February 2014 Financial Update
February was a really happy month for our finances. Spending remained low and our investments went way up. As long as our investments keep up with inflation after we take out living expenses, we will have a financially successful early retirement. We are on the right track so far.
This month’s income of $6,844 was a few thousand dollars higher than January’s income. That’s mostly due to a matter of timing. We received two repayments on a business loan made to family back in October. The first payment missed January by a day, which led to the income falling in February.
This month we again received about $50 in investment income. March will be the next moderately big month for dividends.
The Root of Good earnings from December 2013 were mostly paid in February. That’s the $1,566 in “other income” shown on the income report. Root of Good earnings won’t be quite as high in the next few months.
The top income source for February was Mrs. Root of Good’s paycheck. Having this steady source of income makes it easier to watch violently wild swings in our portfolio value without batting an eye. All of our monthly expenses are completely covered by a paycheck. Lest you think I’m being disingenuous in my claim of being retired, rest assured knowing that we would be just fine without Mrs. RoG’s paycheck.
As I mentioned in the January Financial Update, I’ve been busy selling crap on eBay. The totals are in for February. The “Sales” of $393 reflects the gross amount I received from eBay after paypal fees and shipping costs. The ebay fees on the sales were paid later, which left me with a $350 profit.
What did I sell? Old cable boxes, cable modems, DVR’s, VOIP phone adapters, a “vintage” bookbag, the “vintage” cabinet pull handles from our kitchen, and an assortment of post-it notes, markers, and pens I obtained “free after rebate” from Officemax. The post-it notes really blew my mind. $37 for a couple of small packs of bold colored sticky notes.
Second most surprising were the “vintage” cabinet pulls that sold for $20. Considering I spent $25 for brand new shiny ones, I’m feeling a little smug about this particular kitchen upgrade since I sold the old ones for almost what I paid for brand new ones from this century.
A quick note on the expense tracking and income tracking tools I use. If you like these pretty graphics, that’s exactly what you get from Personal Capital. With Personal Capital, it is really easy to take a quick look at my income and expenses, and then drill down to areas of spending that I want to take a closer look at. But they really go beyond pretty pictures. 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. It’s my first stop when I have a quick finance question like “how much cash do we have?” or “what do we owe on credit cards right now?”.
Personal Capital is also a solid tool for investment management. Keeping track of our investment portfolio takes two clicks and is incredibly easy with Personal Capital. If you haven’t signed up for the free Personal Capital service, check it out today.
Now let’s look at expenses:
Occasionally we have months where we just don’t spend much money. February was one of those months. It snowed a lot, and in North Carolina an inch or two of accumulation means businesses shut down and roads are impassible. For a portion of February, we could not go anywhere to spend money. That means forced savings!
Our $1,810 spending in February is about two thirds of our normal projected expenses in retirement. We didn’t really try to save money or go out of our way to reduce expenses. In fact, I spent more money than usual on a lot of categories. I prepaid $350 extra on the natural gas bill and $200 extra on the internet bill in order to meet the minimum spending requirements to qualify for a credit card sign up bonus. That means no more gas bills or internet bills until the summer.
We spent $200 on a deposit for a week long cruise to the Caribbean and Mexico in September 2014. We found a smoking hot deal and booked it before it disappeared. We can cancel without penalty until June, and we might do exactly that if we see another cruise that is a better value, or we decide to travel somewhere else. We also received a $200 refund (shown in the “income” chart) for the cruise we booked in May but had to cancel due to cruise line error.
We spent $318 for three weeks of summer camp for our two oldest children. At $53 per week, our city parks and recreation department offers a heck of a deal for a high quality camp that the kids really enjoy. I put expenses like these in the “entertainment” category.
The astute observer would note that I don’t spend anything on cell phone service. I switched to Freedompop and don’t pay anything on a monthly basis. So far, I have had consistent data connections but pretty bad voice quality when I’m away from wi-fi. That’s the price of free. I rarely use the cell phone, only using 150 MB data and 12 minutes of talk time in February, for example. It works for me, but wouldn’t be a good solution for anyone that needs reliable voice service. Or reliable service of any type, for that matter.
The service suddenly stopped working at the end of my plan’s first month. I had a really hard time reaching anyone in customer service. Eventually, after bad-mouthing Freedompop on twitter, I miraculously had immediate offers to help. The issue was resolved within an hour. My suggestion to Freedompop would be to ditch the telephone customer service if you don’t actually intend to answer the phone or call back customers when you say you will. I am technically a “beta” customer using their “bring your own device” plan, and I pay nothing, so maybe I’m being a little harsh on them.
Grocery expenses were lower than ordinary at $180. We tend to stock up when groceries are on sale and then buy less when things aren’t on sale. February was one of those months where we didn’t stock up on many groceries. We worked on depleting our stash from the freezer and the pantry and most grocery money was spent on fresh fruits and vegetables and perishable staples like milk, yogurt, and eggs.
The restaurant category didn’t see much action in February. The only restaurant expense was $8 for a take out tray from the neighborhood Chinese restaurant. We stretched that one plate into more than one meal (for a family of five!) by cooking our own rice, lo mein (= ramen noodles), and veggies at home to go with the chicken, beef, and pot sticker dumplings from the restaurant.
I hesitated to reveal that we only spent $8 on restaurants and exactly how we could spend so little. It makes it seem like we are living a life of extreme deprivation. The truth is that we eat pretty well at home, but most dishes are cooked from scratch. From naan, curry, pizza, stir fry, and sushi to lasagna, baked honey hams, pad thai, pho, burritos and chili, we like to eat. We just don’t like to pay a lot for good food. I love cooking and I tend to spend a good bit of time trying new recipes and whipping up family approved classics from my repertoire.
Year to date, we are doing a great job managing our expenses. Since we budgeted around $32,000 per year for retirement, two months of expenses should be $5,333. We are under-running our budget by $360 through the end of February. Our year is off to a great start, and I don’t foresee any major expenses for a couple of months other than travel expenses.
We are in the process of getting our passports updated for our big summer trip. The oldest kids’ passports are still valid for another 18 months, but the two year old and us parents will need new passports (at a combined cost of just over $300). At least I only spent $2 on passport photos, and the passports we get will be valid for five to ten years.
After batting around all kinds of places like Thailand, Cambodia, Spain, and Central America, I think we have finally decided to spend five weeks traveling up the east coast and into Canada. We’ll spend most of the trip in Canada. But before entering our great neighbor to the north, we hope to make it to New York City around the Fourth of July. I hear the fireworks are amazing. I’m guesstimating the whole trip will come in around $5,000 for our family of five. I’ll save the details of our trip for subsequent posts.
Last month I started talking about our net worth in abstract terms (without attaching dollar values to the total). January was a tough month for our portfolio. We lost about $60,000. It didn’t bother me at all because it’s unlikely we’ll run out of money in early retirement.
Unsurprisingly, our portfolio fluctuated in value once again in February. This month it went up roughly $86,000 from the worst point on February third. One month you lose $60,000, the next month you make $86,000. It makes our $1,900 February expenditures look really insignificant. When you are relying on a seven figure portfolio that fluctuates by $50,000-$100,000 many months, it’s hard to stay focused on keeping expenses low over the long term. However, keeping expenses under control is the key to long term financial success in early retirement.
If we can stick to our current budget, we’ll be able to withdraw less than 3% of our portfolio each year for living expenses. Historically, this low level of withdrawals would lead to a near 100% chance of our money lasting longer than we do.
We might be millionaires but we can’t spend all our investments in one year. Then we would have nothing left to grow and pay dividends year after year.
How was your February? Did you dominate your finances?