Trip to Waimanalo, Oahu

Trip to Waimanalo, HI
Waimanalo Beach

This is a one week trip where we stayed at a vacation rental in Waimanalo, Oahu. We used credit card points to cover the flights (Spokane to Honolulu) and the rental car. Waimanalo beach is spectacular with light colored sand and azure/coral blue water. Overall Oahu was a pleasant surprise, as for some reason I had expected the most populous island to be less beautiful than Kauai where we had visited previously. Instead I found the landscape stunning, and we were treated very well by the locals.

Planning the flights

We wanted to use points which required booking well in advance, almost a year. But I’ve found it’s often difficult to find convenient Round trip flights using points. But if you only look one way you can often find convenient flights using one program to get there, and a different one to return. We found convenient flights to Honolulu using 20,000 Delta Skymiles points per person and convenient flights returning to Spokane using 15,000 Flying Blue points per person. Once I had found the flights I moved Citi ‘Thank you’ points to my Flying Blue account which posted immediately and then purchased the flights. The Delta points came from an Amex gold card. In total we used 70,000 points for two people. To me there is no problem having flights there and back on different reservations/different airlines. But I like to book both passengers (DW and I) using the same program on same reservation so we can easily arrange seating together, and if the airline changes the reservation, both tickets are linked. The Flying Blue flights were actually on Delta, but we saved 5,000 points per person using Flying Blue points.

Planning where to stay

We had plans to meet up with a friend in Kaneohe while we were there so we knew we wanted to stay relatively close. We wanted a place that we could walk to a non-crowded beach and also walk to eateries. I looked at vacation rentals on VRBO and found a two bedroom cottage that cost $1,740 for a week inclusive that was a 5 minute walk to Waimanalo beach and a ~20 minute drive to our friends place in Kaneohe. I always look for places where we do not share a wall (or floor/ceiling) with others as I relish peace and quiet.

The rental car

For the rental car I used Chase ‘Ultimate Rewards’ (UR) points. DW and I had generated 100,000 UR points by each getting a Chase Sapphire Preferred card (50k UR points). I moved the points to our new Chase Sapphire Reserve card which allows a 50% bonus when redeeming points. Total cost to rent a Ford Focus from National for a week from Honolulu airport: 15,946 UR points.

Getting to Oahu

We chose an early departure (5:45 am from Spokane) that got us into Honolulu at 11:40 am. This meant waking up at 2:45 am and leaving the house at 3:15am. I have gotten used to getting up early and really prefer it now as I like to get to the destination earlier. The flight to Seattle was on an Embraer 175 which had 2+2 seating and is a jet which DW prefers over a turboprop. Nice start, in the future I will specifically look for Embraer 175 flights. Our connection was at Sea-Tac and we were able to use our Priority Pass that comes with the Chase Sapphire Reserve credit card (you have to request it) to access the ‘The Club at SEA’ lounge in the South Satellite where our departure gate was. A tasty coffee, and toasted bagel in a quiet uncrowded setting, and a bottled water for the flight and then we were on our way. We arrive on time and make our way to the National car rental booth. I videotape the car with the mileage to go over the dings and dents before we leave the lot and we are on our way.

Honolulu to Kaneohe

DW and I are both tired from the flight and ready for lunch. We drive to Kaneohe and after  two miss-steps find ‘Kenko Ya’ Japanese restaurant. It’s ~3/4 full, a good sign and we are seated. I order the special that comes with edamame, sprouts, miso soup, and two choices where I pick sashimi and shrimp tempura. DW gets a soft shell crab roll. Food is great, particularly sashimi which is fresh and we decide we will be back. A nice touch is one of the older servers (an owner?) motions us to a nicer table when it opens up. I really appreciate it when restaurant staff make an effort to improve the experience of an obvious tourist. I am beginning to really like Oahu. The Safeway is in the same outdoor Mall across from the restaurant, and we get supplies for the trip.

Kaneohe to Waimanalo

Back on the road there is some highway construction, but we make it to Waimanalo with only about 10 minute traffic delay. Ironically our vacation rental landlords have already stocked the rental with very similar food to what we bought at Safeway (bananas, milk, bread). The rental is in a neighborhood and my first take is not good. People are parking on their lawns and some young men next door with bandanas on makes me think we may be in for some loud music. As I write this two days in, the neighbors have actually been very quiet, so my fears were unfounded. After we relax we head to the beach using a public access trail and it is … spectacular.

