Time for another monthly update now that I have wrapped up month #54 in my early retirement journey! Spring arrived a little early in North Carolina and that means more time outdoors for us. Goodbye two weeks of “real” winter, we hardly knew ye!
From a financial perspective, February was a tough month punctuated by a strong dip in the stock market, officially putting us in a “correction” with the Dow and S&P 500 index both registering declines greater than 10%. At month end our net worth was down by $58,000 to a “mere” $2,056,000. The silver lining is that our income for the month remained strong at $4,736 while expenses of $3,108 tracked closely to our $3,333 budget. Spending less than you “make” soothes the sting of a big shift downward in net worth.
On to the details!
Investment income was only $314 in February. This represents monthly interest from CD’s, bonds, and the money market account. Our equity mutual funds and ETFs pay dividends quarterly in March, June, September, and December. March will find us with significantly higher investment income given the payout schedule on our equity investments. More on our dividend income.
Blog income, shown as “other income” in the chart, declined slightly to $2,028.
My early retirement lifestyle consulting income (“consulting”) of $712 was roughly the same as January. That works out to almost two hours of consulting per week which is the upper limit of what I’d like to do.
Deposit income of $1,680 came from two sources. I received $1,200 from signing up for the Capital One Spark Business card and completing the $10,000 spending requirement to qualify for a $1,000 sign up bonus (plus 2% cash back on the $10,000 spent). This led to moving some expenses forward into December, January, and February to meet the $10,000 “goal”. If you want some of this free money being handed out, check out the latest credit card offers.
The second source of “deposit income” was $480 in cash back from the Ebates.com and Mrrebates.com online shopping portals (some of which was earned from you readers signing up through these links). If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card. Some big cash back from Christmastime shopping is finally rolling in the doors this month.
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).
As mentioned, I had to spend $10,000 to qualify for a $1,000 credit card sign up bonus. This led to extra spending in December, January, and February to hit this target. In February, we spent extra to prepay utilities and I paid two months of health insurance premiums. As a result the next several months will see lower than average spending in these categories.
In spite of the extra spending, the monthly total spending of $3,108 in February came in just shy of our target spending of $3,333 per month (or $40,000 per year).
Utilities – $1,906:
We prepaid utilities as follows:
- Electricity – $801
- City Water/Sewer/Trash/Recycling – $755
- Natural Gas – $350
We average about $250 per month in total for these three bills, so we effectively paid 7-8 months of utilities all in one month. See you in September, you dirty utility bills! As an added bonus, it’ll be nice to not worry about paying these bills while we vacation in the Bahamas for a month during June and July so I can let my mind focus on more important things like crystal clear water, sand, wind, and waves.
February was also a very warm month in Raleigh. As a result we didn’t have the heat on about half the month so our gas heating bill was about half the normal amount for a typical February. Yay global warming?!
Healthcare/Dental – $728:
Our 2018 ACA plan is slightly more expensive than our 2017 ACA plan though we’re still getting heavy ACA subsidies. The $728 payment reflects two months of health insurance premiums. I elected to forego $300 per month in ACA subsidies so we’ll probably get that back at tax time to cover any tax due (in lieu of paying estimated taxes). I’m departing from that strategy going forward since it looks like we might be better off taking all the subsidies we can get. Depending on income levels, we may not have to pay back 100% of any excess ACA subsidy. I’m still learning the intricacies and interplay of regular income tax and ACA Premium Tax Credits.
We also had a dental visit during February but it was paid with a Visa Debit card purchased in December (to meet that $10,000 spending requirement!). As a result the $150 expenditure is not reflected in February’s expense report which is generated automatically from Personal Capital.
Groceries – $296:
Our grocery expense was significantly less than a typical month. We’ve slowed down on alcohol which saves some money (go figure 🙂 ). And we did dine out slightly more often than normal (which is to say we dined out a few times in total). February is also a short month. Otherwise it seems like we ate like we always do and shopped in a routine way. End result: lower than average spending on groceries.
Clothing/Shoes – $79:
We bought three pairs of Saucony running shoes for about $120 total (the missing $41 was spent in a separate order on one of those prepaid debit cards purchased in December and not tracked in this spending report). We actually bought five pairs however two of them didn’t fit so we took advantage of the generous free return policy. One of the pairs was a mismatch – the left side was size 9 while the right side was size 9.5 (neither fit). End result: all the ladies in the house are re-shoe’d just in time for spring.
Gas – $39:
We filled up in early February and still have three quarters of a tank going into March. I’ll probably top off the tank before the end of March since I earn 5% cash back on gas this quarter with my Chase Freedom Card.
Restaurants – $38:
We revisited an old favorite restaurant of ours that has changed owners since we last visited many years ago. The Wild Cook’s Indian Grill near North Carolina State University in Raleigh serves up a truly wild spread of more than a dozen hot dishes. At only $7.99 for their lunch buffet you wouldn’t expect much. But you would be wrong! We paid for our two lunches and grabbed a takeout plate to share with our kids for dinner (also $7.99 for whatever you can fit in a styrofoam tray).
