The Sunday Best (2/11/2018)

The Sunday Best
The Sunday Best is a collection of articles I’ve curated for your reading pleasure.

Expect most of the writing to be from recent weeks and consistent with the themes presented on this website: investing & taxes, financial independence, early retirement, and physician issues.

 

Presenting, this week’s Sunday Best:

 

Dr. Dahle and I have a pleasant chat about part-time work, slow travel, safe withdrawal rates, and answer a number of reader’s questions. From The White Coat Investor Podcast, Physician on FIRE Update — Podcast #40.

 

I’ve got a massive mega-post from PF Geeks. Want to know how personal finance bloggers (including me) save money? 150 Proven Ways to Save Money.

 

Here’s a good way to save money. Protect some dollars from tax drag by making a Backdoor Roth contribution for you and your spouse annually. I’ve shown how it can be done via Vanguard. Dads Dollars and Debts has a tutorial for you Fidelity users. Funding a Fidelity Backdoor Roth IRA – a Step by Step Guide.

 

Remember Boiler Room? That movie where Ben Affleck teaches Giovanni Ribisi how to be a cold-hearted thief? It’s still happening, but now with cryptocurrency rather than penny stocks. A Warning Story Of Blind Momentum Investing: Inside A Pump and Dump Scheme from JP at The Money Habit.

 

You’re probably tired of hearing about cryptocurrency, but the wild ride has been something to behold. Mama Fish Saves published a great primer on cryptocurrency in Q&A form: Everything You Need to Know About Cryptocurrency.

 

I’m a big fan of three-week trips; in fact, we’re on one right now! The couple behind FI Big Sky appreciates longer-term traveling, as well. Europe – We gallivanted around it. Here’s how much it cost.

 


We spent most of last week in a Kauaian timeshare resort I booked via Airbnb. Most people regret their timeshare experience (particularly when buying after The Pitch). What has ESI Money‘s experience been? Our Latest Timeshare Adventure.

 

If you ever wanted to know more about the dude behind ESI Money (and you should), Coach Carson has the inside scoop. From Corporate Career to Financial Independence in His 50s.

 

Just how has early retirement treated ESI Money? Retirement — 18 Month Update.

 

Speaking of updates, I’m overdue on sharing Miss Bonnie MD‘s excellent interviews.

 

In case you missed it, here’s what I published this week:

Talk Me Out of Purchasing Resale Timeshare Points

 

I learned a lot about timeshares this week. We stayed at the Wyndham Bali Hai in Kauai, which we booked via Airbnb. The place was awfully nice. I don’t need luxury when traveling (I’m writing this from an off-the-grid yurt), but I don’t mind a little luxury from time to time, either.

The 2-bedroom, 2-bath apartment was spotless and nicely furnished. The grounds were landscaped and manicured, and the amenities were top notch. Our kids enjoyed the heck out of the pools, joining us intermittently in the hot tubs, and there were poolside gas grills just waiting for a slab of meat.

After checking out on our last day, we had time to kill before catching our flight to the Big Island of Hawaii, so we filled some of that time with their on-site timeshare presentation. I wasn’t about to drop tens of thousands of dollars on some timeshare points, but I was curious to know more about how their points system worked, and I was willing to learn about the program and their sales tactics for $100 an hour.

After The Pitch, we politely declined and shook hands, and I went on eBay to see what I could find. Of course, Wyndham points packages are practically given away there. People don’t get the use they thought they would, or bought a product they should never have considered in the first place, and just want to be done paying the maintenance fees.

So why would I consider buying a product people are willing to give away, and in some cases, even pay to offload?

  • With my decreased workload, we have a lot of availability and flexibility when it comes to traveling.
  • The potential to book a quality property in prime season and profit by offering the place on Airbnb ($40 off your first stay!) or VRBO is also intriguing.
  • The worst case scenario isn’t so bad. The upfront costs in resale are low, and we’ll know the maintenance fees going in. Given our flexibility and the hundreds of options in the program, we’d probably end up paying a reasonable amount to take a vacation each year we own the points.

I’m not convinced I should take the plunge, but I haven’t talked myself out of it yet, either. Perhaps you can help me with that.


Yurt So Good

 

 

green sand beach, hawaii

do you really want to yurt me?

After living like kings and queens for a few days, we’re living like people who consider a big round tent to be a home.

 

It’s actually a pretty spectacular yurt as far as yurts go. It’s got a walled-off bedroom, a sleeping loft above it, and the center is a large clear plexiglass dome that offers a great look at the starry night. The Big Island is known to have some of the best stargazing on the planet, and it’s not letting us down. Orion is out in full force, and I can see all seven of the seven sisters.

We’re surrounded by jagged lava rock, there’s not a swimming pool in sight, the shower starts trickling when toilet flushes, and my boys think it’s the coolest place on earth. It also happens to be a short drive from one of earth’s few green sand beaches — we took a nice 6-mile round-trip hike to spend the afternoon there on Saturday.

