savings. My present self would like to thank past Anine, and you all, for encouraging me on this journey. I hope it inspires you to get your finances in order so you can do the things you love!

Check out AAII’s Education Hub to increase your investing knowledge and learn how to prioritize your goals with the PRISM Wealth-Building Process.

Back to Investing Basics: On the Road Again

For the August 2023 issue of the AAII Journal, I revived the Beginning Investor column with the article “Starting on the Road to Investing.” If you’ve been following along with me but haven’t started investing, I hope the article serves as a helpful distillation of what I’ve learned about my own finances so far!

Writing the article forced me to go back to basics and determine how each stop on the road to investing built the foundation for the next one. My investing journey was nowhere near as linear as the article’s order suggests, and yours doesn’t have to look perfectly tidy for you to start now.

I discuss each step, the tools required and the difficulty level below, along with my own experiences. Each section has a link that will take you to my first blog post on the topic. None of these are destinations, but ongoing processes you’ll have to revisit as you make progress.

Tools required: Pen, paper, computer

Creating a budget, though I long dreaded it, is an easy place to start. Not everyone has a budget or sticks to it, but it helped me demystify where my money was going and how much I truly had to play with. It also doesn’t require you to speak to a professional, unless you really want to, so this is a step that can be taken entirely on your own or with your partner. When I first started budgeting using the percentage budget, it was a huge relief to know that my fixed expenses were less than 50% of my monthly income. If I hadn’t started a budget, I would still be living in the dark, not understanding how much I was spending until it came time to pay the bills.

Tools required: Computer, savings account, discipline, time

Building up my emergency savings fund was the first thing I did when I graduated college and started working. Before I even heard the adage “pay yourself first,” I was saving as much as I could in a kind of competition with myself. (I’m not usually competitive, but I guess my worst enemy is myself!) Whenever I wasn’t spending money at Sephora was a good time to slide some of my leftovers into savings. Your emergency savings fund should have three to six months of living expenses—for the good, the bad and the fun things you’ll need it for in the short term.

Tools required: Computer, government-issued ID, Social Security number

I can’t tell you much about opening my regular savings account, but I believe it was done in person at an actual bank. This isn’t necessary, but if you’re unsure about opening a savings account, there are professionals who can help you virtually as well. When I opened my high-yield savings accounts, it was simpler than I thought it would be, but required a lot of front-end research on my part to find the right account for what I wanted to do with my savings. Interest rates are still increasing, so this is a great time to shop around for savings accounts with higher yields than your regular bank savings account, if you have one.

Tools required: Computer, materials from your employer, your budget, some mutual fund knowledge

Starting to invest in my retirement account wasn’t just hard logistically, it was also a very difficult decision to cough up the money from my paycheck. My employer-sponsored 403(b) account was eligible for contributions when I filled out the paperwork and chose which mutual funds to invest in. Except I made all those decisions without factoring in my own contribution. I couldn’t afford to live and save for retirement at the same time, so I put it off. When I created that budget I was talking about, I realized I could finally make it work.

Tools required: Cold hard facts, your budget

Only you can determine how much you need to start investing, based on what you decide to invest in and what you have available to spare. You could start with $5 if that’s all you have, but it would limit you to fractional shares or very small stocks. If you have $1,000, you could potentially invest in a mutual fund or a few exchange-traded funds (ETFs).

First and foremost, you have to invest in yourself, which means building up your savings and thereby your net worth. When you have your financial foundation of savings, any excess can be allocated to your investments and other goals. You can do hard things! Go forth, invest!

Budget Status: It’s Complicated

If you’re tired of hearing about my budget, that makes two of us!

Last time we talked about my budget, I tried out a mini-budget to get back on track with my savings. I haven’t been able to save quite as much as I wanted, but I’m still trying to stick with the percentage budget I have in place to save around 20% of my monthly income.

I recently renewed the lease on my apartment, and my rent increased by $100 to $1,300—as if my landlord thinks all the pictures I take of the sunset every night can pay my bills! It wouldn’t have been so bad if I had received it during the day, but when I came home at 10:00 p.m. on a Saturday night, my building manager was in the lobby waiting, lease in hand. If I hadn’t immediately texted the friend I had just been out with and my mom about it, I wouldn’t have believed it myself 😂!

Thankfully, this higher rent doesn’t apply until September, so I have some more time to be anxious about it! With my rent at $1,300 and my air conditioning hiking up the price of my utilities, my total fixed expenses slid in at 49.7%, just under 50% of my monthly income. I had a feeling it would be tight, but I have the peace of mind that after this lease is up, I’ll be moving out to find something better for my money (with a dishwasher, which should no longer be considered a luxury in this economy!).

