Category Archives: Personal Finance

March 2017 Financial Update

money-january-2014

I can’t believe we are already a quarter of the way through 2017!  Financially speaking, we are doing incredibly well as we ride this bull market up and up.  March left us $15,000 wealthier thanks to investment gains with our net worth climbing to $1,771,000.  Our expenses for a family of five were very modest at just $1,388, while our income remained strong at $3,747 for the month thanks to quarterly dividend payments.

On the non-financial side, life is going swimmingly well.  We’re two months away from our nine week sojourn through Europe.  Springtime brings us beautiful weather here in North Carolina so we get to enjoy the outdoors more.  And last but not least our oldest daughter made the A honor roll.  College scholarships here we come!

 

Income

Our investment income was $2,791 in March.  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 (closer to $100-150).

Blog income, shown as “other income” in the chart, dropped to $508.  That’s due to the lumpiness in payments from advertisers.  A check came a few days into April instead of the end of March as I was expecting, so I’ll have a great month in my next financial update post.  Fortunately I have a very generous cash buffer so I don’t need to rely on the cash flow from this blog to pay my monthly bills.  My early retirement lifestyle consulting income dropped to $240 for March.  It’s just as well since I’ve been busy having fun on other pursuits.

The $180 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.  I spent over $4,000 on gift cards to cover lodging for our trip to Europe and received over a hundred dollars of cash back from Ebates on those purchases.

The healthcare/medical “income” of $27 represents a reimbursement of some prescription copays from 2016 where we paid the full price at the pharmacy for preventive medicines that should have been free.  The insurance company noticed the mistake and repaid us on their own initiative!  I filed an additional claim for another $27 x 2 to seek reimbursement for two other instances of overpayments during 2016, but I won’t be surprised to never see a dime of that money.

march-2017-income

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).

 

Expenses

Now let’s take a look at March expenses:

march-2017-expenses

We came in well under our budgeted $3,333 per month (or $40,000 per year) during March with total spending of just $1,388.

 

Groceries – $421:

We spent slightly less than our $500 per month average for groceries.  We used up a few small gift cards for Aldi and Walmart that we purchased at Raise.com when they ran some promotions earlier in the year.  If you haven’t checked out raise.com for discounted gift cards for places you already shop, then feel free to save an extra $5 off your first purchase at Raise.com.

If you’re curious about what kind of groceries we buy, here’s a snapshot of an entire month of groceries from a few years ago that probably includes more “junk food” than we routinely purchase in an ordinary month these days.  The low grocery spending is simply a continuation of our grocery buying strategy.

We don’t do extreme couponing at all.  Instead of couponing, we check the weekly sales papers from a few local grocery stores within 1-3 miles of our house and take notes on potential good buys from their selection of heavily discounted loss leaders and sale items.  We pick the best one or two grocery stores for the week and head there to get our staples, necessities, and the loss leaders and sale items.  Unfortunately most of the sale items are junk, so there has to be some compelling discounts on actual stuff we want to buy to attract us to the grocery store that week.  We do well using this strategy to save big on meat, seafood, fresh fruits and vegetables, some dairy, eggs, and non-perishables.

At any given time, we have several types of fresh veggies and a couple cuts of meat in the fridge (plus several more in the freezer).  In the pantry we keep plenty of rice, noodles, and basic canned goods on hand because we know we’ll be eating several times per day.  Using these basic building blocks, some fresh lime and cilantro, plus a pantry full of spices, curries, sauces, and seasonings, we can make just about anything.  Googling recipes works well too.

Just a few treats we made this month:

My delicious homemade pad thai

My delicious homemade pad thai

Calamari fried rice

Calamari fried rice

Thai pork cucumber salad

Thai pork cucumber salad

 

Travel – $396:

We continue to book bits and pieces of our summer Europe trip.  Right now we are two train tickets away from having all ground transportation booked.  During March we spent $396 on travel expenses.  Half that went toward a pre-paid rental car reservation with the other half spent on four sets of train tickets for the five of us (one of which will be in first class!).  Those train tickets will carry us across Italy, Slovenia, Austria, and Germany.

We also spent a dollar on a five pack of US-to-Europe electrical adapters from ebay.  Direct ship from China.  It amazes me that I can purchase electronics straight from China for under a buck including shipping.

In cruise news, we booked another cruise!  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 $150 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.

 

Utilities – $191:

Water, sewer, and trash bill plus natural gas bill.  We prepaid the electric bill for several months ahead to generate some spending for our credit cards so we can score some huge sign up bonuses.

 

Electronics – $115:

Who knew photos and videos take up so much space? We had to buy a new 2 terabyte hard drive to store all that digital media.  We also picked up a few other goodies like a camera bag for the t5i DSLR camera we’re taking to Europe along with a lightweight wireless mouse.

 

Cable/Satellite (Internet) – $84:

Spectrum bought Time Warner. Along with a new internet overlord comes a new and improved higher price tag. Yay competition! Oh wait…

We’re now paying $45/month instead of $35 with Time Warner.  It took a while to negotiate Spectrum down to $45.  On the upside, they upgraded me from 50 mbit service to 100 mbit service.  Which doesn’t really matter since I rarely use more than 50 mbit of throughput.

The $84 charge also includes $35 for February plus a few bucks extra to make sure I paid the bill in full since the swap to the new rate looked complicated on the bill.

I’m looking forward to finding out more about Spectrum’s low income rate plan that provides 30 mbit service for $15 per month for “qualifying households”.  They don’t have information on their site about this plan yet, so I don’t know if we will qualify.  I would definitely take that package at a 66% discount since 30 mbit bandwidth is plenty for us (a high definition Netflix stream uses about 5 mbit, for reference).  As long as there aren’t too many hoops to jump through (like applying for the plan through a social services agency and filling out reams of paperwork).

 

An uncommon mid-March snowy day.

An uncommon mid-March snowy day in Raleigh, North Carolina.

Same view later in the afternoon when it was warm and sunny.

Same view later in the afternoon when it was warm and sunny.

 

Healthcare/Medical – $71:

I paid $55 for a routine cleaning and exam at the dentist.  It’s normally $99 but I paid the copays for the kids twice by accident, so the $44 overpayment was credited to the charges for my visit.

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.

Every month I speculate on the future of the Affordable Care Act and this month is no different. Except the continued existence of the ACA is less in doubt these days compared to the past several months.  In case you missed the news, March was an exciting and surprising time for American healthcare.  The House Republican plan didn’t make it to a vote because GOP leadership withdrew the bill due to lack of support.  The proposed American Health Care Act (AHCA) would have sort of kind of repealed the ACA after three years (effective 2020) and replaced the current ACA tax credits with something entirely different.  Tax credits calculated a different way!! (<– sarcasm).  Many of the other provisions of the ACA remained intact.  In other words, you might pay more or less for health insurance under the AHCA versus the ACA and you might call it Trumpcare instead of Obamacare, but it’ll still feel similar to the ACA.

But the AHCA didn’t make it to a vote.  The far right “Freedom Caucus” conservatives didn’t like it because they recognized it wasn’t really much of a departure from the ACA on a fundamental level (“it’s still an entitlement program”), while the moderates in the Republican party realized the AHCA would lead to tens of millions losing access to medical insurance and health care because of the removal of income-based subsidies currently available under the ACA.  Both the far right and the center didn’t want to take the heat in the upcoming midterm election of 2018 (note for non-US readers: our US House of Representative legislative seats are up for election every 2 years and campaigning isn’t far off for contested races).

What does this mean for early retirees and access to guaranteed issue (maybe) affordable health insurance?  Right now it means the ACA remains the law, subsidy cliff and all.  What is uncertain is whether the Republicans will introduce an AHCA v2.0 bill that gains traction.  The vote would have been very close on AHCA v1.0 so I can imagine an AHCA v2.0 could be successful if the right palms are greased and the greediest pockets lined with enough silver and gold.

Our family wouldn’t have fared horribly under AHCA v1.0, since we would still have guaranteed access to health insurance but starting in 2020 we probably would have paid several thousand dollars per year more for a policy with much higher deductibles and copays.  And the insurance would grow much more expensive as we aged, while the tax credits would increase only slightly to compensate for higher premiums.

The big question remains.  What is the fate of the ACA?  Looking at prediction markets where people bet real money on the outcome of political issues (like this one at Predictit.org), suggests a 30-40% chance that the ACA will be substantially repealed and replaced by year end 2017.  Interestingly, the market on the fate of the pre-existing condition coverage reveals just a 12% chance of losing that specific provision.  To summarize, people betting real money think there’s a fair chance we’ll have a repeal-ish and replace bill in place soon, but it will keep at least some provisions of the ACA such as coverage of pre-existing conditions.  I think prediction markets in general are more accurate than expert opinions or polls when it comes to knowing the unknowable.  Consider that the prediction markets were putting the odds of a Trump win as high as 36% in the week preceding the November 8, 2016 presidential election (so it wasn’t a complete surprise for those of us that follow the political prediction markets instead of solely the news’ polls and “experts”).

Will ACA be around in 2020 and beyond? Definitely. Maybe. I don’t know.

 

Gasoline – $64:

I filled up our minivan not once, but twice (!!) during March.  Once at the very beginning of the month and once at the end.  My Chase Freedom card was paying 5% cash back through the end of March so I went ahead and filled up before I needed to in order to snag a little extra cash back.  All this carpool driving to school is driving up our gas costs!

The upside to morning carpool drop off duty: beautiful sunrise/moonsets over downtown

The upside to morning carpool drop off duty: beautiful sunrise/moonsets in downtown Raleigh

 

Restaurants – $36:

We bought take out pizza for a birthday party for around 15-20 guests. We paid in part using gift cards purchased through Groupon during 2016, and the rest was a gift card purchased through Raise.com at a discount.

This was perhaps the most insane deal on pizza ever. I bought gift cards at a discount, and the gift card purchased through Groupon (using a coupon and cash back through ebates!) came with two free pizza coupons.  Then, when I bought the pizza for the birthday party, I used a 50% off coupon and stacked it with a “spend $15+ and get a free pizza code” promotion (times 2 for a his and hers account).  When it’s all said and done I think I paid $2-3 per large pizza.

We celebrated Pi Day on 3/14 at a local pizza place that offered 17″ NY style pizzas for $3.14 each ($6 and change for two, which was enough for a couple of meals for the five of us).  More $3 pizza.  In this case, restaurants are cheaper than home cooking.

17 inches of pure pizza x2. Only $3.14 each. Happy Pi Day!

17 inches of pure pizza x2. Only $3.14 each. Happy Pi Day!

And we got some fried chicken from Bojangle’s (a magical place here in the South if you like fried chicken).  $12 for a dozen thigh pieces.

Never pay retail.

 

Entertainment – $5:

$5 for roller skating admission for one kid.  We threw a birthday party for our newly minted 12 year old and hosted a few other gatherings at our house, but those expenses ended up in the “grocery” or “restaurant” category.

All the besties celebrating 12th birthday for our oldest daughter.

All the besties celebrating the 12th birthday for our oldest daughter.

Smashing the homemade piñata

Smashing the homemade piñata

Adults eating pizza and drinking beer. Can you find the fresh salad I carefully crafted that NO ONE TOUCHED?

Adults eating pizza and drinking beer.

Building dueling robots when the Children's Museum visited our library

Building dueling robots when the Children’s Museum visited our library

 

Year to Date Living Expenses for 2017

march-2017-ytd-expenses

After spending $6,876 for the year through the end of March, we are more than $3,000 below our annual spending target of $10,000 budgeted for the first three months of the year.  I don’t think we’ll make it to almost $40,000 of spending like we did in 2016.

I made progress on reroofing the house.  I don’t have a contractor yet, but I do have $3,300 in cash from the insurance company.  On the advice of some blog readers and family and friends, I called my insurance company to see if they could check my house for hail damage.  It turns out we DO have hail damage and we need a complete roof replacement (score!).  They estimated the price at just over $7,000, and cut me a check immediately for the actual cash value of the roof minus our $2,500 deductible.  In theory if the costs escalate above $5,800 I can recuperate an additional $1,300 or so in “depreciation” that they won’t pay me until they see receipts and documentation that the work is done.  I have a call into the insurance adjuster so I can understand exactly how all this works and how I need to negotiate with contractors to ensure the optimal deal for me.

I’ve been budgeting $4,000 to $8,000 for our roof replacement so this might be a nearly free roof depending on how the quotes come back and how much extra work we get the contractor to perform.  The roof project was going to be our biggest expense of 2017, so this is great news for our budget.

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.  We probably won’t spend a ton beyond that $4,000 while we are gone, so 2017 is shaping up to be somewhat of a low spending year already.

 

Monthly Expense Summary for 2017:

 

Cousin play time. Glad to be able to offer (free) childcare to family occasionally when they have to work

Cousin play time. Glad to be able to offer (free) childcare to family occasionally when they have to work

 

Net Worth: $1,771,000 (+$15,000)

Another month, another bump in net worth.  It’s easy to think the stock market only goes up and our accounts will keep growing in a mostly straight line forever, but I know that’s not true!

march-2017-net-worth

On the investing front, I didn’t do anything in March other than collect dividends and transfer them to my checking account.  I probably won’t touch the portfolio till it’s time for end of the year tax planning unless the markets make a big move up or down.  A big upswing will see me trimming away some equities and buying more of the bond fund.  A sharp downturn in the market will make me consider converting some cash or bonds back to stocks.  I’ll also be checking the asset allocation every few months to see if I need to rebalance any asset classes in the event the international markets zig while the US markets zag.  That’s how I manage a lazy portfolio.

The lazy man with the lazy portfolio proudly sporting his Vanguard gear

The lazy man with the lazy portfolio proudly sporting his Vanguard gear

Our cash position is close to $30,000 in savings and money market accounts, which is enough to fund around a year of expenses at our current spending rate assuming the dividends don’t stop flowing. On top of that we have another two years of living expenses in a bond fund (held inside an IRA) should we need additional liquid funds.  Things are looking very rosy for us at the moment.

 

 

Did you enjoy another positive financial month?  Any big financial moves coming up soon?  Any super frugal moments in the past few months to rival my pizza hustle?

 

 

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Summer Vacation for 5 in Europe: 9 Weeks, 8 Countries, 14 Cities, $10,000

world-maps-europe-featured

The Root of Good family is ramping up for an epic adventure across Europe during the summer of 2017.  The five of us will spend nine weeks traversing an all new (to us) continent by train, plane, bus, car, and foot.

We really struggled to narrow down the itinerary to something feasible for a family with three young children.  As a result this trip will NOT include London nor Paris nor a dozen other cities we would have loved to visit.  What we will see are museums, parks, castles, palaces, cathedrals, caves, mountains, seas, rivers, lakes, and canyons scattered about the rest of western and central Europe.

Many will view this as a “trip of a lifetime” or a “dream trip” but I choose to view this as just another cool vacation in a series of vacations we have already taken and will continue to take.

However, this Europe trip is in some ways the realization of a dream.  As a wistful traveler / college student yearning for adventure before embarking on my 10 year corporate grind, I ordered a stack of maps from AAA back in the dark days before the invention of Google Maps.  What better way to think, plan, and dream about where you want to explore than a pile of maps for all the countries in Europe?  For 15 years I kept these maps in a shoe box in the closet.  Now I’m figuratively dusting them off and planning on hitting the road soon (I’ll leave the maps at home since I’m going all digital with Google Maps on my computer and phone!).

Dreams fulfilled. Finally getting to bust out these maps of Europe.

Dreams fulfilled. Finally getting to bust out these maps of Europe.

This Europe trip is unique compared to our typical budget travel two months in Mexico and road trips through the US and Canada.  We’ll spend two or three times as much as we usually do on our grand summer vacations. And it’s Europe – a place we have never visited before, and in a cliché way, a must-have on every legitimate traveler’s resume.

 

Where are we going?

In mid-June we depart Raleigh for a flight across the Atlantic to Lisbon, Portugal where the adventure begins.  From Portugal we fly to the Andalusia region of southern Spain for a bit over a week before flying onward to Italy for a week.  After landing in Italy we travel overland through Slovenia, Austria, Germany, and the Czech Republic before arriving in Amsterdam where our vacation ends with a flight back to Raleigh.

The itinerary for nine weeks:

  1. Lisbon, Portugal 5 nights
  2. Malaga, Spain 2 nights
  3. Granada, Spain 3 nights
  4. Seville, Spain 4 nights
  5. Milan, Italy 4 nights
  6. Venice, Italy 2 nights
  7. Ljubljana, Slovenia 7 nights
  8. Bovec/Bled, Slovenia 4 nights
  9. Salzburg, Austria 2 nights
  10. Munich, Germany 7 nights
  11. Prague, Czech 7 nights
  12. Berlin, Germany 7 nights
  13. Koblenz (Mariaroth), Germany 7 nights
  14. Amsterdam, Netherlands 3 nights
  15. Back to Raleigh!

 

 

Transportation: Getting around town. And country. And continent.

To get around Europe, we’re relying primarily on buses and trains.  We are also taking a pair of flights for those travel segments that are difficult, expensive or take a long time on ground-based transit.  Overall, transportation in Europe is quite a steal IF you can snag the advance purchase cut rate fares.  Budget airlines aplenty such as Ryanair and EasyJet offer tickets for USD$10-20 in some cases.

Buses and trains can be even better deals for families with kids since children’s tickets are often heavily discounted or free altogether.  I looked into rail passes and quickly decided purchasing tickets a la carte would be much cheaper and easier than understanding the rules for different regional rail passes and days of validity versus days of travel.

All together, we spent 300,000 United Airline miles plus USD$544 cash for plane tickets.  More than half that was taxes on our transatlantic flights from Raleigh to Lisbon and Amsterdam to Raleigh.  The other bit is a roughly 1,000 mile flight from Seville, Spain to Milan, Italy on Ryanair at just under USD$40 per person (and a meager 2.5 hour flight time).

The flight from Lisbon, Portugal to Malaga, Spain was free since we booked an award flight to Europe.  You get a one way flight within the region you’re visiting with United Miles redemptions.  The award flights that we booked for 300,000 miles plus $350 in taxes would have cost $6,000 to $7,000 had we paid cash.  In the end we obtained between 2 to 2.2 cents per mile of value out of these points, which is pretty good for United miles.  All thanks to travel hacking some credit card sign up bonuses over the past few years.

To add to the value, we picked up the Chase Sapphire Reserve card earlier this year which gives us free Priority Pass Select membership.  Priority Pass admits us to certain business/first class lounges in the airports we’re traveling through so we can stop in and grab drinks (alcoholic or non) and some basic grub before and after our flight in lieu of paying for the same at an overpriced airport restaurant or rushing to get to a food establishment before the kids starve OMG literally to death (or so they would claim, literally).

Plane Tickets: Points Cost
United: Raleigh, North Carolina to Lisbon, Portugal x5 150,000 $175
United: Lisbon to Malaga, Spain x5 0 (free 1 way tix with United miles award booking) $0
Ryanair: Seville, Spain to Milan, Italy x5 0 $194
United: Amsterdam, Netherlands to Raleigh x5 150,000 $175
TOTAL 300,000 $544

 

For buses and trains, we spent between USD$40 and $69 for all segments with travel times between roughly two to four hours.  One exception is the Berlin to Koblenz train trip which is closer to six hours.  Since it was a longer duration than other trips, we decided to indulge in a little luxury and spring for first class tickets on Deutsche Bahn for $32 more than second class tickets (that’s $32 total for the entire family!).