For Valentine’s day we grabbed some Chinese takeout (including sushi) from our neighborhood favorite for about $12 (cost not included in the $38 restaurant total since I paid with a previously purchased Visa gift card). We considered dining in but they jacked up their normally priced $7 buffet to $13 as a courtesy to help guys celebrate Valentine’s day without their date thinking them cheap for taking them to a $7 buffet.
Our third restaurant outing was $11 for a box of fried chicken and biscuits from Bojangles. We skipped the dine in option and chose an al fresco seating arrangement on our back deck instead. I took a few dollars off the price by buying a Bojangles gift card through Cardcash.com (sign up through that link and you get $5 off your first purchase). I also use Raise.com to save money by buying discounted gift cards (take $5 off your first Raise purchase too).
Cable/Satellite – $14:
$14.99 per month for 30 mbit/second download speeds and 4 mbit/second upload speeds with no data caps.
Home Maintenance – $4:
Our microwave stopped working. Over time it grew harder and harder for the door to shut completely so that the microwave would turn on. I figured it was a simple switch or relay that went bad and sure enough it was. After a bit of troubleshooting (remember: youtube is your friend) and voltmeter usage, I isolated the faulty switch and ordered a new one for $4. While waiting for the switch to arrive, I decided to rebuild and clean the faulty switch by sanding off some of the carbonization so that it could form a more complete electrical connection when closed. So far, so good with that rebuilt switch. I still have the $4 switch waiting for installation if my improvised repair fails.
Not a bad way to avoid spending $100+ on a new microwave!
Tip: working on microwaves can potentially blow your fingers off if you aren’t careful. If you don’t know or can’t learn how to safely discharge the massive capacitor inside most microwaves, then you might want to skip DIY efforts in this case (assuming you don’t have a surplus of fingers you’re looking to rid yourself of).
Total Spending in 2018
Two months into 2018 and I can see a pattern emerging. We’ve only spent $4,332 of the $6,667 budgeted for two months of our $40,000 early retirement budget. And that’s in spite of prepaying seven months of utilities during February (which will lead to continued low spending months through the end of summer).
It feels like we’re living a $100,000 lifestyle on $40,000 per year or less. After four years of early retirement, our spending has averaged $32,000 per year (see summary below).
Monthly Expense Summary for 2018:
- January 2018 – $1,281
- February 2018 – $3,108
Summary of annual spending from all years of early retirement:
Net Worth: $2,056,000 (+$-58,000)
It’s been fun watching our net worth increase ever upward for the past two years (other than one bad month in October 2016). Then BOOM! A big fat $58,000 loss in a single month. In fact, eight days into February we were down an astounding $122,000. Such is the risk with a 90% equities investment portfolio. Eventually the stock market rebounded and we gained back about half of those losses during the remainder of February. Year to date, I’m feeling zero pain since our net worth is up a comfortable $19,000 since January 1, 2018.
I don’t know if the good times are over or if this is just another brief blip in the stock market’s continued long term growth. But I have to say the ride has been fun so far. Imagine this: in February of 2016 Mrs. Root of Good quits her full time job to join me in early retirement. Our net worth sits at $1,435,000 at the end of February 2016. In less than two years our net worth skyrocketed almost $700,000 by the end of January 2018 (in spite of both of us being early retired!).
I’m happy with all the gains we have enjoyed the past several years, but I would still be very happy with the $1.4 million or so we had two years ago. It’s still plenty to enjoy our planned $40,000 per year spending. So if the worst case happens and we lose $700,000 from our net worth high water mark, I’ll still be smiling every day when I wake up and know I don’t have to go to work. I doubt we will run out of money during early retirement even if we do see a continued stock market decline.
On the investing front, I shifted to a more conservative 90% equities and 10% fixed income allocation during 2017 into early 2018.
We now hold fixed income assets totaling $176,000:
- VBTLX Vanguard Total Bond Market Fund – $146,000 (held in traditional IRA)
- Credit Union 2% CD’s: $15,000
- Checking and Money Market at 0.25% and 1% respectively: $15,000
With this level of fixed income investments and liquid funds, we’ll be able to wait out a five year stock market correction without needing to sell anything at a capital loss. Factor in a reasonable level of dividend income plus what I’m earning from this blog and the minor consulting efforts, and we’ll be able to stretch those fixed income funds even longer. So while living through a 30%+ stock market correction will be interesting, it won’t necessarily be damning for our early retirement plans.
How is 2018 treating you so far? Ready for spring to arrive?
P.S. I’m giving away two free copies of “Meet The Frugalwoods: Achieving Financial Independence Through Simple Living“. It’s the hit new book from fellow FIRE blogger Liz Thames (who you probably know as the author of the Frugalwoods blog). From previewing an advanced copy, I can tell her new book is an engaging read!
To enter yourself in the drawing for a copy of the book, comment below and mention you want to enter the drawing for the book. I’ll pick two lucky winners on Tuesday March 13, 2018 and I’ll contact you by email (so leave a legit email in the comment form!).
**The book giveaway is over. Congrats to the lucky winners Mary W and Amy S!**