Before I updated my budget with these increases, I thought I might have to decrease the amount I could save going forward. Thankfully, there’s still room in my budget to allocate 20% to savings. In my latest blog post, I moved money from my SmartyPig high-yield savings account into my brokerage account. I’m feeling comfortable with the amount I have invested for now, so I can shift my focus to building up my savings in SmartyPig and LendingClub to continue taking advantage of the high interest rates.

Since every month is different, with various occasions to buy things for and necessities to replenish, I should probably be updating my budget more regularly—possibly every month. At this point, I’m not sure if it will help or hurt the process in place; if it will make me feel like I have more or less freedom to live my life. Ultimately, my sense of wealth depends on how much time I spend doing the things I love, and that means spending money. It might help to have some foresight when expensive months are on the horizon so that it’s not a surprise when I can’t save enough—I can just pretend it was all part of the plan 😉.

Do you think this view should cost $1,300? Comment below!

Should Young People Still Save for Retirement?

Retirement has been on my mind lately, and not in a romantic way. When I picture my retirement, I don’t necessarily think of what I’ll be doing or where I’ll be—I think of the air quality I’ll be living in and imagine that the vibes will be, generally, bad. I promise I’m not catastrophizing here; I’m just trying to be realistic about the way the world could turn out so I can prepare for the worst. The worst, in this case, would mean that there would be no retirement for my generation and other young people.

I read an article on MarketWatch that discusses how young people should wait to start saving for retirement, in some cases until middle age. The logic comes from the life-cycle model, which is an economic theory of how people consume based on their income. The theory holds that people will save more when they have higher income and borrow more when they have lower income—seems pretty simple, right? Someone who has just started working likely doesn’t have the income to start saving for anything. The usual financial advice given to young people when they start working is to begin contributing to their retirement account as soon as possible, max out their contributions and ensure they are getting their employer-matched contribution (free money!). The article states that, instead, this could do a lot of harm to young people who are just getting on their feet financially and might not be able to afford any level of retirement contributions until they are making a higher salary.

I found this to be a validating point, as I certainly couldn’t afford to start contributing to my retirement account when I was first eligible. Instead, I prioritized building up my emergency savings until I could move out on my own and made decisions based on the kind of life I wanted to have in the present. (Trying fancy artisan cheeses was definitely a higher priority than retirement during this time!)

We save for retirement because we want to maintain a certain standard of living once we are no longer working. This sounds a lot simpler before you decide to crunch the numbers, factoring inflation into your future. Not only are young people worse off financially in the current economic environment, but the latest I’ve found is that millennials now need to save between $3 million and $4 million for retirement. Yes, I laughed out loud when I read that! When I first started working at AAII, the magic number was $1 million for retirement. Six years later, a threefold increase from that number seems to be leaving a huge chunk of the point on the table: Wages have not and cannot keep up with inflation and likely never will. So if millennials are supposed to be saving three times the amount our parents thought they had to save for retirement, how on earth are we expected to keep up with that? (Seriously, do we need to get the aliens involved?)

The MarketWatch article also touches on low-income workers and Social Security, saying that Social Security should be the main source of retirement savings for them: “In essence, the more Social Security replaces of your preretirement income, the less you’ll need to save.” The only downside here is that Social Security may be significantly depleted by the time low-income millennials need to retire.

Much like a minimum wage, I think there should be a baseline salary that everyone deserves to make in order to survive. This could vary based on the cost of living in your area. If we work in order to live under capitalism, then we need to be able to actually live on what we are making from working. The baseline salary wouldn’t necessarily have to be entirely provided by the company you work for, but it could be provided from other sources that are meant to help people, like the government (in a perfect world where there’s no debt ceiling).

Trying to imagine myself with $3 million at the time I retire is harder to believe than many of the works of fiction I’ve consumed. If the cost of living continues to skyrocket with no accountability in other areas of the economy, people won’t even be thinking about retiring, they’ll be too busy trying to survive!

So where does this leave me and my retirement plans? Right where I left them: My 403(b) account slowly increasing with each paycheck contribution, me still not sure where or when I will ever retire and the peace of mind that I still have time to see if the world doesn’t end before then.

PRISM Step 5: Monitoring Your Allocation, Progress and Life Stages

This is the final post in this initial series. You can read the rest of these blog posts here to learn more about how to use the AAII PRISM Wealth-Building Process!

PRISM is a five-step method for aligning my investment decisions with my goals, created by AAII Journal editor Charles Rotblut. The fifth step details how to use PRISM as a cyclical process that changes as you and your investments age.