Waimanalo beach
Trip to Waimanalo, Oahu
Waimanalo beach with view of Manana island

The views of Manana (Rabbit) Island with the coral blue ocean are stunning. There are a few groups of people boogie-boarding but plenty of space on a Wednesday. This is probably the most visually spectacular beach I’ve ever been to. After a walk down the beach we go to ‘Ono steaks’ to get take-out dinner. DW and I get the $9.50 combo of shrimp plus 4 oz. steaks with rice and salad. Back at the cottage it goes great with ice cold Kirin Ichiban beer. Later in the visit I do some body boarding.

Pearl Harbor

To get tickets to visit the USS Arizona we logged into the reservation site at 7 am the day before we wanted to go. I quickly reserved 3 tickets. We arrived, picked up our tickets, and had 30 minutes to stroll and read about the contributions of individual submarines and their crews. Ten minutes before our time we entered the line to the movie. I learn the air defense was concerned about sabotage so they parked the planes defending Pearl Harbor wingtip to wingtip without any ammunition. We take the boat ride out to the memorial and learn that survivors from the USS Arizona are being interred with their shipmates, as recently as 2017. After the Arizona tour we paid for a tour of the USS Bowfin submarine and take the audio tour. I really enjoyed it and was amazed by the complexity of the electrical power of the sub.

Bowfin submarine
Bowfin submarine
Bowfin submarine tourist attraction
Bowfin submarine controls

We had several great meals. The first was at Kenko Ya. On the second visit I got the combination meal again with butterfish and shrimp and vegetable tempura which was excellent. The most fun we had was Haleiwa Joe’s in Haiku Gardens near Kaneohe. When they brought the prime rib to the table next to us we were in shock at it’s size, huge. When it came to our table it tasted great, but there was no way I could eat it all. So DW and friend get ¼ of my prime rib and share their fish so we all end up having surf and turf. The view of the Ko’olau Mountains from the deck is spectacular, really an amazing evening.

Dining at Haliwei Joe’s in Haiku Gardens

We had a great time and enjoyed staying near Waimanalo beach. Living in the country doesn’t mean you can’t get off the farm and do something new. Credit card rewards can help minimize the cost, and keep you on track for FI. We will be back.


Country living: Rototilling the garden

Why have a garden?

There is something satisfying about growing your own food. And there are advantages of a garden versus having chickens or larger animals. First you don’t have to butcher a head of lettuce or remove its feathers. Second, you can leave a garden unattended for a few days. Third, my garden doesn’t make a lot of noise. From a financial point of view you can save some money but if you include your cost of labor you will find it doesn’t pay. But a home-made salad, fresh strawberries, or a meal where most of it came from the garden is satisfying.

Starting the garden

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Bogleheads and the Three Fund Portfolio

The Bogleheads can help you invest wisely

In the Get FI article I mention several resources for investing wisely including the excellent book “The Bogleheads’ Guide to Investing

The Bogleheads are a group whose name honors Jack Bogle. Mr. Bogle has been a champion of the individual investor and a pioneer of index mutual funds. The Bogleheads maintain an investing wiki and a forum for investing advice and discussion.

The Bogleheads wiki

The wiki is a great place to educate yourself if you want to get FI. Where to start? The getting started page. As you start to learn the basics you will eventually come across the “Three Fund Portfolio”:

Investing with the Three Fund Portfolio

You pick three index funds; a total US stock market index fund, a total US bond index fund and a total international stock market index fund. If you are using Vanguard funds the three funds are:

Vanguard Total Stock Market Index Fund (VTSMX)

Vanguard Total International Stock Index Fund (VGTSX)

Vanguard Total Bond Market Fund (VBMFX)

You then pick an asset allocation which is individualized. For example you could decide you want to have your age in the bond fund VBMFX. Then 100 – (your age) will be in the stock funds VTSMX and VGTSX. Next you decide what percentage will be US (VTSMX) and what percentage will be international (VGTSX). There is some disagreement among experts here. My approach is to have 20% in international. So what would this look like for a 30 year old?

