Category Archives: Personal Finance

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

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“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.

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Pho, from scratch. Maybe a buck per bowl.

 

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(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

two-cents-photo

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?

 

 

Want to get the latest posts from Root of Good? Make sure to subscribe on Facebook, Twitter, or by email or RSS reader (in the column to the right).

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?

 

 

August 2016 Financial Update

two-cents-photo

Now that August is over, we are officially in the last third of the year!  It’s hard to believe the year is already winding down.  August was a decent month financially.  Our net worth crept up another $2,000 to $1,635,000.  Income totaled $5,191 while expenses were $2,817 for the month.

After spending the first part of August on our three and a half week road trip to Canada, we returned home in mid-August to a flurry of activity to get the kids ready for school.  That meant buying school supplies (including a brand new fancy pants TI-84 CE color graphing calculator) and attending two back to school orientations.  Our oldest daughter just entered middle school so now we have twice as many PTA meetings and school events to fit into our not-so-busy schedules.  She’s loving middle school so far!

Here’s what our August 2016 looks like under a financial microscope.

 

Income

August investment income was $60.  Our portfolio consists of mutual funds and ETFs that pay dividends at the end of each quarter.  September will generate a much higher level of investment returns.  We are well on our way toward matching or exceeding the total of $28,527 in dividend income received in 2015.

Blog income, shown as “other income” in the chart, ballooned to $4,279 in August while my early retirement lifestyle consulting brought in $565.  Blog income was higher than normal because I received two month’s worth of payments from a major revenue source.  The consulting income was also higher than normal and I’m not sure why other than strong traffic thanks to continued good exposure in the media (including this podcast interview with fellow 30-something early retiree blogger Brandon the MadFIentist).

$211 in Deposits includes the cash back rebates from the Ebates.com and Mrrebates.com online shopping portals. If you sign up through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did.  I try to do all of my online shopping through one of these portals and the cash back adds up fast.  For example, in August I booked an $810 cruise through Expedia by clicking through Ebates to get to Expedia.  I’ll be getting $81 in cash back once we return home from the cruise in December (more on the cruise later in this article!).  Ebates is a nice way to get a 10% discount on every cruise from a booking site we already use.

The $64 Insurance income is a refund of our auto insurance premiums thanks to removing the Honda Accord from our policy.  We became a one car family when we sold the 2000 Honda Accord in June (after debating whether we should be a two car or one car household for a while!).  Our auto insurance premiums are now $344 per year for a half million dollars of coverage for two drivers.  Given how little we drive on a routine basis, I’d say that’s pretty fair.

The $10 “Entertainment” income came in the form of a $10 rebate check from a liquor purchase.  We categorize hard liquor purchases as “entertainment” whereas beer and wine find themselves in the “groceries” category.  It’s an arbitrary distinction but makes sense when you consider we buy liquor at the state run ABC store whereas we buy wine and beer at the grocery store (and don’t feel like splitting the wine/beer to a separate category called “alcohol” because we simply don’t spend a ton in that area.  Burp.).

august-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 August expenses:

august-2016-expenses

After spending a measly $1,190 in July, we seem like frivolous spendthrifts in August because we spent a whopping $2,817 during the month.  That’s cool, we’re still $500 under our budget of $3,333 per month (or $40,000 per year).  The higher spending comes from booking more travel for later in the year and from taking care of business after returning home from our almost month-long vacation.

Travel – $1,144: August represents the second month in a row where travel topped our spending.  That’s no accident since it makes up our single largest expense category in our carefully crafted annual retirement budget at $10,000 per year.  Around $300 of the travel expense covered gas for the van, meals at restaurants, parking, tolls, and other travel related expenses for the nine days of August that we were on vacation.

We booked another cruise for late 2016 for $810.  They are fun.  After our annual turkey-filled Thanksgiving fiesta we will set sail in late November on a five night cruise from Jacksonville, Florida destined for Half Moon Cay, Bahamas (a private island) and Nassau, Bahamas.  On this cruise we’re only taking our four year old son and cruelly leaving our two older daughters at home with Grandma so the girls can attend school (bwahahahahaha).  Don’t worry, our two daughters will join us on an even better and longer seven night cruise later in December (should we even unpack between the two cruises?).

Fun times in the Bahamas on our January 2016 cruise.

Fun times in the Bahamas on our January 2016 cruise.

I think we are done booking cruises for 2016.  Maybe.  Unless a really good deal pops up later in the year.  We are only spending around $5,000 of our $10,000 travel budget in 2016.  The unspent funds will help cover the cost of a potential eight to nine week excursion through Europe in the summer of 2017 (more details on that at a later date!).  I hear Europe ain’t cheap like Mexico.  Or our sub-$1000 3.5 week Canada trip this year for that matter.

Groceries – $816: A few hundred dollars higher than usual in August after underspending the budget by a few hundred dollars in July.  We restocked the fridge and freezer after returning from our trip.  And restocked the pantry and wine cabinet.  We also spent a hundred bucks on massive quantities of heavily discounted toilet paper and did this with it:

At least $100 worth of fun. Plus free butt-wipe material for a six months. Or a year??

At least $100 worth of fun. Plus butt-wipe material for six months. Or a year??

Healthcare/Medical – $249: Health insurance premiums of $125 for our very impressive gold plated silver plan obtained through Healthcare.gov with some very sizable ACA subsidies. $99 for a routine cleaning, x-rays, and exam from our super awesome dentist that gives great discounts to cash/debit payers. $25 for a few prescriptions.

