April 2017 Financial Update
This year is flying by so far! Now that we are one third of the way through 2017, our financial picture for the year is becoming clearer. And it’s a good picture so far. Our spending for April remained below budget at $2,981 while our income of $3,321 slightly exceeded our expenses. Our portfolio and other assets continue their upward trajectory with a $34,000 gain bringing our total net worth to $1,805,000.
This time of year is one of the prettiest in North Carolina, with moderate temperatures perfect for exploring the outdoors. Or lounging in the hammock on the back porch. The past month has been incredibly busy for us with school events, time with family and friends, tackling some issues around the house, and entering the final stages of planning and preparation for our nine week summer vacation in Europe (we leave in about a month).
Our investment income was $241 in April. The majority of our mutual funds and ETFs pay dividends quarterly in March, June, September, and December. During other months investment income tends to be much smaller. The $241 is mostly interest from our roughly $100,000 investment in our money market account and bond fund. Also included in that total is a small dividend payment from a mutual fund. I have no clue why they paid out in the middle of the quarter.
Blog income, shown as “other income” in the chart, returned to a more normal $2,193 in April after dropping to $508 in March. My early retirement lifestyle consulting took off during April with a half dozen clients seeking advice during the month. Total consulting income climbed to $836 for the month. This is busier than I would like to be long term, so if this level of interest continues I’ll probably raise rates from $125 per hour to $150 per hour in order to trim back my hours per month devoted to consulting. It’s really cutting into my video gaming / Netflix / hammock time and I’m afraid of losing my official “Early Retired” status if I work so much. Though the consulting continues to be a personally rewarding and intellectually stimulating pastime.
The $49 in Deposits includes cash back rebates from the Ebates.com and Mrrebates.com online shopping portals. If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did. When shopping online, I always check to see if I can score some extra cash back by using one of those online shopping portals (and it usually pays off!).
If you’re interested in tracking your income and expenses like I do, then check out Personal Capital (it’s free!). All of our savings and spending accounts (including checking, money market, and five credit cards) are all linked and updated in real time through Personal Capital. We have accounts all over the place, and Personal Capital makes it really easy to check on everything at one time.
Personal Capital is also a solid tool for investment management. Keeping track of our entire investment portfolio takes two clicks. If you haven’t signed up for the free Personal Capital service, check it out today (review here).
Now let’s take a look at April expenses:
We came in just under our budgeted $3,333 per month (or $40,000 per year) during April with total spending of $2,981. Where did the money go?
Utilities – $662:
In addition to paying the monthly water bill and natural gas bill, I also prepaid about $500 extra in order to meet the spending requirements on our pair of Chase Sapphire Reserve Cards. I just received one set of 100,000 bonus Ultimate Reward points for one of the Sapphire Reserve cards and I should get the other 100,000 bonus points in a few days. I had to spend $4,000 per card within three months, which is a stretch for us given our low spending of $1,000 to $3,000 during most months.
The 200,000 Chase Ultimate Rewards points can be redeemed for $3,000 of travel if booked through the Ultimate Rewards portal, or transferred to a ton of different airline and hotel partners, which in turn can be redeemed for a dozen or more hotel nights or several international round trip plane tickets or up to eight domestic plane tickets. Even if you don’t travel, 200,000 UR points can be cashed in for $2,000 instant cash back. Credit card sign up bonuses are great, aren’t they? FYI, the 100,000 Chase Sapphire Reserve offer is gone, but there is an 80,000 point bonus for a Chase Ink business card. Sell stuff on ebay? That’s a business!
Home Maintenance – $609:
This was the worst month of homeownership ever.
After noticing the electricity bill unexpectedly doubling last September, I assumed an inefficient air conditioner was the culprit. So I planned on having the HVAC system checked out this spring. $220 later and we have a clean set of coils on the outside compressor unit and an extra pound of R-22 refrigerant added to our system (and picked up a $17 discount for paying in cash). I haven’t needed to run the AC much given how cool it’s been this April and May, so I’ll probably have to wait till June to see if it helped with the electricity bill. I’ve done a bit of DIY air conditioner maintenance before but didn’t want to illegally recharge my own AC system (or blow it up accidentally).
Right around the time of the AC repair, our main sewer line completely clogged up. Not knowing where to start with the repair, I called my trusted neighborhood plumber. The proposed fix was a $750 installation of a cleanout near the foundation of my house (as long as I dug the two tons of dirt out of the hole myself; $100 extra if they dig it). So I got out the shovel and started digging. I eventually struck gold – a buried cleanout cap a couple feet down! They were able to use that cleanout to snake the main drain and remove what might have been roots from the sewer line about 50-60 feet from our house. It’s a mystery because there aren’t any large trees anywhere near that part of the yard. It might be that 45 year old sewer pipes clog up due to slow accumulations of gunk. By the end of it, I was still out of pocket $389, but at least now I know I have a cleanout available if it happens again, and I might try renting an industrial drain snake to DIY the cleaning since it looks pretty straight forward (though dirty).