Though second class seats on German trains are more than adequate, we opted for the upgrade to get comfier more spacious seating (including a private compartment) and more importantly, first class lounge access for the day.  We’ll be feasting on the all-inclusiveness with pastries, fruit, coffee and hot chocolate for breakfast in Berlin.  After a four hour high speed train ride from Berlin, we’ll grab a quick bite and pop some champagne during the 35 minute layover in Frankfurt before transferring to another high speed train bound for Cologne, Germany.  We have a three hour layover in downtown Cologne to explore on foot and have lunch with some beer or wine (and maybe an early dinner if time permits) in the first class lounge before heading a few minutes down the tracks to the airport for our rental car pickup.  A day on the rails in first class, three snacks or meals in their lounges, plus a quick city tour for $84 for the five of us.  That’s how you travel in style on the cheap!

Bus/Train: Cost (total for 5 tickets)
Bus from Malaga to Granada, Spain $41
Bus from Granada to Seville, Spain $40
Train from Milan to Venice, Italy $49
Bus from Venice, Italy to Ljubljana, Slovenia $69
Train from Bled, Slovenia to Salzburg, Austria $41
Bus from Munich, Germany to Prague, Czech $40 (estimate; not yet purchased)
Bus/train from Prague to Berlin, Germany $53 (estimate; not yet purchased)
Train from Berlin to Koblenz/Cologne, Germany (higher cost due to 1st class tix) $84
Train from Koblenz/Cologne to Amsterdam $40
Total $457

 

We’ll be renting cars for three different periods during our trip.  I’m unable to drive a manual transmission vehicle so I’ll be paying the 20-30% markup for automatic transmission vehicles.  The extra $100 will be recouped dozens of times when I don’t stall the car or inadvertently roll into oncoming vehicles or back down the hill onto the hood of an about-to-be-angry driver.  The frugalist in me says “learn to drive a stick to save a few bucks”. Then the realist shouts “This is why we saved up all this money. To afford small luxuries and conveniences.”  Though learning to drive stick while destroying someone else’s clutch does have its merits.

I’m shocked at how cheap the rental rates are since we are doing one-way rentals for at least two of the rentals (and possibly the third rental in the Koblenz area if I can find a decent one-way rate).  Another lesson learned is the lack of rental office availability on Sundays (note: never plan on conducting business or shopping for groceries on Sunday in Germany).

I’m also shocked at the opaqueness of rental car pricing. It jumps all over from hour to hour and day to day. And there are quirks.  Sometimes the price to rent for seven days is the exact same as for five days. And sometimes the total price DROPS if you extend the rental period.  Our Ljubljana, Slovenia rental was $20+ cheaper for a 13 day rental compared to a 10-12 day rental.  Ummm, okay, I can store your car for you for a few days in exchange for $20.

Rental Car: # Days Cost Cost Per Night
Ljubljana, Slovenia to Bled, Slovenia 13 $161 $12
Salzburg, Austria to Munich Germany 4 $113 $28
Koblenz, Germany (Via Cologne) 7 $181 $26
Total/Average 24 $455 $19

We will be taking public transit during about two thirds of our trip.  Most cities have multi-day or weekly transit passes and discounts for children (or they ride free with an adult pass), so transit costs should be fairly moderate overall.  Except in Venice where it’s $8 per person for a boat-bus called a vaporetto!  I’m sticking $750 in the budget for all transit costs.  Other miscellaneous transportation costs include parking and tolls at $75 and gas for the rental car at $250.  The gas cost is based on 1,375 miles at 33 miles per gallon with gas at $6/gallon.

Gas for Rental Car $250
Parking, Tolls $75
Local Transit $750
Total $1,075

To sweeten these deals, I’m always checking online cash back shopping portals like Ebates.  In this case, I didn’t have much luck finding the European train and bus companies on Ebates (but there are some travel consolidators that sell train tickets and qualify for cash back).  However, most rental car companies qualify for 4-5% cash back (like Hertz and Sixt) and the big travel sites like Expedia and Travelocity offer a couple percent cash back on rental car reservations.  I booked two out of three rental cars through Ebates so I should get another $10-20 cash back once the car rental is complete this summer.

If you’re interested in getting cash back at hundreds of sites where you are already shopping online, check out Ebates.  And click through this link for $10 bonus cash back for new members!

 

Lodging

At first we planned on a combination of hotels for short stays of two or three days and apartment rentals for longer periods.  After digging in to available hotel and apartment offerings, we quickly discovered that apartment rentals offered a much better value even for short stays.  Most hotels in Europe offer standard rooms that sleep two or possibly two plus a kid.  And you pay extra for guests in the room beyond one or two people, including kids.  For our family of five this put us in large hotel suite territory (think $$$) or paying for two rooms, the second of which might come with extra person fees for the third kid.

We moved on to Airbnb, our choice for vacation apartment rentals.  I’ve used VRBO in the past when I couldn’t find anything on Airbnb.  But this time around, the inventory and options available in all the cities we are visiting was simply overwhelming so I didn’t need to expand my search beyond Airbnb.

I love their search tools because you can filter out properties that don’t meet your criteria and then save your favorite properties on a map so it’s easy to see where your most desired properties are located.  Once you know exactly what you’re looking for, the thousands of properties in a city drop to several dozen or several hundred.

My typical search criteria was:

  • Whole house rental (not “shared room” or “private room”)
  • 2+ bedrooms (unless there aren’t many properties or they are super expensive or we’ll only be there for a couple nights, then 1+ bedroom)
  • 4+ guests (many times there’s an extra bed or couch where a small kid can sleep or a huge bed where multiple kids can sleep; 5+ guest weeds out too many perfectly acceptable rentals)
  • Air conditioning if it’s hot (summertime anywhere in Spain, Portugal, Italy)
  • limit price to a max of 60-80% of the average for the city (and increase price limit to show more properties if nothing cheaper looks appealing)

Though not included in our search criteria, we highly desire:

  • washer, and preferably dryer
  • internet
  • non-smoking
  • pet free

I find that limiting a search based on these latter four factors will eliminate nice properties that will work for us with some flexibility.  Sometimes there’s a washer available on site for free or a small charge that isn’t included in the listing.  One place we booked charges €3 per washer load, for example, but costs $40/night less than other comparable apartments!  If the cost savings are huge (as in $100+), or the property is really luxurious or in a sweet location, it might be worth making a trip to a laundromat a couple times to make the apartment work for us.

airbnb-montreal-2

Pretty decent bedroom (with a VERY firm bed) in our airbnb rental in Montreal a few years ago. We booked nicer places during our 2017 trip to Europe.

Internet is another weird one. Almost all rentals that aren’t absolute bare-bones have internet these days, but some don’t list it or only list “wireless internet” or “internet” (they are two separate check boxes on Airbnb’s search).  However, virtually all that have “internet” have a wireless router.  The key is reading the description or asking the owner if it’s in doubt.  Again, if the cost savings are huge or the property is otherwise wonderful we could forego internet.  However, I can’t recall seeing a really nice property that didn’t have internet, which is why I ignore this as a search term but double check that internet is available before booking.

We also looked for places that had ratings of 4+ stars with at least a few written reviews.  There’s no way to limit this with the search terms, but I would often skip over properties with poor ratings or no ratings.  Too many other polished gems out there to research!  However, if you’re on a very tight budget or not able to find much availability, there are certainly hidden gems waiting for you to find them.  We’ve had to stay at a few places with zero or one review due to reservations falling through at the last minute and suddenly needing to book a new apartment on short notice.  They all worked out fine after discussing the properties with the owner.

Amazing last minute booking in Mexico City with only one review. It was around USD$45 per night and beautiful inside and one block from the subway.

Amazing last minute booking in Mexico City with only one review. It was around USD$45 per night and beautiful inside and one block from the subway.

If you haven’t tried Airbnb yet, you should do so on your next vacation.  It’s an incredible way to save money, stay in a much larger, nicer accommodation than a hotel room (especially relevant to families!), and end up in a cool non-touristy neighborhood surrounded by locals (part of the reason you’re traveling, right?).  Right now you can take $40 off your first Airbnb stay through this link.

Here are all the apartments and houses we booked for our nine week trip:

Destination Nights Cost Cost Per Night
Lisbon, Portugal 5 $389 $78
Malaga, Spain 2 $124 $62
Granada, Spain 3 $201 $67
Seville, Spain 4 $252 $63
Milan, Italy 4 $343 $86
Venice, Italy 2 $332 $166
Ljubljana, Slovenia 7 $600 $86
Bovec/Bled, Slovenia 4 $180 $45
Salzburg, Austria 2 $260 $130
Munich, Germany 7 $618 $88
Prague, Czech 7 $351 $50
Berlin, Germany 7 $697 $100
Koblenz (Mariaroth), Germany 7 $383 $55
Amsterdam, Netherlands 3 $517 $172
Total/Average: 64 $5,247 $82
20% savings w/ gift cards   $4,198 $66

We booked 14 different properties for a total of 64 nights at a cost of USD$5,247, or $82 per night.  Most are apartments with two bedrooms, a full kitchen, a living room, and one bathroom.  A few places are three bedrooms with multiple bathrooms.  All but one place booked for three or more nights have a washing machine.

Our goal isn’t to stay in the cheapest lodging possible, but rather to balance cost with comfort, luxury, convenience, cleanliness, and location.  We could have saved 20-40% in most cities if we were traveling on a bare-bones budget and didn’t mind making sacrifices.

We have enjoyed a half dozen very positive Airbnb rentals and only one “rental from hell”.  Feel free to read more about the latter experience.  We learned to be wary of the lowest price properties and go with our guts when it comes to Airbnb places.  If there’s a hint that a place is unclean, it doesn’t make it on our list.

I amplified the cost savings on apartment rentals through Airbnb by buying Airbnb gift cards at a 20% discount through Giftcardmall.com.  Lots of them.  Roughly $5,800.  I clicked through Ebates to make the purchases at Giftcardmall, thereby adding ANOTHER 1% discount to the deal in the form of cash back.  Sadly the Giftcardmall promotion ran for just a few days in December. However, keep your eyes open at discount sites like Slickdeals and you’ll occasionally see Airbnb gift cards on sale for 10-20% off face value (usually in limited quantities).

And don’t forget Ebates for cash back on hotels if you don’t go 100% Airbnb.  Most hotels qualify for 3-6% when booked directly at the hotels’ website (12% for Hilton!!) and about the same if booked through Travelocity or Expedia.  If you go the Hotels.com route (possibly with discounted gift cards from somewhere like Raise.com), you currently earn 6% cash back through Ebates on hotels.com purchases.  Sign up for Ebates through this link for $10 bonus cash back for new members.

To summarize, you should be able to take at least a few percent off the cost of lodging using Ebates, and possibly 10-20% by combining discounted gift cards and shopping through Ebates.

In my case, I paid $4,198 cash for the gift cards used to purchase $5,247 worth of Airbnb rentals, a 20% cost savings (plus I got 1% cash back through Ebates).

 

Eating all the food

Most of the other areas of our trip are pretty well planned out, booked, and paid for.  Food is the one area where we’re going to make it up as we go along.  Belly rumbling means it’s time to eat.

Since we’ll have a full kitchen in all the Airbnb rentals, we have the option to cook essentially all meals.  We (and specifically the kids) enjoy basic breakfasts including cold stuff like fruit and yogurt or cereal and milk.  Sometimes we might get fancy and make some meat or eggs.  Or get pastries from a nearby bakery or grocery store.

For lunch we’ll grab lunch on the go while we’re out sightseeing during the day.  Some days we might pack a picnic lunch if we happen to have good ingredients on hand.  Otherwise, it’ll be a mix of street food and sit down or casual restaurants and cafes.

Dinner will be a mix of cooking at the apartment and getting take out, with some dining out mixed in.  You can’t go to Spain and NOT enjoy some tapas with wine or beer, right?

I know lunch is usually less expensive than dinner at restaurants, and we’ll naturally be consuming a higher proportion of lunches at restaurants given our schedule as tourists.

I found an app called “Too Good To Go” that I’m excited to try. The concept is simple – for a heavily discounted price, you purchase unsold food from a restaurant at the end of their meal service for pickup at a pre-determined time (usually around 3 pm or 8-9 pm).  The price is generally USD$3-4 for a take out plate.  I gather that sometimes it’s a mystery what they give you, and other times they give you a takeout tray to pick from their selection behind the counter or from their buffet.  Definitely an interesting concept, but it leaves me wondering how fresh the offerings will be by the time you pick them up.  So far the app is confined to a handful of countries in Europe plus 10 or so restaurants in New York City.  Of the places we are visiting, the only city with a major Too Good To Go presence is Berlin with 50+ restaurants offering dirt cheap surplus food.

As far as groceries, I always enjoy visiting new grocery stores to see what’s new and different versus our experience at home.  I’ve scoped out a few sales circulars for grocery stores near our rental apartments and confirmed that (1) Europeans do indeed buy food at grocery stores just like us Americans and (2) the prices are roughly the same on average, with some things a little more expensive and many things the same or cheaper.

A grocery run from our last Canada trip

A grocery run from our first trip to Canada. Pastries, fruit, bagels, and yogurt for breakfast or snacks. Broccoli, fries, salmon, tuna, and beef steaks for lunches and dinners.  And jello.

For budgeting purposes I’m making an educated guess that we’ll spend an average of $20 per day on dining out and $20 per day on groceries (with the understanding that we can greatly exceed this budget if we find awesome places to eat!).  That works out to roughly $1,250 each for restaurants and groceries, or $2,500 total for food.

We won’t dine out every day but we might end up dining out twice per day for several days in a row while we’re on the fast paced segments of the trip that find us staying in each city just two or three days at a time.  We’ll have access to free food and drinks on some of the travel days at the airport lounges and the first class train lounges, so we might spend next to nothing on food for a few days of the trip.

 

Having fun

We’ll be on vacation for nine weeks and don’t plan on packing in the museums, castles, and tourist attractions every day we are overseas.  But when we do venture out for the day, we’ll inevitably buy numerous tickets for those museums, castles, and tourist attractions.  I am pleased with just how cheap admission fees are in general.  Many cities have castles, museums, and churches open for free visits all the time or on certain days of the week.  We also enjoy walking around the historic districts, taking the kids to the park, and exploring natural parks and waterfronts (most of which are free or have nominal admission fees).

I’m budgeting $750 total for the various attractions that cost money.  There are a few “must sees” on our trip that cost $40-100 for family admission:

  • El Alhambra in Granada, Spain
  • Postojna Cave and Skocjan Cave, outside Ljubljana, Slovenia
  • Dachstein Ice Cave near Hallstatt, Austria
  • Neuschwanstein Castle (admission is part of Bavaria pass)

We haven’t nailed down every single place we want to visit, but these locations stood out in our preliminary research as places we have to go.  We’re brainstorming fun stuff to do and see in each city and we keep track of all that info in a spreadsheet. Then once we arrive in a new city we’ll dig through our list of local attractions to see what we’re up for at the moment.

 

Packing

Our goal is to pack light.  By light, I mean everything should fit into regular size bookbags.  The idea is we’ll be agile and mobile. We can hop on trains, toss the gear in lockers for a couple hours if necessary, stick the bags in overhead compartments (and carry them on board planes for free), and walk a mile or so with the bags on our backs (remember, we have kids including a soon to be five year old) to get from intercity train/bus station to public transit to our apartment.

The family with all our gear on our backs. Pack light and a mile or two is nothing!

The family with all our gear on our backs. Pack light and a mile or two is nothing!

We’ll probably take three changes of clothes since we’ll have a washing machine in every apartment and can do laundry frequently.

We will keep electronics gear to a minimum.  Phones for the adults, Amazon FIRE tablets for the kids.  We have a pair of ultralight laptops for the adults (the 13″ HP Probook 430 G3 at 3 pounds).  All travel guides, leisure reading books, and entertainment will come from our tablets, phones, and computers.  For photography, we have a basic DSLR, the Canon EOS Rebel T5i with a few lenses including a 75-300mm zoom lens.

Beyond clothes and electronics, we’ll have the regular assortment of toiletries and travel meds, snacks, water, and travel documents.  That plus a spirit of adventure is all we’re taking, folks.

I admit it feels weird to walk out your front door for a two month journey with nothing more than a bookbag slung over your shoulder, but we did exactly that in 2015 when we spent nearly the whole summer living out of our bookbags while traveling around Mexico.  It worked out just fine before with only 52 pounds of gear between the five of us.

This is all we packed for seven weeks in Mexico.

This is all we packed for seven weeks in Mexico.

The only tricky part about this trip is cold weather gear. It’ll be mild to warm in most destinations but the ice cave in Austria is supposed to be around freezing even in summer.  I hate to bring a heavy coat and winter gear for this one cave visit, so I need to figure out a solution.  So far I’m considering wearing socks on my hands, a long sleeve shirt, and accepting that it’ll be cold temporarily.  Or find a thrift shop somewhere in Slovenia or Austria then ditch the clothes after the ice cave visit.

 

Challenges

We are traveling with our three kids who will be five, ten, and twelve during our trip.  The pace of the whole trip takes that into consideration which explains why we’re going pretty slow.  We’re big fans of slow travel and loathe the idea of “popping off to another country for a quick weekend away”.  Slow travel and kids go hand in hand.

The whole idea is to spend a relatively small proportion of the trip on a bus, train, or plane and most of the time relaxing or enjoying the places you are visiting.  Initially we laid out a bold plan to visit 12-15 countries including 25 cities in the same nine week period.  After realizing this was idiotic, we started amputating amazing destinations from our itinerary.  Places like Paris – nope. The French Riviera – nope. Switzerland – nope. London – nope. Rome – nope.  Belgium – nope.  Budapest – nope.  We eventually settled on eight countries with stays in 14 cities.

We designed our itinerary with plenty of time in most cities so we can take a day off every second or third day.  This means we won’t see everything in every place we visit and that is okay, as long as we have a generally good time and all get along.  Nine weeks on the road with exhausted children and frazzled adults is not a good time.

These “do nothing days” are golden.  What a luxury to travel half way across the globe and NOT have to spend every waking moment sightseeing.  It’s like a rainy Saturday back home when you don’t go out and spend the day reading, relaxing, catching some Netflix, and maybe an afternoon nap.  Great way to battle travel fatigue.

Homesickness is a related issue we’ll face.  We crave the familiar and the routine as much as we crave uniqueness.  Sometimes you get tired of arguing with the guy behind the car rental counter or stressing out that you’ll miss your train.  I find the “do nothing” days help it feel a little more like home as much as they provide relaxation and a day of respite.  A nice juicy burger or a familiar home cooked meal helps too.

Along with homesickness is the yearning for people who just speak plain ole “regular” English.  Conversing in a foreign language is tricky and mentally exhausting.

Foreign languages are challenging too.  We are proficient in Spanish which will help for the nine days in Spain.  I’ve completed a few dozen modules of German on Duolingo but I’m nowhere near being able to carry on a conversation.  Otherwise, I’m hoping Italian and Portuguese are close enough to Spanish to let me catch a few words here and there.  We’re totally screwed in Slovenia, the Czech Republic, and Amsterdam since languages spoken there aren’t familiar to us at all.

I hope what they say is true – that everyone speaks English in Europe.  For those that don’t, we have Google Translate on our phones along with mad charade skillz to mime what we need.  I’d like to spend some more time on Duolingo learning the basics of Portuguese and Italian and refreshing my very rusty and basic German.

 

How we planned the trip

We started planning this trip in September of 2016 so that we could book plane tickets as early as possible in order to get the best flight schedules with convenient layovers.  Our transatlantic flights are only 7.5 hours to Lisbon and 8.5 hours returning from Amsterdam (plus a one hour hop from the Washington DC airport to Raleigh here in the States).  Seven or eight hours in coach isn’t ideal but overall our transatlantic flight itinerary is hard to beat.  It’s only two hours longer than flying to the west coast from here and people do that without hesitation.  And they still give out those tasty bags of peanuts, right?  We might even get two bags on the transatlantic flights.