Home Maintenance – $225 + Home Improvement – $59: Our magical plumber earned a solid $225 this month by replumbing and installing a new shower valve, faucet and supply pipes plus installing a new kitchen faucet.  The shower developed a slow leak that appeared while we were out of town (fortunately mold wasn’t an issue!).

This is all work that I could maybe DIY but choose not to.  My track record on plumbing jobs is pretty poor so I probably saved myself a few bucks by outsourcing the task.  $59 was most of a new shower valve and faucet from Lowe’s (the remainder came from gift cards purchased over the past year and recorded as “home maintenance” expenses at the time). Of course I purchased a $15 off $50 Lowe’s coupon from ebay for a buck which saved me $14 on the purchase.

I spent the several hours of the afternoon while the plumber was here profitably researching our summer 2017 Europe trip.  I don’t regret the $225 expenditure a bit (really more like $150-175 after factoring in cost of supplies and special tools).  It’s taken me a while to get to this mindset of outsourcing tasks I really don’t enjoy or don’t excel at.  But I think I proved my mettle in this situation by putting the wrench down and picking the phone up.

Restaurants – $81: Two visits to the Chinese restaurant plus a birthday pizza party for the 10 year old and half a dozen of her friends (and a half dozen of our friends!).

Utilities – $72: Water, sewer, trash, and natural gas bill.  These bills were much lower than normal because we were out of town during most of the billing cycle.  All told, we saved about $200 on utilities during the 3.5 weeks we were out of town.  The electric bill doesn’t make a showing in this expense report because we still have a credit balance from pre-paying the electric bill in the spring to meet credit card minimum spending requirements to qualify for sign up bonuses (gotta love credit card travel hacking!).

Clothing – $56: Back to school clothes.

Education – $46: School supplies.

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

Root of Good hosting fees – $27 (not shown in the summary chart): Once per year domain name registration and privacy protection service.  I paid about $60 per year for 3 years of hosting and things are working quite well for me at Hostgator.  I like Hostgator and recommend them if you’re thinking of starting a blog.

Gas – $0: Other than refueling during our road trip (which gets included in the “travel” category), we didn’t spend anything on gas in August.  The van is below a quarter of a tank so I expect to drop $30 or $35 on a full tank in the next several days.  That should last us the remainder of September.

 

Year to Date Living Expenses

august-2016-ytd-expenses

At $26,538 year to date spending, we are once again below our annual spending target of $26,667 budgeted for the first eight months of the year by about a hundred dollars.  In spite of the $8,200 minivan purchase in March, we managed to get our year to date spending back in line with our annual target.  I guess we’ve been lucky that we haven’t suffered any large unexpected expenses.  That’s mainly because we included the routine “unexpected” stuff when we developed our first annual early retirement budget over two years ago.  Unexpected expenses are highly predictable over the course of a 40+ year retirement.

September should be a relatively low expense month other than $600 in estimated tax payments to North Carolina and the IRS.  The weather cools off here in Raleigh and almost all of our favorite outdoor activities are free or very inexpensive.  Now that the oldest two kids are back in school full time, we are back to our school year early retirement weekly routine.

Monthly Expense Summary:

 

Net Worth: $1,635,000 (+$2,000)

At +$2,000, it’s a small gain, but a gain nonetheless.  August started with a slight drop in the markets before a strong recovery that fizzled out a little toward the end of the month.  September is already shaping up to be a great month.

It’s a bit scary watching the investment portfolio climb month after month because these things rarely go up in a smooth line.  I’m expecting a dip at some point but not doing much about this “knowledge” because I don’t know when this dip will happen, how severe it will be, or when the market will recover.  If I knew any of that, then Bernie Madoff’s investors would have invested their billions with me for a guaranteed 12%+ annual return.

august-2016-net-worth

In a way, I am doing something defensive during this time of perpetual market gains.  In portfolio news, I just sold $15,000 worth of a junk bond I bought many years ago at a steep discount to par.  I sold it at 99.8% of face value (the theory being “get out while the gettin’s good”).  That pushes our cash on hand to roughly $50,000.  That represents about two years of core living expenses.  Add to that the $8,000 to $10,000 in taxable dividends we get each year and we’ll be close to two years of our full-of-fluff $40,000 annual budget.  And then there is the $2,000 to $3,000 per month that this blog and my little Early Retirement Lifestyle Consulting brings in right now.

To summarize, I might need to figure out a strategy for all this cash on hand.  It’s invested at 1% in a FDIC/NCUA insured money market at my credit union right now.  I could move some of it to 1.75% four year CD’s (with 90 day interest loss for early redemptions) at the same credit union with near-zero effort.  I’m thinking that might make sense.  Bond fund yields don’t seem too exciting right now with the Vanguard Total Bond Market Index Fund yielding 1.88% for a fund with an average duration of 5.8 years (that translates to a non-negligible loss of principal if interest rates increase).

I guess this “too much cash” is a great problem to have.  At these recent market highs, we have almost $1.5 million invested in equities, which means our overall liquid net worth is 97% equities and 3% cash.  That’s very aggressive overall.  I’m in no hurry to redeploy any of the $50,000 cash because it feels nice and comfy as a security blanket since we have no bonds in the portfolio at this point.

 

 

How was your August?  Did you see big gains or a smaller steady rise in net worth?  Any big shifts in spending if you (or your kids) are headed back to school?