Age in bonds would be 30% in the bond fund VBMFX

Then 100% – (30%) is 70% in the stock funds VTSMX and VGTSX

Of the 70% in stock funds 20% (20% of 70% is 14%) of the total is in international (VGTSX)

Of the 70% in stock funds 80% (80% of 70% is 56%) of the total is in US (VTSMX)

So for a 30 year old who uses the age in bonds formula with 20% of stock funds in international:
Three fund portfolio
30% in VBMFX

56% in VTSMX

14% in VGTSX

The Three Fund Portfolio wiki has more info, and if you have any questions you can ask them in the Bogleheads forum. Selling investments in a taxable account to set up a Three Fund Portfolio may incur taxes. So make sure you understand any tax implications.

Low costs matter… a lot

The costs of the Three Fund Portfolio from Vanguard are the ‘Expense Ratio (ER)’. The three funds currently (July 2017) have expense ratios of:

VBMFX: 0.15%

VTSMX: 0.15%

VGTSX: 0.18%

It is important to understand you pay these fees every year regardless of whether the funds increase in value. In the above example the overall ER for the portfolio is 0.1542%. For comparison, an all-in-one fund from Vanguard that has 25% in fixed income and 75% in equities, Vanguard Target Retirement 2030 Fund (VTHRX), has an ER of 0.15%, basically the same. I found an all-in-one fund from a well-known competitor that has an ER of 1.42%. That is more than 9 times as expensive as either the Vanguard Three Fund Portfolio or the VTHRX all-in-one fund. Does it really make a difference between 0.15% and 1.42%? Yes, over a long time span it makes a huge difference. If we estimate returns on a $10,000 investment over 25 years using the default 6.0% yearly return from the Vanguard cost calculator we see that with a 0.15% ER we end up with $94,362.22. At a 1.41% ER (the calculator does not accept 1.42%) the returns are $66,347.98. A difference of $28,014. Since one will likely be contributing constantly over this 25 years, the differences will likely be much higher. Now imagine 25-year-old you walks up to 50-year-old you with a suitcase containing $28,014 cash. Thank you very much for paying attention to costs, 25-year-old you.

So why not just use VTHRX and keep it even simpler?

Actually that is a perfectly good solution and one that might be best when starting out, particularly since the minimum investment for VTHRX is only $1,000. But there are 2 major advantages to the Three Fund Portfolio.

First, once your assets grow you can move from the ‘Investor’ class to the ‘Admiral’ class of the three funds that have lower ERs. The Admiral class funds have higher minimum investments:

Vanguard Admiral Funds

In the Three Fund Portfolio example above the overall ER for the portfolio with Admiral class funds would now drop to 0.0528%. If we plug that into the Vanguard calculator (use 0.06% as we cannot plug in 0.0528%) we see we can save even more, now we would have $96,734.46 after 25 years. So we save another $2,372. Again I’m pretty sure 50-year-old you will thank 25-year-old you for the extra $2,372.

Second, the Three fund portfolio allows you to better organize your portfolio for tax efficiency. You can keep bond funds in tax-advantaged accounts (Roth, Traditional IRA, 401k, 403b) and equities in taxable accounts which allows you to tax harvest losses and also tax harvest gains. This is complex and we won’t delve into it here. If you are just starting out it is fine to go with a low cost, all in one fund like VTHRX and worry about improving tax efficiency later.

Will a more expensive, actively managed fund outperform the Three Fund Portfolio?

The short answer is it might, but probably not. The Three Fund Portfolio is comprised of index funds that do not attempt to beat the market, only capture its returns. Rick Ferri and Alex Benke compared a Three Fund Portfolio to actively managed funds and found that the Three Fund Portfolio outperformed 82.9% of active funds over a 16 year period. See their white paper.

But I saw an advertisement for a fund that consistently beats the S&P500

See survivorship bias.

The investment policy statement (IPS)

An IPS, described here, is basically a set of rules you set for yourself to help you ignore market volatility and capture market returns over a long investment horizon. If you don’t have an IPS, maybe a month after setting up the Three Fund Portfolio the stock market gets hot. You decide you want to increase your stock holdings and change to an age – 10% in bonds formula to increase equity exposure. You sell some of your VBMFX and buy VTSMX and VGTSX. Then 2 months later there is a market correction and stocks go way down. Now having seen your portfolio drop in value you decide it wasn’t such a great idea to have age -10% in bonds, and you want to go back to the more conservative age in bonds formula. So you sell VTSMX and VGTSX and buy VBMFX. Congratulations, you have now just bought high and sold low. This is why many people never capture the returns of the market, they let emotions control their investment decisions. The IPS is a mechanism to keep you on track through good markets and bad. It’s a way to formalize your asset allocation and remove emotion from investing. As Mr. Bogle often says “Stay the course”. Your IPS can help you stay the course.