 

green sand in Hawaii

 

The Market Correction

 

In other news, the stock market has been doing stock market things, like dropping 10% for the first time in some time. As long as you weren’t heavily invested in a fund that shorts volatility, you probably weathered this storm. The wind and rain could intensify, there may be some thunder and lightning, and we might even see a bear market (can a bear take away FI?) before calmer weather returns.

Hiccups like this are expected and not at all unusual. It can be a bit unsettling to see your net worth drop nearly 10% in a week, so if that bothers you, it’s best not to pay such close attention.

If you are paying attention, though, times like these can present opportunities to harvest losses from recent investments. I did just that on Thursday this week. It wasn’t a huge loss to harvest, but I’ve been waiting for an opportunity to show you all how it’s done, so look for a post with screenshots on tax loss harvesting in a couple days.

 

Have a calm week!

-Physician on FIRE

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26 comments

  • Toby

    Excellent – I can’t wait for the TLH post! I’ve read a lot about it but it still seems awkward in the actual mechanics. PoF Screenshots®️ to the rescue!

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  • Agreed. Looking for to your tax loss harvesting post.

    That PF geeks money saving post really is epic. I am going to have to read the rest of that later.

    Hope you enjoyed your time on the islands!looks like a blast.

  • kk

    In general, how long does a market correction last?
    I have lost a lot of money during the recent stock market crash

    • Your net worth may have dropped, but unless you lock in your losses now by selling low, it doesn’t matter much in the long run, assuming the market eventually bounces back, as it has done 100% of the time over >100 years. From CNBC:

      “”The average bull market ‘correction’ is 13 percent over four months and takes just four months to recover,” Goldman Sachs Chief Global Equity Strategist Peter Oppenheimer said in a Jan. 29 report.

      But the pain lasts for 22 months on average if the S&P falls at least 20 percent from its record high — past 2,298 — into bear market territory, the report said. The average decline is 30 percent for bear markets.

      The last week of stock market drops has taken the S&P 500 into correction territory for the first time in two years.”

      Some argue that a correction or bear market is a good thing in the accumulation phase. You’re able to buy more shares at a discount during the dip. I started my career in 2006 and absolutely benefitted from the big drop in 2008 and 2009.

      Best,
      -PoF

  • I think the fact that someone is paying to get rid of those timeshares should be your first clue it’s a bad idea. Timeshares are generally a liability not a asset. You are paying for a contract for a reoccurring expense. Sometimes the timeshare company has right to block your resale. Recently we’ve been using Airbnb and sometimes those costs are less then timeshare maintenance fees in the same area.

  • Another vote in favor of the TLH post. Please also share any thoughts around harvesting tax losses for “recent” purchases (less than 12 months) vs. purchases made more than one year prior. Thanks!

  • We’ve owned a Marriott Timeshare in Aruba since 2006. We bought it from Marriott themselves, which didn’t turn out to be the best plan.

    It’s been awhile since I looked into Ebay, but it wasn’t a very good place to buy/sell timeshares. Redweek.com specializes in everything related to timeshares. When we can’t use our Marriott timeshare, we just post the week up there and sell that one-time use for cash.

    Here’s the thing though, we often just get a little more money from selling than the maintenance fees. So if you are thinking about this from a financial perspective, I suggest that you look at what your liability is with those maintenance fees and what it would cost to simply buy a one-time week on the secondary market. I think that’s the real calculation that matters if the people are really giving the points away for free.

    Also, keep in mind that maintenance fees rise however the hotel companies want them to rise. Maybe there’s real math and documentation to justify the rise in fees. We found our fees with Marriott have been going up 6.5% compounded annually since 2006. Inflation since then at least in the United States has been a good deal less.

    We also bought at a new property, so this is a time that maintenance should be at a minimum. However, now that Marriott has gone to points, I think most people pay a maintenance that’s related ALL their properties on average, which is not what we thought we signed up for.

    I wrote an article (err… rant) on this a couple of months ago that goes into the numbers in more detail:
    https://www.lazymanandmoney.com/save-money-in-aruba/

    I lean towards it being a break-even deal at best. Consider what your money buys at RedWeek.com and I think you’ll find you can get the same luxury with no ownership commitment.

  • Thanks for the mention. I switched my IRA to Fidelity from Vanguard this year just to do the step by step post…crazy right?

    As for Hawaii, sounds great. We have never been but now that we are West Coasters we are planning a 10 day trip in September…so sorry Cuba won’t be happening but at least take solace in the fact that I will be vacationing and pretending to be an early retiree!

    As for time shares, it seems like one of those things that should be avoided, much like high expense ratios. Just saying. Have a good Sunday!

  • hatton1

    You forgot an important interview…..Bonnie interviews Hatton1.
    Interviews with real women physicians -Hatton1

  • hatton1

    Check out my “beta blog” post https://wp.me/p9CTec-H


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  • Love the yurt! Sounds like you get some crazy star views at night. And I am totally jealous of the green sand beach, I’ve only seen red and black so far. #lifegoals!!

    FYI- Mr.Wow just commented that he’s not staying in a yurt during the cruise. haha!

