August 2015 Financial Update
August showed us how net worth can fluctuate wildly while income and expenses remain fairly stable. August also reminded us that investments in the stock market don’t always go up.
Our net worth reversed course from the previous six months of generally upward momentum and crashed by $74,000 to $1,470,000. That sounds like a scary sum of cash to lose in one month but I’m not worried at all.
Income for the month was lower than normal at $2,016. Expenses of $1,701 were slightly less than our anemic August income. We’re finally settling back down into our lives here in Raleigh after spending June and July out of the country on an incredible seven week journey through Mexico (with three kids!).
August yielded only $39 of investment income and interest. However, the second quarter of 2015 produced a total of $7,500 in investment income. Our next big dividend season is the end of September and early October at the end of the quarter but we’ll probably earn less than $7,500 in dividends for quarter three.
Blog income, shown as “other income” in the chart, was a paltry $81. Don’t worry too much because the readers are still showing up. I didn’t get a big check deposited until late on August 31 so it showed up in the account on September 1 and won’t get included in income until the September financial update comes out. A few other income sources didn’t exceed the thresholds to pay out during August but they will pay in September. I’m expecting September to be an above average month for Root of Good blog income.
Freelance writing income totaled $125. While not a ton of money, I also don’t devote a lot of time to this activity. It’s more than enough to pay for the whole month’s grocery bill for one person in our household, so nothing to sneeze at.
The “deposits” income of $81 represents cash back rebates and referral bonuses from the Ebates.com online shopping portal. I’m all about sharing the wealth, so if you sign up through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card. You can also refer your friends and family to the Ebates.com shopping portal, get a bonus when they sign up, and give them a free $10 gift card. Win win win situation for everyone!
Mrs. Root of Good was back at work for most of the month of August after being on a three month paid sabbatical since May (hence the paycheck/salary income in the chart). We have big news to share regarding her job and early retirement but it’s still being sorted out, so no official news today (sorry for the teaser!).
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 look at August expenses:
August’s $1,701 in living expenses is only 63% of our targeted $2,700 per month (1/12th of our $32,400 per year early retirement budget). We spent the most on groceries because we were still in replenishment mode after being away for almost two months. The $809 grocery expense includes a $242 prepayment for three months of school lunch money for two kids.
The $325 utility expense was a prepayment on our city water/sewer/trash bill. I had to meet the $3,000 spending requirement on our Chase United Mileage Plus credit card to qualify for the 50,000 mile sign up bonus, and prepaying a few months of the city water bill is an easy way to get some instant spending on something we routinely use. Read on for more on credit card bonus point hacking.
Our automotive expenses of $238 covers the annual vehicle safety and emissions inspections, property tax, licensing, and registration for our two cars. Cutting back to one car would save us half that fee every year. But I’m still not sure if we want to drop to one car.
Restaurant expenses of $131 includes one work lunch with a friend for Mrs. RoG and $120 in gift cards for Domino’s Pizza*. We spent about half of the gift cards to order pizza for our kid’s birthday party and for another meal just for our family. The remaining balance we’ll use throughout the rest of the year. Our local grocery store offered $20 off when buying $100+ of gift cards, so I “saved” $20 on groceries by buying gift cards to a restaurant we routinely visit throughout the year.
* If you think Domino’s sucks, order a steak and chicken pizza with the garlic parmesan white sauce when they run their 2 topping large pizza for $6 deal and get back to me.
The $91 gas expense includes filling the tank a few times and a large replenishment charge on our EZ-Pass toll account.
Entertainment expenses of $64 reflects the cost of a pool pass for about six family admissions to our city pools and water park. These should last us another month or two with occasional visits to the pool and water park.
Medical/dental expenses of $21 include a dentist visit and a prescription.
The “other income” expense of $15 covers the rootofgood.com annual domain name registration fee at Hostgator.
Home improvement expenses of $4 covered a new pair of toilet tank bolts to replace the old ones that rusted away and caused a small leak. Fortunately this happened while we were back at home and not while we were gone for those seven weeks in Mexico. I also used a gift card to buy $15 worth of replacement rubber faucet seats and faucet innards for both our showers since they started to leak simultaneously. I guess the rubber inside the faucets dried out from lack of use while we were gone for almost two months.
Using the gift card, I also picked up a couple pairs of outdoor work gloves and a $0.14 nut to repair the kids’ swing set. Just a continuation of my DIY habit that saves us a ton of money throughout the year. More on my DIY philosophy next week!