Then the lights started flickering. I called the power company and they came out to determine the problem. Our meter base housing was busted and their power line from the transformer also had issues, so they shut off our power for the whole day while they installed a new meter base. They still haven’t returned to replace their line to our house, so in the meantime we have a mystery device – a “service saver” – sitting next to our electric meter that provides the neutral necessary for proper electrical service (the electrician said it was “some kind of transformer but he’s not really sure how it works”). We have power so that’s good enough for me.
I found out I could power our refrigerator and our router using a 100 foot extension cord plugged in at the neighbor’s house. While the refrigerator was pulled away from the wall, I decided to clean the coils in the refrigerator. So. Much. Dust. I’m not really sure how it was able to operate, and I assume this is why many refrigerators fail prematurely. Hopefully I’ll get around to vacuuming out the coils while brushing them clean with a toothbrush more than once a decade.
I tackled a leaking sink drain line. Unsuccessfully. So I’ll be heading to a home improvement store in May to get the parts to replace the drain line (or at least the one leaky connection).
All of this was a huge distraction in my efforts to get quotes to replace our roof. As this post goes live I’ve received over a half dozen quotes and should be selecting a roofing contractor soon. The costs came in exactly as expected – just over $4,000 on the lower end and just over $8,000 on the high end. We’ll definitely end up using one of the guys that quoted under $6,000 (which includes a few upgrades like chimney repair/replacement, additional/new gutters, and redoing the roofs on the porch and shed). Insurance already paid $3,300 and should pay another $1,100 once all the work is complete, so out of pocket costs will be limited to roughly $1,500 or less.
Although we tackled a ton of home repairs in April, and the costs are slowly mounting, it’s okay. We explicitly budgeted for all of these major and minor home repairs with a long term capital replacement plan of roughly $1,500 per year. The roof is listed in the plan at $4,000 on a 20 year replacement cycle. Major plumbing repairs listed at $1,000 every 10 years. The one big shocker will be the hot water heater since I’m planning on converting to a tankless wall-mounted installation to bring things up to code once the current 40 gallon tank water heater dies. The plumber estimated $2,300 to do that, and I’m only carrying the water heater replacement expense at $700. Oh well – can’t get it right every time.
This isn’t the first time everything decided to conspire against us at once. Over three years ago I wrote about the other time all the things broke at one time.
Homeownership certainly has its share of ups and downs.
Taxes – $600:
State and Federal estimated income taxes (minus the 2016 tax refunds received). Since we no longer have paychecks that withhold taxes for us, we have to make small quarterly estimated tax payments to avoid an underpayment penalty at tax filing time each year. We owe very little tax in early retirement, but it’s still higher than the $150 per year we paid while working full time earning $150,000 per year!
Groceries – $476:
Another slightly below average month for grocery spending. We’re trying not to buy more food than we’ll consume before we leave for Europe in mid-June, so our “stocking up” efforts are near zero these days. I would like to leave the fridge and freezer as empty as practicable in case we lose power or the refrigerator dies while we are away.
We threw a birthday party for our five year old and our nephew who turned one. We had around 30-35 guests and provided a Mexican buffet. All those groceries plus a case of beer are included in our $476 monthly grocery budget. The other family that joined us brought papaya salad, pad thai, and chicken wings.
Clothing/Shoes – $226:
A new pair of shoes for all of us so our feet will be happy while vacationing in Europe. A miscellany of shorts, shirts, and socks. Mostly in preparation for our Europe trip but things we’ll wear day to day at home too.
After I wore my new shoes for a while and completed a five mile walk/hike, I realized the new shoe has a tiny spot that causes friction on one toe. So I went crazy and dropped another $40 (after requesting a $5 discount for a tiny imperfection in the stitching on one shoe) on a SECOND pair of new shoes that are even more comfortable. I’ll be taking the more comfortable shoes to Europe. We’ll be doing five miles of walking or more on some days, and I really don’t want to suffer through uncomfortable footwear.
I’m working on loosening up the purse strings (since we can afford it) and spending where it makes sense and brings value.
Travel – $181:
We’re slowly completing the final bookings and reservations for our big summer trip to Europe. We finished booking the last two bus/train tickets from Munich to Prague and Prague to Berlin at the end of April but the charges posted to the credit card in May (so I’ll report on them next month). Here’s a preview: who knew you could buy five double decker bus tickets for the 4.5 hour ride across Germany from Munich to Prague, Czech Republic for €38 (USD$41)?