Once the flights were booked we had our trip bookends. We are flying into Lisbon, Portugal in mid-June and flying out of Amsterdam a bit over two months later.  Then we had to figure out where exactly we wanted to visit in Europe and how we were going to travel between cities.  Portugal and southern Spain made it on the list as did northern Italy, Slovenia, Austria, Germany, Czech Republic, and the Netherlands.  The biggest jump of the trip is between southern Spain and northern Italy, so we decided on flights between these two points.

Other cities were close enough together that buses and trains offer reasonable transit times.  As a form of due diligence I checked the prices between cities along our route to ensure that a bus or train link was available at a reasonable price (it was).  Then we started booking Airbnb apartments in all our destination cities before all the cheap and good places were reserved.

Once the lodging was finalized, the train and bus schedules for our specific travel dates opened up and I booked most of the intercity bus/train tickets.  All intercity travel is booked at this time except the segments into and out of Prague which go on sale at the end of April.

The only remaining bookings are a few of the most popular tourist attractions like El Alhambra that can sell out a month or more ahead of time.

In general, we booked the big ticket items first to lock in good prices and options, then drilled down to smaller details on the itinerary once we knew for certain we were staying in a particular city and traveling by a certain method.

This method has worked out well so far except for the rental car pick up in Germany.  We are doing four one week stays across Germany and the Czech Republic and switching apartments on Sundays.  The apartments are already booked and paid for, and come with cancellation fees to change the dates.  We are stuck with Sunday travel days.  Many rental car offices aren’t open on Sundays or open for just a few hours so we’ll end up driving an hour longer to pick up the car at the rental company’s airport location instead of their downtown city locations.  A lesser inconvenience is the German grocery store. It’s closed on Sunday so we’ll have to make do for our Sunday evening meal and get some groceries on Mondays.

To economize on the trip, we used a few tricks:

 

Conclusion

There you have it.  That’s how you do a nine week vacation in Europe for a family of five for around $10,000.

Trip Budget Cost
Planes $544
Buses/Trains $457
Rental Car – 24 days $455
Misc. Transportation $1,075
Lodging – 64 nights $4,198
Restaurants $1,250
Groceries $1,250
Admission Fees $750
TOTAL $9,979

Most of the trip is already booked and paid for, so the hardest part is done.  Now we get to enjoy the fun part of reading about each destination and figuring out what we want to do while we are bumming around Europe.

In some regards, this will be a budget trip because we’re not staying in fancy five star luxury hotels nor dining in three star Michelin restaurants (well, probably not).  In other regards, this really IS a luxury vacation because it won’t be rushed and the itinerary is customized to our interests and tastes.

As this post goes live, we have just under three months till we leave for Europe.  Soon we’ll be packing our meager possessions in our bookbags and bidding farewell to home so we can spend the summer exploring the world.

 

 

Are we crazy?  Can this be done?  Any suggestions on the cities we are visiting? General tips on travel in Europe?  If you’ve been to any of these places, what is number one must see on your list?

 

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February 2017 Financial Update

money-january-2014

Two months into 2017 and things are off to a great start for us.  Our income of $4,893 for the month greatly exceeded our expenses of $2,108.  Our net worth climbed another $38,000 to $1,756,000 primarily due to solid stock market gains.

Our taxes are filed and we’re due small refunds from the state and the feds totaling several hundred dollars.  My first effort at paying quarterly estimated taxes in 2016 were a huge success since I came very close to our actual tax liabilities without giving our state and federal governments unnecessarily large loans.  Our overall tax liability is higher in retirement compared to our working years thanks to the self employment tax due on blog earnings.  At least I’m increasing my future social security check slightly.

 

Income

Our investment income was $132 in February.  We get more monthly investment income since shifting $50,000 from stocks to bonds in January.  However, the majority of our mutual funds and ETFs pay dividends quarterly in March, June, September, and December.  Since the bond yield is about the same as our overall portfolio yield, our total annual investment income will remain roughly the same.

Blog income, shown as “other income” in the chart, remained strong at $3,581.  My early retirement lifestyle consulting income dropped to $465 after a very busy January.  That works out to about one hour per week which is perfect for me.

The $713 in Deposits includes cash back from my credit card (now I’m putting spending on Chase Sapphire Reserves to score 200,000 bonus points).  It also includes 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.  We had a bunch of spending late last year that finally paid out the cash back bonuses in February along with some referral payments for folks signing up through the links on this blog.

february-2017-income

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).

 

Expenses

Now let’s take a look at February expenses:

february-2017-expenses

We came in well under our budgeted $3,333 per month (or $40,000 per year) during February with total spending of just $2,108.

Utilities- $1,036:

This is mostly from the $800 I prepaid on our electric bill.  They charge a flat $2.40 fee for credit card transactions so I usually pay a large chunk at a time to avoid the $2.40 fee every month.  I prepaid enough to cover all spring and summer electric bills since I’m trying to spend $8,000 in three months to score my 200,000 Chase Ultimate Rewards points from our Chase Sapphire Reserve cards (hint: 100,000 point offer is no longer available online but the 50,000 point bonus for Chase Sapphire *Preferred* card is still available).

The utilities total also includes our regular monthly water, sewer, and trash bill from the City plus an abnormally low natural gas bill (thanks overly warm winter!!).

Groceries – $508:

We came in very close to our $500 per month average for groceries.  Not bad considering we bought several discounted gift cards for groceries at Walmart, Aldi, and Kroger during the month and still have about $150 in value remaining from those purchases.  If you haven’t checked out raise.com for discounted gift cards for places you already shop, then feel free to save an extra $5 off your first purchase at Raise.com.

They have sales a few times per month where they offer $5-10 off a $50-100 purchase or an extra 4-5% off all gift cards so it’s easy to get a discount on gift cards and score an additional discount from Raise.com’s promotions.  Since I already spend about $500 per month at stores such as Aldi, Walmart, and Kroger it’s an easy way to save 10%+ off stuff I’m routinely buying.

Homemade banh xeo Asian crepes.

Homemade banh xeo Asian crepes.

Obligatory monthly pho pic.

Obligatory monthly pho pic.

...which we enjoyed outside in the 70-80 degree weather this February.

…which we enjoyed outside in the 80 degree weather this February.  Gotta love “winter” in the South.

I tried out Instacart grocery delivery service during February.  They were offering $15 off a $35 purchase with free delivery.  How bad could it be?  Turns out it wasn’t that great.  They messed up several items by substituting other items that cost twice as much or more. And instead of the two bunches of kale I ordered, I received two partially moldy bundles of mustard greens.  The apples (sold by the pound) were huge while the lettuce (sold by the head) was tiny.  After complaining to Instacart and receiving a refund for the most egregious shortcomings I ended up spending a net of $10 for my grocery order so it wasn’t a bad deal after all.

I think the service is good enough once you learn to specify certain things like “pick small apples”, “don’t substitute”, and “kale is dark green and says k-a-l-e on it, not m-u-s-t-a-r-d g-r-e-e-n-s”.  If I were mobility impaired or without transportation this service would be 100% kick ass in terms of quality of life improvement, warts and all.

The one on the left is Instacart's choice of lettuce. The one on the right is what I usually buy. Mine is twice as heavy as the Instacart lettuce (and 5 cents cheaper).

The one on the left is Instacart’s choice of lettuce. The one on the right is what I usually buy. Mine is twice as big as the Instacart lettuce (and 5 cents cheaper).

Automotive – $165:

This represents our annual car inspection fees, licensing, registration, and taxes.  I appealed our vehicle’s tax valuation and they lowered the appraised value from just over $10,000 to $6,800, thereby saving about $35 in property taxes.  The effort required?  Emailing a scan of the Bill of Sale to the county tax assessors office.  Maybe 10 minutes including finding the Bill of Sale.  If they jack up my assessed value for 2018 I’ll be able to forward the same email in about 30 seconds and save another $35 hopefully.

A little DIY repair. The license tag lights burned out and as a result I failed the state safety inspection. $0.99 on ebay and a few days later and I had a fix. Though it took 45 minutes to install. In hindsight, I should have paid the auto shop $20 to install the new tag lights.

A little DIY repair. The license tag lights burned out and as a result I failed the state safety inspection. $0.99 on ebay for a pair of LED lights and I had a fix. Though it took 45 minutes and removal of all the back tailgate interior panels to install. In hindsight, I should have paid the auto shop $20 to install the new tag lights.

Travel – $150:

We’re still chugging away at our trip planning for our nine week trip to Europe this summer.  The $150 represents three sets of intercity bus tickets for the five of us:

  • Malaga, Spain to Granada, Spain on Alsa – USD$41
  • Granada, Spain to Seville, Spain on Alsa – USD$40
  • Venice, Italy to Ljubljana, Slovenia on Buscenter.it – USD$69

It looks like those Venice-Ljubljana tickets will be our most expensive set of bus or train tickets on the entire trip.  It’s crazy how cheap buses and trains are in Europe.  March’s expense report will include several more sets of tickets in the USD$40-50 range.

I'm hoping to see some of the great outdoors while in Europe. Slovenia looks particularly promising.

I’m hoping to see some of the great outdoors while in Europe. Slovenia looks particularly promising. This, however, is more local. A trail a couple miles from our house.

Healthcare/Medical – $114:

We paid $98 to the dentist which covers the 20% copays on two routine dental visits plus two fillings for our kids.

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.

Will the ACA remain intact in 2017 and in the future?  Who knows.  The latest draft GOP “repeal/replace” bill didn’t look too ugly for the near term since it kept ACA premium subsidies intact through 2019, with the subsidies changing to a refundable tax credit starting in 2020.

Enjoying our free "made from pallets" balance machine

Enjoying our free “made from pallets” balance machine

Nothing like a completely empty pool and aquatic park during the weekdays for your private lap swimming. Impossible to get in here most weekends due to long lines.

Nothing like a completely empty (other than lifeguards) pool and aquatic park during the weekdays for your private lap swimming. Impossible to get in here most weekends due to long lines.

Electronics – $45:

I ponied up $80 for a new (used) smartphone in preparation for our Europe trip.  I had $35 of ebay gift cards purchased last year that brought the cost down to $45.  I went with the Samsung Galaxy S4 Active, a ruggedized version of the regular Galaxy S4.  The phone is a few years old but still a beast of a smartphone.  And if I drop it in a puddle it might survive the inundation.  If not, at least it won’t cost a lot to replace it.

I’m using a $0.99 global SIM chip purchased from Freedompop for service while in Europe.  It’ll give us 600 MB of data per month (actually x2 since I bought 2 SIMs).  Plus 200 minutes voice calling to US numbers, with 100 minutes of global calling.  I think it will work everywhere in Europe except Slovenia where they currently don’t offer service with the Global SIM.  Not bad for 2 bucks if it works like I think it will.  It’s working very well here in the US so far.

Gifts – $29:

The Samsung Galaxy S4 wasn’t the only cell phone I bought in February.  I also picked up a Kyocera Hydro Icon directly from Freedompop for $29.99.  This is going to be our oldest daughter’s birthday gift later in March, and our kid’s first entry to the world of smartphone ownership.  Scary times for sure.

The phone comes with free monthly service and includes 200 “voice” minutes, 500 texts and 900 MB of data each month.  I can set it up so overages are impossible for a one time $5 fee if that’s what my daughter prefers.  Otherwise she’ll be on the hook for monthly fees.  She has unlimited free wifi at school so hopefully the limited cell data won’t be a problem.

A commenter asked if I’ve done a review of Freedompop on my blog.  I haven’t but you can read my brief thoughts on it in my response to that comment.  Basically, I like it.  We’re on wifi most of the time and the 3G/4G data is adequate for times we’re not.  I put the “voice” minutes in quotes because it’s actually VOIP or voice over internet protocol for their voice minutes.  So if I’m in an area with bad cell data reception I can suffer degraded call quality.  Given that I only use about 5-10 minutes of call time each month it’s not a big deal.  It wouldn’t work for some, but for a light cell user like me it works perfectly. And the $0 monthly price tag is hard to beat.

Right now they have $2 US based SIMs available if you have an old inactive phone that takes SIMs and want to give it a go for a few bucks.  Or power up that old phone for Grandma or for your kids.

Gasoline – $39:

We finally refueled the minivan in February.  We’re carpooling with another family so we drive about 120 miles per month for that in addition to other routine driving around town for shopping, errands, entertainment, and recreation.

I actually refueled again on February 28th but the expense didn’t post on the credit card statement till March so you’ll see that expense next month.  I had to use up my Kroger fuel rewards set to expire at the end of February.  That should get us through March unless we take a big trip somewhere.  Though with nicer weather here we might be out and about a lot more swimming and exploring local trails and parks.  Or not, if the hammock calls my name.

Entertainment – $11:

$11 was roller skating admission for two kids.  Most other entertainment options are free or very cheap.

Who has time for expensive paid entertainment options when there's a lakeside campfire to be enjoyed?

Who has time for expensive paid entertainment options when there’s a lakeside campfire to be enjoyed?

Fire also doubles as a grill.

Along with some flame roasted steaks and sausages. Improv rock tossed in the middle to support the “grill” (aka an old oven rack).

Or things to climb on in the neighborhood?

Free things to climb on in the neighborhood?  Check.

Or more things to climb on ?

More things to climb on at a different nearby park.

Or things to build then climb on?

Things to build then climb on.

How about the state science museum coming to your neighborhood library with snakes and other assorted reptiles?

How about the state science museum coming to your neighborhood library with snakes and other assorted reptiles?

Restaurants – $6 (not shown in the expense summary graphic):

We bought takeout pizza twice during February.  Once was with gift cards bought in previous months (at a discount through Raise.com or elsewhere of course).  The second time was partially paid by us but also included some free personal sized pizzas the kids earned at school.

Not from a restaurant. $2.99 for a one pound bag of pork or chicken potsticker dumplings at Trader Joe's.

Not from a restaurant. $2.99 for a one pound bag of pork or chicken potsticker dumplings at Trader Joe’s.

Fish n green beans. Mmmm...

Fish n green beans. Mmmm…

 

Year to Date Living Expenses for 2017

february-2017-expenses-ytd

At $5,487 spending for the first two months of 2017, we are about $1,000 below our annual spending target of $6,667 budgeted for the first two months of the year.  And that’s in spite of paying the big lumpy annual home property tax bill and prepaying $800 toward the electric bill.

For the financial voyeurs, here is a full summary of our 2016 budget versus actual spending for all twelve months of last year.  In that article I make the case that we’re living a $100,000 lifestyle on roughly $40,000 per year.  Let me know what you think.

This month I plan to solicit bids from a number of contractors to replace our roof.  I expect this will cost around $4,000 to $8,000 which will probably be our largest expense all year.  Our other living expenses are usually pretty modest in March and April so we might not exceed our total annual budget even after the large roof expense.

Most of our travel expenses are already paid for our nine week trip to Europe.  By late January we finished booking 64 nights in Airbnb apartments for around $5,250 or about $82 per night.  We purchased $5,800 worth of Airbnb gift cards in December 2016 so we didn’t pay anything out of pocket in January for the Airbnb rentals (and we still have several hundred dollars left over for future travel).  The good news is that once we are in Europe in June through August most expenses will already be paid other than local transit, rental cars, food, and some attractions.  I hope to publish a big post during March outlining our nine week trip to Europe with a rough budget included!

 

Monthly Expense Summary for 2017:

 

Net Worth: $1,756,000 (+$38,000)

Deja vu! On the heels of a $38,000 net worth increase in January, we experienced another $38,000 net worth bump in February bringing our total net worth to an all time high of $1,756,000.  We didn’t celebrate breaking through another quarter million dollar milestone other than noting it, and accepting that we might get to experience breaking through that particular milestone again at some point if the market doesn’t continue going up forever (which it won’t).

February of 2016 found Mrs. Root of Good leaving full time employment for good.  One year later and our net worth is up by more than $300,000.  It’s a good feeling to have all this cushion in our portfolio but I accept that the stock market goes up and down.  We could just as easily lose $300,000 or more in the next year.  We’d still feel pretty wealthy since I know I felt wealthy one year ago at a ~$1,400,000 net worth!

 

february-2017-net-worth

A quick note on those spikes in the net worth chart.  Nothing crazy here, just hiccups from doing some asset conversions and transfers.  First, I converted my admiral class Vanguard shares to ETF class shares.  It’s a tax free conversion.  It makes the shares easier to transfer in kind to other brokerage firms.

I then transferred over $200,000 of ETF shares to Fidelity to pick up a his and hers 50,000 United Airlines mile bonus when you transfer $100,000 or more to a brokerage account.  This bonus is available once every 12 to 14 months so I’ll probably rinse and repeat in 2018 (by transferring assets back to Vanguard or elsewhere for a few months then round-tripping to Fidelity).  100,000 points equals four flights across the US or around three flights to Mexico/Central America/Caribbean.

This guy right here knows it's feeling like springtime right now!

This guy right here knows it’s feeling like springtime right now!  On a different note, why are dandelions considered a weed?

In investing moves, I maxed out our Roth IRA’s to the tune of $11,000 in February and contributed $4,050 as an employer contribution to my solo 401k.  I’m able to fund the IRAs and the 401k due to earnings from this blog.  Since I wanted to maintain my cash/bond reserve I transferred $15,050 from my money market account to fund these new IRA/401k contributions in the Vanguard Total Bond Market Index Fund.

Fixed income investments are now at roughly $65,000 bonds and $25,000 cash (in money market).  The bonds yield roughly 2.5% while the money market yields 1.0%.  I’ll suffer some cash drag on investment returns but I can sleep at night knowing I have a few years of living expenses tied up in relatively stable fixed income investments.

And when it comes to living well for the next 40 to 60 years, sleeping at night is pretty important.

 

 

Boy howdy, this stock market is on fire! Any newly minted millionaires want to out themselves publicly?  What are you sensible, frugal-minded people doing with all your newfound wealth?  

 

 

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January 2017 Financial Update

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January is over and what a fine January it was for our finances!  Our net worth climbed another $38,000 to $1,718,000 and in the process we broke through another $100,000 milestone.  Income for the month of January was solid at $5,068 while expenses remained roughly on budget at $3,378 in spite of a few large, lumpy quarterly or annual expenses.

After finishing 2016 about $1,000 under our $40,000 budget with total spending of $38,991, we are off to a great start in 2017.

 

Income

Our January investment income was a modest $54 since almost all of our mutual funds and ETFs pay dividends quarterly in March, June, September, and December.  I reallocated some equity mutual funds into a bond fund during January so our monthly investment income will be slightly higher going forward (but about the same over the course of an entire year due to the bond fund yielding about the same amount as our overall portfolio).  More on the portfolio moves in the “Net Worth” section of this financial update.

Blog income, shown as “other income” in the chart, was up slightly in January compared to December 2016 to $3,834.  I’m still blown away that this blogging gig actually makes money.  I guess that is what happens when you get a consistent 50,000 visitors per month (#humblebrag).  My early retirement lifestyle consulting income jumped to $952 after a slow December.  That’s about as busy as I want to get (two hours of work per week), so if business remains strong I may have to raise rates again.

Trying not to work too hard IS a full time job. Don't hire this bum.

Trying not to work too hard IS a full time job. Don’t hire this bum.

The $226 in Deposits includes cash back from my credit card thanks to high spending in December plus the proceeds from the sale of a $12 Lego cruise ship I bought while on our last cruise.  The Lego ship sold for $75.  I also received 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.  Though not included in January’s Ebates cash back, January was a bright month because I finally received credit for 10% cash back on our two December cruises purchased through Expedia after clicking through Ebates.  They wait an excruciating 40 days after your cruise before crediting the 10% cash back and then pay out earned balances quarterly.

january-2017-income

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).

