August 2016 Financial Update
Now that August is over, we are officially in the last third of the year! It’s hard to believe the year is already winding down. August was a decent month financially. Our net worth crept up another $2,000 to $1,635,000. Income totaled $5,191 while expenses were $2,817 for the month.
After spending the first part of August on our three and a half week road trip to Canada, we returned home in mid-August to a flurry of activity to get the kids ready for school. That meant buying school supplies (including a brand new fancy pants TI-84 CE color graphing calculator) and attending two back to school orientations. Our oldest daughter just entered middle school so now we have twice as many PTA meetings and school events to fit into our not-so-busy schedules. She’s loving middle school so far!
Here’s what our August 2016 looks like under a financial microscope.
August investment income was $60. Our portfolio consists of mutual funds and ETFs that pay dividends at the end of each quarter. September will generate a much higher level of investment returns. We are well on our way toward matching or exceeding the total of $28,527 in dividend income received in 2015.
Blog income, shown as “other income” in the chart, ballooned to $4,279 in August while my early retirement lifestyle consulting brought in $565. Blog income was higher than normal because I received two month’s worth of payments from a major revenue source. The consulting income was also higher than normal and I’m not sure why other than strong traffic thanks to continued good exposure in the media (including this podcast interview with fellow 30-something early retiree blogger Brandon the MadFIentist).
$211 in Deposits includes the cash back rebates from the Ebates.com and Mrrebates.com online shopping portals. If you sign up through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did. I try to do all of my online shopping through one of these portals and the cash back adds up fast. For example, in August I booked an $810 cruise through Expedia by clicking through Ebates to get to Expedia. I’ll be getting $81 in cash back once we return home from the cruise in December (more on the cruise later in this article!). Ebates is a nice way to get a 10% discount on every cruise from a booking site we already use.
The $64 Insurance income is a refund of our auto insurance premiums thanks to removing the Honda Accord from our policy. We became a one car family when we sold the 2000 Honda Accord in June (after debating whether we should be a two car or one car household for a while!). Our auto insurance premiums are now $344 per year for a half million dollars of coverage for two drivers. Given how little we drive on a routine basis, I’d say that’s pretty fair.
The $10 “Entertainment” income came in the form of a $10 rebate check from a liquor purchase. We categorize hard liquor purchases as “entertainment” whereas beer and wine find themselves in the “groceries” category. It’s an arbitrary distinction but makes sense when you consider we buy liquor at the state run ABC store whereas we buy wine and beer at the grocery store (and don’t feel like splitting the wine/beer to a separate category called “alcohol” because we simply don’t spend a ton in that area. Burp.).
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:
After spending a measly $1,190 in July, we seem like frivolous spendthrifts in August because we spent a whopping $2,817 during the month. That’s cool, we’re still $500 under our budget of $3,333 per month (or $40,000 per year). The higher spending comes from booking more travel for later in the year and from taking care of business after returning home from our almost month-long vacation.
Travel – $1,144: August represents the second month in a row where travel topped our spending. That’s no accident since it makes up our single largest expense category in our carefully crafted annual retirement budget at $10,000 per year. Around $300 of the travel expense covered gas for the van, meals at restaurants, parking, tolls, and other travel related expenses for the nine days of August that we were on vacation.
We booked another cruise for late 2016 for $810. They are fun. After our annual turkey-filled Thanksgiving fiesta we will set sail in late November on a five night cruise from Jacksonville, Florida destined for Half Moon Cay, Bahamas (a private island) and Nassau, Bahamas. On this cruise we’re only taking our four year old son and cruelly leaving our two older daughters at home with Grandma so the girls can attend school (bwahahahahaha). Don’t worry, our two daughters will join us on an even better and longer seven night cruise later in December (should we even unpack between the two cruises?).
I think we are done booking cruises for 2016. Maybe. Unless a really good deal pops up later in the year. We are only spending around $5,000 of our $10,000 travel budget in 2016. The unspent funds will help cover the cost of a potential eight to nine week excursion through Europe in the summer of 2017 (more details on that at a later date!). I hear Europe ain’t cheap like Mexico. Or our sub-$1000 3.5 week Canada trip this year for that matter.
Groceries – $816: A few hundred dollars higher than usual in August after underspending the budget by a few hundred dollars in July. We restocked the fridge and freezer after returning from our trip. And restocked the pantry and wine cabinet. We also spent a hundred bucks on massive quantities of heavily discounted toilet paper and did this with it:
Healthcare/Medical – $249: Health insurance premiums of $125 for our very impressive gold plated silver plan obtained through Healthcare.gov with some very sizable ACA subsidies. $99 for a routine cleaning, x-rays, and exam from our super awesome dentist that gives great discounts to cash/debit payers. $25 for a few prescriptions.
Home Maintenance – $225 + Home Improvement – $59: Our magical plumber earned a solid $225 this month by replumbing and installing a new shower valve, faucet and supply pipes plus installing a new kitchen faucet. The shower developed a slow leak that appeared while we were out of town (fortunately mold wasn’t an issue!).