 

 

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Trip Report: Toronto, Mammoth Cave, and Niagara Falls Road Trip

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The Root of Good family made it back from our 3.5 week road trip a couple weeks ago.  Here’s an after action battle report on our trip including highlights from all the places we visited plus a complete cost breakdown of our trip budget.  Skip to the end for some travel hacking tips to save big bucks on your next epic vacation!

 

Trip summary

We traveled for 24 days with stays in the following cities:

  • Between Charlotte and Asheville, NC – staying with family 3 nights
  • Nashville – 1 night
  • Bowling Green, KY (Mammoth Cave) – 3 nights
  • Detroit, MI – 2 nights
  • Toronto, Canada – 12 nights
  • Niagara Falls (Canadian side) – 2 nights
  • Washington D.C. – 1 night
  • Back home in Raleigh!

When I describe this summer’s big crazy road trip to people, their first reaction is to drop their jaw, drool, and say “wow, sounds like an awesome trip!”.  Their second reaction is to scrunch their eyebrows, and ask in a puzzling way “wait, Nashville and Toronto – those… aren’t anywhere near each other are they?”.

They aren’t.  But we’re not complete geography noobs either.  We wanted to visit Nashville and Niagara Falls (near Toronto), and decided to embrace the triangular path between those two locations, with Raleigh forming the third vertex of the triangle.  And visit some cool places along the way (some of which you, dear gracious readers, suggested!).

For more detail on our trip planning, check out “The Great American Canadian Road Trip – Summer 2016 Edition“.

 

Nashville

We only spent one night in Nashville, so we had to play the role of stereotypical tourist and see what we could during our limited time in town.

Honky Tonkin' - It's what Nashville is all about, right?

Honky Tonkin’ – It’s what Nashville is all about, right?

 

Nashville riverfront

Nashville riverfront

 

Who put the Parthenon in the middle of Nashville?

Who put the Parthenon in the middle of Nashville?

 

Tennessee State Museum

Tennessee State Museum

 

World's largest iPad (at Nashville Public Library).

World’s largest iPad (at Nashville Public Library).

 

Who has time to visit places that cost money when libraries are free and come with bridges and skyscrapers?

Who has time to visit places that cost money when libraries are free and come with bridges and skyscrapers?

 

Lunch.

Was it the #1 Cheesesteak in the world?  Probably not, but it was good.

 

Grand Ole Opry Resort. One of three hotels we visited in Nashville because the interiors are mind-blowing.

Grand Ole Opry Resort. One of three hotels we visited in Nashville because the interiors are mind-blowing.  They have a boat. In a canal. Inside the hotel lobby.

 

Bowling Green, Kentucky and Mammoth Cave

We only spent one night in Nashville so that we could spend two full days exploring Mammoth Cave.  We stayed in the city of Bowling Green about 30 minutes from the Cave entrance.

Airbnb rental in Bowling Green, Kentucky. Way better than a hotel!

Airbnb rental in Bowling Green, Kentucky. Way better than a hotel!

 

The descent to Mammoth Cave

The descent to Mammoth Cave

 

mammoth-cave-1

 

Mammoth Cave in Kentucky. The reason we only spent one night in Nashville.

 

mammoth-cave-4

 

mammoth-cave-3

 

mammoth-cave-2

It’s hard to capture the scale of these rock formations but they were about 50 feet tall.

 

A rainbow wished us well as we departed Bowling Green.

A rainbow wished us well as we departed Bowling Green.  Also symbolic of post-retirement life.

 

Dayton, Ohio (Air Force Museum)

Thanks to all the commenters and Root of Good friends that suggested the Air Force Museum in Dayton, Ohio.  It was a perfect break from our seven hour drive from Bowling Green, Kentucky to Detroit, Michigan.

Before the museum we stopped for lunch at Gold Star Chili. Considering the tiny portions and food that's not that great, a more accurate name would be Bronze Star Chili.

Before the museum we stopped for lunch at Gold Star Chili. Considering the tiny portions and food that’s not that great, a more accurate name would be Bronze Star Chili.  Don’t get me wrong.  The chili itself was pretty good.  Both tablespoons of it.  My hand isn’t abnormally large in the pic.  It’s an optical illusion because the plate is tiny.

 

dayton-air-force-museum-1

 

"Oh, that's just a thermonuclear bomb, son. Move along."

“What’s that? Oh, that’s just a thermonuclear bomb, son. Move along.”

 

Kennedy's Air Force One.

Kennedy’s Air Force One.

 

Detroit, Michigan

Exactly zero people got excited when I mentioned that we were spending two nights in Detroit.  It’s not exactly the kind of place you visit while on vacation apparently.  My perception of the big D included active gang warfare, rounds flying overhead, and houses going up in smoke as the innocents suffered collateral damage to life and property.

We needed a place to stay half way between Toronto and Bowling Green, Kentucky, and Detroit was almost in the middle.  And they have one of the only four Category 1 Starwood Preferred Guest hotels in the nation (the Four Points By Sheraton Detroit Airport was beautiful, by the way).  So it was settled.  We would pause for two nights, rest, relax, and possibly test out the thickness of the sheet metal on the minivan as we drive through the inevitable war zones.

Sadly, there was very little going on in Detroit.  It was very quiet.  No people.  Almost eerie.  Mid-day on a Saturday and there were basically zero people in downtown.  Traffic was light.