 

Expenses

Now let’s take a look at January expenses:

january-2017-expense

In spite of some big lumpy quarterly or annual expenses, we still came very close to our budgeted $3,333 per month (or $40,000 per year) with total expenses of $3,378.

Taxes – $2,120:

Taxes are my least fun expense and unfortunately they top the charts for last month.  Our annual real estate bill of $1,520 was due just after the first of the year.  Of course we get a ton of value out of our local taxes (police, fire, great parks and swimming facilities, “free” public education for the kids, and pothole free streets and sidewalks).

Quarterly estimated taxes were due once again on January 15.  $300 to the State of North Carolina and $300 to the feds.

Teaching the kids how to make banana bread.

Teaching the kids how to make banana bread.

 

Finished product.

Finished product.

 

Groceries – $855:

We usually spend closer to $500 per month on groceries.  Part of the higher expense in January was refilling the kids’ lunch money accounts for $244 (the max I can fund with a credit card at one time).  We also replenished our fridge and freezer after spending just $205 on groceries during the month of December (thanks, busy travel schedule!).

Mrs. Root of Good indulged her smoked salmon habit quite a bit as well (if anyone knows where to buy decent quality smoked salmon for less than Aldi’s $3.49 for 3 ounces please let me know in the comments).  This is slightly cheaper than going on a Carnival cruise where the smoked salmon bagels flow freely and plentifully from their on-board sandwich shop.

Accidental low carb sushi with the smoked salmon on top.

Accidental low carb sushi with the smoked salmon on top.

 

Caviar and champagne don't help the grocery budget any.

Caviar and champagne don’t help the grocery budget any.

I also picked up a $100 Kroger grocery store gift card from Raise.com at a $10 discount.  So far about half that value remains on the card and I’ll spend it in the next month or two.  If you haven’t checked out raise.com for discounted gift cards for places you already shop, then feel free to save an extra $5 off your first purchase at Raise.com.

First time making this. Steamed banh bao char siu barbecue pork rolls.

First time making steamed banh bao char siu barbecue pork rolls.

 

Ok, last food pic I promise. Coconut curry fish and bamboo with egg and somen noodles.

Ok, last food pic I promise. Coconut curry fish and bamboo with egg and somen noodles.  We could spend WAAAY less on groceries if we stuck to rice and beans (but what fun would that be?).

 

Utilities – $155:

Since we were out of town on two cruises during December, our water bill which lags by a month was lower at $86 (hidden savings due to travel!).  Our natural gas bill was also lower than usual at $69.  Being out of town helped but the unseasonably warm weather probably played an equal role.  We didn’t pay the electricity bill in January because we prepaid many months ago using a credit card to snag some sign up bonuses.  We finally received a bill with a balance due and I just paid $800 in February which will cover electricity through the expensive summer cooling season (when we’ll set the thermostat way high when we depart for Europe for the majority of the summer).

 

Gifts – $111:

We purchased a number of small “generic” gifts during some after Christmas sales.  These will come in handy throughout the year when our kids are invited to birthday parties (and our kids might see some of these gifts as well but I can’t say more since they might read this blog post!).  The gift total also included some belated Christmas gifts.

 

Entertainment – $64:

This represents my family’s share of a shared Netflix subscription.  Our only real paid media expense during the year.  I also paid under $1 for a computer game.

One of 2016's entertainment expenses: wheels from Harbor Freight strapped to the bottom of a wood pallet for insta-pull cart fun time lakeside tomfoolery. Also doubles as a utility cart.

One of 2016’s entertainment expenses: wheels from Harbor Freight strapped to the bottom of a free wood pallet for insta-pull cart lakeside tomfoolery. Also doubles as a utility cart.

 

Cable – $34:

Our monthly internet bill for 50/5 mbit service from Time Warner Cable.  I believe my rate will reset to the normal $40 per month sometime soon so I’ll have to make my annual phone call to snag a $30 or $35 monthly rate for 12 more months.

 

Healthcare/Medical – $16:

One month’s health insurance premiums.  I can’t speak for others but the Affordable Care Act works phenomenally well in making our health insurance premiums tiny.

I’ll reprint what I posted in last month’s financial update (which went to press two weeks before the Presidential Inauguration):

“A quick note on “OMG OBAMACARE IS ENDING!!1”: Yeah, maybe.  There’s a lot of uncertainty over what the promised “repeal and replace” actually means.  I wouldn’t be surprised to see many parts of the Affordable Care Act remain in place under TrumpCare like the coverage for children on the parents’ policy through age 26, coverage of pre-existing conditions, and some form of subsidies to make insurance affordable.  Who knows, TrumpCare might actually be better for the average person than ObamaCare (though unlikely to be better for us given our $16 policy for 2017!).

In terms of timing, I expect the ACA subsidies and coverage to definitely remain through 2017 and most likely remain through 2018, and possibly later.  So now isn’t the time to panic. Yet. We’re probably good for two more years.

What will we do in 2019 should TrumpCare prove unfavorable?

  • Pay more, possibly tens of thousands per year more, and spend less elsewhere
  • Or work a little bit harder at money making endeavors and keep non-healthcare spending the same as today
  • Accept worse coverage to save money
  • Move overseas to any of the dozens of countries with reasonable health care costs
  • Move to a state with reasonable health insurance costs (that might include state-level subsidies or adult Medicaid)
  • Adapt our plans to maximize our benefit under the new TrumpCare subsidy rules
  • Throw in the towel and get a job with employer provided (and subsidized) health insurance

Fortunately we have time to see how the situation unfolds and react to new information as it becomes available.  Pay close attention in the coming weeks and months.” END QUOTE

We still don’t know much more now than we did a month ago, although the grumbling I’ve heard coming out of Washington is that a number of legislators have realized it might not be the best thing to get rid of this whole Affordable Care Act without figuring out a way to affordably insure most of those that would lose coverage with a repeal.

If you're worried about health insurance in 2017, take a deep breath and enjoy the view. Life is good.

If you’re worried about health insurance in 2017, take a deep breath and enjoy the view. Life is good.  It’ll be alright.

 

Travel – $11:

I used our credit cards to pay our quarterly North Carolina and federal taxes.  They charge a convenience fee around 2% for the privilege.  Right now I’m working on spending $8,000 on a pair of Chase Sapphire Reserve credit cards so that I can snag 200,000 Ultimate Rewards points (worth $3,000 of travel or transferable to a wide selection of airline frequent flyer programs for many thousands of free flights).  Check out current credit card offers if you like free travel as much as I do.

 

Service Charges – $8:

Mrs. Root of Good’s 401k charges small quarterly fees.  In exchange we get institutional class Vanguard funds with expense ratios as low as 0.02% which saves us a lot of money on the $300,000+ balance.

 

Restaurants – $2:

I used two free coupons for Papa John’s pizza and paid $2 to upgrade one to an extra large.  I obtained the free pizza coupons when I purchased a $25 Papa John’s gift card for $25 on Groupon last year.  We also enjoyed some takeout tacos using a previously purchased gift card.

Ok, I lied earlier. But this is the last food pic for real. We bought an extra turkey right before Thanksgiving when the grocery store practically gives them away at $0.37/lb. This bird chilled in the freezer till mid-January.

Ok, I lied earlier. But this is the last food pic for realz. We bought an extra turkey right before Thanksgiving when the grocery store practically gives them away at $0.37/lb. This bird chilled in the freezer till mid-January.  We had a little feast, turkey sandwiches and wraps for a few days, then froze the remaining meat.  We also kept the bones and meaty scraps for some soup in February.

 

Gasoline – $0: Another $0 month for gasoline purchases.  I finally had to refill the tank in early February.  We also switched up the school transportation for our oldest kid and are now carpooling with another family instead of sending our daughter on the free school bus at 5:50 am.  That will add about 120 miles per month to our routine driving, which means we’ll need to buy gas around once per month now.  Not a bad trade off for an extra one or two hours of sleep each morning.

 

In the next several months I hope to solicit bids from a number of contractors to replace our roof.  I expect this will cost around $4,000 to $8,000 which will probably be our largest expense all year.  Most of our travel expenses are already paid for our nine week trip to Europe.  By late January we finished booking 64 nights in Airbnb apartments for around $5,250 or about $82 per night.  We purchased $5,800 worth of Airbnb gift cards in December 2016 so we didn’t pay anything out of pocket in January for the Airbnb rentals (and we still have several hundred dollars left over for future travel).

 

Net Worth: $1,718,000 (+$38,000)

Another month, another massive net worth increase.  The stock market remained strong throughout January which was the primary driver behind our $38,000 net worth gain, bringing out total net worth to $1,718,000.  This represents an all time high net worth for us.

The strong increase in net worth comes at a time when we are celebrating Mrs. Root of Good’s one year retirement anniversary.  Not a bad way to end the first full year with both of us retired.

 

 

january-2017-net-worth

As I said in last month’s Financial Update:

“I don’t “fear” a market correction but know well enough they happen periodically.  Having enough cash on hand to supplement other income streams for the next several years is a comforting feeling.  If a 20% or 30% market crash occurs tomorrow, I’ll lose $300,000 to $450,000 but I won’t have to sell anything at a loss for several years.”

While some would freak out facing the loss of hundreds of thousands of dollars, I’m more of a “glass half full” kind of guy.  Even after sustaining heavy portfolio losses of 30%, we would still have over a million dollars in our investment portfolio above what we are setting aside for the kids’ college costs.  While we will feel a little poorer, it’s still a pretty sweet spot to be in.

What we REALLY focus on. Enjoying those sunny 70F+ days in the middle of January.

What we REALLY focus on. Enjoying those sunny 70F+ days in the middle of January.

 

...and dipping our toes in the water.

…and dipping our toes in the water.

Of course I have to disclose a big move in my portfolio during the month of January that helps me stare down huge market corrections.  I moved $50,000 worth of equity mutual funds into the Vanguard Total Bond Market Fund (VBTLX / BND for those following along at home).  Nothing more than taking some profits while the markets are at relatively high levels.  Other than the $40,000 or so sitting in a money market, we didn’t have any bond positions prior to this move.

In absolute terms it’s not a big move at roughly 3% of our total investment portfolio value.  But what it buys us is over one year of our $40,000 budget and probably closer to two years if we cut spending to 2015 levels.

Take note that this isn’t a move derived from fear or a gut reaction to current events.  I saw the market hit a new all time high and I decided to make a small shift to secure a year or two of additional relatively liquid funds to protect against a prolonged down market.  In another three to six months I might move another chunk of funds to bonds if stock market valuations continue their upward trajectory.  I’m not calling the top of the market because I really have no clue where the market is going but I know where it’s been.

To quote Warren Buffett:

“Be fearful when others are greedy and greedy when others are fearful”

 

 

Those nasty market corrections strike when least expected.  Now that we have almost $100,000 in near-liquid investments we can rest easy during all but the worst market dives.

In the meantime we spend very little mental energy thinking about investments and zero energy worrying about our investments.  Life is too short and there are too many other exciting diversions demanding our time and attention.

 

 

How did the first month of 2017 treat you?  Enjoying this rocket ship upward trajectory in the stock market?  

 

 

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Living a $100,000 lifestyle on $40,000 per year – 2016 Expenses in Review

detroit-windsor-skyline-featured

“Oh you live on $40,000 per year? Guess you like camping in the van underneath the highway bridge huh?  Still enjoying those rice and beans?  Three kids cost $40,000 per year right off the bat so it’s clearly impossible!”.  That complainer clearly doesn’t know how we spend money.

Living well on $40,000 per year is possible and I’m here to explain exactly how by going over all of our expenses during 2016.  Later in the article I’ll explain why our spending affords us a lifestyle that costs most other people $100,000 per year.  And I don’t think many would argue that a $100,000 per year lifestyle is a tough way to live.

2016 was the first time that Mrs. Root of Good and I didn’t have a full time job all year (other than that one month of full time employment in January 2016 for Mrs. RoG).  Now we have essentially a full year of early retired living expenses recorded.  At a high level I can summarize our 2016 spending by saying “We nailed it!”.  Our 2016 budget totaled $40,000 while our expenses came in just a few bucks under $39,000.  On that low budget we managed to take several international vacations and purchase a 2009 minivan for cash.

 

Where did the money go?

At the beginning of 2016 I laid out our $40,000 spending plan for the year.  We increased the 2016 budget to $40,000 after acknowledging that we could be spending a lot more than the $32,000 or $32,400 that we budgeted for 2014 and 2015, respectively.

Our spending tracked closely to our budgeted amounts in almost all categories with the only really notable deviation coming from the $8,300 we spent on the new (used) minivan.  That expense plus other regular auto-related expenses reached 369% of our budgeted amount for autos.

Education and taxes were between 100% and 120% of budgeted amounts.  All other expense categories were 100% or less than the budgeted amounts.

 

 

Housing

$8,200 budgeted vs. $6,031 actual spending

First off allow me to celebrate our complete lack of a mortgage payment.  We paid off the last small chunk of mortgage in 2015.  No more mortgage!

Our housing expenses are fairly predictable year to year.  The repairs and maintenance budget of $2,500 covers big ticket items plus smaller repairs.  It also covers lawn maintenance supplies and equipment like gas for the lawnmower, fire ant bait, and paint for the house.  We spent $866 in this category which is only 35% of the $2,500 budgeted.  I intentionally budgeted plenty for this category because I wanted the flexibility to call a repairman for tasks I don’t want to do (like plumbing).

During the year we had a few plumbing issues, some preventative like replacing all the toilet shut off vales, and some repairs (I broke a sink drain P-trap while trying to clean it; the shower faucet sprung a leak and had to be replaced).  I also did a small amount of DIY plumbing repair and saved a few hundred bucks that way.  I needed to replace the pressure regulator valve.  It was an “unscrew the old one, screw back on the new one” repair fortunately.  That is about the limit of my plumbing expertise.

Had to get a little dirty in the crawl space to replace this beauty.

Had to get a little dirty in the crawl space to replace this beauty.

For house insurance and taxes we spent $2,203 against a budget of $2,200.  If only I could get all our expense categories within $3 of budgeted amounts!

Utilities are also fairly predictable since the rates are regulated for the most part.  We spent $2,809 out of the $3,000 budget.  The almost $200 cost savings versus the budget was due to savings on the water bill thanks to that pressure regulator valve replacement and the fact that we are on vacation five to ten weeks during any given year.

Our Home Furnishings / Furniture budget of $500 was way more than enough to cover our $153 actual spending.  We’ve owned our house for over 13 years so we don’t really need to replace a lot of household items.  We picked up a new couch from the thrift shop and a few other odds and ends.  I probably make enough from random craigslist sales to cover our actual spending on furniture but I don’t keep track of craigslist sales that closely.

 

Auto

$2,900 budgeted vs. $9,428 actual spending

This is the one area where we blew up the budget with our new (used) minivan purchase.  But it’s okay because we intentionally budget for these “one time” expenses by allocating $1,000 per year to our car replacement fund to account for the depreciation over time.

Here’s an excerpt from my “$50 car payment for life” car replacement strategy:

Here’s the math behind my $50 car payment.  Buy a gently used six to eight year old car with low to moderate mileage for around $8,000-10,000.  Run the car almost into the ground and then sell it after nine or ten years when it’s 15-16 years old for $3,000.  The net depreciation (cost of new(er) car minus sale proceeds from older car) for those nine to ten years is $5,000 to $7,000 or about $50 per month ($6000 divided by 120 months = $50/month).

$50 per month is less than $1,000 per year but I wanted to keep plenty in the budget in case we need to replace the vehicle more often (and odds are we’ll be in an accident or sustain damage to the van at some point).  We are our own insurance company since we carry no comprehensive or collision coverage on our minivan.  We’re saving hundreds per year and can easily afford a sudden $8,000 to $10,000 loss.

Great for hauling lots of people and loads of stuff. And 2000+ mile road trips.

Great for hauling lots of people and loads of stuff. And 2000+ mile road trips.

I’ll probably put out a full article on it later, but so far we are eight months into owning just one car.  And there have been exactly two situations where it would have been nice to have two cars (but we managed to get by just fine with one).  No uber or public transit required so far (though I did take the bus downtown once for a day of museums with our four year old).

It’s worth mentioning that we didn’t come close to spending our $400 gas budget.  We only spent $191 during 2016.  I planned the gas budget assuming 4,000 miles of driving around town at 30 miles per gallon while paying $3 per gallon for gas.  It turns out all three assumptions were wrong.

We drove much less than 4,000 miles during the year (I count road trip related expenditures such as gas in the “Vacations/Travel” category).  We replaced the 30 mpg Honda sedans we owned at the beginning of 2016 with the minivan that probably gets 19-20 mpg in the city.  And gas prices were closer to $2 than $3 throughout 2016.

 

Food

$8,000 budgeted vs. $6,330 actual spending

We budgeted $7,000 for groceries and $1,000 for dining out.  By year end, we spent a total of $5,753 on groceries (82% of budget) and $577 on dining out (58% of budget).

We manage to save on groceries without Extreme Couponing (hint: Aldi and grocery store loss leaders are your friends).  We eat pretty well with a variety of fresh fruits and vegetables (and meat of course) plus purchase a ton of Asian and Latino ingredients throughout the year to make some tasty ethnic dishes (here’s what a month of grocery shopping looked like for us a couple of years ago).  We love cooking and enjoy the challenge of making awesome meals out of whatever random stuff is in our fridge.

IMG_9748

Pho, from scratch. Maybe a buck per bowl.

 

12-produce

(Mostly) fresh fruits and veggies mostly from Aldi. And all of that was probably under $40 (about what you would spend for a small basket of produce at a fancy pants grocery store).

 

When dining out, we tend to frequent the same few restaurants.  For those restaurants that take them, we buy discounted gift cards from Raise.com (and you can get $5 off your first gift card purchase at Raise by clicking here).  But we really don’t go out to eat very often.

 

Other Core Living Expenses

$6,300 budgeted vs. $5,378 actual spending

We spent about $1,000 less than budgeted in this catch all category that includes phone, internet, medical and dental, clothing, education, and taxes.

For phone, cell phone, and internet, we go the extremely cheap route.  The $422 per year that we pay for phone, cell, and internet is less than some households pay in one month!

Our phone is hooked up through a $50 Obihai VOIP adapter using Google Voice for free monthly service.  My smartphone service is free through Freedompop.  Each month I get 200 voice minutes, 500 texts and around a gigabyte of 3G/4G data for free.  I never come close to any of those limits.

Our internet is 50 mbit/5 mbit service through Time Warner Cable at $35 per month (and we bought our own cable modem for $30 to avoid the $10 per month cable modem rental fee).  The regular rate for internet is $40/month but I call or go online each year and snag an extra $5-10 discount by asking politely.

We have a prepaid T-mobile dumb phone on a legacy plan that costs $10 per year. We rarely use it, but keep it activated for convenience and for emergencies.  It has saved us several times while overseas since it works worldwide (for higher per-minute rates).

Our medical and dental expenses were $2,162 for the year which is 72% of the $3,000 budgeted.  Our health insurance premiums (with heavy subsidies from the Affordable Care Act) were about what we expected at $125 per month.  We planned on $440 in healthcare expenses and didn’t spend all of that.  Dental expenses were budgeted for $1,000 since Mrs. Root of Good and I don’t have dental insurance.  We were lucky and didn’t have any expensive dental procedures in 2016 (just routine cleaning and exams).

What will you do when the Affordable Care Act / Obamacare goes away?” someone will ask.  Check out my discussion and the comments in my December 2016 Financial Update post to learn more about my thoughts and our plans.

Clothing purchases totaled $452 for the year.  How do we do it with a family of five? Some hand me downs, some thrift shopping, and some retail store purchases.  Since the adults in the house are no longer working, our wardrobes are pretty basic.  Swimming attire and shoes are probably the largest clothing subcategories these days.

