January 2014 Financial Update

money-january-2014

Let’s go over the Root of Good household’s financial activity in January 2014.

I’ll start off with income.  This month’s income of $4,291 was much lower than December’s income of almost $20,000.  We only received around $50 in investment income this month, which was much less than December’s massive $13,100 year-end dividend payments.  March will be the next moderately big month for dividends (but not “December” big!).

The Root of Good earnings from November 2013 finally appeared in my checking account in January.  That’s the $1,515 in “other income” shown on my income report.  December and January Root of Good earnings weren’t quite as high, but at least I know I’ll be seeing that revenue flow in over the next few months.

The biggest source of income in January was “deposits” which were Mrs. Root of Good’s earnings from her job and a small repayment of the business loan we made to family back in October.

February is stacking up to be a very nice month for income.  Mrs. Root of Good just received a sweet bonus.  As expected, the majority of it was siphoned off to fund her 401k and pay ridiculous taxes that we’ll mostly get back in April 2015.

I’ve also been busy selling crap on eBay.  I’ll have a better update on what I sold and what I made in next month’s financial update.  So far I’ve made a few hundred dollars, but I’m not booking that as earnings yet until the buyers have a few weeks to defraud me or dispute charges.  I’m new to the ebaying hustle so I’m hoping for the best but expecting the worst.  So far, so good.

 

January 2014 Income

 

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:

January 2014 Expense

 

January wasn’t as spendy as I expected.  We paid the annual property tax bill of $1,431 and the twice per year auto insurance of $235.  That was about half of our monthly expenditures.  I actually saved about $10 per year on auto insurance by changing the main purpose of my driving from “commuter” to “pleasure/recreational”.

The expense summary shows we spent $200 on “travel” but we’ll be getting all of that back.  We booked a $600 cruise that was supposed to take the four of us (excluding the toddler) on a week-long journey through a bunch of island destinations in the Caribbean.  The seven night cruise was unilaterally changed to a two night cruise (for the same $600), so I canceled.  I’m still waiting on the refund.  Preparing this post on our expenses motivated me to collect on this debt.  Travelocity “filled out a form to escalate my issue with accounting”, so I assume that means I can expect a full refund of my $200 deposit within the next month or so.

In some areas we spent a lot – thrift shopping for clothes and shoes ain’t cheap after all ($75, but that includes a few brand new toys, too).  In other areas, like “restaurants”, we spent very little ($46 in January compared to the $80 per month we have in our budget).  Too much awesome home cooking I guess.

The “home maintenance” expense of $124 has been mostly refunded (but it showed up as “income”).  That was for the replacement microwave I bought when our old one died.  I borrowed a working microwave from family, so I returned the unopened microwave I bought.  We also replaced the kitchen cabinet handles in January.

We spent almost $100 on electronics in January, which is higher than our average electronics spending of $50 per month.  Those expenses were the replacement laptop screen ($45 from eBay) and a brand new (to me) phone ($54 from eBay).  I bought the phone in order to try out Freedompop’s “bring your own device” phone service.  I rarely use my cell phone for voice, so the monthly fee of free is pretty enticing.  So far, the voice quality is fair to poor, but I think it’s because I don’t have the 4G service configured correctly (freedompop uses VOIP over data to carry the voice signal).  The data works perfectly though.  I’ll give it another month or two before deciding whether to dump it for a better but more expensive service provider.

I was using Virgin Mobile’s grandfathered $25/month unlimited data plan, although the best they offer these days is $30-35 per month.  I liked them a lot and would recommend them if you need an inexpensive prepaid option. In fact, I’ll sell you my old Virgin Mobile phone with the grandfathered $25/month plan if you’re nice to me (and pay me).  Although I might go back to Virgin Mobile before my grandfathered plan expires in a few months.

Overall we are doing great on our expenses.  Since we budgeted around $2,700 per month for retirement, we are well on our way to staying within our targeted budget.  January was certainly a more expensive month than usual with the annual property tax bill and the six month auto insurance bill coming due at the same time.

February will probably be a low-spending month.  It’s 10% shorter than January, which helps.  The kids’ summer camp just hit the credit card, but that’s about the only big expense I expect in February.  Unless we start blowing some money on the big summer travel we are planning.

 

Net worth

I don’t normally say much about our net worth.  But I figured I’d give a general update.  Someone mentioned to me that they thought I was crazy for remaining heavily invested in equities “during these crazy times”.  I assume they were talking about the barely noticeable mild volatility we experienced in January and early February.

By the third of February, our net worth declined over $60,000 from where it was just a few weeks earlier.  That’s about two year’s worth of expenses.  I guess to some people that would be a cause for panic.  Since I think it’s unlikely we’ll run out of money in early retirement, I’m not panicked at all.  We still have over 30 years of annual expenses in our investment portfolio!  Maybe I’ll panic if the portfolio drops to 15 year’s worth of expenses.

 

The crash

To put that $60,000  loss in perspective, it made us as poor as we were on December 17, 2013.  I didn’t feel particularly poor back on that particular day in December (quite the opposite actually!).  Since the third of February, the stock market has switched directions and started marching upwards once again.  As of today (February 15th), we are once again within $4,000 of our all time high net worth.