I paid our quarterly estimated taxes using credit cards in order to meet minimum spending requirements and to snag some big sign up bonuses on our pair of Chase Sapphire Reserve cards, so I’m including the $34 transaction fee for credit card usage here in the “travel” expense category.
In cruise news, we booked another cruise! As I mentioned in last month’s financial update, a very helpful Root of Good reader emailed me about an incredible deal over the 2018 Christmas holidays (yes, over a year away). It was a price mistake but before the cruise line corrected the error, we managed to book the family on a seven night cruise out of Miami bound for the Caribbean on MSC Cruises’ new ship, the MSC Seaside. Our total cost will be around $1,400 for two rooms to accommodate five of us. We only had to make a $147 refundable deposit to hold our two rooms, with final payment not due until October 2018. With two kids in middle school, the cruise over Christmas break is very helpful to avoid excessive absences from school.
Restaurants – $48:
$35 for a family meal at the Chinese restaurant to celebrate the kids’ excellent grades. $13 for a box of Bojangles fried chicken and biscuits for the whole family. We also redeemed a few free pizza codes acquired during March (with no additional costs in April).
Gasoline – $42:
One tank of gas for the minivan. We don’t drive a lot.
Cable/Satellite (Internet) – $40:
Now that Spectrum’s done gobbling up Time Warner Cable, we’ve been given a “courtesy upgrade” to a faster, more expensive internet plan. It’s currently $45 per month for the next 12 months at which point it reverts to the regular $65 (or some other crazy figure – but I’ll be at a different provider if that happens). I only paid $40 in April because I paid a bit extra in March during the transition to the new plan.
Gifts – $28:
$15 for some action figures at Walmart for our son’s fifth birthday. $13 at a local discount store for some small birthday gifts for our other daughter and a friend (and some glue for the birthday piñatas).
Healthcare/Medical – $23:
Another dirt cheap healthcare month. I paid a $5 copay to visit my new doctor for a routine physical and to get a prescription renewed (usually an extra charge at my old doc). It turns out he only charged me for a routine physical so the $5 copay will be credited toward a future office visit (or refunded at my request). I had to switch doctors since my new insurance plan for 2017 doesn’t have my previous doctor in the network (but they do have several hundred other doctors within 10 miles of me). I was pleasantly surprised with the new medical practice and might just stay with them!
I also paid $2 for a 90 day supply at the pharmacy. This new insurance is saving us more than the old insurance so far.
The balance of the healthcare/medical spending is one month’s health insurance premiums of $16. For us, the Affordable Care Act works phenomenally well in making our health insurance premiums tiny.
Since the ACA and it’s impending demise is a popular topic right now, it’s worth addressing here. The US House of Representatives passed the AHCA which is the promised “repeal and replace” bill that’s supposed to gut the ACA and Make America Great Again. The US Senate will get a go at making all the changes they want and then they have to vote on the AHCA (as modified) and pass it, then it goes to the House for further sausage making. There’s a good chance the final version of the AHCA won’t look a whole lot like the version of the AHCA just passed.
But if it does, here’s the best summary I’ve seen of the current version of the AHCA compared to the ACA (courtesy of the non-partisan Kaiser Family Foundation). Main takeaways:
- ACA premium subsidies continue through 2017, 2018, and 2019 (so it’s not an immediate “repeal”). Your subsidy declines as your income increases up to 400% of the federal poverty level.
- Starting in 2020 those buying individual coverage get a $2,000 to $4,000 tax credit per person for qualifying insurance (and policies don’t have to be purchased through the official Healthcare.gov Marketplace to qualify for the tax credit). Tax credits vary with age (older = larger credit) but not with income, however there are income limits where the tax credit phases out
- Cost sharing reduction subsidies disappear in 2020 (currently available to those earning under 250% of the federal poverty level – it’s what makes my deductible $100, max out of pocket $1,200, and my copays $5-20)
- In 2018, HSA contribution limits double to $13,100 for family coverage.
- If a state chooses to allow it, insurers can charge more for pre-existing conditions for those that have a lapse in coverage. Possibly much, much more. Maintaining continuous coverage seems to be the way to go to avoid paying a lot more for pre-existing conditions.
- Increase the age banding of premiums so that the premiums paid by older people aren’t capped at three times the premiums charged to the youngest people (under AHCA older people will pay five times what younger people pay – while only getting an extra $2,000 in tax credits)
- No more individual mandate to have health insurance retroactive to 2016
Those are the basics but trust me, I’m leaving a lot out. Medicaid and Medicare are tinkered with too.
The Senate will most likely make significant modifications to the AHCA, so it’s pure speculation as to what we’ll actually end up with once all the sausage is made.