Marathon thrift shopping

Marathon thrift shopping

Education expenses of $267 were 107% of the $250 budgeted for 2016.  Now that our oldest child is in middle school, the field trips are getting more expensive. As are the required graphing calculators.

We paid a total of $2,075 in taxes during 2016 versus a budgeted $1,750.  This primarily comes from rounding up when paying quarterly estimated state taxes to spend in even $100 increments.  North Carolina charges $2 per $100 when paying with a credit card so I try to get as many points or miles as possible.  Paying taxes with a credit card is a great way to meet minimum spending requirements from new credit card bonus offers.  And who doesn’t love free travel?  (Check out Jeremy at Go Curry Cracker – he graciously allowed Uncle Sam to buy him a free family trip to Hawaii!).

For those curious about our tax liability in 2016, we’ll owe a couple of thousand dollars in federal tax due to the self employment tax I pay on blog income (partially offset by $3000 in child tax credits).  We are in the strange situation of paying higher taxes during early retirement than we were when working full time and earning $150,000 per year while paying only $150 in taxes.  I still think our overall 2016 tax burden is very reasonable considering I took some capital gains and converted $4,000+ from a traditional IRA to a Roth to start my Roth IRA Conversion Ladder.

 

Purely Discretionary Expenses

$14,600 budgeted vs. $11,812 actual spending

This is where the fun is.  Vacations, entertainment expenses, and electronics primarily.

I bumped our entertainment and toys budget up to $2,500 from the $1,000 in 2015 and previous years.  At $522 total entertainment spending for the year we still didn’t spend the $1,000 let alone the $2,500 “new and improved” budget.  What can I say? So many free or cheap entertainment options mean we don’t spend a lot in this category.  Most of the $522 is outdoors/sports related expenses like bike tires/tubes, rollerskating admission, and city swimming pool passes.  Liquor ($176) is included in this category.  There’s a miscellany of computer/video games, supplies to build crazy things, and half of a netflix subscription.

Boat rental - not free but worth every penny of the $4. Also cheaper and more fun than a gym membership. And we saw a bald eagle.

Boat rental – not free but worth every penny of the $4. Also cheaper and more fun than a gym membership. And we saw a bald eagle.

 

Vacations represent the bulk of our discretionary spending.  We somehow managed to come in just $43 under our $10,000 budget with $9,957 total vacation spending in 2016.

In 2016 we did some serious traveling:

We stretch a buck till it hurts.  Travel hacking helps a lot. Check out credit card sign up bonuses and get you some free travel too.  The European lodging is all through Airbnb (save $35 on your first trip!).  For cruises we usually book through Expedia but click through Ebates to get a 10% cash rebate (and you get an extra $10 when you sign up for Ebates through this link).

View of both falls from the Canadian side.

We took a quick 2 night pit stop in Niagara Falls on our drive home this past summer.

 

Our electronics budget of $1,000 was big enough to accommodate our $885 in tech gadget purchases.  The majority of the electronics spending was a pair of brand new HP ProBook 430 g3 ultralight computers for $350 each (Black Friday special pricing).  They have similar specs to macbook pros that cost 3-4 times as much (except ours came with no Apple logos).  We mainly bought them for our 9 week summer trip since we’ll be carrying nothing more than regular size bookbags for our trek across Europe.  These new toys are faster, smaller, and almost half the weight of our old 15″ laptops.

Our $1,000 gift budget went mostly unused.  We spent just $381 throughout the year on various gifts for Christmas and birthdays.  Our families aren’t huge gift givers fortunately so we get by without much financial outlay.  We’re also opportunistic gift acquirers, so if we see a nice deal on a gift for someone then we’ll purchase it months ahead of time.

A "free" gift. An art kit pulled together from random unused school supplies. Our kids love these and use them all the time.

A “free” Christmas gift. Random unused school supplies found around our house repurposed into an art kit. Our kids both loved receiving these for Christmas gifts and use them all the time.

I’m going to get some nasty comments for this, but here it goes.  We gave almost nothing away to charity in 2016 and I’m totally okay with it.  We only spent $67 out of our already scrooge-like $100 budget.  Maybe we’ll give hundreds, thousands, or millions to charity some day.  We still have three young kids to take care of and several other financial unknowns.  Health care costs in the future are uncertain.  In the meantime we are active in the community and volunteer our time in various ways.

2016 was a huge year in the Personal Finance blogging community. It was pretty awesome when Mr. Money Mustache gave away $100,000 of his loot to charity.  Then Physician on Fire did the same thing.  Newcomer to the FIRE blogging world TJ Pridonoff gave away $17,000.  I believe all of them received some decent tax breaks from making these sizable donations (in some cases to their own donor advised funds), and I hope to one day turbocharge the value of my giving by finding some tax breaks too.  That time is not today.

I’m a big fan of letting each person choose how they spend their money and not shaming others into giving it away.  I know at least one other major FIRE blogger feels the same way but I’ll never tell who!

A quick note on discretionary expenses: over one third of our annual budget falls in the discretionary category.  And that’s a great situation to be in since we can very easily slash discretionary spending if we enter a prolonged period of poor stock market returns.  Cheap vacations or skipping them altogether combined with deferred toy purchases would lower our total annual expenses to roughly $30,000.

 

Living well on less than $40,000 per year

So that’s the story of our $40,000 per year budget and how it played out in practice over the past year.  Sometimes I’ll hear from high spending folks that there is no way anyone could live on $40,000 per year, and certainly not with three kids.

However if we gross up our $40,000 per year budget to account for things we don’t pay for, it’s easy to see how we’re living a $100,000 per year lifestyle only minor sacrifices:

  • +$20,000 mortgage payment
  • +$5,000 new car payments
  • +$10,000 extra tax bill
  • +$5,000 dumb financial moves (credit card interest, extended warranties, investment management fees)
  • +$10,000 rough annual value of travel hacking free hotel rooms and free flights
  • +$10,000 work related costs (lunches out; fancier wardrobe)

So if you’re like me and spend around $40,000 per year, realize that you might be living a luxurious six figure lifestyle without even knowing it!  And welcome to the club.

 

How to track spending like a pro

When I was working I kept track of spending but never budgeted. We always had a surplus of funds and spent like we wanted to.  I used a simple spreadsheet to keep track of our expenses.

Total 2016 Spending (courtesy of Personal Capital)

Total 2016 Spending (screen cap from Personal Capital)

 

Then a few years ago I switched to Personal Capital to track all of our expenses (full review).  Personal Capital also tracks all our income (including dividends and interest), and summarizes a couple dozen investment accounts into one screen.  It is completely free to use Personal Capital whether you have $10,000 or $1,000,000 or more.  If you don’t already track expenses, try Personal Capital, since it only takes 10 minutes to sign up and link all your accounts.

 

 

How was your 2016 spending?  Who’s going to win the biggest spender award?  And the tiniest spender award?  Impress me with your numbers!

 

 

December 2016 Financial Update

two-cents-photo

Now that the year end celebrations are over, it’s time to get down to business.  Our December finances closed on a strong note with a big $29,000 boost to our net worth, bringing the total to an all time high of $1,680,000.  Our income for the month totaled $16,120 primarily due to year end dividend income while our expenses increased to $6,326 thanks to some incredible travel deals.

We closed out the year just under our $40,000 budget with total spending of $38,991.

Here’s how everything went down:

Income

In December our investment income climbed to $12,686 thanks to year end dividend payments from our investments.  Since our mutual funds pay at the end of each quarter, the months of March, June, September, and December always bring us high investment income while the other months are near zero.  Total investment income for 2016 rose to an all time high of $35,190, roughly 20% higher than the $28,527 dividend income we earned in 2015.  We aren’t dividend focused investors but the mutual funds we invest in tend to yield between 2% and 3%.  This year was no different with an overall portfolio yield of 2.52%.

Blog income, shown as “other income” in the chart, returned to a more normal $3,272 after a very slow November.  My early retirement lifestyle consulting income slowed to $125 in December after several months of much stronger results.  I was out of the country for roughly half the month without internet, which possibly led to the loss of a client or two (but it was worth it for the peacefulness and relaxation!).

What I was doing instead of helping people retire early.

Busy being early retired instead of helping other people retire early.

The $35 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.  I made some large travel-related purchases in December (more on that below) and I expect to get over $100 cash back on those purchases.

december-2016-income

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).

 

Expenses

Now let’s look at December expenses:

december-2016-expenses

Our core expenses remained very modest but a busy month of traveling and travel-related purchases pushed our total spending for the month to $6,326, or almost twice our normal budget of $3,333 per month (or $40,000 per year).

Travel – $5,332: Of the total travel expense, we spent $697 on all cruise costs beyond our cruise fares for the two cruises that we took in December.  The $697 includes mandatory gratuities of $12-13 per person per day (half that for children on MSC Cruises), gas for the minivan, and a week of parking at the Miami light rail station.  $36 for parking at the South Miami rail station parking deck was the cheapest way to get Port of Miami parking for a week at 80% less than the port charges.  However it took much longer than I expected to park the car and get back to the cruise terminal due to downtown construction and related transit detours.  The upside is I spent a few hours wandering around downtown Miami.

We travel-hacked this free two bedroom, two bathroom two story hotel suite (with full kitchen) that sleeps six for 10,000 Marriott points (= 3,333 Starwood points).

We travel-hacked this free two bedroom, two bathroom two story hotel suite (with full kitchen) that sleeps six for 10,000 Marriott points (= 3,333 Starwood points).

And it came with free breakfast. Incredible waffles and yes, that is brie (first time seeing that on a hotel's free breakfast buffet).

And the suite came with free breakfast. Incredible waffles, hot goodies like eggs and sausage (and tortillas!) and yes, that is brie (first time seeing that on a hotel’s free breakfast buffet!).

The bulk of the travel spending was for Airbnb gift cards.  I spent $4,635 to purchase $5,800 worth of Airbnb gift cards, which equates to a 20% discount.  I also bought them through an online shopping portal to snag another $100+ in cash back.

I estimated the cost of nine weeks of Airbnb rentals in Europe at roughly $90 per night and bought enough gift cards to cover what I expect to spend for this summer’s lodging.  We might stay in hotels for short stays of a night or two, and some airbnb’s will cost more than $90 per night, but overall I figure I’ll use up most of the $5,800 Airbnb credit.  If not, it never expires so I can use it on a future vacation.

If you have never tried Airbnb, it’s worth checking out.  We just booked a two bedroom, two bath high rise apartment (with a view!) in Lisbon, Portugal for five nights at USD$76 per night.  Get $35 off your first reservation using this link.  In our experience, we pay about half the rate of similar hotels and gain access to a living room and kitchen which makes family vacations go more smoothly (especially by week seven or eight).

For those following along with last month’s saga of the Cardcash.com disaster where many of us bought $500 to $1,000 worth of Aldi gift cards and they all turned out bogus (but we all got our money back as far as I know!), these Airbnb gift cards don’t have the same risk.  I bought them through GiftCardMall which is a “new” seller of gift cards and not a reseller, so there is no risk of shady fly by night sellers trying to pull one over on unsuspecting buyers through Cardcash.com (which is really a marketplace to connect buyers and sellers).

I still think places like Cardcash.com present a great way to save 5-20% off of places you plan on shopping anyway.  And I continue to think they are generally reliable due to several previous successful purchases and the 45 day cash back guarantee actually working in this most recent case.  Another alternative site I used more recently is Raise.com which is a gift card reseller just like Cardcash.com.  Raise.com offers a 100 day money back guarantee so there’s even less risk involved.  You can snag $5 off your first purchase at Cardcash or at Raise when you click through those links (I get $5 too!).  Just don’t buy more gift cards than you plan on using within the money back guarantee period.

Healthcare/Medical – $308: The majority of the healthcare spending for December was dental care.  Four of us had checkups and we have to pay for part or all of the dental visits out of pocket.  Also included in December’s medical expenses were prescription drugs.

We paid for the first month of insurance premiums on our new ACA-subsidized insurance plan.  It’s a slightly worse plan than what we had in 2016 and requires us to switch doctors.  We usually go to the doctor’s office once or twice per year so it’s not a huge deal to switch.  I can’t complain too much since we are only out of pocket $16 per month.  The $100 deductible and $1,200 out of pocket maximum means our medical costs will remain fairly minimal.  The $16 per month is also significantly less than the $125 per month we paid in 2016.

I guess we are the only ones in the nation paying less in 2017 than in 2016 for health insurance and generally happy with it?  The Healthcare.gov application process this year took no time at all as (amazingly) almost all of my information was pre-filled from last year’s application.  If this is evil commie government health care I’d like some more, please.

2017-health-insurance-costs

Since we carefully manage our Adjusted Gross Income to fall just over the poverty line, we get a large ACA subsidy.  We picked the cheapest silver plan.  The more expensive Blue Cross plan would cost about $125 per month (and that’s the cost the ACA uses to calculate the $856 per month subsidy).  We get to use the $856 per month subsidy on any Marketplace plan of our choosing, so we opted for a cheaper plan.

As of press time in early January, our two oldest children have “pending” applications with the North Carolina Children’s Health Insurance Program / Medicaid.  They qualify for this “free” coverage based on our low AGI and it’s pretty decent coverage from what we can tell (though not as flexible as some private insurance).  If one of the kids develops a significant medical issue and we need private insurance, we can always re-apply to the healthcare.gov Marketplace based on changed circumstances (our income could significantly increase, for example) and obtain heavily subsidized private insurance for the kids, too.

A quick note on “OMG OBAMACARE IS ENDING!!1”: Yeah, maybe.  There’s a lot of uncertainty over what the promised “repeal and replace” actually means.  I wouldn’t be surprised to see many parts of the Affordable Care Act remain in place under TrumpCare like the coverage for children on the parents’ policy through age 26, coverage of pre-existing conditions, and some form of subsidies to make insurance affordable.  Who knows, TrumpCare might actually be better for the average person than ObamaCare (though unlikely to be better for us given our $16 policy for 2017!).

In terms of timing, I expect the ACA subsidies and coverage to definitely remain through 2017 and most likely remain through 2018, and possibly later.  So now isn’t the time to panic. Yet. We’re probably good for two more years.

What will we do in 2019 should TrumpCare prove unfavorable?

  • Pay more, possibly tens of thousands per year more, and spend less elsewhere
  • Or work a little bit harder at money making endeavors and keep non-healthcare spending the same as today
  • Accept worse coverage to save money
  • Move overseas to any of the dozens of countries with reasonable health care costs
  • Move to a state with reasonable health insurance costs (that might include state-level subsidies or adult Medicaid)
  • Adapt our plans to maximize our benefit under the new TrumpCare subsidy rules
  • Throw in the towel and get a job with employer provided (and subsidized) health insurance

Fortunately we have time to see how the situation unfolds and react to new information as it becomes available.  Pay close attention in the coming weeks and months.

This is the special place I'd like to return to so that I can properly ponder future Affordable Care Act questions.

This is the special place I’d like to return to so that I can properly ponder future Affordable Care Act questions.

Groceries – $205:  We spent a lot less than normal on groceries in December because we weren’t at home for half the month and we enjoyed several nice meals at other peoples’ houses for the various winter holidays.

Shrimp and grits. And ham and cheese. (grits = ground up corn meal, popular in southern USA)

Shrimp and grits. And ham and cheese. (grits = ground up corn meal, popular in southern USA)

10 pounds of barbeque. We buy whole pork shoulders (also called boston butts), roast them all day, let it fall off the bone and serve it.

10 pounds of Eastern North Carolina style barbeque. We buy whole pork shoulders (also called boston butts) for about a buck per pound, roast them all day, let it fall off the bone and serve it.

Cruise ship desserts. Mmmmm flan.

Cruise ship desserts. Mmmmm flan.

Utilities – $156: The city water, sewer, and trash bill plus the natural gas bill.  In a previous month I prepaid the electric bill by applying an extra $250 toward my account balance – more credit card travel hacking.  January will see me paying the electric bill once again.

Education – $150: An overnight school field trip for one kid. Now that she’s attending the fancy middle school instead of the worst elementary school in the district we can no longer count on $20-60 per year in field trip costs. It’s still about $10,000 cheaper than private school and probably better.

One of our Christmas traditions - candy cane reindeer

One of our Christmas traditions – candy cane reindeer

The finished product. Nothing celebrates America and Baby Jesus better than candy cane reindeer.

The finished product. Nothing celebrates America and Baby Jesus better than candy cane reindeer.

 

Restaurants – $76: I bought some Taco Bell gift cards (my fast food weakness) through Raise.com for approximately 30% off (after factoring in the new account $5 discount).  I suppose I should allocate part of the expense to “Travel” because we had to stop for a bite on the drive back from Miami and I used up part of the card balance.

Gifts – $51: Picked up a few birthday and Christmas gifts.  Some of these included superheroes with superpowers. Because four year olds love superheroes with superpowers.  And Pikachu piggy banks.

Kaboom!

Kaboom! Wrapping paper everywhere!

I wish I could figure out Pinterest so I could put this pic on there.

I wish I could figure out Pinterest so I could put this pic on there.

Cable – $34: This is internet from the cable company.  Yes, it’s pretty cheap for 50 mbit service.  I call or go online annually to get this rate after a little finessing.

Home maintenance – $10: Donation for our neighborhood’s luminaria display along all the neighborhood streets on Christmas Eve.  This single annual payment is much cheaper than an HOA and provides more pleasure (and NEVER tells you your grass is unkempt).

Neighborhood luminarias (white paper bags filled with candles line all the streets - it helps Santa Claus find us)

Neighborhood luminarias (white paper bags filled with candles line all the streets – it helps Santa Claus find us)

Service Charges – $1: I pay a buck per month for my credit union checking account.  They pay me decent interest with no account minimums which usually offsets this buck.

Gasoline – $0: Other than the gas we used to get to and from the cruises, we haven’t had to purchase any gas locally.  We can go for a couple months between refills when we’re strictly staying around home (our feet are good at taking us places and almost everything is just a couple miles away if we’re driving). Gas purchased while on road trips is included in “Travel”.

Other than pre-paying $4,635 for our summer 2017 European lodging, we only spent $1,691 for our routine expenses in December.  Another great low cost month!

Root of Good's abode all lit up

Root of Good’s abode all lit up.  We’re gentrifying this joint!

 

Total Living Expenses for 2016

december-2016-ytd-expenses

At $38,991 total spending for 2016, we remained about $1,000 below our annual spending target of $40,000 budgeted for the entire year.  I can’t believe we actually came so close to our spending target.  The $8,000+ minivan purchase would blow our budget for sure, I thought.  But as the year wore on and we spent less than the monthly budget most months we eventually got back on track for our annual spending target.

Here is a full summary of our 2016 budget versus actual spending for all twelve months of the year.

Big expenses for 2017 include replacing the roof early in 2017.  The budget for the roof replacement is somewhere around $4,000 to $8,000.

Nine weeks in Europe in the summer of 2017 won’t be cheap either.  Now that all flights and most lodging expenses are already paid, I think I can easily fit in ground transportation, food, and entertainment for nine weeks within our $10,000 travel budget for 2017.

There’s also the chance for higher than average dental expenses to take care of some issues that the dentist noticed during 2016 that may need attention eventually.

Living the good life on under $40,000 per year!

Living the good life on less than $40,000 per year!

If we give ourselves an inflationary raise based on the 1.7% CPI inflation for 2016, then our $40,000 2016 budget becomes $40,680 for 2017.  I’m pretty sure we can fit all our desired spending into that budget.  Our investment portfolio is over $1.5 million, so a $40,680 annual expenditure represents a 2.7% withdrawal rate from our portfolio (ignoring other income sources).  We could spend more from the portfolio if we wanted, plus we have the income from this blog and my consulting income if we find a worthwhile way to spend more money.