    • Yurt on a cruise ship? I think that’d get a little drafty when sailing. But it’d be more spacious than the rooms we booked!

      Don’t forget — you’ve also seen white sand. And playground sand.

      Cheers!
      -PoF

  • Great Sunday best as always PoF! Looks like you’re having a great time in Hawaii.

    We’re heading to some warmer weather soon too!

  • Gasem

    Remember tax loss harvesting is best served with a demi-glace of post tax stocks! I’ll be quite interested to see you showcase this powerful technique.

    My impression from my study is stocks bonds and interest are all operating at 90% above the mean, so reversion to the mean is inevitable. Reversion to the mean is a good thing. It effectively is the market equivalent of portfolio re-balancing which is inherently risk reducing. I think we barely missed going into deflation (think Japan) and are now heading to more normal and safer relationship between asset classes.

    One of my wicked smart fund managers thinks equity growth will average only 2.5 to 3% over the next decade as reversion occurs. Just a data point to think about.

    • That wouldn’t surprise me. Bogle himself has been quoted predicting 4% nominal (1% to 2% real) over the next decade. Maybe it’s the next nine years, since the quote’s probably at least a year old by now.

      The potential for weak returns as I approach an early retirement emphasizes the importance of multiple income streams. I’m not going to pretend I don’t have one in this website.

      Cheers!
      -PoF

      • Gasem

        Multiple streams is good! The other solution (my solution) is a bigger portfolio prior to retirement and a clear understanding of spending and taxes (as in a more conservative SWR) and portfolio efficiency (Roth conversion, tax loss harvesting etc).

        Re-allocation is simply something to be planned for. When I retired instead of saying “if things get rough I’ll cut back”, I actually cut back about 30% to see what living on 70% was like. This included funding healthcare for myself, my wife and kids which was a new expense. It took some getting used to but after multiple spreadsheet analysis overall no big deal and I have a MUCH better understanding of the moving parts of my portfolio in various “what if” scenarios. The advantage is cutting back in early retirement is at least partial if not complete immunization to SORR plus I get an idea of how my family reacts to a lower cashflow. It’s been a rewarding experiment.

  • How was the wind that day at the green sand beach (assuming southern point beach?). It was howling and later in the day, we actually forked over the money for a Big Island Uber…

    Wind had to be 30+mph steady. Enjoy your trip!

    • That’s the spot. Papakolea beach in Hawaiian.

      The wind was calm on the hike out, but pleasantly brisk on the way back. Would have been hot if not for the breeze.

      Lots of people were forking over $20 for a ride to and from the beach. Not us. We got our exercise in for the day.

      Cheers!
      -PoF

  • Shane

    I’m not familiar with points on timeshares, but I have bought 2 from eBay. We chose a smaller resort type chain because the maintenance fees are very reasonable, and they are both high end properties that trade very well with interval international. There are a lot of timeshare haters out there but I just believe they were not informed enough to make an educated decision. We have done our research and we have a lot of free time to travel like you, so they make a great fit in our lifestyle. We will be in Breckenridge for Spring Break and Hawaii in September all thanks to timeshares. Just a heads up but Hawaiian timeshares have pretty high maintenance fees. I’ll leave you with some links to help with your decision or you contact me if you like.
    https://tugbbs.com/forums/index.php

    https://www.doctorofcredit.com/benefits-owning-timeshare/

    https://www.doctorofcredit.com/complete-guide-renting-timeshare-properties-cheap/

    • Thanks for the links, Shane. Do you mind sharing which chain you bought into?

      Best,
      -PoF

      • Shane

        Breckenridge Grand Vacations it’s a small family owned outfit. Most of their properties are 4 and 5 star resorts, and they trade very well with Interval International. It took me about a year to get it but we took a year off from skiing and traded our 2 bedroom in and got a 1 bedroom at Marriott Ko Olina on Oahu in September, it took so long because I requested that property only and a 1 bedroom or larger. We own a 2 bedroom ski week every year at Grand Timber Lodge (we have got spring break 2 years running) and a summer week every other year at Grand Lodge on peak 7, both part of Grand Vacations.

  • Thanks for the mention! Love reading about the awesome women docs who mostly manage the finances in their household.

  • JSA

    In regards to timeshares in Hawaii (I’m assuming that’s what you’re considering), maybe I can appeal to the ethical/moral side. Talking to everyone I know from Hawaii, they don’t need more tourists or snowbirders. Heavy tourism can cause all kinds of problems for locals.

    • No kidding. Problems for locals and tourists alike!

      This is our third trip to Hawaii in five years, and each time we are annoyed with the congestion, traffic, etc… At first, I thought the issue was mainly in Honolulu proper, but we’ve experienced stop and go traffic on Kauai, Maui, and the Big Island, too. There’s a lot to love here, but I’m not sure we’ll come back much when I can’t use a CME conference as excuse.

      If we were to purchase any kind of timeshare points, they would be flexible enough to allow us to travel worldwide. I wouldn’t lock into any one location.

      Best,
      -PoF

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