My thoughts

Once you embrace the idea that you won’t try to beat the market, just capture its returns with low cost, you are ready for the Three Fund Portfolio. There are more complicated portfolios that may or may not do better. But the simplicity of the Three Fund Portfolio can be valuable, particularly if a spouse without much investing knowledge needs to take over at some point.

Red wines I like, Independence Day, 2017

Eastern Washington has some great red wines and the Walla Walla area in particular has some outstanding values. I tend to favor Eastern WA over other regions, but I buy from all over. My strategy is to drink a mix of $8.00-$25.00 price points and types. Overall I like robust, smooth wines and am not a fan of dry wines, spicy wines or Pinot Noirs. Prices are from the Total Wine website on 6/11/2017.

top ten red wines summer 2017

My top ten red wines, Summer 2017
  1. Charles & Charles Red Blend. 2015. Washington State. $8.99 (or $8.09 with a 10% volume discount), are you kidding me? This blend of 70% Cabernet Sauv. and 30% Syrah is perfect for sipping on the porch or with a ribeye steak. I recommend letting it breathe about 45 minutes after opening. MrWheat score: 89
  1. Zerba Cellars Wild Z Red. 2012. Washington State. $22.49. Blend of 52% Merlot, 48% Cabernet Sauv. I like it on its own or with any red meat or poultry. This wine is a great example of what Walla Walla has to offer. MrWheat score: 91
  1. Robert Karl Claret. Washington State. $19.49. This one I recommend waiting till you have a steak. Any steak will do. A blend of 55% Cabernet Sauv. 17% Merlot, 10% Cabernet Franc, 9% Petit Verdot and 9% Malbec. MrWheat score: 91
  1. Kaiken Ultra Malbec. 2013. Argentina. $19.99. Pure Malbec aged 12 months in French oak. Rich flavor. I’ll take mine with roast chicken, thank you. MrWheat score: 91
  1. Marques de Caceres Rioja Reserva. 2013. Spain. $17.99. Tempranillo blend is a bit spicy but still smooth. MrWheat score: 90
  1. Columbia Crest H3 Cabernet Sauv. 2014. Washington State. $9.97. Widely available. From Horse Heaven Hills. Great on its own or with a meal. MrWheat score: 89
  1. Montes Alpha Cabernet Sauvignon. 2012. Chile. $17.99. 90% Cabernet Sauvignon, 10% Merlot. Black current and earthy with hint of sage. Let it breathe an hour. Great with potato chips. MrWheat score: 88
  1. Saviah Cellars The Jack Red. 2015. Washington State. $13.99. I recommend letting it breathe about 45 minutes after opening. Blend of 75% Merlot, 7% Malbec, 6% Cabernet Franc, 6% Sangiovese and 5% Petit Verdot. Great with pasta. MrWheat score: 88
  1. Anakena Carmenere Tama Vineyards. 2015. Chile. $12.99 100% Carmenere. A bit of spice. Goes well with pork chop with New Orleans rub. MrWheat score: 88
  1. B-Side Cabernet Sauvignon. 2014. California. $19.97. Widely available. Great for the porch. MrWheat score: 88

Country living, contract or do it yourself?

To me a major reason to live in the country is to take part in outdoor activities, so fencing, landscaping, pruning are all jobs I would rather do myself. On the other end are jobs that require many specialized tools, heavy equipment, significant knowledge or major ramifications if it is done incorrectly. For those I’d prefer to hire a contractor. Another consideration for contract or do it yourself is what you enjoy and what irritates you. And of course safety, I don’t want to do jobs where I have to be on the roof.

In our first 6 years we have:

Done ourselves Hired a contractor
 pellet stove repair central furnace repair
 exterior painting first story
painting above first story
 spraying weeds haying (for DWs horse)
landscaping/pruning/mowing  driveway gravel
minor plumbing major plumbing
 tractor repair/maintenance
 concrete for pole barn
barn/outbuilding repair
 septic maintenance
gutter cleaning  
Haying, concrete, gravel and toilets

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