Monthly Expense Summary:

Free gingerbread house event at the public library.

Free gingerbread house event at the public library.

 

Net Worth: $1,680,000 (+$29,000)

Year end 2016 brings us another all time high net worth.  With $29,000 in net worth gains during December, we were closing in on the magical $1.7 million mark by year end (and have since surpassed it a few days into the new year).

We are $177,000 wealthier compared to one year ago when our net worth was $1,503,000.   That one year jump in net worth comes in a year with Mrs. Root of Good’s retirement, Brexit, a surprising upset in the US presidential election, civil war(s), scary geopolitics, and continuing terrorist attacks around the world. Even though the world we live in seems turbulent at times, it doesn’t mean you can’t make money with long term investments.

Skip the worries over market turbulence. Focus on the important things in life.

Skip the worries over market turbulence. Focus on the important things in life.

Most of this year’s net worth increase came from investment growth.  This blog and my Early Retirement Lifestyle Consulting generated enough income during the year to almost offset all of our living expenses, so we haven’t touched our investments during the year other than withdrawing the dividends from our taxable portfolio.

In fact, I plowed $18,000 into my Roth solo 401k from Root of Good earnings.  In other year end tax moves, I started climbing a baby step up my Roth IRA Conversion Ladder with the conversion of $4,300 from my traditional IRA to my Roth IRA.  Before the April 2017 tax filing deadline I plan to invest another $11,000 into his and hers Roth IRAs as well.  This means I’ll be expanding my Roth account balances by $18,000 + $4,300 + $11,000 = $33,300 for tax year 2016.  That translates to almost one full year of tax free withdrawals at some point in the future as I continue to climb the Roth IRA Ladder.

Here's our Design On A Dime foyer makeover. Classic video game systems like Nintendo, Super Nintendo, and Playstation 2 along with a 32" CRT TV.

Here’s our Design On A Dime foyer makeover. Classic video game systems like Nintendo, Super Nintendo, and Playstation 2 along with a 32″ CRT TV.  Bean bags and Mexican woven blanket/rug for 100% crash pad authenticity.  Foyers are pretty much a waste of space unless you put video games in them.

From a cash flow perspective, we’re hovering between $40,000 and $50,000 in money market accounts.  I’m considering selling a few taxable investments that have roughly zero capital gains to shore up the cash position (or at the least, use the sales proceeds to fund the $11,000 Roth IRA 2016 contributions coming up soon).

I don’t “fear” a market correction but know well enough they happen periodically.  Having enough cash on hand to supplement other income streams for the next several years is a comforting feeling.  If a 20% or 30% market crash occurs tomorrow, I’ll lose $300,000 to $450,000 but I won’t have to sell anything at a loss for several years.

december-2016-net-worth

Overall, we had a great 2016 and look forward to more good times in 2017. Financially things are looking good.  We made it through our first year of both of us being retired and profited nicely (but may give away all of the gains and then some in the coming years!).

As for the blog, in the next couple of months I’ll be posting about the family cruise in December, our summer 2017 European vacation, our 2016 budget vs. actual spending, and, as it evolves politically, health insurance for early retirees.

Happy new year!

Happy new year and best wishes for 2017!

 

Did you enjoy Christmas and New Year’s?  Any juicy family gossip you heard? Any good money talks with family and friends?  What’s your plan for 2017?

 

 

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November 2016 Financial Update

two-cents-photo

November was a busy month for us!  We ate a lot of turkey then packed up the minivan and set out for a five night Caribbean cruise.  Now that we are back, it’s time to take a look at our financials for last month.  Income looks tiny at $785 for the month (but I’ll explain why) while expenses remained moderate at $2,774 $1,884.  A strong stock market propelled our net worth $33,000 higher to $1,651,000.  All in all, November was a great month financially and otherwise.

Here’s the details:

Income

November investment income dropped to $39.  Since our mutual funds pay at the end of each quarter, the months of March, June, September, and December always bring us high investment income while the other months are near zero.  December should be a huge month of dividends, hopefully pushing our 2016 dividends over last year’s total of $28,527 in dividend income.

Blog income, shown as “other income” in the chart, shrunk to $276, down from $7,253 in October.  The stark difference is a matter of timing of deposits.  I received some checks in the mail while we were on vacation and didn’t get them deposited till the first few days of December.  November’s numbers were bad but December’s income will make up for it.  My early retirement lifestyle consulting also declined from October to $242.  After a month of spotty income like November, I’m very glad I don’t rely on my blog and consulting income to support our living expenses!

My full time job now.

My full time job now.

The $227 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. We spent over $800 on the cruise through the Ebates portal and we’ll be getting 10% of that back soon.

Not shown in the income chart is the $10 per day our middle child earns as a tutor.  She was just getting started with tutoring at the time of my last monthly financial update and now she’s steadily earning $10 two or three days per week.

november-2016-income

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).

 

Expenses

Now let’s look at November expenses:

november-2016-expenses

Even though we went on a Black Friday spending spree, at $2,774 $1,884* for the month, we still spent almost $1,500 less than our budget of $3,333 per month (or $40,000 per year).

Groceries – $1,273 $383*:  No, we didn’t dine on wagyu beef and caviar for every meal.  I spent $890 on $1,000 worth of Aldi gift cards (my largest Black Friday purchase).  The other $383 was our actual grocery bill for the month, which was less than we usually spend because we didn’t want to buy many perishable goods then head out of town for a week on our cruise.

1/4/2017 note: since getting a quick refund of $890 on the Aldi gift card purchase, our revised spending total for November 2016 was $1,884 total, and $383 on groceries

Mrs. Root of Good's killer pho. It's pho real.

Mrs. Root of Good’s killer pho. It’s pho real.

Enchiladas hot from the oven.

Enchiladas hot from the oven.

More Mexican food (from the cruise). Here's a whole post on cruise food!

More Mexican food (from the cruise). Here’s a whole post on cruise food!

I’ll probably blow through those Aldi gift cards in the next three or four months since I spend more on groceries at Aldi than other grocery stores.  I bought them at Cardcash.com, a gift card reseller that buys and sells gift cards, for 11% off of face value which saved me $110.  If you want to browse their inventory and save $5 on your first gift card purchase, click on over!  That’s my go-to site before I make any major purchases.  They offer gift cards for hundreds of different retailers like Lowe’s, Home Depot, grocery stores, gas stations, restaurants, even hotels.  Some are discounted just a percent or two while others routinely sell at double digit discounts.  They also run sales for an extra 5-10% off select gift cards (like the Black Friday 5% off everything sale).

*** 12/14/2016 Update: A couple of readers bought the Aldi gift cards from Cardcash and they turned out to be empty or invalid (and it turns out my $1000 of gift cards are duds too).  Cardcash will almost certainly refund the money we paid since it’s within their 45 day guaranteed refund period. If not a credit card charge back will do the trick!

After reading similar complaints online about Cardcash (maybe it’s only certain stores’ gift cards bought through Cardcash??) I think I’m switching my gift card buying to Raise.com (get a $5 discount off your first purchase through that link).  They have very similar offerings and not as much negative feedback AND offer a 100 day money back guarantee.  I’m also learning it’s a good idea to buy just what you plan on spending within the guarantee period so you can ensure you won’t lose money.

12/15/2016 Update: Cardcash approved my refund claim and I received the full $890 value paid. ***

Electronics – $759: I’ve been looking for a smaller, lightweight laptop for our Europe trip next summer.  I finally found an almost perfect laptop on a Black Friday sale for $349.  Mrs. Root of Good said she needed one too so we got matching his and hers laptops.  I went with the HP ProBook 430 G3 13.3″.  It’s like a 70% cheaper version of the Macbook Pro but with a crappier LCD screen and worse battery life.  It came with a SSD hard drive, Intel i3-6100U CPU, and 8 GB of RAM.  I have to say I’m impressed so far given the $349 price tag. It weighs just over 3 pounds and it’s lightning fast for most tasks (but could only run my Heroes of the Storm graphic-intensive game at medium settings).  The keyboard feels a tiny bit cramped but I think it will be fine once I get used to the slightly different key layout.

I also bought the HP X3000 wireless mouse for $8 to accompany the new laptop.

Mrs. Root of Good indulged her photography habit with the purchase of a Canon EF 75-300mm f/4-5.6 III zoom lens for $53.  Now she can take really close up pretty pictures of birds and stuff from far away.

Insurance – $213: 6 months of auto insurance for the two of us.  $500,000 liability limits.

Healthcare/Medical – $135: Health insurance premiums of $125 for our very impressive gold plated silver plan obtained through Healthcare.gov with some very sizable ACA subsidies.  $10 for a prescription.

Utilities – $124: Mainly the city water, sewer, and trash bill plus a small natural gas bill (before we turned the heat on in November).  In a previous month I prepaid the electric bill by applying an extra $250 toward my account balance – more credit card travel hacking.  This month I’ll have to start paying the electric bill once again.

Home improvement – $87: A run to Home Depot for miscellaneous home improvement and yard maintenance stuff.  Ant killer, some blue paint, wood stain for a furniture project, primer/stain block for some water stains, and HVAC vent covers.  Sadly, I didn’t have any discounted Home Depot gift cards on hand nor did I have any coupons so I HAD TO PAY RETAIL (and it breaks my heart a little).  But we knocked out several projects so there’s that.

One of those projects. Repurposing some random lumber from our storage shed to build a new shelf in our pantry.

One of those projects. Repurposing some random lumber from our storage shed to build a new shelf in our pantry.  Check out those safety goggles and steel toe sandals.

Travel – $63: Gas on the way to the cruise terminal in Jacksonville – $22.  Parking right across the street from the cruise terminal for six days – $41 (way better than $75 for parking at the port).

Crystal clear water. Fine white sand. Minimal waves. Perfect temperature. Other than the risk of sunburn, I can't complain.

Crystal clear water. Fine white sand. Minimal waves. Perfect temperature. Other than the risk of sunburn, I can’t complain.

I love Mexican buffets. I love them slightly less when they occur at 11 pm. That's what mid-day siestas are for though, right?

I love Mexican buffets on cruise ships. I love them slightly less when they occur at 11 pm. That’s what mid-day siestas are for though, right? (The kid is awake, just goofy all the time as most four year olds are)

Cruises are a great place to buy cheap liquor too. USD$79 for 7 liters of mid-shelf and top shelf goodies!

Cruises are a great place to buy cheap liquor too. USD$79 for 7 liters of middle shelf and top shelf goodness!

Restaurants – $62: This includes one meal for the whole family at the Chinese restaurant and a $25 Groupon deal for a $25 Papa John’s gift card plus two free large pizzas.  Using coupons and promotions, I’ll turn that $25 Groupon deal into six or seven large pizzas.  I’m not a huge Groupon fan because we don’t go out to eat very often, but there are certainly some killer deals to be had if you dine out often.  Check out Groupon if you haven’t already (they offer 25% off your first purchase through that link).

Not a restaurant purchase exactly because it cost $0. Half a dozen free Krispy Kreme donuts for getting A's on her report card.

Not a restaurant purchase exactly because it cost $0. Half a dozen free Krispy Kreme donuts for getting A’s on her report card.  Little guy on the right says “I promise I won’t eat any while you’re at school”.

Gasoline – $28: I finally had to buy two thirds of a tank of gas.  This was at the beginning of November when the east coast gasoline pipeline blew up (again) and we feared gasoline shortages.  Nothing ever happened here and prices didn’t even go up.  I topped off the tank at the very end of November while driving to the Jacksonville, Florida cruise port but I classify any gas purchased while on vacation as a “travel” expense and not a routine driving-around-town gasoline expense.

Cable – $24: This is internet from the cable company.  It’s usually $35 but I had a small credit from the previous bill.

Overall we had a very frugal month.  When I pull out the Aldi gift card purchase, the big electronics purchases, and the six months of auto insurance, our routine monthly expenses were only about $1,000.  Even when we include all those big lumpy expenses we were still several hundred dollars below our monthly budget of $3,333.

 

Year to Date Living Expenses

november-2016-ytd-expenses

At $33,554 $32,664 (see note under “groceries”) year to date spending, we remain below our annual spending target of $36,667 budgeted for the first eleven months of the year by a few thousand dollars.

With only a few weeks left in the year, it looks like we’ll have a budget surplus of at least four or five thousand dollars.  I’ll mentally carry that balance forward into 2017 because we will need it.  Nine weeks in Europe in the summer of 2017 won’t be cheap.  I doubt I can pull it off for less than our 2016 travel budget of $10,000.

We also need to replace the roof early in 2017.  The budget for the roof replacement is somewhere around $4,000 to $8,000.

Of course we won’t be spending over $8,000 on a new vehicle in 2017, so things might work themselves out naturally.

Monthly Expense Summary:

 

Net Worth: $1,651,000 (+$33,000)

The $33,000 net worth increase in November more than erases the $29,000 we lost in October.  Our net worth reached a new high water mark in November at $1,651,000, and things are holding steady about a week into December as I publish this post.  It certainly looks like we’ll close out 2016 with a much higher net worth than 2015, when we ended the year at $1,503,000.

Most of this year’s net worth increase came from investment growth.  Mrs. Root of Good only worked about one month in 2016 before joining me in early retirement, so her salary this year was minimal.  This blog and my Early Retirement Lifestyle Consulting generated enough income during the year to roughly offset all of our living expenses, so we haven’t touched our investments during the year other than withdrawing the dividends from our taxable portfolio.

In November, I finally bumped up the value of our house from $140,000 to $145,000 in Personal Capital after reading some reader comments in my article on the gentrification of our neighborhood.  I don’t really update our home’s value on a regular basis because we have no plans of selling it any time soon, and I’m not sure I could get the $185,000 that Zillow says our home is worth.  But I figure after paying for some minor fixes, landscaping upgrades, and a 5-6% realtor commission, I could get a net of $145,000 with an easy sale.  Personal Capital has a neat tool where you can keep your home’s value updated in real time by linking to Zillow’s value estimate, but that seems like overkill for an illiquid asset.  I like to have manual control over how I value our house since spikes in value might be fleeting.

The view from our bedroom window. Fall is here!

The view from our bedroom window. Fall is here!

On the investing front, I dumped $18,000 into my Roth solo 401k.  Since my federal income tax (not including the self employment tax I owe) remains around zero in early retirement, I don’t need the tax deduction of a traditional 401k contribution, so I chose the Roth this time around.  Later in the year or in early 2017 I’ll be making another contribution to the traditional 401k for my “employer” contribution since it isn’t possible to contribute to a Roth out of employer earnings.  I’ll also max out two Roth IRAs (assuming our earned income is high enough for all these contributions).

november-2016-net-worth

Our cash position continued to climb throughout 2016.  After the $18,000 solo 401k contribution, we still have close to $40,000 in cash right now.  It’s a nice spot to be in since that will cover more than a year of living expenses given the stream of dividend income routinely flowing into our checking account plus the hit and miss blog and consulting income.

Thanksgiving spread. I was conscripted to help with kitchen duty.

Thanksgiving spread. I was conscripted to help with kitchen duty.

If markets remain high, I might take some capital gains in taxable accounts in 2017 to shore up our cash position a little more.  I’m also looking closer at bonds as rates increase.  The Vanguard Total Bond Index Fund, BND, has dropped a lot since the election and I’ve had my eye on it for a while.

Aside from the year end financial moves, December is a very busy month for the Root of Good family.  We just returned from a Caribbean cruise and we are driving to Miami for another cruise next week heading to the central and eastern Caribbean.  Then there’s Christmas and New Year’s right after we get back from Miami.  Good thing we’re retired because we would have a hard time fitting in all this leisure with a full time work schedule.

This happened.

This happened.

Someone on Twitter suggested I block off an hour on the Monday morning after I get back from vacation to catch up on emails.  I gently reminded him that I was retired and no longer needed those kind of time/stress management tips!  I still get a lot of blog related emails and comments on the articles here which I promise I’ll respond to (eventually).

This is my Monday morning routine now.

This is my Monday morning routine now.

Given our hectic schedule for December, this will likely be my last blog post of the year.  I hope everyone has a profitable and enjoyable remainder of the year!

I’ve been posting a lot less frequently in 2016 and that will probably be the trend in 2017 as well.  Looking forward to 2017, I’ll be posting more about next summer’s nine week European vacation as well as the non-financial aspects of early retirement.

Nothing like a nice sunset at sea.

Nothing like a nice sunset at sea.

 

Did you have a good Thanksgiving?  Looking forward to Christmas/holidays?  Or dreading it?  Any big year end financial moves in the works?

 

 

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October 2016 Financial Update

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Now that the trick or treating is over and October is gone, I’m ready to share the good and bad financial data from last month.  Our income, mostly derived from this blog, remained very strong at $8,365 while our expenses ended the month at $1,460 which left us with a large cash surplus.  If I make much more money, I’m afraid I might be “unretired”!

I can’t say I paid any attention to the stock market in October but apparently it declined.  In spite of income exceeding expenses by about $7,000, our net worth still dropped by $29,000 to $1,618,000.  Since this is significantly more money than we had a year or two ago, I continue to feel safe and secure at our current net worth levels.

Here’s the straight dope on our October financials:

 

Income

October investment income dropped to $31 after a much stouter September with $4,160.  That’s the nature of the beast since most of our funds pay at the end of each quarter which means March, June, September, and December always bring us high investment income while the other months are near zero.  We are still on pace for matching or exceeding the total of $28,527 in dividend income received in 2015.  Although I’m no dividend-focused investor, dividends still figure significantly into our annual cash flow by helping provide the funds we need for living expenses.

No October post would be valid without the obligatory pumpkin pic. Neighborhood event in the park.

No October post would be valid without the obligatory pumpkin pic. Neighborhood event in the park.

Blog income, shown as “other income” in the chart, ballooned to $7,253 while my early retirement lifestyle consulting also increased healthily to $1,076.  Blog income was higher than normal because I received both September and October payments from one advertiser during the month of October.  The consulting income remained very strong even though I raised rates last month.  As one client mentioned, it’s hard to find good, competent professionals that understand taxes and investments with a focus on very early retirement at any price point, and particularly at the relative pittance I’m charging (though I don’t claim to be a professional or anything more than “a guy that writes stuff on the internet and retired at 33”).

The $4 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. I recently booked an $857 cruise for next month through Expedia by clicking through Ebates to get to Expedia.  I’ll be getting $85.70 in cash back once we return home from the cruise in December.  Ebates is a nice way to get a 10% discount on every cruise from a booking site we already use.  I’ll also be using one of those shopping portals later in the month if I see any good deals on Black Friday / Cyber Monday.

On a slightly different note, our ten year old just landed her first job!  Someone asked us if one of our kids would be interested in making some cash as a tutor for their kid.  Now our little gal makes $10 per hour as a tutor.  She will be working one hour after school Monday through Thursday.  If this gig continues, she might make enough to fund a Roth IRA like Go Curry Cracker’s kid!  This also supports my notion that mom and dad won’t be on the hook for very much during the kids’ college years.

october-2016-income

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).

 

Expenses

Now let’s look at October expenses:

october-2016-expenses

While some consider $1,460 to be a mind blowing monthly expense total for a family of five, I consider it just another routine month where we didn’t have any huge lumpy annual expenses (like property taxes or insurance).  We spent almost $2,000 less than our budget of $3,333 per month (or $40,000 per year).  For the second month in a row, travel spending topped the expense report (and I like it that way!).

Travel – $579:  In September it was cruises. In October it was plane tickets for the five of us to, from, and around Europe.  We booked tickets from Raleigh to Lisbon, Portugal for June, 2017 with the return from Amsterdam to Raleigh in August, 2017.  Even though we used United Airline miles to score “free” tickets, we still had to pay tax on the tickets which was almost $400 for the five of us.