My main takeaway as a 30-something early retiree that will be 40 by the time the ACA premium subsidies goes away in 2020 is that I’ll be paying more for health insurance that will come with higher deductibles and copays. Mrs. Root of Good and I will each get a $3,000 tax credit to use toward insurance that will probably cost $4,000-$5,000 per year per person for a basic plan, and possibly much more if healthy people choose to go uninsured (since the individual mandate will be gone and many people will pay more for health insurance, making it less affordable). I don’t know what the kids’ policy pricing will look like or if they’ll end up on Medicaid (if that’s still an option given the possibility of AHCA-related changes to Medicaid), but I understand they’ll be eligible for $2,000 tax credits too (based on their age) if we purchase individual policies for them.
In conclusion, I’m mentally penciling in an extra $4,000 or so for health insurance and healthcare costs starting in 2020, but also accepting that a lot can change with the AHCA before passage (or it might fail to pass altogether). There might be a subsequent health care bill passed later on in 2018 or 2020 as the political winds change that could put our costs back in line with where they are currently under the ACA.
Entertainment – $22:
Is it weird that I categorize hard liquor as an entertainment expense? We bought a half gallon of vodka and a fifth of tequila (1.75 L and 750 mL, respectively, for those using the far superior metric system). All bottom shelf stuff for making cocktails, although the tequila bottle did come with a red sombrero attached to the lid, so I’m pretty sure it’s high quality stuff. Or at least high octane.
Education – $13:
The middle kid’s elementary school Spring Fling Carnival. Admission included unlimited games and we bought a few raffle tickets. This could just as easily be categorized as “charity” since it’s a huge fundraiser for the PTA. So far our K-12 educational expenses have been very modest compared to those reported by some blog readers. No organized sports fees nor band fees certainly helps keep education costs to a minimum.
Electronics – $6:
3 replacement USB cables for charging the kids’ tablets. Put this in the “getting ready for our Europe trip” category of expenses.
The tablets require heavy duty USB cables with higher amp ratings to charge the tablets quickly. Monoprice.com offers good quality cables at a ridiculously low price, even though you do have to pay a couple bucks for shipping. Still cheaper than Amazon (which might sell lower quality cables).
Year to Date Living Expenses for 2017
Through the end of April we’ve only spent $9,857. That’s roughly $3,500 below our annual spending target of $13,333 budgeted for the first four months of the year. So far so good!
The two remaining big cost items for 2017 are the roof replacement and our trip to Europe. The roofing quotes are coming in low enough that it shouldn’t cost more than $1,500 out of pocket beyond the amounts paid by the insurance company.
We’ve already booked and paid for roughly $6,000 out of our $10,000 total budget for our nine week Europe trip this summer. The remaining $4,000 of vacation spending will be concentrated in June through August while we are overseas. The good news is we won’t be spending much to maintain our home or car here in Raleigh while we’re traveling.
Coming up in May, I’ll pay just under $1,000 for our annual homeowner’s insurance and umbrella policy plus our six month auto insurance policy. Even though the insurance and the roof expense will hit in May, there’s a chance we won’t exceed our $3,333 monthly budget by too much.
Monthly Expense Summary for 2017:
Net Worth: $1,805,000 (+$34,000)
Another $34,000 added to the pile. This stock market thingy always goes up, right? It’s starting to feel that way. We broke through another $100,000 milestone now that we crossed into the $1.8 million territory. How long will these gains last?
I’ll be checking our asset allocation soon to see if I need to rebalance any asset classes since the international markets have done well lately. I’m also planning on moving another $25,000 to $50,000 from equities into bonds very soon. That will bring our total cash/bonds position from roughly $100,000 up to $125,000-150,000.
If we get to $150,000 in cash and bonds, that will represent about four years of living expenses without any efforts to curtail spending, without collecting any dividends from the equities side of the portfolio, and without any side income earned from this blog, the early retirement lifestyle consulting, or other ventures I might stumble upon in the future.
In reality, we’ll keep collecting $8,000 or more in dividends and the blog plus consulting will probably bring in $20,000 or more without too much effort. If we can cut spending by 25% then we won’t need to pull more than $3,000 to $5,000 from our fixed income reserves, which means the cash and bonds could get us to Social Security age (contrary to popular belief, retiring in your 30’s doesn’t mean you won’t collect a fat Social Security check at age 67). That’s why the next stock market correction doesn’t worry me at all – we’ll be just fine for many years without needing to sell any equities at sharply reduced prices. In other words, I don’t think we’ll ever run out of money.
Still enjoying this rising market? Are you taking any defensive measures to protect against losses, or staying the course (as you probably should!)? Now that tax season is over, any new tax strategies you’re implementing in 2017?