December 2016 Financial Update
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:
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!).
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.
If you’re interested in tracking your income and expenses like I do, then check out Personal Capital (it’s free!). All of our savings and spending accounts (including checking, money market, and five credit cards) are all linked and updated in real time through Personal Capital. We have accounts all over the place, and Personal Capital makes it really easy to check on everything at one time.
Personal Capital is also a solid tool for investment management. Keeping track of our entire investment portfolio takes two clicks. If you haven’t signed up for the free Personal Capital service, check it out today (review here).
Now let’s look at December 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.
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.
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.
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.
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.
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.
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).
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!
Total Living Expenses for 2016
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.
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:
- January 2016 – $2,293
- February 2016 – $2,030
- March 2016 – $10,911 (includes minivan purchase)
- April 2016 – $1,829
- May 2016 – $2,979
- June 2016 – $2,485
- July 2016 – $1,190
- August 2016 – $2,817
- September 2016 – $2,781
- October 2016 – $1,460
- November 2016 – $1,884
- December 2016 – $6,326
- TOTAL 2016: $38,991
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.
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.
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.
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.
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?