December 2017 Financial Update
Happy New Year! Another great year in the books for us. Our youngest started kindergarten. We took an amazing nine week trip to Europe. And with all the kids in school we were finally able to take advantage of a nice last minute travel deal when Mrs. Root of Good and I jumped on a cruise to the Caribbean for a week. Our early retirement lifestyle is going well.
Here’s how our finances finished 2017. Year end dividends rolled into the investment accounts in December pushing our total income to just over $14,000. Our spending was rather high at almost $8,000 (which needs some explaining). Another freakishly good month in the stock market pushed our net worth up another $26,000 to leave us with $2,037,000 at year end. Needless to say, our 2017 went remarkably well from a financial perspective.
Investment income totaled $10,843 for the month of December plus a bit more from a 401k that didn’t show up in Personal Capital. Our equity mutual funds and ETFs pay dividends quarterly in March, June, September, and December. Some funds only pay once per year in December which explains why the December investment income is much higher than other months of the year. Mrs. Root of Good’s 401k doesn’t report the dividend income as dividends in Personal Capital. Including those unreported dividends plus all other investment income reported in Personal Capital, we earned a total of $36,234 in investment income during 2017. That’s a little higher than 2016 dividend income.
Blog income, shown as “other income” in the chart, remained roughly the same as last month, at $2,294 for December.
My early retirement lifestyle consulting income (“consulting”) increased to $843 in December. That works out to almost two hours of consulting per week which is the upper limit of what I’d like to do. We’ll see how January goes before I finalize rate increases for 2018.
Deposit income of $51 was cash back from the Ebates.com and Mrrebates.com online shopping portals. If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card. We scored a decent amount of cash back while shopping online over Black Friday and leading up to Christmas.
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 take a look at December expenses:
December was a high expense month for us. Two main factors added up to much higher than usual spending. I paid the annual property tax bill of roughly $1,500. I also bought around $3,700 in gift cards that I’ll be using throughout 2018 for everyday spending.
The December total spending of $7,953 is about two and a half times our budget of $3,333 per month (or $40,000 per year). Subtracting out the $3,700 in unused gift cards brings our effective spending to “only” $900 over budget.
Groceries – $2,643:
This shockingly high grocery spending is easily explained. We bought $1,000 worth of Visa Gift Cards and $700 worth of Walmart Gift Cards to take advantage of some significant cash back opportunities and to meet minimum spending requirements on a credit card (to qualify for a sweet $1,000 cash back bonus!). We’ll spend these gift cards on things like groceries, household goods, and general merchandise over the next several months. I bought another $2,000 worth of Visa Gift Cards (that cost $1,963 out of pocket) and included those in the “General Merchandise” expense category.
Tracking spending with Personal Capital is easy since the data feeds in automatically from credit cards, checking accounts, and investment accounts. With simplicity comes limitations. I don’t think there’s a way to add in expenditures manually after the fact as it’s basically a cash basis accounting system. As a result I have to guesstimate where I’ll end up spending these thousands of dollars of gift cards in the future. Which is okay since I’m more concerned about tracking the total amount we spend instead of getting it allocated exactly between specific categories (= keep it simple).
Other grocery spending included a total of $363 added to our three kids’ school lunch accounts.
The actual grocery store grocery purchases for December totaled only $574 which is roughly what we spend on average in most months. More on how we shop for groceries without using coupons. And why we never shop at Costco.
General Merchandise – $1,963:
The $1,963 in this category represents the purchase of $2,000 Visa Gift Cards bought at a slight discount. I purchased these and other gift cards through the Ebates Cash Back portal and I hope to get $45 in cash back or possibly more depending on how they are categorized by the merchant.
Home Maintenance – $1,536:
Our annual property tax bill. Even though our house is worth $200,000 or more, we are paying tax as if our house is worth $147,000. They only reassess property values every eight years here, and the last re-evaluation came just before our neighborhood property values started skyrocketing as the wave of gentrification pushed east from the “nice” part of town.
Travel – $828:
It’s official. Our 2018 summer vacation is booked! We’re spending a month in an oceanfront condo in Freeport, Bahamas. We’re staying in a ground floor unit of a 20 unit condo building that sits on a half mile stretch of undeveloped beach. Lots of bleached white sand, crystal clear water, and not much else. If you don’t hear from us very much over the summer, just know that we’re
relaxing working hard next to the pool or on the deserted beach.