We rolled around town to check out the blighted areas and they didn’t disappoint.  Through the window, block after block rolled by.  We saw more cleared or reforested lots than abandoned houses.  Most blocks had no more than one or two inhabited houses.  We didn’t see any crime probably because there were no people.  Zero corner boys slinging their trade.  No one running from the non-existent cops.  No gunfire.  Just a very peaceful drive around a mostly deserted part of town.

Upsides included the Renaissance Center on the waterfront and the burgeoning Mexicantown (which was booming!).

I bet this place was a beauty 50 years ago. Where did the neighbors go?

I bet this place was a beauty 50 years ago. Where did the neighbors go?

 

Looks more like a country house than what used to be densely packed center city blocks.

Looks more like a country house rather than what used to be densely packed center city blocks.

 

The Renaissance Center. The only place we saw a bunch of other people in Detroit.

The Renaissance Center. There were some people here, but not a lot.

 

Hey, look kids. It's Canada across the water! We're going there next!

Hey, look kids. It’s Canada across the water! We’re going there next!

 

A buck fifty each for some authentic chorizo street tacos from Taqueria del Rey in Mexicantown. Amazing.

A buck fifty each for some authentic al pastor street tacos from Taqueria del Rey in Mexicantown. Amazing.  Who knew you could get these in Detroit?

 

Toronto, Ontario Province, Canada

We spent 12 nights in Toronto in an Airbnb rental in the Roncevalles neighborhood a few miles west of downtown.  Since we had our van, we skipped the streetcars and subway in Toronto and chose to drive or walk everywhere.  Downtown was about 15-20 minutes away by car.

 

Very cool Airbnb rental in Toronto. Probably the nicest one we've stayed in.

Very cool Airbnb rental in Toronto. The nicest one we’ve stayed in.

 

Full kitchen and dining area.

Incredibly well appointed kitchen with eat in dining area (pic taken from the living room).

 

A second living room in the upstairs bedroom/loft area let us all have our own space at times.

A second living room in the upstairs bedroom/loft area let us all have our own space at times.

 

Enjoying the rooftop patio.

Enjoying the rooftop patio.

 

 

We made use of all that space by hosting lunch for dynamic blogging duo and fellow 30-something early retirees Kristy and Bryce of Millennial-Revolution.com fame.

We took advantage of our Airbnb’s spacious layout by hosting lunch with dynamic blogging duo and fellow 30-something early retirees Kristy and Bryce of Millennial-Revolution.com fame.  Bryce is the weird one not wearing pink.

 

A city perpetually under construction. The orange traffic cone must be the city's mascot (at least for the six weeks of summer when construction goes gangbusters).

Toronto, a city perpetually under construction. The orange traffic cone must be the city’s mascot (at least for the six weeks of summer when construction goes gangbusters).

 

You like the pretty buildings at sunset, eh?

You like the pretty buildings at sunset, eh?

 

View of downtown skyline from the Centre Islands ferry.

View of downtown skyline from the Centre Islands ferry.

 

The Lake Ontario beachfront on Centre Islands.

The Lake Ontario beachfront on Centre Islands.

 

Familia Root of Good

Familia Root of Good

 

Public art in City Hall. A sculpture made from tens of thousands of nails. Why didn't I think of something like that?

Public art in City Hall. A sculpture made from tens of thousands of nails. I don’t think you’re actually supposed to touch them though.

 

A metropolitan city, full of culture and life. The Art Gallery of Ontario proved impressive (and free on Wednesday nights).

A metropolitan city, full of culture and life. The Art Gallery of Ontario proved impressive (and free on Wednesday nights).

 

An art gallery of another breed. Graffiti Alley (a few blocks south of Chinatown) is more my style. You can see (and smell) the strong influence of the medical marijuana dispensaries located just around the corner.

An art gallery of another breed. Graffiti Alley (a few blocks south of Chinatown) is more my style. You can see (and smell) the strong influence of the medical marijuana dispensaries located just around the corner.

 

Don't worry, it's not really a pot shop for kids.

Don’t worry, it’s not really a pot shop for wee little kids.

 

The massive High Park was walking distance from our house.

The massive High Park was walking distance from our house.  We visited several times during our stay.  High Park has it all.

 

Beautiful wildlife.

Beautiful wildlife.

 

Castles for a playground.

Castle playground.

 

Comfortable park benches for weary travelers.

Comfortable park benches for weary travelers.  Possible food coma in progress (see following pics for explanation)

 

Chinese pastries from the Ding Dong Bakery (great name by the way). This mother lode was just under $15 USD.

Chinese pastries from the Ding Dong Bakery (great name by the way) in Chinatown. This mother lode was just under USD$15.  Some sweet, some savory, some meaty.  All delicious.

 

Vietnamese vermicelli noodles with pork and spring roll from Bun Saigon in Chinatown. USD$8

Vietnamese vermicelli noodles with pork and spring roll from Bun Saigon in Chinatown. USD$8

 

A heaped up plate of Korean bbq pork ribs, chicken, and beef. Plenty for two hungry people. USD$14

A heaped up plate of Korean bbq pork ribs, chicken, and beef with tempura zucchini, potsticker dumplings, and rice. Plenty for two hungry people. USD$14

 

A homemade creation. The salami bagel.

A homemade creation. The salami bagel.  One of the benefits of staying in an Airbnb is having a full kitchen so you can cook big meals (or toast a salami bagel, in this case).