Over the next few years, I wouldn’t be surprised to see our net worth drop by 20% in a relatively short period of time.  We’ve seen much worse in the ugly financial markets of 2008-2009.  While I don’t expect it to be quite as bad as 2008-2009 any time soon, a 20% loss in the stock market isn’t all that uncommon.  Historically, the markets bounce back after a period of time.  The next major correction won’t scare me any more than the mild turbulence of January 2014.  I guess that’s why I’m happy enough holding an equities-heavy investment portfolio.

 

January was a wonderfully blissful month of retirement in spite of the fact that we didn’t spend that much money.  Our cash accounts have been growing over the last five months since I retired, and if the blog income and other sources of income stay constant, we won’t need to dip into the investment portfolio very much.  Here’s to a good February and good remainder of 2014!

 

How was your January?  Is the year off to a good start?

 

photo credit: 401(K) 2013 creative commons

20 comments

  • “During these crazy times?” That gave me a good laugh!!!! I can’t even begin to imagine what they would have said a few years ago during the actual crisis. People just need to chill, not panic, and maybe stop watching their nest egg every minute. Recipe for disaster as they start second guessing themselves.

    • That’s a good way to approach the daily swings. I don’t know how I could deal with losing $10,000 in a day if I treated it like a crisis every time it happened. It isn’t like I rent a limousine and buy cases of champagne and caviar to celebrate every time I make $10,000 in a day. Making or losing $10k is mostly a non-event. I might cringe a little if we had one of those days where the market crashes 7%. But no point in “crying over spilled milk”.

  • What’s funny is after the last week or so, you’re probably not that far off from the ‘Weeeee’ peak. I track daily just for entertainment, but don’t ever plan on doing anything. We’ll see if I keep that up during the next big downturn!

    Also – had absolutely no idea you could save anything by changing your car insurance from commuter. Good to know…

    • Just checked. Within $1,000 of the former all time high as of today.

      I always heard I could save a bundle by switching to “pleasure/recreational”. I was a little disappointed the reduction in premium was so tiny.

  • January wasn’t the greatest month for my net worth. I did use the recent drop in the stock market to add shares to some of my dividend stocks, which will hopefully be a good move over the long run.

    • Taking advantage of drops like in January tend to pay off long term. We took on a little more risk via a permanent shift in our asset allocation back during the 2008-2009 crash and it paid off handsomely.

  • Dang, didn’t realize you guys banked in almost $20K in December! Nice work!

    I do think it’s great you can take the stock market punches well. I can’t, which is why I keep my equities to no greater than 40% of my NW, and preferably no greater than 35%.

    • Our passive income sources are almost enough to fund our monthly budget of roughly $2,700/month, and that’s really why I’m not too worried if the stock market dips for a year or three. It wouldn’t really change our day to day lives any. Other than we might not spend quite as much on discretionary spending like travel.

      But perhaps the bigger message is “don’t take on more risk with your investments than you can handle.” Sleeping at night is way more important than squeezing out a few percent additional return (long term, on average).

  • Nice job for sure. I’m also trying to get started with the ebay thing this month.

    My January was pretty good. I’m working on a goal of $1800 in dividend income for the coming year and was able to add to my equity holdings on the dip which was good. We were waiting for a little dip like that so I was pleased!

  • Justin,
    Nice perspective on how the drop just bought you back to December. We lost at a greater rate than the market due to growth stocks but that’s as expected. I don’t need the money for another 10 years.

    • That’s how I deal with volatility. If I lose half the value of our portfolio today, that’s really money I need in the 16th year of our retirement (and beyond). So yeah, it will suck but it won’t change much for the next decade and a half (other than meaning I might have to return to work at some point in the next 16 years).

      • That’s a great way to look at it. As my account values grow, I always get a little nervous thinking about the swings being larger. But its really just all relative and probably a good problem to have! Congrats on another solid month.

  • January was a good month but February is a slow one in terms of income. I’m hoping things will pick up here in the next few weeks. I love the outlook on the market. The market is always going to bounce around in the shirt-term. You might as well sit back and ride it out then sell out and try to figure out when to get back in. If you had sold out a few weeks ago, you would have missed out on this little rebound. Just ignore the short-term and stay focused on the long-term. Drops will happen, but the long-term trend is positive.

  • We had a great January which was fortunate because it was the first time I posted about it – haha! Hard part is going to be keeping it up but you’ve got to make sure to celebrate the small wins when they happen.

    • That’s great! Keeping a monthly update going also keeps you accountable to yourself and the world. And it makes it a little harder to waste money on mindless crap.

  • Great job! This really makes me want to work on growing some dividend income!

  • Love Personal Capital! Great job on blog income as well! It really is quite impress and gives me hope that I will be there in a few years 🙂

    • I wish Personal Capital was around a few years ago. Neat time saver and something I find myself using many times per week whether I need a quick look at an account balance or I need to drill down into the investment allocations and holdings.

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