We paid about $2,300 for the one month airbnb rental which includes a 50% “long term” discount. It’s a 2 bedroom, 2 bath unit with a decent living room and dining room, washer, dryer, A/C, internet, full well equipped kitchen, and pool. The cost breaks down to $828 out of pocket for Airbnb plus a big chunk of gift cards that I bought in 2016 (at a discount, of course) but didn’t use for our Summer 2017 trip to Europe. If you want to take $40 off your first Airbnb stay, check it out!
The flights are booked except one flight for me on one leg because I’m being cheap and hoping it drops slightly in price. I used a combo of Southwest frequent flyer points to for round trip tickets from Raleigh-Durham to Ft. Lauderdale then I used Chase Ultimate Rewards points (from last year’s Chase Sapphire Reserve signup) to get round trip Ft. Lauderdale to Freeport, Bahamas tickets. Total cost out of pocket would have been around $500 per ticket but we managed to use points or other travel hacking to cover all costs in full (including the $56 tax at Southwest which the $300 Sapphire Reserve annual travel reimbursement covered).
I also used up $544 of remaining Sapphire Reserve travel credit to add to the deposit on our winter 2018 Christmas cruise on the brand new MSC Seaside cruise ship sailing out of Miami. Which means we’ll probably visit the Bahamas a second time in 2018.
Gotta love getting many thousands of dollars in free travel from credit card bonuses! If you want to peruse the available credit card bonuses, check out my credit cards page.
Gifts – $357:
Most of this expense is cash gifts to our kids for Christmas. It’s one of their main sources of spending money throughout the year and preempts all those nagging “can I get this?” questions. It’s their money, they can do what they want (as long as it’s not dangerous or likely to lead to big problems).
We also bought the five year old a new bike for Christmas ($53). And phone cases for our daughters’ new phones ($3).
Healthcare/Dental – $348:
Our 2018 ACA plan is about $60 per month more expensive than our $16 per month plan from 2017. It offers nearly identical coverage as in 2017 except the deductible increased from $100 to $125 and the specialist office visits are slightly more expensive. I decided to take less than the full ACA premium subsidy that we qualify for so that I can pay extra each month.
I figured out that I can in essence pay an extra $300 each month for my health insurance and that replaces the need to pay quarterly estimated taxes. In this case the health insurance company eats the credit card processing fees for the $300 per month instead of me paying the 1.87% fee. It’ll only save me $60 each year but it also eliminates the administrative overhead of making four estimated tax payments. I feel kind of like a genius (a very stable genius). In future months we’ll owe $364 per month for health insurance premiums ($64 for the actual policy plus $300 per month extra that will count as taxes paid once we get back a large ACA Premium Tax Credit at tax time).
Entertainment – $71:
Due to a quirky decision I made 8 years ago when I first started keeping detailed spending records, I include hard liquor purchases made at our state run liquor stores (the misleadingly named ABC Stores) in the “Entertainment” line item. Good for entertaining and making a strong beverage at home for personal consumption I suppose.
Clothing/Shoes – $52:
A few random winter clothing items and a pair of shoes for Mrs. Root of Good.
Gas – $51:
Slightly more than one tank of gas. We drove to the North Carolina foothills to visit my grandmother and celebrate her 90th birthday!
Automotive – $44:
I paid $39 for an oil change at the dealership. This is the first time I’ve paid for maintenance on the minivan that we bought in 2016. While there, we also let the dealer perform a few non-critical recall fixes. They found a few things that needed attention on the van but otherwise gave it a clean bill of health.
One of those items needing attention was a burned out tail light. Instead of paying the dealer $20 to replace a single bulb, I bought a new set of tail light bulbs and a new set of license tag light bulbs (required equipment in North Carolina, and something that failed me on the annual safety inspection in the past). Total cost: $4 shipped from Rock Auto online (or about $11-12 at the auto parts store). In the minivan, it’s a pain to get to the rear light bulbs because the interior panels must be removed. As a result I wanted to replace all the bulbs in there at one time so that they will hopefully last the life of the van (and I paid a few pennies extra to get the “long life” light bulbs).