 

Niagara Falls

After leaving Toronto, we headed south to spend two nights on the Canadian side of the falls.  On the way down we stopped at Welland Locks to watch a ship transit the canal up river.

Once we arrived in Niagara Falls, we planned to do the Maid of the Mist (also called Hornblower Cruises on the Canadian side) but learned that the wait to board the boat can be two hours.  Poor planning on our part because we visited during the busiest time of year on the busy weekend.  Instead, we explored the falls on foot and by bus from the US and Canadian sides.

 

Looking up river from the observation deck

Welland Locks, about 30 minutes from Niagara Falls.  Looking up river from the observation deck.  The ship in the lock to the left waits for the water level to rise even with the upstream water elevation.

 

Niagara Falls from the American side.

Niagara Falls from the American side.  We took a day trip to the US to get a different vantage point of the falls.

 

View of both falls from the Canadian side.

View of both falls from the Canadian side.

 

Falls at night.

Falls at night.

 

The Niagara River forms a massive Whirlpool a few miles downstream from the falls. Circling the Whirlpool are a number of (free) overlooks.

The Niagara River forms a massive Whirlpool a few miles downstream from the falls. Circling the Whirlpool are a number of (free) overlooks. Pictured is the not-free Aero cable car suspended above the Whirlpool where you can enjoy waiting in line and then, for a few minutes, get a slightly different vantage point compared to what we enjoyed.

 

Washington, D.C. (Smithsonian Air and Space Museum – Udvar-Hazy annex)

Washington, D.C. served as our last waypoint on the trip.  We spent the night at an Aloft hotel near the Dulles airport (free with SPG points, of course) then woke up, played some pool, and departed for our last bit of tourism of the vacation.  The Udvar-Hazy Annex of the Smithsonian Air and Space Museum.

It’s got a bunch of cool planes, missiles, rockets, and spacecraft of various types.  But the most awesome vessel in the hangar is the Space Shuttle Discovery.  This bad boy flew to outer space 39 times over the past several decades.  And we got close enough to almost touch it.

For anyone thinking of replicating our trip, the Air Force Museum and the Air and Space Museum had a lot of overlap (once you’ve seen several hundred planes from the various eras of flight, several hundred more planes don’t add a lot of marginal utility).  Air and Space is still an awesome museum because of the Space Shuttle.  The Air Force Museum stood out for having a few historic Air Force Ones that used to fly former presidents (and you can walk through the Air Force Ones).  Both museums are free except for a $15 parking fee at the Air and Space Museum.

 

The Space Shuttle up close.

The Space Shuttle up close.

 

'Merica!

‘Merica!

 

Not the space shuttle.

Not the space shuttle.

 

Something I could possibly pilot.

They let me in the cockpit.

After 2,432.3 miles and 25 days on the road we made it home in one piece.  Another great vacation on the books!

 

Trip Budget

We budgeted $2,100 for the whole trip.  We’re good at optimizing expenses on the fly and miraculously managed to spend only $954 for our 3.5 week road trip.  Of course we’re travel hackers, so that total doesn’t include several thousand dollars worth of free lodging expenses (including 4 room nights at a USD$300-400/nt hotel in Niagara Falls).  First I’ll show the travel budget with actual expenditures, then I’ll reveal some travel hacking tips so you can replicate some of my success.  All amounts in US dollars with the US to Canadian dollar exchange rate hovering around USD$1 to CDN$1.30.

Lodging – $157 (budget: $476) 

  • 12 nights Toronto Airbnb rental – $43 (after $345 airbnb referral discounts, $85 cancellation/rebooking credit and $500 Barclay Arrival Card travel rebate/bonus, plus a $56 damage charge for our kiddo breaking a fancy pants light fixture)
  • 3 nights Bowling Green, KY Airbnb rental – $47 (after $250 Airbnb gift card from Amex credit card reward bonus)
  • 1 night hotel in Nashville from Hotwire – $66
  • 2 nights x 2 rooms – Four Points by Sheraton Detroit Metro Airport – $0 (8,000 SPG points from Starwood Amex)
  • 2 nights x 2 rooms – Four Points by Sheraton Niagara Falls Fallsview – $0 (12,000 SPG points from Starwood Amex)
  • 1 night x 1 room – Aloft Dulles Airport North – $0 (4,000 SPG points from Starwood Amex)

We initially booked a two bedroom Airbnb apartment on the east side of Toronto.  The landlord cancelled a month before our trip so we had to re-book a different property.  Airbnb offers a rebooking credit of 10% of the amount you initially paid to help you find a replacement property.  The new rental was a big win because it was cheaper and nicer.

Now for the bad news.  Our four year old pretended one of the light fixtures was a steering wheel.  He drove it hard.  It broke.  We agreed to the landlord’s request for $56 in damages to replace the light fixture.  Otherwise the 12 nights in Toronto would have netted out to negative $13!

In other lodging snafus, let’s talk about the $66 Nashville hotel we purchased through Hotwire.  The room itself was okay, but the hotel had serious issues with management.  We showed up around five or six in the afternoon expecting our hotel room to be ready (check in time was three pm).  It was not ready.  We grabbed dinner nearby then checked in with the hotel.  Still not ready.  We gave up checking in at that point and decided to spend the rest of the evening touring around downtown Nashville.  Fortunately when we returned to the hotel around nine pm our room was ready.  The hotel had many cautionary reviews, but these weren’t visible until after we booked the room through Hotwire and they revealed which mystery hotel we booked.  Next time around I think we’ll either book a higher class of hotel through Hotwire or book directly with a hotel and not roll the dice.  Though at $66 for a room with clean sheets, clean bathroom and free breakfast in the morning, it wasn’t a horrible deal in spite of the six hour delay checking in.  I might be able to get a partial or full refund if I fought and fought and fought, but it’s simply not worth $66 to me.