For those in the points/miles game, we spent 60,000 miles per ticket, or 300,000 total to fly economy between Raleigh and Europe.  By booking so far ahead of time we scored some great flights that are only 10 hours to Europe and 13 hours back home including connection times.

With United’s new redemption rules, you get a free one way flight anywhere within the region you’re flying to (in this case, Europe).  We used the free flight for a short hop from Lisbon to Malaga, Spain.  We could have flown all the way across Europe to some distant corner (Estonia?) but instead chose to take a relatively short flight to coastal Spain since we wanted to visit that area and it’s cooler in June than it is later in the summer.  We’re slowly making our way north across the continent as the temperature rises throughout the summer.

All of those 300,000 United miles came from sign up bonuses for credit cards, so if you’re interested in free flights to Europe don’t forget to check out my credit card page.

We also jumped on a luke warm Ryanair deal from Seville, Spain to Milan, Italy for $194 total for the five of us.  There might be some extra checked bag fees later on if we can’t pack extremely light like we did for our 7 weeks in Mexico last summer.

All of our gear for seven weeks in Mexico.

All of our gear for seven weeks in Mexico.

So far, we spent $579 for our 9 week trip to Europe and managed to buy all the flights for our trip (20 one way tickets in all).  Hopefully this is prelude to a nice low cost, high value summer in Europe!

After visiting Portugal, Spain, and Italy, we will continue through Slovenia, Austria, Hungary, Czech Republic, and Germany before flying back home from Amsterdam.  It won’t be cheap even with my travel hacking skillz.  I’ll feel really proud if we can pull it off for less than $10,000, and content with a total under $15,000.  In rough terms, we’ll probably spend around $6,000-7,000 on lodging ($100/day), $3,500 ($50/day) on food, $2,000 ($30/day) on ground transportation between and within cities, and $1,000 on various admission fees, attractions, and entertainment.

Sound off in the comments if I’m being completely ridiculous about prices but keep in mind we have hotel points for free nights and will rely heavily on airbnb (click for $35 off your first rental), and will probably dine out once per day and buy groceries for the other meals.  Trains and buses are stupid cheap in most places (goeuro.com is amazing for cost comparisons) and often come with kids ride cheap or free promotions.

I’ll probably ramp up the hotel/airbnb reservations in the early spring and book those advance purchase train tickets that come with discounts for booking early as the reservation windows open up.  Anyone have experience booking airbnb apartments six or eight months before their stay?

I’ll publish a more in depth article on the trip at some point.

Groceries – $366: Another modest month buying groceries.  Some of the savings came from “shopping in our freezer and pantry” instead of buying stuff at the store.  Here’s a typical month of groceries for us.

We enjoy good food cooked from scratch.  Somehow we find these incredible deals on groceries including some high end, “fancy” ingredients.  At Kroger, we scored about $80 worth of imported Italian goodies like cheeses, pasta sauce, prosciutto, and olives at 75-95% off retail prices.

We also shop at the ethnic grocery stores in our neighborhood.  After walking to the kid’s school for morning drop off, we continued walking to the neighborhood Latino supermarket and picked up three pounds of poblano peppers (on clearance but still perfectly good), a bunch of cilantro, two and a half pounds of fresh tortillas, and two bottles of imported Guatemalan hot sauce for $6.  These goodies combined with some large hunks of meat led to incredible fajitas for under $1 per meal.  “Reminds me of those street tacos in Mexico” one of our kids remarked.  ¡Que rico!

Some of that prosciutto and mascarpone gracing the tops of some day old ciabatta bread. Mmm... discount good eats.

Some of that prosciutto and mascarpone gracing the tops of some day old ciabatta bread. Mmm… discount good eats.

Clothing – $134: Fall and winter clothes for the kids.  One pair of shoes.  A combo of Walmart and the thrift store.  The thrift store offered all girls/women’s apparel at 40% off.  How incredible is that?  A steep discount on top of already low prices.  As usual, the thrift store haul included some articles of clothing with price tags still attached.

Healthcare/Medical – $129: Health insurance premiums of $125 for our very impressive gold plated silver plan obtained through Healthcare.gov with some very sizable ACA subsidies. $4 for some random lab tests at the doctor.

For those looking for insurance in early retirement, on November 1st the Healthcare.gov marketplace started open enrollment for 2017.  You can price out plans based on your income and household size.  Even though North Carolina was one of those states that lost a few insurers, we picked up one new insurer (Cigna) bringing the total number of companies offering insurance in Raleigh to two, with Blue Cross Blue Shield being the other one.

The two cheapest silver plans look like reasonably good options for our family.  I’m debating between the $50 per month plan with $200 deductible, no kid dental coverage and limited network and the $125 per month plan with $800 deductible, kid dental, and nationwide network plus out of network coverage.  Those costs are after the very generous premium tax credit/subsidy and include large cost sharing subsidies since our MAGI is less than 150% of the federal poverty level.

Utilities – $103: Water, sewer, trash.  In a previous month I prepaid the electric bill by applying an extra $250 toward my account balance – more credit card travel hacking.

October is a cheap time of year for utilities since we don’t need to use the heat or the air conditioning.  Winter is coming (like the Game of Thrones reference?).  A few minutes before pressing “publish”, I had to turn on the heat.  It was 62 inside the house and the forecast for the week calls for brisk mornings in the 40’s and cool afternoons topping out in the upper 60’s.  I appreciate thriftiness, but don’t mind dropping a few bucks to keep it 68 degrees during the day and 63 at night.

Hurricane Matthew blew through in October. Culvert underneath our property almost topped out. That plus 4-5 more feet of water equals a flooded crawlspace.

Hurricane Matthew blew through in October. Culvert underneath our property almost topped out. That plus 4-5 more feet of water equals a flooded crawlspace.

On the bright side, the kids got to play in a hurricane!

On the bright side, the kids got to play in a hurricane!

Education – $66: Field trips for the year for the elementary school kid.

Free education: troubleshooting a freebie TV given to us by some family. Looks like a $4 fuse will fix it.

Free education: troubleshooting a freebie TV given to us by some family. Looks like a $4 fuse will fix it.

Restaurants – $38: Dinner at a pizza place for the whole family and a clandestine lunch at the Chinese restaurant for Mrs. Root of Good and I (we brought home some fortune cookies and mints for the kids).

Internet (“Cable”) – $34: 50/5 mbit service.

Entertainment – $4: One hour boat rental on the city lake.  Small price to pay for a beautiful morning paddling on the water.  My first bald eagle sighting was included at no additional charge.

Most of our entertainment is free.  Tennis or other sports/recreation at neighborhood parks.  Walking/hiking on the trails.  Hanging out with friends at the park or at our house.  Campfires in the back yard.  A seemingly endless string of birthday parties.  Visits to the art museum, science museum, and children’s museum.  After all that, it’s time to kick back and relax with some video games, Netflix (which actually costs us a tiny bit), and library books (like European travel guides).

Free visit to the children's museum. I'm strapped in with the little dude at the flight stick. HELP!!

Free visit to the children’s museum. I’m strapped in with the little dude at the flight stick. HELP!!

Special huge inflatable bunny week at the Art Museum. Free, of course.

Special huge inflatable bunny week at the Art Museum. Free, of course.

Boat rental - not free but worth every penny of the $4. Also cheaper and more fun than a gym membership. And bald eagles.

Boat rental – not free but worth every penny of the $4. Also cheaper and more fun than a gym membership. And bald eagles. And look at that grin.

Home Maintenance – $2: A gallon of gas for the lawn mower. Colder weather = no more mowing (soon).

Gas – $0: Nope, not for the car. But I did get a full tank in early November which you can read all about next month.

 

Year to Date Living Expenses

october-2016-ytd-expenses

That should read “through 10/31/2016”

At $30,780 year to date spending, we remain below our annual spending target of $33,333 budgeted for the first ten months of the year by a few thousand dollars.

Other than paying for gas, parking, and tips on our two cruises in December, we won’t have a lot of expenses out of the ordinary.  I’m planning on replacing the roof sometime in the next year but I don’t think I have time to get bids, research those bids, schedule an installation time, and deal with any unexpected delays before we leave for our first cruise in less than three weeks.  And there’s a huge Thanksgiving feast we’ll be throwing somewhere in that schedule.  Otherwise, I would go ahead and tackle this project in November.

The budget for the roof replacement is somewhere around $4,000 to $8,000.  I could probably fit it in the $40,000 annual budget this year, or underspend 2016’s budget by a bit, then go over slightly in 2017 if we do the roof replacement in the spring.

 

Monthly Expense Summary:

 

Net Worth: $1,618,000 (-$29,000)

After several good months we experienced a slight reversal of fortune in October as $29,000 disappeared from our net worth statement.  It’s to be expected.  The market goes up, it goes down.  October happened to be a down month.  So far November is following in October’s footsteps.

october-2016-net-worth

From last month’s financial update:

We’re still sitting on over $50,000 in cash in our credit union money market account right now.  I’ll be moving some of that cash around for year end tax planning, like a large solo 401k contribution, but I will also hang on to part of that cash in order to provide a buffer against severe market downturns.

My procrastination paid off since we’re sitting on even more cash right now and I still haven’t pulled the trigger on the IRA or solo 401k contributions and the market is lower now than it was a month ago.  I’m either the wisest or laziest investor ever.

This pretty much sums it up right here. Didn't cost a penny but worth a million bucks.

This pretty much sums it up right here. Didn’t cost a penny but worth a million bucks.

 

Looking for year end tips to get your finances in order? Check out these 11 tips to finish the year strong.

 

 

How was your October?  Any big year end financial moves?  Ready to end the year on a high note?

 

 

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September 2016 Financial Update

two-cents-photo

I can’t believe September is already over!  Our oldest two kids are settling into the back to school routine (with a few hiccups along the way) while our youngest starts one day per week pre-school next week.  Fall usually brings cooler, dryer weather to North Carolina but this year summer decided to overstay its welcome by keeping the warm, humid air around much longer than normal.

September was another great month for us financially.  Our income remained strong at $5,695 while our spending remained below budget at $2,781.  Net worth increased by $12,000 to $1,647,000.

Here’s all the nitty gritty details on our September finances:

 

Income

September investment income was $4,160 thanks to all the quarter-end dividend payments from our mutual funds and ETFs.  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, shrunk to $1,044 in September while my early retirement lifestyle consulting brought in $484.  Blog income was lower than normal because I received a large payment from one advertiser in the first days of October (it usually arrives at the end of the month but was a few days late this time).  The consulting income maintained about the same pace as August thanks to steady traffic here at Root of Good.  On the consulting side, I’m a little busier than I would like to be, so I raised the hourly rates again.  I’m aiming for 3-4 consulting sessions per month at a maximum.

$5 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 September I booked an $857 cruise through Expedia by clicking through Ebates to get to Expedia.  I’ll be getting $85.70 in cash back once we return home from the cruise in December.  Ebates is a nice way to get a 10% discount on every cruise from a booking site we already use.

september-2016-income

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).

 

Expenses

Now let’s look at September expenses:

september-2016-expenses

Spending for September totaled $2,781, which was slightly lower than the $2,817 we spent in August.  We spent $500 less than our budget of $3,333 per month (or $40,000 per year).  The bulk of our spending last month came from more cruise bookings and quarterly estimated taxes.

Travel – $868:  We booked a second cabin on our second cruise in December so our son can join us (along with my mother who’s paying her own way).  We booked a four person cabin last January and hoped we would find a two person cabin at a great deal and we finally did just a few months before the sail date (patience/procrastination pays off).  The final payment for our four person cabin was also due last month.

If you are interested in taking a cruise, now is the time to start shopping for deals because the fall season (hurricanes, oh no!) and the winter season offer the lowest prices for cruise fares.  Check out my cruise overview and my tips on getting the best deals.  And don’t click on this cruise ship food unless you want to get hungry.

Taxes – $600: Another quarterly estimated tax payment.  Half that went to the State of North Carolina, the other half went to the feds.  I paid both of these bills using my credit card to rack up some free airline miles (1.87-2% convenience fees to pay by CC were included in the “travel” expense category).

Utilities – $455: Water, sewer, trash, and electricity.  I prepaid the electric bill by applying an extra $250 toward my account balance – more credit card travel hacking. The natural gas bill was paid in October so it didn’t show up in this total.

Groceries – $420: After a restocking binge upon returning home from our 3.5 week Canada road trip, we didn’t have to shop as much in September.  We still made some awesome dishes.

pad-thai-september-2016

Pad thai, my specialty. Just because we spend very little on groceries doesn’t mean we don’t eat amazing stuff. (edit: after all the comments on this pad thai I feel like I need to post the recipe!)

Healthcare/Medical – $336: 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 dentist that gives great discounts to cash/debit payers. $66 in co-pays and co-insurance for a couple of doctor’s visits and some lab tests.  $45 for a few prescriptions.  The $336 we spent this month is much higher than average for our healthcare and medical expenses.

Gas – $35: We had to refuel the van in early September.  North Carolina also suffered a brief gasoline shortage when the Colonial pipeline supplying the southeastern United States leaked and had to be shut down for a couple weeks.  Some panicked.  We were fine because we drive so little (this drives up the “new shoes” budget line item, of course).  I think we’re at a half tank as of press time, so watch out, there will be another ~$35 gas purchase at the end of October or in early November.  Or maybe sooner since there’s a Hurricane Matthew pointed at us right now (fingers crossed that no one gets hurt but fingers also crossed that we lose our roof and get a free one courtesy of the insurance company).

Internet (“Cable”) – $34: 50/5 mbit service.

Restaurants – $19: Mrs. Root of Good and I went to Golden Corral.  At lunch time, it was disappointing.  We dined there several months ago for Father’s Day (with premium pricing!) and it was much better during that visit with fresh vegetables, steak from the grill, and some other delicious eats greeting us along the buffet line.  Apparently the cheaper lunch buffet doesn’t have much to offer.

Vietnamese chicken and rice noodle dish. Not at a restaurant though.

Vietnamese chicken and rice noodle dish. Not at a restaurant though. $.75 worth of ingredients that would be $8-15 at a restaurant.

Entertainment – $5: The kid’s school’s skate night at the roller skating rink down the street.   We skipped the $8 glow in the dark flashy thingy toys and the $4 slices of frozen reheated pizza.

Education – $5: PTA membership

 

Year to Date Living Expenses

september-2016-ytd-expenses

At $29,319 year to date spending, we are once again below our annual spending target of $30,000 budgeted for the first nine months of the year by almost seven 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.

The remaining three months of the year should see fairly low spending from us.  The high summer air conditioning bills are gone, no more estimated taxes due in 2016, and most of our travel expenses are already paid for the year.

In the next week or two, we are hoping to book tickets to Europe for our summer 2017 trip.  Since we are redeeming United Airlines frequent flyer miles, we’ll only owe the taxes (probably under $500).  We will start booking hotels, airbnb rentals, and local train/plane tickets some time in the spring of 2017, so our spending will ramp up at that point.

Time to hit the books.

Time to hit the books.

Monthly Expense Summary:

 

Net Worth: $1,647,000 (+$12,000)

Another $12,000 added to our net worth!  It’s been smooth sailing in the investment portfolio lately.  Everything feels good in the markets but who knows what will happen in the next six months.

september-2016-net-worth

We’re still sitting on over $50,000 in cash in our credit union money market account right now.  I’ll be moving some of that cash around for year end tax planning, like a large solo 401k contribution, but I will also hang on to part of that cash in order to provide a buffer against severe market downturns.  If the market drops 20-30% (which it does occasionally), then we’ll sit back and live on our cash reserve and dividends (plus income from the blog and my early retirement lifestyle consulting).

Enjoying nachos al fresco. We did the Moe's free queso day this year and I had to convert the chips and queso into full on nachos.

Enjoying nachos al fresco. We did the Moe’s free queso day this year and I had to convert the chips and queso into full on nachos.

In the meantime, we’re busy enjoying our daily early retirement routine (which lately includes a lot of walking through the park and playing tennis first thing in the morning) and working out the bones of our summer in Europe next year.  We’re thinking of starting in northern Italy, then working our way through Slovenia, Austria, Germany, Czech, and Hungary with a possible side trip to Spain and/or Portugal.

Edit 10/12/2016: We just booked plane tickets to/from Europe (10 hours there, 13 hours back; excellent flights using United points!) and flights within Europe from Lisbon to Malaga, Spain, and Seville, Spain to Milan, Italy.  We’re adding Amsterdam, Netherlands to the end of our trip bringing the total country count to nine (in nine weeks).  More details soon! 🙂

 

How did you do in September?  Enjoying the steady upward trend in the markets?

 

 

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How to Pay for College while Early Retired

yale-university-doorway

One of the top questions I’m asked when people see “retired at 33 with 3 kids” is “yeah, but what about college?”.  The truth is I never really gave it a lot of thought because the total cost is well into the future (though closing in fast for our oldest kid) and not huge relative to our total net worth.  I had a very vague goal of being able to cover the tuition and fees for four years of in-state tuition for all three kids.

We funneled some cash into 529 accounts when North Carolina offered a tax credit for doing so.  We earned a $350 tax credit for contributing $5,000 per year to the 529.  When that tax credit was eliminated, I stopped contributing to the 529s and stopped thinking about college funding.  Paying tens of thousands of dollars for college is no biggie when you have a million or two, right?

It turns out my lazy attitude toward college funding won’t spell disaster for my children’s higher education future.  Between what we have saved in 529s, our large investment portfolio, and a plethora of other funding sources, the kids will be perfectly fine when the college tuition bills start piling up.  You’ll have to read on to find out why I’m so confident (or is it cocky?).

 

How much does college really cost?

“It works out to just pennies per inspiring moment” reports the University of North Carolina at Chapel Hill’s Cost of Attendance page.  While technically true (it’s about six cents per minute assuming all the minutes are “inspiring”), a better way to look at the cost is dollars per year.  For the 2016-2017 school year, the cost of attendance at UNC is just under $25,000.

Univ. of NC Tuition & Fees $8,834
Room $6,292
Board $4,926
Books & Supplies $1,442
Travel $810
Health Insurance $1,088
Loan Fees $58
Personal $1,448
Total $24,898

Here in Raleigh at North Carolina State University, the total Cost of Attendance is closer to $23,000.  NCSU doesn’t include health insurance (something we would likely provide at near zero cost after subsidy through the Affordable Care Act) which explains $1,000 of the difference in cost (the other $1,000 being meals; Raleigh is cheaper than Chapel Hill I guess).

UNC Chapel Hill and NC State University are two great local options for school where the sticker price is under $100,000 for four years.  We pay for these institutions through our tax dollars and we’re hoping to get a nice return on our tax dollars when our kids attend one of these two flagship research universities (Mrs. RoG and I are alumni of one or both schools.  Go Heels/Pack!).

Breaking down the approximately $24,000 cost of attendance further, we see the actual academics cost around $10,000 between tuition, fees, and books.  The remaining $14,000 covers personal expenses like rent, food, transportation, and beer.  For those living on campus, that’s probably a good number to use since the dorms and meal plans cost what they cost and that’s the bulk of the living expenses.  Off campus living costs vary greatly based on whether you own a car, whether you split a house or apartment, and whether your college crash pad is luxury, slummy, or somewhere in between.

For those students living at home, the cost of college is the $10,000 cost of tuition, fees, and books plus whatever the parents have been spending for the past 18 years.

I don’t know whether my kids will live at home, attend NC State University and commute the 12-15 minutes to school by car or live on/off campus at whatever state school they attend.  With either choice, the total cost for college will be between $10,000 per year plus whatever we already spend on them as part of our $40,000 early retirement budget and $24,000 per year.  