Credit card sign up bonus hustling
We’ve applied for these cards in 2015:
- Chase British Airways Visa x2 (50,000 bonus BA avios points each)
- Barclays US Airways card x2 (50,000 bonus AA/USAir points each)- now the Barclay AAdvantage Aviator card
- Chase United Mileage Plus Business Card x2 (50,000 bonus United points each)
- Chase United Mileage Plus Personal Card (55,000 bonus United points)
That’s 355,000 bonus points plus many thousands of additional points for meeting the $2,000 to $3,000 minimum spending requirements on most cards. By my reckoning, 355,000 points is worth roughly $7,000 in free travel.
I wanted to point out that I reached the limit with Chase and they denied my request for a United Mileage Plus Personal Card however they approved Mrs. RoG’s application for the same card. Apparently Chase wondered why I applied for two other airline miles cards with them and a third card from Barclays within the previous 3-4 months. Legit question! And one they probably won’t ask when I apply for my next Chase card in the not too distant future.
It’s about time to crank up the credit card bonus offer machine again since it’s been four months since my last credit card application. I’m eyeing a 75,000 bonus point offer for the American Express Business Rewards Gold card or a 30,000 point offer for the Amex Starwood Preferred Guest Business card. Decisions, decisions…
Check out some of the airline, hotel, or cash back/points credit card offers if you would like to get free flights, hotel nights, and other rewards. It won’t take long to accumulate enough points and miles to travel the world for free, even if you have a family like us.
Credit card bonus point offers are a key part in our strategy to stretch our travel budget as far as possible. It’s how we take extended international vacations on our $5,400 annual travel budget for a family of 5.
Year to date expenses
At $16,539 year to date spending, we are five thousand dollars under the $21,600 budgeted for the first eight months of 2015. For the year, we’ve spent an average of $2,067 per month for our family of five including a seven week vacation in Mexico.
We are on track to significantly under spend our $32,400 annual budget as long as no major unexpected expenses pop up later in the year. With a $5,000 budget surplus, we can cover a lot of unexpected mishaps in the last four months of the year and still do okay overall.
Monthly spending for 2015 to date:
- January 2015 – $2,548
- February 2015 – $903
- March 2015 – $2,443
- April 2015 – $4,549
- May 2015 – $849
- June 2015 – $3,089
- July 2015 – $498
- August 2015 – $1,701
Net Worth: $1,470,000 (-$74,000)
In July we celebrated month #5 in the $1.5 Millionaire club. We dropped below the magical $1.5 million threshold in August.
Losing $74,000 in a single month should be scary. It seems like a lot of money. In reality, we’re only as poor as we were seven months ago in early February. And I felt pretty good about our net worth back then.
Here’s an excerpt from our February 2015 Financial Update where I discuss the $74,000 gain we experienced during that month.
We lost $8,000 in net worth during January. We gained $74,000 in February. That means we’re up a net of $66,000 for the year so far. To put that amount of money in perspective, it’s two years of our early retirement living expenses. Will the gains hold in March? Who knows. The value goes up and down. Gaining $74,000 is only slightly more pleasurable than losing $74,000 (which almost happened in September 2014).
Since we tend to spend between $1,000 and $3,000 in most months, a $74,000 gain is almost meaningless in terms of day to day spending. We haven’t made any changes to our spending habits so far.
Replace “gain” with “loss” and we have:
A $74,000 loss is almost meaningless in terms of day to day spending.
We’ve seen $74,000 monthly fluctuations in net worth before (in the positive direction) and this won’t be the last time our net worth moves by a big number many multiples of our annual expenses.
For now, we’re going to keep spending like we always have. We have over a year’s worth of living expenses sitting in cash. We won’t have to worry about selling any investments for well over a year given our stream of dividend income and blog-related income to supplement our cash savings.
The month started off nice and boring (just how I like it financially) and then in the second half of the month the markets fell apart. It wasn’t entirely a waste since I made $5,000 in about 30 minutes by taking advantage of the Mini Flash Crash of 2015.
That opportunity to make quick easy cash probably won’t repeat itself soon, so I’ll stick with my advice from the July 2015 Financial Update since it’s a bit of timeless wisdom:
As for which way the markets are headed, I can’t say. No one can. Stick with a solid asset allocation and skip expensive money managers and you’ll do much better than the average retail investor over the long term.
Did August’s volatility make you panic and sell everything? Or did you double down and pick up some shares at a steep discount to prices over the last six months to year? Are you worried yet?