 

Transportation $264 (budget – $500)

  • 2,432 miles – $148 (most gas was below $2/gal)
  • Tolls – $6.50 ($5 bridge crossing in Detroit; $1.50 bridge to US in Niagara Falls)
  • Parking and Transit – $110 ($18 for 24 bus pass in Niagara Falls; $92 for parking)

I used the Gasbuddy app to find the cheapest gas stations along the way.  Most were under $2 per gallon.  We filled up just before entering Canada because the average gas price north of the border is around USD$3/gal, so we only had to purchase a few gallons in Canada at those prices.

We somehow managed to avoid toll roads everywhere other than the one international bridge crossing from Detroit to Windsor, Canada (USD$5).  We also walked to the American side of Niagara Falls for the day and spent USD$1.50 for the privilege of making a pedestrian crossing on the international Rainbow Bridge.

We budgeted $200 for parking and/or transit and spent almost half that.  I used the Best Parking website to find the best deals for parking and frequently paid USD$3-5 for all day parking in downtown areas that might have been $20+ otherwise.  Except one day when there was a Drake concert and the “event rates” kicked in.  You win some, you lose some.  For us, driving proved cheaper than transit so we went with the less expensive option.

 

Food $435 (budget – $720)

  • Restaurants – dining out about once per day – $435 or ~$20 per meal
  • Groceries – slightly less than what we usually spend at home ($125-150/wk) – $0 extra (but $208 total, mostly in Toronto)

It seems like we ate out constantly, but looking at the numbers, we only ate out once per day on average.  At $19 or $20 per meal, this roughly matches our average from our Canada trip two years ago.  Some of the meals were very inexpensive at $10-15 (think fast food dollar menu or BOGO falafel wraps), other meals were closer to the $20 average (inexpensive take out from a “real” restaurant), while several meals were $35-45 at regular sit down restaurants.  We usually drink water with our meal and skip alcohol at restaurants.  That plus the weak Canadian dollar meant some really good eats for under USD$50 for our family of five.

 

Entertainment/Admission Fees $98 (budget – $400)

  • 2 days of Mammoth Cave tours – $96
  • Touristy stuff at Niagara Falls – $0
  • Bata Shoe Museum in Toronto – $2

The two days of Mammoth Cave tours was the only big museum or park admission cost during this trip.  So many other museums are free all the time (Air Force Museum; Air and Space Museum) or certain days of the week (like the outstanding Art Gallery of Ontario).

We also visited the Bata Shoe Museum in Toronto – a “name your own price” museum where I dropped two American $1 bills into the donation slot.  It was worth every penny (they had Shaq’s boot available to touch and smell!) but not a lot more.  Regular admission was crazy expensive so it’s unlikely I would have visited without the name your own price option.  The museum wasn’t crowded even on the day you can get in for free, so I imagine the regular admission days are really desolate.

 

Souvenirs $0 (budget – $0)

  • 5,024 pictures and tons of  memories – $0

I don’t like souvenirs.  Toronto’s City Hall handed out free TORONTO pins, so technically we received a few souvenirs but paid nothing for them.

 

Budget Wrap Up

  • Lodging – $157
  • Transportation – $264
  • Food – $435
  • Entertainment – $98
  • TOTAL: $954

At $954 for 3.5 weeks of life on the road for a family of five, I’d say we did okay.  Our goal wasn’t to travel this cheaply.  It just happened.  We also had several hundred dollars of Airbnb referral credit that brought costs down which might be hard to replicate if you don’t have a blog.

We saved about $200 on utilities while we were out of town primarily by setting the thermostat on 90 degrees and therefore using very little electricity.  We also consumed zero water and almost zero natural gas for the hot water heater.  Does that make our net vacation cost $754?

 

Travel hacking tips

When we plan a trip we try to leverage our existing stash of airline miles and hotel points for free flights and hotel rooms.  For stays over two nights, it’s often cost effective to stay at a short term rental located through a service like Airbnb or VRBO.

Large credit card sign up bonuses are our main source for miles and points.  Some cards entice new cardmembers by offering $400-500 reimbursement for any kind of travel expense (like the Barclay Arrival Card and the Capital One Venture card).  Other cards provide 30,000 to 50,000 hotel points or airline miles.  A third variety of cards, like the Chase Sapphire Preferred and Sapphire Reserve cards, offer points that can be transferred to a variety of hotel or airline programs or redeemed at the Chase site for 25-50% extra value (compared to redeeming for cash).

We slashed the lodging expense significantly by careful use of our credit card points.  We redeemed the $500 sign up bonus from our Barclay Arrival card on the Toronto Airbnb rental.

I picked up a $250 Airbnb gift certificate by redeeming 25,000 of the 150,000 American Express Membership Rewards points we earned when we signed up for a pair of Amex Business Gold Rewards cards in December last year.  That slashed the total price for three nights in an Airbnb rental in Bowling Green, Kentucky from $297 to $47.