This is all work that I could maybe DIY but choose not to. My track record on plumbing jobs is pretty poor so I probably saved myself a few bucks by outsourcing the task. $59 was most of a new shower valve and faucet from Lowe’s (the remainder came from gift cards purchased over the past year and recorded as “home maintenance” expenses at the time). Of course I purchased a $15 off $50 Lowe’s coupon from ebay for a buck which saved me $14 on the purchase.
I spent the several hours of the afternoon while the plumber was here profitably researching our summer 2017 Europe trip. I don’t regret the $225 expenditure a bit (really more like $150-175 after factoring in cost of supplies and special tools). It’s taken me a while to get to this mindset of outsourcing tasks I really don’t enjoy or don’t excel at. But I think I proved my mettle in this situation by putting the wrench down and picking the phone up.
Restaurants – $81: Two visits to the Chinese restaurant plus a birthday pizza party for the 10 year old and half a dozen of her friends (and a half dozen of our friends!).
Utilities – $72: Water, sewer, trash, and natural gas bill. These bills were much lower than normal because we were out of town during most of the billing cycle. All told, we saved about $200 on utilities during the 3.5 weeks we were out of town. The electric bill doesn’t make a showing in this expense report because we still have a credit balance from pre-paying the electric bill in the spring to meet credit card minimum spending requirements to qualify for sign up bonuses (gotta love credit card travel hacking!).
Clothing – $56: Back to school clothes.
Education – $46: School supplies.
Internet (“Cable”) – $34: 50/5 mbit service.
Root of Good hosting fees – $27 (not shown in the summary chart): Once per year domain name registration and privacy protection service. I paid about $60 per year for 3 years of hosting and things are working quite well for me at Hostgator. I like Hostgator and recommend them if you’re thinking of starting a blog.
Gas – $0: Other than refueling during our road trip (which gets included in the “travel” category), we didn’t spend anything on gas in August. The van is below a quarter of a tank so I expect to drop $30 or $35 on a full tank in the next several days. That should last us the remainder of September.
Year to Date Living Expenses
At $26,538 year to date spending, we are once again below our annual spending target of $26,667 budgeted for the first eight months of the year by about a hundred dollars. In spite of the $8,200 minivan purchase in March, we managed to get our year to date spending back in line with our annual target. I guess we’ve been lucky that we haven’t suffered any large unexpected expenses. That’s mainly because we included the routine “unexpected” stuff when we developed our first annual early retirement budget over two years ago. Unexpected expenses are highly predictable over the course of a 40+ year retirement.
September should be a relatively low expense month other than $600 in estimated tax payments to North Carolina and the IRS. The weather cools off here in Raleigh and almost all of our favorite outdoor activities are free or very inexpensive. Now that the oldest two kids are back in school full time, we are back to our school year early retirement weekly routine.
Monthly Expense Summary:
- January 2016 – $2,293
- February 2016 – $2,030
- March 2016 – $10,911 (includes minivan purchase)
- April 2016 – $1,829
- May 2016 – $2,979
- June 2016 – $2,485
- July 2016 – $1,190
- August 2016 – $2,817
Net Worth: $1,635,000 (+$2,000)
At +$2,000, it’s a small gain, but a gain nonetheless. August started with a slight drop in the markets before a strong recovery that fizzled out a little toward the end of the month. September is already shaping up to be a great month.
It’s a bit scary watching the investment portfolio climb month after month because these things rarely go up in a smooth line. I’m expecting a dip at some point but not doing much about this “knowledge” because I don’t know when this dip will happen, how severe it will be, or when the market will recover. If I knew any of that, then Bernie Madoff’s investors would have invested their billions with me for a guaranteed 12%+ annual return.
In a way, I am doing something defensive during this time of perpetual market gains. In portfolio news, I just sold $15,000 worth of a junk bond I bought many years ago at a steep discount to par. I sold it at 99.8% of face value (the theory being “get out while the gettin’s good”). That pushes our cash on hand to roughly $50,000. That represents about two years of core living expenses. Add to that the $8,000 to $10,000 in taxable dividends we get each year and we’ll be close to two years of our full-of-fluff $40,000 annual budget. And then there is the $2,000 to $3,000 per month that this blog and my little Early Retirement Lifestyle Consulting brings in right now.
To summarize, I might need to figure out a strategy for all this cash on hand. It’s invested at 1% in a FDIC/NCUA insured money market at my credit union right now. I could move some of it to 1.75% four year CD’s (with 90 day interest loss for early redemptions) at the same credit union with near-zero effort. I’m thinking that might make sense. Bond fund yields don’t seem too exciting right now with the Vanguard Total Bond Market Index Fund yielding 1.88% for a fund with an average duration of 5.8 years (that translates to a non-negligible loss of principal if interest rates increase).
I guess this “too much cash” is a great problem to have. At these recent market highs, we have almost $1.5 million invested in equities, which means our overall liquid net worth is 97% equities and 3% cash. That’s very aggressive overall. I’m in no hurry to redeploy any of the $50,000 cash because it feels nice and comfy as a security blanket since we have no bonds in the portfolio at this point.
How was your August? Did you see big gains or a smaller steady rise in net worth? Any big shifts in spending if you (or your kids) are headed back to school?