A quick note on college cost inflation.  Yes, tuition increases at a faster rate than overall CPI inflation.  But tuition is less than half of the total cost of attendance at the two schools I’ve mentioned.  The room and board, while subject to inflation, isn’t increasing at such a rapid rate.  For example, when I started college in 1998, tuition at NCSU was $2,364 while it’s $8,880 in 2016.  That’s an average annual 7.6% increase.  Holy smokes!  All other costs of attendance totaled $6,672 in 1998 while it’s $14,159 today, a more modest 4.3% average annual increase.  The total cost of attendance increased 5.3% overall during the past 18 years.  CPI inflation averaged 2.2% during that period of time.  Tuition outpaced inflation by 5.4% per year whereas room and board outpaced inflation by only 2.1% per year, with the overall cost of attendance outpacing inflation by 3.1% per year.

Keep that in mind when you see the headlines that read “college tuition increases at 8% per year on average for the past X years”.  Room and board aren’t going up at nearly the same rate, and if you live and eat off campus, your room and board will probably track CPI very closely (because you’re paying the same prices baked into the CPI that all of us are paying outside the university).  It’s also worth noting that the quality of room and board has increased greatly in the 18 years since I started full time higher education.  We didn’t have tikka masala or sushi in the dining hall for example, and many of the dorms didn’t even have air conditioning back in 1998!  You pay more, you get more.  Or you can eat 6/$1 ramen noodles off campus like all the broke college students did in 1998 (back when it was 8/$1).

Life often throws curve balls, so it’s quite possible our kids will attend some other in state public university (which all cost less than NCSU and UNC), a private U, or an out of state school.  It really depends on what will work best for the kids, and what kind of financial aid a particular university offers.  We are still seven years out from the oldest kid starting college, so for planning purposes I’m focusing on the costs for the two best in-state universities that routinely rank well for great values in public universities.

 

Nobody pays sticker price for college

Like the MSRP on a new car, the college sticker price is the starting point for negotiations.  If you’re early retired and don’t have a high Adjusted Gross Income or huge assets in taxable brokerage accounts, you’re in luck.  You’ll probably get a nice financial aid award.

The University of North Carolina offers a Net Price Calculator to estimate what kind of financial aid package you’ll receive.

After roughly estimating our numbers and filling out the calculator, the results say we’ll get $4,250 in grant money when one kid is in college.  One year later when our second kid enters college we’ll get $10,250 PER KID.  That’s almost half of the total cost of attendance right there, before we even start talking about other sources of financial assistance offered such as work study or student loans.

Is this an equitable result?  Probably not.  But that is how the system works.  We look poor on paper because they don’t ask about retirement account values and that is where 75% of our net worth resides.  Therefore we get a lot of free money for college.  And this is with us making zero effort to game our assets and income to maximize free grant money!

If those grants work out, we’ll be paying a maximum of $14,000 per kid half the time and $20,000 per kid the other half of the time.

 

What do we have saved for college?

We invested in 529 accounts for several years to snag some state income tax credits.  The older two kids have $18,000 each in 529s while the youngest kid has $7,000 in his 529.

The older two kids have UTMA accounts at Vanguard with about $2,500 per account.  This is their money but could be used for college, or something like a new (used) car to commute to college if living at home.

The remainder of college expenses will come from our main investment portfolio.  As of mid-September 2016 we have about $1.45 million in the investment portfolio (including the 529 accounts) and another $50,000 cash in a money market account.  I’ve mentally set aside $200,000 (including the 529 account values) to cover college, car purchases, higher teenage expenses, and some adult gifts like house down payments and weddings.

That will leave about $1,250,000 to fund the remainder of our early retirement expenses (which, if we spend $40,000 per year according to our budget, will equate to a 3.2% withdrawal rate).  If our portfolio does well, we will feel more free to spend the $200,000 and then some.  If things don’t go well, we might not part with all of that $200,000 if we need it to cover core living expenses. In a way we’re taking a wait and see approach to deciding exactly how much we’ll pay for college.

Money is fungible and we can move it around all we want.  We’ll likely spend enough on college expenses to deplete the $43,000 in the 529 accounts, so I’m not concerned about paying a 10% penalty to withdraw any balance remaining after they finish college.  But I don’t want to save a significantly higher sum in the 529s because I expect they will obtain college funding from numerous other sources (to be discussed later in this article).

 

Will the kids help with college expenses?

Yes. And we have talked with them about this starting around age 9 or 10.  Exactly how much they will have to pay is uncertain, although we plan on paying (at a minimum) the tuition and fees (and maybe a lump sum for books) which will total around $40,000 per kid.  That leaves them responsible for room, board, transportation and miscellaneous personal expenses, though some of that would be covered by us if they drive one of our cars and/or live with us.

There’s a strong incentive to save when it’s your money you’re spending and not someone else’s.  There is plenty of moderately priced off campus college housing around NCSU.  With roommates, monthly rent is $250-400 per month plus a share of utilities ($50-75/month per person).  A private bedroom in a shared apartment (with kitchen) rents for 12 months for around $4,000.  In contrast, shared dorm rooms cost around $6,500 per person for the fall and spring semesters (summer session costs extra).

A full year of off campus housing is much less than the price of a shared dorm room on campus for nine months, and would allow the option of a full semester of summer studies for only $3,500 tuition and fees.  Two or three summers of that would lead to graduating college in three years (or less!).  Paying for three years of college is a lot cheaper than paying for four.

The same logic applies to the food budget.  Pay the rack rates for on campus dining plans and it costs $8.61 per meal IF every single meal in the plan is consumed during the school year.  I’m pretty sure my kids can figure out a way to pay less than $8.61 for some fruit, cereal and milk, oatmeal, and yogurt for breakfast.  Rules vary by university, but it appears that NC State University requires first year students living on campus to purchase an overpriced meal plan (“looking out for their best interests” and all that), but beyond the first year students have the choice to skip the meal plan and pay a la carte (or dine off campus as often as possible like everyone did when I went to NCSU).

Having the kids pay part of their own way through college isn’t just a devious way to remove some of those costs from my cash flow statement and lower the overall costs for all parties involved.  There’s also a real benefit to the kids.  They will learn crucial money management skills in a sort-of real world environment with a parental safety net stretched underneath them in case they take a tumble.  It’s better to fail when the stakes are small (calling mom and dad to make up their share of the month’s rent) instead of when they are enormous (calling to say they are $50,000 underwater on their mortgage and will lose their house without help).

 

Sources of college funding

But it’s cruel, you say, to make kids pay for any of their college when they should be studying hard.  That would be true if they didn’t have nights, weekends, breaks, and a huge 3+ month summer vacation to figure out a way to make a little money.

15 possible sources of funds for the kids:

  1. loans
  2. grants
  3. scholarships
  4. research assistanceships
  5. teaching assistanceships
  6. work study
  7. formal co-op program
  8. internships
  9. ROTC
  10. resident advisor (free housing + meals + living stipend)
  11. on campus jobs during school year
  12. summer jobs between college semesters
  13. jobs during the school year in high school or during HS summer breaks
  14. entrepreneurship
  15. UTMA investment accounts

Parental source of college funds:

  1. 529s (currently have $43,000 total for all 3 kids)
  2. our main early retirement portfolio
  3. doing something productive that pays money (part time job, freelancing, more blogging or consulting, entrepreneurship)

As you can see, the kids have more options for funding college than us parents do.

I wanted to elaborate on a few great ways to cover half or more of the total cost of attendance:

Resident advisor or RA – I strongly considered becoming a resident advisor but decided to move off campus and split a $700 per month apartment between four people for extremely cheap rent instead.  The Resident Advisor lives in a dorm room for free, gets a university meal plan, and receives a small annual cash stipend (currently $1,735 or more at NCSU).  The room, board, and stipend are worth about $12,400 per year at NC State (more at UNC), which is over half the total cost of attendance.  You aren’t supposed to work other jobs while working as an RA because they claim it’s a 20 hour per week work commitment, though in practice many of those hours have you chilling in your room in the evenings for “office hours” while you do your homework (or whatever kids do in college these days).  At 20 hours of “work” per week for a $12,400 benefit, that equates to somewhere between $17 and $20 per hour, almost all of which would be tax free. Becoming an RA is an option after your first year of living in the dorms.

My freshman year resident advisor, George, was an overseas engineering student from Ghana paying his way through undergrad primarily by being a resident advisor plus getting some small grants and scholarships.  I could totally see my oldest daughter being an RA and loving every minute of it!

ROTC – I didn’t have any personal experience with ROTC but it sounds like an incredible opportunity.  I reached out to Doug “Nords” Nordman, a retired nuclear submarine officer who blogs at The Military Guide and an occasional guest poster here at Root of Good.  Doug’s daughter Carol recently graduated from college after completing the Naval ROTC program.  Here’s what Doug had to say:

Every student who’s the least little bit curious about the military should join a ROTC unit just to try the first year for free. At the very minimum they’ll get priority registration (for ROTC classes), lots of new friends with peer tutors, and a summer tour of their career options. Parents will know that their freshmen are getting a good start with plenty of career options.

NROTC paid over $160K of Carol’s tuition, fees, and textbooks at Rice University. She also earned $2K-$5K/year in stipends and summer training pay.

Carol also landed a well paid position as a commissioned officer in the Navy straight out of school.  Doug reports her net worth is significantly higher than her peers even though she’s only a few years out of college.  Sounds like another early retiree in the making!

ROTC provides funding for everything but room and board.  Students can drop out of the program at any time during the first year without penalty and don’t have to repay the ROTC funds (that’s what Doug meant by “free”).  There’s very little risk for joining ROTC for one year.  Starting in the second year of ROTC, the grant recipients are on the hook for repayment of any additional moneys received if they drop out of ROTC.  Alternatively they can enlist in the military later to discharge that debt.

 

How I funded my college

If you’re a long time reader you won’t be surprised to learn that I managed to finish college on the cheap.  First up was entering the fall semester of my freshman year just a few hours short of being a junior upperclassman.  Through AP credits, taking several courses at the state university during high school, taking several more during the summer after graduating high school, and taking one course through credit by examination, I managed to enter the university as a full time student with 56 credit hours (FYI most bachelor degrees require around 120-132 credit hours to graduate).  With all that credit, I managed to graduate with two bachelors degrees in three years.  And I managed to bum around Mexico for six weeks one summer.

Considering I finished 120th in my high school class, my experience wasn’t atypical for the upper level students at my high school which is the exact same high school that our two daughters will attend in a few more years (one of the reasons I like our public schools here).  So far both kids are academically on track to follow the same general path that I did, therefore entering college as a sophomore with 30+ credit hours is very possible.  If that happens, that’s $48,000 saved (minus costs of AP exams and several thousand dollars for university courses during high school and summer sessions).

Once I was in college, I received some parental help with tuition, books, room and board, and other living expenses the first year (but I couldn’t tell you exactly what my parents paid for the first year).  I also took advantage of the subsidized college loans offered to me.

During my first year of college I landed a position as a DJ at the college radio station.  In addition to being as cool as it sounds, it also paid very well if you took the boring shifts that included running the control board during men’s baseball and women’s basketball games (read: 2-3 hours to do homework punctuated with 2 minutes of work each hour to run station identification reels plus a couple of advertisements).  I didn’t suck at DJ’ing so I got promoted to production manager and became a member of the board of directors where I made $200 per month producing commercials and other on air spots.  Overall, the college radio experience was mostly jamming out to music while doing some homework during my shifts.  And getting paid cash money for the privilege.

By my second year of college I won a number of scholarships that more than paid for all of my expenses (I guess doing all that homework while working at the college radio station helped my grades).  I also started teaching an intro to engineering class for incoming freshmen ($25/hour) and landed an internship in the university’s facilities engineering department ($10/hour).  I quit the facilities department internship when a professor hired me on a research assistanceship ($13/hr) that later morphed into a grant ($3000 for a semester).  These progressively more challenging jobs qualified me for an $18/hr research engineer position during the summer between undergrad and law school.  All these dollar amounts are in the 1998-2001 time frame, so you can inflate them by 40% to arrive at values in 2016 dollars.

During law school I founded my own business that initially didn’t make more than $400-500 for an occasional small job.  Then I made $30,000 profit in five weeks (mostly working 12-16 hours per day).  I wish I had a $99 course explaining the secret to making that much, but it’s really common sense.  I did a great job on the smaller projects which led to my selection for a massive job that included some add on work because my quality was better and my prices were lower than the other team in competition with me.  Skip the $99 course fee, just do good work and profit.  And then there were the summer jobs during law school that paid between $0 and $23/hr.

Overall, I made a ridiculous amount of money by the time I graduated from undergrad and even more by the time I graduated from law school.  For the curious, here’s all 20 jobs I held between being a paper boy at age 12 and retiring as an engineering director at age 33.

In addition to making money and learning how to hustle, all those jobs provided invaluable experience that helped me land a professional job right out of school.

Will my kids find as much employment success as I did during college?  Even if they don’t, they can still make quite a bit of money to help pay for living expenses during college.

 

Hacking college

A four year degree doesn’t have to take four years, nor does it have to cost $100,000 to $300,000.

For those students that excel academically, they can start college as a sophomore or junior.  Focus on AP classes, credit by examination, summer school before college, and university/community college courses during high school.  If you can’t find resources online, then starting around 8th or 9th grade ask your kid’s guidance counselor what programs are available to earn college credit while still in high school.  I recall getting bored on summer during high school so I grabbed a course catalog from NC State University (pre-internet days, folks), and that’s when I realized they have very specific guidelines on what AP test scores get you, and what basic educational courses I should take to apply toward an engineering degree.

Another classic college hack is to attend community college for two years in a college transfer program.  Then, apply to a four year college and transfer in those two years of community college credits.  This way you only pay for two years of the more expensive university tuition.

I’m a little skeptical of this one after running the numbers.  In our situation, tuition runs $2,768 per year for full time at Wake Technical Community College, a $6,112 cost savings versus NC State University’s $8,880 per year for tuition and fees.  Not too bad but it might be a money losing proposition for students that miss out on financial aid and merit based scholarships (the engineering college at NCSU was awash with scholarship money and often had a hard time finding applicants for all that free money in my experience).  Community college is probably a better bet for students in an academic field with little prospect for discipline specific scholarships or for “average” students that graduate high school without credit for many of the freshman level college courses.

I also worry about how well those two years of community college credit would transfer into some four year degree programs that require very specific coursework (NC State University College of Engineering, I’m looking at you).

Ed Mills of The Millionaire Educator fame has figured out a way to hack a college degree in 12 months from a real, accredited four year institution for just $7,500 in tuition and fees.  It’s a little circuitous and requires discipline to study on your own then pass third party exams to demonstrate competency.  But well worth the effort for someone that needs a bachelor’s degree and doesn’t have a lot of money nor four years to waste.  Mr. Mills hones in on a few universities in the US that allow the bulk of the required credit hours to be taken through various credit by exam options.  You might want to add a second year to your course of study to allow time to actually learn the material that will be on your exams (or what the heck, take the exam and maybe you’ll pass it without studying!).

 

Other thoughts on college

I still wonder whether college will be relevant in another 10 years.  And at what cost will it remain relevant?  Is it worth a quarter of a million dollars?  Half a million dollars?  If college costs continue their meteoric rise to the moon, at some point we can jump off that vertically asymptotic crazy train by simply skipping the whole college charade and handing our kids a huge portfolio full of investments and let them join us in FIRE at age 18.  Then they can read Chaucer and learn Laplace transformations at a more leisurely pace.

To put the absurdities of growing costs in more stark contrast, there are so many free or extremely cheap educational options available today that continue to grow in quantity and quality.  Harvard, Yale, MIT, and Stanford (among other top tier schools) offer tons of free undergraduate and graduate level courses in every academic field imaginable.  Education is mostly free already, it’s just that diploma – that piece of paper that says you’re educated – that you need to get a job.

There also educational consolidators like Coursera, Udacity, Codecademy, and Khan Academy offering courses from a variety of instructors.  If you have $300 for a laptop and access to an internet connection, it’s hard to stay ignorant if you’re motivated to learn.

Will all this easily accessible free education ever supplant the need for a traditional four year degree?  That’s the $64,000 (or $99,592 at University of North Carolina) question that remains to be answered.  It’ll take a paradigm shift in hiring practices and corporate mindsets away from a strict requirement for a four year degree toward a more fluid skills-based or portfolio based assessment of job applicants.  Or a willingness to accept credentials from a different kind of educational institution.

Perhaps one day smart kids will brag about a set of certificates from Coursera instead of a diploma from Harvard.  That day isn’t today and I don’t know if we’ll see it before oldest two kids graduate college in 10-12 years.  But it’s a valid question to ask as you’re planning on college costs for a newborn today.  18 years might be enough time for an educational revolution.

Jeremy at Go Curry Cracker put a lot of thought into college funding for his newborn.  The most interesting take away from his article was the fact that investing college savings into a stock index fund like the S&P 500 is a smart way to combat escalating college tuition if you start early.  He looked at a 34 year period from 1979 to 2013 and found that

[f]rom 1979, consumer prices increased 3.4x.  Tuition increased 10x.  The S&P500 increased 18x.  And with dividends reinvested, the S&P500 increased 45X!

The stock investment grew 4.5 times as much as the cost of tuition.  Even with a much more mediocre stock market, it’s still a good bet that stock returns will at least keep up with inflation.  That’s why I’m not too worried about the inflation we’ll see between now and 7-8 years from now when my oldest two kids enter college.  Their 529s are invested in an aggressive mix of equities, though I’ll be slowly dialing back on the risk as the looming tuition payments draw near.

image courtesy of Go Curry Cracker

 

The bottom line

My kids will be able to attend college and somehow we’ll pay for it.  And we can remain early retired.

I see the best case scenario playing out like this:

$24,000 cost of attendance for 3 years – BEST CASE SCENARIO:

  • $4,000 – cut costs on room and board, misc. expenses (live at home with us?)
  • $6,500 – average need based grant (probably free money but maybe some loans)
  • $4,000 – merit based scholarships and grants
  • $6,000 – various jobs and internships
  • $3,500 – spending from our 529 accounts

If this rosy tinted picture plays out, we’ll have three years of spending at $3,500 per year times three students.  Our total outlay will be $31,500 in today’s dollars, and our kids might leave college with a small dose of those dangerous student loans.  That’s about $10,000 less than we have in 529 accounts today, so we are well prepared if this scenario occurs.

But what if my kids end up being “average” and deviating from the path their old man followed?  And what if they can’t or won’t economize on housing and food?

$24,000 cost of attendance for 4 years – WORST CASE SCENARIO:

  • $6,500 – average need based grant (probably free money but maybe some loans)
  • $4,000 – various jobs and internships (they’re average; the earnings are lower than the optimistic scenario)
  • $13,500 – spending from our 529 accounts and investment portfolio

In this scenario, where our kids are very average, can’t economize on costs, get no merit based grants or scholarships and deliver pizzas or bus tables instead of engaging in paid activities related to their field of study, we are left with a $13,500 bill every year.  That means we’ll be paying a combined $162,000 for three kids for four years of study.  That figure exceeds our existing 529 balances by $119,000, so we’ll be digging deep into our investment portfolio to cover the shortfall.  I’ve mentally set aside $200,000 in my portfolio to cover some variation of this worst case college funding scenario plus other big, lumpy one time kid expenses, so we’ll be okay financially.

I suppose I should mention the beyond superlative worse than worst case scenario (though in purely financial terms, the least costly).  There’s a chance that one or more of our kids won’t attend a four year college at all, which means that $3,500 to $13,500 per year spending figure drops close to zero (spending tons of money on adult children is a topic best left for another article).

Whether our kids excel academically and need very little parental financial assistance, or whether we end up paying for the majority of their college costs, we’ve got it covered in our early retirement financial plan.

 

 

What is your plan for kids’ college funding?  How did you fund your own college experience?  Anything you would do differently?

 

 

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