We booked nine nights at Starwood Hotels (including Four Points by Sheraton and Aloft hotels) using 24,000 Starwood Preferred Guest points from a single Starwood Amex sign up bonus offer.  The most amazing redemption of the bunch was a $400 per night (in Canadian dollars) room in Niagara Falls for 3,000 points per night (and one of our rooms was upgraded to the Falls View executive room priced over $500 per night).

Overall, we slashed what would have been $3,000 in lodging expenses to under $200 using credit card reward points and hotel points.  Not a bad deal at all.

Travel hacking is how we traveled through Mexico for seven and a half weeks in 2015 for $4,500.  If you like free travel as much as we do and want to get some of these same cards, check out these credit card offers.

Airbnb is an incredible way to save money while on vacation, particularly if you’re traveling with a family.  We booked decent two bedroom apartments and houses for much less than the cost of a crappy hotel room suite.  The biggest benefit beyond having tons of space is that we get a full kitchen so we don’t have to dine out for a month straight.  If you haven’t tried Airbnb before, check them out for your next vacation and save $35 off your first stay.

Cooking at our house or apartment helps bring the food cost down.  This doesn’t mean you can’t try new restaurants and cuisines while you’re vacationing, but simple things like cereal, yogurt, fruit, and eggs for breakfast are much cheaper when prepared at “home” rather than purchased at a restaurant.  For lunch and dinner, we made a variety of wraps, sandwiches, and salads (on the easy end) while frequently delving into more complex culinary pursuits by cooking ribs, sausages, tortellini, spaghetti, and tacos during our two week stay in Toronto.

A few technological innovations helped us immensely.  The GasBuddy website/app shows the cheapest gas stations along your route.  The Best Parking website/app shows the cheapest parking for your area and time of day.  Google Maps is another great free resource and allows offline download of maps with navigation (we didn’t have data on our cell phone while “overseas” in Canada).

It’s worth mentioning the financial benefits of slow travel.  When you aren’t trying to hit all the bullet pointed sites in your travel guide within the typical American week long vacation, you can take time to relax and enjoy the trip more.  Schedule a “do nothing” day every two or three days of the vacation and spend the day strolling around the neighborhood, take the kids (or just you!) to the pool, catch up on your Netflix queue, or cook a big feast in your kitchen.  When you’re paying a weekly or monthly rental rate instead of a nightly rate at a hotel, it doesn’t cost much to take the day off from the sightseeing trail.

I also find tracking expenses and seeing where your travel dollars went to be a useful exercise.  I don’t really manage our spending against the budget while on vacation, but that could be useful if you are on a really tight budget or need to conserve cash for another upcoming trip.  Personal Capital is a great (and free!) app and website tool to track your spending automatically.  Then you can see where your travel dollars go without spending lots of time manually tracking expenses.

 

Where to next?

For 2016, we increased our travel budget to $10,000.  However we most likely won’t spend it all this year.  Year to date through August we have only spent $3,100 for travel.  That total includes our Canada road trip, $810 for a recently booked cruise in late November, partial payment toward another cruise in December, and some miscellaneous travel related expenses throughout the year.  We should spend another $1,000 to $2,000 for the remainder of the second cruise and other cruise expenses.  We will likely end the year with half of our $10,000 travel budget unspent.

Not to worry, as we are already talking about spending the summer of 2017 in Europe, so there’s a good chance we will use most of the $10,000 travel budget next year, and the $5,000 not spent in 2016 might come in handy too.

 

 

What epic trips have you taken?  Where do you want to travel next?  

 

 

July 2016 Financial Update

two-cents-photo

Thanks July, you were great.  Can you tell August to keep doing the same thing please?  Our net worth continued to climb throughout July to an all time high of $1,633,000.  Spending was very low at $1,190 while income was a bit higher for the month at $2,336.

We just returned home from our three and a half week road trip to Canada and it was a huge success!  Some of those travel expenses are included in this post, however I hope to have a separate post outlining our trip and the travel budget later in August.

Here’s what our July 2016 looked like from a (mostly) financial perspective.  And some random travel pics to prove we were actually on vacation.

Niagara Falls from the American side.

Niagara Falls from the American side.

 

Income

July investment income dropped to $78.  Our portfolio consists of mutual funds and ETFs that pay dividends at the end of each quarter, so July is typically a very slow month for investment income.  Our total investment income for the first half of the year is almost $10,000, putting us on pace to hit and possibly exceed the total of $28,527 in dividend income received in 2015.

Blog income, shown as “other income” in the chart, returned to a more normal $2,244 in July after a very low June.  My early retirement lifestyle consulting brought in $184 at the very end of July but will show up as part of my August expense report because that’s when the payment posted to my account.  August’s blog income won’t be quite as high since I didn’t publish much during July (advertising payments lag by a month).

The $13 of healthcare/medical income was a refund for the electric toothbrush heads I bought in June.  Turns out they weren’t authentic Philips Sonicare brand toothbrush heads as advertised.  They were very convincing fakes including the packaging, but I grew suspicious and noted enough differences to contact Philips to investigate.  Turns out they aren’t particularly concerned about high quality forgeries of their merchandise, so they didn’t even ask for the eBayer’s name that I bought them from.  I mentioned that the seller had hundreds of the same product listed for sale.  Still no concern from Philips.  Oh well.