The final step of PRISM contains three parts of your financial life to monitor: allocation, progress and life stages. Asset allocation is the process of dividing your investments between different categories like stocks, bonds and cash. Currently, my investment portfolio and my retirement account are pretty much fully allocated to stocks via exchange-traded funds (ETFs), but I have around $80 in cash in my Charles Schwab brokerage account.

Using AAII’s My Portfolio tool, the A+ Investor Asset Allocation Analyzer shows me that the breakdown of my portfolio of index ETFs is a bit off from the AAII Aggressive Asset Allocation Model. The aggressive model calls for 60% invested in domestic stock, 30% in foreign stock and 10% in bonds. My index ETFs round out to 53.5% domestic stock and 46.4% foreign stock, and obviously nothing is in bonds (which, according to AAII founder James Cloonan, is a sound portfolio strategy). I decided to take a look at my 403(b) retirement account as well to see if the average asset allocation of my overall investments could be closer to the aggressive model. My 403(b) has 80.3% in domestic stock and 17.1% in foreign stock. Combined with my index ETFs, my average allocation is 66.9% to domestic stock and 31.8% to foreign stock—definitely closer to the model!

During my next portfolio review at the end of June, I might take a deeper look into my allocation, but for now I’m happy with where I stand.

Next on the list is to check my progress toward my goals. Back in the first step of PRISM, I determined my short-, intermediate- and long-term goals and how much I thought I would need for them. My nearest-term goal is to accumulate $2,000 for the next lump-sum investment in my brokerage account. I’m using my SmartyPig high-yield savings account to track this goal and have about $500 more to go. By my next portfolio review, I should have realized this goal. My goal of buying property in the next three to five years has an estimated cost of $35,000. I’ve been neglecting this goal because the housing market has been ridiculous and, after determining the pros and cons of owning property, I decided that renting is my best option until I feel the need to run away and become a forest witch! Even so, I should be taking more advantage of the 4.25% yield my LendingClub savings account is offering. I currently have around $7,200 and if I can add money more consistently to this account, I could be a lot closer to my goal in the next five years.

The last part of the fifth step of PRISM is to assess any life stage changes that have occurred. Using the Monitoring Your Life Stages worksheet, I determined that nothing has changed, except that I have to walk a lot more to stave off knee and back pain!

Though I made it through all five steps of PRISM, that doesn’t mean I’ll never look at my investments through the lens of PRISM again. When a life stage change occurs, I will need to determine if any revisions are needed to my goals, risk tolerance, allocation and management preferences and apply any of these changes to my investments. PRISM will make its return whenever something dramatic happens to me—I’ll keep you posted!

One-Year High-Yield Savings Accounts Update

Shortly after I last discussed my high-yield savings accounts, interest rates increased again and haven’t showed any signs of slowing! On October 6, 2022, LendingClub increased my annual percentage yield (APY) to 2.85%; later that month on October 26 it reached 3.12%; and by the new year, we broke 4%! As of mid-March 2023, the APY is 4.25%—12 times the national average, according to LendingClub. For perspective, LendingClub was offering a 0.65% interest rate back in March 2022 when I opened these accounts.

My SmartyPig high-yield savings account is not getting as much love, but the interest rate is holding steady at 3.50%. When I opened my SmartyPig account, the interest rate was only 0.70% on my savings. I started a new goal with SmartyPig to have $2,000 ready to invest in my Schwab brokerage account by June 30 to correspond with my next portfolio review. Unfortunately, my SmartyPig goal didn’t come with a higher yield as it did the first time I set this goal back in the fall.

In total, I’ve made over $175 across these two high-yield savings accounts in the last year. Meanwhile, my investments have lost money since March 2022. When going through my transaction history to see how much I made on my savings, I saw the huge differences in interest payments that were a result of not only the increasing yield but also the compounding interest I’m making on my savings. The interest I’m being paid increases because there’s more money in my account to make interest on (like magic!).

Back in October 2022, I calculated my net worth for the first time. Since then, I performed a net worth checkup on a quarterly basis. My net worth has gone up by roughly $2,000 each quarter, which is directly attributed to how much I’ve been putting away in savings. If I wasn’t saving on a regular basis, and specifically if I didn’t have these high-yield savings accounts to make the most of my money, I wouldn’t have made as much progress on increasing my net worth.

Before writing this, I moved the $580 I have allotted for monthly savings into my regular bank savings account. Now that I can actually see the difference my savings are making to my overall wealth, I’m feeling more motivated to save. My goal isn’t to make the most money I can, but to be disciplined with the money I already have. As the many financial voices I have in my head keep telling me: Pay yourself first! It pays off.