Restaurants – $37:
We’re stuck in our boring ways. Just one family visit to our regular haunt – the neighborhood Chinese restaurant.
Cable/Satellite – $14:
$14.99 per month for 30 mbit/second download speeds and 4 mbit/second upload speeds with no data caps.
Telephone – $4:
I’ve been using Google Voice hooked up through an Obihai Telephone Adapter to get free VOIP home phone service for several years. Something technological happened such that the older Obi100 adapter stopped receiving firmware updates. Google updated their Google Voice security interface and boom – my old Obi100 no longer played nicely with Google Voice. I found a $4 workaround through some telephony forums and paid that small fee to keep things running for free (at least on a recurring basis) in the home phone department. I briefly considered tossing out the home phone completely but it is handy to have the whole house set up with phone service without relying on our cells. And the price is right.
Total Spending in 2017
All told, we spent only $31,708 in 2017. That’s about 80% of our annual $40,000 early retirement budget. We had a great time in 2017 and didn’t lack for anything. We enjoyed nine weeks traveling across Europe and a week cruising the Caribbean. We had a new roof put on the house. Lots of fun was had by all!
I don’t see any huge expenses coming up on the horizon in the short term. Our big 2018 summer vacation is mostly paid for. The annual property tax bill is paid. I don’t foresee any big housing expenses in 2018 although our water heater and furnace are both getting older and there’s a small chance that we would have to spend a lot on repair or replacement of either one of those systems during 2018. Don’t worry; it’s in the budget along with other capital expenditures for all major systems in our house.
Life is good. I’ve expressed this opinion before, but I really feel like we’re living a $100,000 lifestyle on $40,000 per year or less. After four years of early retirement, our spending has averaged $32,000 per year (see summary below).
Monthly Expense Summary for 2017:
- January 2017 – $3,378
- February 2017 – $2,108
- March 2017 – $1,388
- April 2017 – $2,981
- May 2017 – $1,829
- June 2017 – $2,629
- July 2017 – $1,616
- August 2017 – $1,390
- September 2017 – $1,824
- October 2017 – $1,748
- November 2017 – $2,857
- December 2017 – $7,953
Summary of annual spending from all years of early retirement:
Net Worth: $2,037,000 (+$26,000)
Another month is over. Another YEAR is over! Our net worth increased yet again in December, making 2017 a year with 12 out of 12 months with positive net worth gains. I’ll be surprised if we ever experience another year with such smoothly positive net worth growth.
In December, our stash of investments grew by $26,000 to bring our total net worth to $2,037,000. Year over year, we’re $357,000 richer than we were at the end of 2016. That astronomical amount of growth is more than five times what I earned on a yearly basis while working full time as a transportation engineer.
Here’s my market forecast for 2018: The market will go up, and the market will go down. I have zero clue where we will end up on December 31, 2018. However I expect that on December 31, 2038 we will look back longingly at how cheap stocks were way back in 2018.
As far as investments, my biggest change in 2017 was switching to a slightly more conservative asset allocation. I sold stock mutual funds and ETFs throughout 2017 and bought VBTLX, the Vanguard Total Bond Market Index Fund, with the proceeds. I’m now the proud owner of $127,000 worth of bond funds. In addition to the bonds, I hold $15,000 in 2% CDs at my local credit union and another $35,000 in money market accounts yielding 1%.
In total, I’m holding just over $175,000 in fixed income investments (including cash) which represents just under 10% of my total portfolio. The other 90% remains invested in a broad asset allocation covering the entire globe. At an average annual spending level of $35,000 per year, the fixed income allocation will cover five full years of living expenses. Add to that five years of $8,000 per year in dividends from the taxable brokerage account and that would result in another year of living expenses. If we enter a multi year bear market we’ll have plenty of cash and bonds on hand to get us through the tough spots without selling our equities for quite a while. This worst case back of the envelope contingency planning excludes any blog or consulting income (which covers our monthly spending in most months).
I wanted to close this blog post with a hearty “Thank You!” to all the Root of Good readers and I’d like to extend best wishes for a prosperous 2018 from my family to you and yours!
How much progress did you make toward your early retirement goals in 2017? Any big New Year’s Resolutions for 2018?