I contacted the eBay seller and informed him he sold me some fakes and asked for a refund.  $13 was refunded immediately, no questions asked.  Pretty sure that’s a confirmation of my theory.  In the end I got a free two pack of generic electric toothbrush heads and a cool story to share with any intellectual property attorneys I may bump into at cocktail parties.

july-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 July expenses:

july-2016-expenses

Another month of ridiculously low (but real) spending.  At $1,190, we spent just over a third of our budget of $3,333 per month (or $40,000 per year).  Not bad considering we were on vacation for over half the month (though we paid for our two airbnb rentals in previous months).  It’s worth noting, however, that we didn’t have any large, lumpy expenses in July like taxes, insurance, or a new minivan purchase so getting close to the magical $1,000 mark is relatively easy in those kind of months.

Travel – $423: The single largest expense for the month.  This include gas for the van, meals at restaurants, parking, tolls, and other travel related expenses.  We paid for the airbnb rentals and the two days of Mammoth Cave guided tours in previous months so this number seems artificially low for 17 days of traveling.  We also stayed with family in the North Carolina foothills for three days on the way to Tennessee, which meant close to zero spending those days.

Mammoth Cave in Kentucky. The reason we only spent one night in Nashville.

Mammoth Cave in Kentucky. The reason we only spent one night in Nashville.

Groceries – $299: A few hundred dollars lower than usual.  We didn’t buy many groceries in the two weeks of July before we left for vacation.  Two thirds of the grocery spending occurred while we were on the road trip.

While visiting family, we found a discount grocery store that sells odd lots of product, some of which were slightly expired.  We scored two cases of delicious granola bars at $0.29 per box.  Great road trip food (a small step up from chips or cookies) and handy snacks while out exploring.  Part of one case made it’s way back to Raleigh.

SCORE!! FYI, that's $0.29, not $29.

SCORE!! FYI, that’s $0.29, not $29.

Utilities – $140: Water, sewer, trash, and natural gas bill.  We still have a credit balance from pre-paying the electric bill in the spring to meet credit card minimum spending requirements to qualify for sign up bonuses (gotta love credit card travel hacking!).

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

Entertainment – $55: Hard liquor.  For some reason I categorize liquor store purchases as “entertainment” while beer and wine are “groceries”.

We restocked the liquor cabinet at home before vacation, and bought a ridiculously expensive pint of Canadian whiskey at the LCBO store in Canada (LCBO = ABC store north of the border).  While at the Canadian liquor store, I cringed as I watched a guy pay USD$12 for a six pack of Coors.  South of the border that’ll almost get you a 12 pack of fancy beer or a case of 24 Coors.

Toronto skyline from the Centre Islands

Toronto skyline from the Centre Islands.  Photo credit goes to fellow 30-something retiree/blogger FIRECracker from millennial-revolution.com, who gave us a tour of the island. 

Restaurants – $49: Chinese restaurant in Raleigh for the family; a new (to us) fried seafood restaurant for fish and shrimp for the adults in the house (kids are like “ewwwww fish!” – more for us).

Clothing – $46: Thrift shopping.

Internet (“Cable”) – $34: 50/5 mbit service.  Mostly good except when it rains.  The service technician is coming in a few days to figure out why.

Telephone – $12: Our annual $10 phone bill for Mrs. Root of Good’s rarely used T-Mobile cell phone plus two SIM chips for Freedompop’s free international phone service.

Service Charges – $3: Mrs. Root of Good’s 401k.  Institutional Vanguard shares at tiny expense ratios but we pay a few bucks per quarter for that privilege.  Worth it.

The Space Shuttle. The coolest thing I've ever seen in a museum.

The Space Shuttle. The coolest thing I’ve ever seen in a museum.

 

Year to Date Living Expenses

july-2016-expenses-ytd

At $23,720 year to date spending, we have exceeded the $23,333 budgeted for the first seven months of the year by a few hundred dollars.  In spite of the minivan purchase in March, we are almost back to meeting the annual budget.  By the end of August we should be on track.

August is shaping up to be a low cost month.  I’m not certain what the rest of 2016 holds for expenses.  We are taking both of the older kids to the orthodontist at the end of August, so there is a chance we’ll start paying for $10,000 worth of braces this year.  Their insurance covers braces in cases of medical necessity, so we’ll see whether that helps us any.

In October we’ll make the final payment of several hundred dollars for our December 2016 cruise to the Caribbean.

Monthly Expense Summary:

 

Net Worth: $1,633,000 (+$67,000)

Our net worth continued to climb throughout July to an all time high of $1,633,000.  Taking a look back at 2016, we are up almost a quarter of a million dollars since Mrs. Root of Good quit working and retired early six months ago.  Quit work, make a quarter million dollars every six months. Rinse, repeat.

Well, that’s probably not how the next several years will transpire but I expect the next several decades will see us occasionally tacking on another quarter of a million dollars to our net worth given our low spending, side hustle income from this blog and my consulting, and the background growth of our portfolio.

july-2016-net-worth

Looking back at June and July, it’s clear the one day loss of $70,000 that we suffered after the Brexit vote was no more than a bump in the road.  The lasting economic impact remains to be seen, but over the short term it turned out to be nothing more than a fleeting scare that briefly interrupted the market’s growth.

Where the markets head from here is anyone’s guess.  I can’t help but feel we’re riding an old, rickety wooden roller coaster as it ratchets its way slowly up an incline.  After it gets to the top, you know what happens next.  But even if we see a sudden crash from the recent highs, odds are it’ll be back up the incline once more after a bit of a wild ride.  That’s been the long term trend.

 

 

How was your August?  Did you let your investments rise with the market?  

 

 

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