January 2016 Financial Update
One month down, eleven to go. With the new year came a significant drop in the markets that left our portfolio a little lighter than it was during most of 2015. We suffered a $64,000 net worth decline during the month of January.
Our income remained steady at $6,912 while our expenses ended the month at a modest $2,293. In cash flow terms, we made much more than we spent. However that didn’t mitigate the stock market losses to any real degree.
We were due for a stock market correction for a while and it’s finally here now. Whether this is a real recession and how deep it might become remains to be seen.
In January, we received only $38 in interest and investment income. Our monthly dividend income is very inconsistent, with most of the income arriving at the end of each quarter. For all of 2015, we received $28,527 in dividend income. If we are in the beginning of a recession, I expect the dividend income to be slightly less during 2016.
Blog income, shown as “other income” in the chart, remained solid at $3,112. This is slightly above average due to receiving a check from a single advertiser covering all of 2015. I expect to earn slightly less in February but the total should still be above $2,000. I’m hesitant to forecast what I think I will make from Root of Good during 2016, but if the past is any predictor of the future, it should be $2,000 to $3,000 per month. That’s quite a bit higher than the $600 to $800 monthly income I was expecting a couple of years ago!
In January, I continued to provide individualized advice through my early retirement lifestyle consulting. Between that consulting and other freelancing income the “consulting” income totaled $472 in January.
The “deposits” income of $97 comes from cash back rebates from the Ebates.com and Mrrebates.com online shopping portals. I’m all about sharing the wealth, so 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 scored almost $100 cash back from the cruise we just got back from.
Also in the “deposits” category are two class action settlement checks worth $15 each. Score! I think this was to settle my claims against Intel for misrepresentations they made about their Pentium 4 chip almost 15 years ago. Vindication (and $30) is mine!
The “paycheck” income is from Mrs. Root of Good’s job. Since September of 2015 she’s been working three or four days per week from home. Last month Mrs. RoG worked exactly seven days. We were on vacation for a week on a cruise, but she’s also trying to exhaust her allocated vacation time before joining me in early retirement soon. We have some exciting news on that front in next week’s post!
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 January expenses:
We spent $2,293 in January. That is only 70% of our new and improved budget of $3,333 per month (or $40,000 per year). I’m hoping to find fun ways to spend all of that $40,000 during 2016 but so far we’ve been too busy having free or cheap fun to spend much more than what we have been (like the $24,000 we spent in all of 2015).
Our single largest expense in January was the annual property tax bill for our house. At $1,614, it’s quite a steal compared to taxes in areas with high real estate values or high property tax rates. $1,614 seems like a very reasonable amount to support education, police and fire protection, and our wonderful City parks and recreation department (among other programs). For the curious, our house is 1,800 square feet and assessed at $154,000 for the 2016 bill (recently reassessed at $147,000 = cheaper property taxes in 2017!).
Another cheap month of grocery spending at $424. We were out of town the last week of January so we didn’t shop for much in the week leading up to our cruise. Instead, we played “let’s eat all of the food in the fridge” for a few days. We routinely manage to eat about 99.5% of the food we purchase and waste very little.
There’s no secret magic to this efficiency, but rather a few easy rules we follow. We buy only what we can realistically eat before it expires. We eat leftovers (and intentionally cook extra to generate plenty of delicious leftovers). If it won’t be eaten before it expires, it goes in the freezer.
The utility expense of $152 includes our natural gas bill from December usage and monthly water bill. Thanks to global climate change (or possibly atmospheric gnomes and/or random variations in weather), we experienced a steamy December with temps in the 70’s some days. Balmy temps led to very minimal usage of our gas furnace most of the month.
We didn’t pay the electricity bill in January, but instead paid a huge lump sum at the beginning of February to cover our electricity for the spring and summer. I’m once again playing the travel hacking game. I need to manufacture $3,000 in spending by April to get $400-500 in free travel from the Barclay Arrival Plus card, and pre-paying utilities is an easy way to meet the spending goal by spending money on things we already purchase.
I’ll get a second card for Mrs. RoG soon and the combined rewards from our two cards should pay for most of our December 2016 week long cruise on the MSC Divina (in a balcony room!). We already received almost $1,000 in free travel from the Barclay Arrival Plus cards back in the spring of 2014, and we’re gonna do it again this year. These babies are churnable apparently (churnable = you can apply again even if you already had the card in the past).
If you want to get a free cruise too, check out all the credit card offers here. There are also plenty of cards that will reward you with free international airfare or many free nights in hotels.
In case you missed my recent series of articles on cruising, here they are:
Our $36 in travel expenses covered the gas to drive to Charleston for our cruise. I count gas purchased while on vacation as a vacation expense instead of a gasoline expense. We parked at a friend’s nearby office building and saved $85 compared to the port parking fees. She generously offered to drop us off at the port (thanks, Sarah!) and we brought her back a liter bottle of Bacardi rum. Sounds like a fair exchange, right?
Our “cable” bill is really our internet connection from Time Warner Cable. Who would be silly enough to still have cable in 2016? Apologies to sports fans out there since I know you are the ones keeping Comcast and TWC solvent (gotta have the ESPN fix, right?).
Entertainment spending of $24 represents a pool pass good for 15 admissions to any of our City’s wonderful pools or the water park. At a buck sixty per entry, that’s an expenditure with seriously high ROFOI (Return Of Fun On Investment). We’re also paying a fixed cost for all the parks and rec facilities through our property taxes which is why the marginal cost of a single water park admission is so low.
The $5 electronics expense was a package of three replacement USB cables for the kids’ Amazon FIRE tablets we bought last year. The connectors on the original cables wear out over time.
Absent from January’s expense report are restaurant spending and regular gas purchases. We didn’t spend anything on dining out during the month nor did we drive very much other than the road trip to the cruise (accounted for as “vacation” spending). I think I’ll have to refill my fifteen year old Civic eventually (it’s not electric, you know) so get ready for a big $20 expense in February or March.
Net Worth: $1,439,000 (-$64,000)
January marks the third consecutive month with a drop in net worth. We are roughly $140,000 poorer than we were about eight months ago and almost exactly as wealthy as we were at the start of 2015.
Investing in equities is a dance where you take two steps forward and one step back. It’s less fun to take a step back, but necessary before you can take another two steps forward.
The $64,000 in losses sustained during January represent around two years worth of living expenses. This seems like a huge amount of money to lose but it’s just part of the dance of solid long term returns (unless it really is different this time!).
I’m not close to worrying about the sharp drop that commenced with the new year. I was happy with our net worth levels during 2014 when we spent most of the year with a lower net worth than we have now. If we see another 20-30% drop, I’ll start to take a closer look at our spending and finances to make sure we will be fine.
But I’m pretty confident we won’t run out of money in early retirement. We have a stream of dividends coming in, the blog income is fairly steady, and we still have well over a million bucks in our investment portfolio.
If you’re worried about the markets, all I can suggest right now is to stick with your asset allocation and see if you need to rebalance by buying any downtrodden asset classes. If you’re still working, keep plowing money into the market and you’ll thank yourself when the inevitable recovery happens. After that, go outside and play (or stay inside if it’s freezing out!). Turn off the talking heads on CNBC and stop checking your stocks every hour.
How did you do in January? Are you worried about the downturn in the markets so far this year? Or dropping even more dough in the markets?