January 2017 Financial Update
January is over and what a fine January it was for our finances! Our net worth climbed another $38,000 to $1,718,000 and in the process we broke through another $100,000 milestone. Income for the month of January was solid at $5,068 while expenses remained roughly on budget at $3,378 in spite of a few large, lumpy quarterly or annual expenses.
After finishing 2016 about $1,000 under our $40,000 budget with total spending of $38,991, we are off to a great start in 2017.
Our January investment income was a modest $54 since almost all of our mutual funds and ETFs pay dividends quarterly in March, June, September, and December. I reallocated some equity mutual funds into a bond fund during January so our monthly investment income will be slightly higher going forward (but about the same over the course of an entire year due to the bond fund yielding about the same amount as our overall portfolio). More on the portfolio moves in the “Net Worth” section of this financial update.
Blog income, shown as “other income” in the chart, was up slightly in January compared to December 2016 to $3,834. I’m still blown away that this blogging gig actually makes money. I guess that is what happens when you get a consistent 50,000 visitors per month (#humblebrag). My early retirement lifestyle consulting income jumped to $952 after a slow December. That’s about as busy as I want to get (two hours of work per week), so if business remains strong I may have to raise rates again.
The $226 in Deposits includes cash back from my credit card thanks to high spending in December plus the proceeds from the sale of a $12 Lego cruise ship I bought while on our last cruise. The Lego ship sold for $75. I also received 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. Though not included in January’s Ebates cash back, January was a bright month because I finally received credit for 10% cash back on our two December cruises purchased through Expedia after clicking through Ebates. They wait an excruciating 40 days after your cruise before crediting the 10% cash back and then pay out earned balances quarterly.
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 January expenses:
In spite of some big lumpy quarterly or annual expenses, we still came very close to our budgeted $3,333 per month (or $40,000 per year) with total expenses of $3,378.
Taxes – $2,120:
Taxes are my least fun expense and unfortunately they top the charts for last month. Our annual real estate bill of $1,520 was due just after the first of the year. Of course we get a ton of value out of our local taxes (police, fire, great parks and swimming facilities, “free” public education for the kids, and pothole free streets and sidewalks).
Quarterly estimated taxes were due once again on January 15. $300 to the State of North Carolina and $300 to the feds.
Groceries – $855:
We usually spend closer to $500 per month on groceries. Part of the higher expense in January was refilling the kids’ lunch money accounts for $244 (the max I can fund with a credit card at one time). We also replenished our fridge and freezer after spending just $205 on groceries during the month of December (thanks, busy travel schedule!).
Mrs. Root of Good indulged her smoked salmon habit quite a bit as well (if anyone knows where to buy decent quality smoked salmon for less than Aldi’s $3.49 for 3 ounces please let me know in the comments). This is slightly cheaper than going on a Carnival cruise where the smoked salmon bagels flow freely and plentifully from their on-board sandwich shop.
I also picked up a $100 Kroger grocery store gift card from Raise.com at a $10 discount. So far about half that value remains on the card and I’ll spend it in the next month or two. If you haven’t checked out raise.com for discounted gift cards for places you already shop, then feel free to save an extra $5 off your first purchase at Raise.com.
Utilities – $155:
Since we were out of town on two cruises during December, our water bill which lags by a month was lower at $86 (hidden savings due to travel!). Our natural gas bill was also lower than usual at $69. Being out of town helped but the unseasonably warm weather probably played an equal role. We didn’t pay the electricity bill in January because we prepaid many months ago using a credit card to snag some sign up bonuses. We finally received a bill with a balance due and I just paid $800 in February which will cover electricity through the expensive summer cooling season (when we’ll set the thermostat way high when we depart for Europe for the majority of the summer).
Gifts – $111:
We purchased a number of small “generic” gifts during some after Christmas sales. These will come in handy throughout the year when our kids are invited to birthday parties (and our kids might see some of these gifts as well but I can’t say more since they might read this blog post!). The gift total also included some belated Christmas gifts.
Entertainment – $64:
This represents my family’s share of a shared Netflix subscription. Our only real paid media expense during the year. I also paid under $1 for a computer game.
Cable – $34:
Our monthly internet bill for 50/5 mbit service from Time Warner Cable. I believe my rate will reset to the normal $40 per month sometime soon so I’ll have to make my annual phone call to snag a $30 or $35 monthly rate for 12 more months.
Healthcare/Medical – $16:
One month’s health insurance premiums. I can’t speak for others but the Affordable Care Act works phenomenally well in making our health insurance premiums tiny.
I’ll reprint what I posted in last month’s financial update (which went to press two weeks before the Presidential Inauguration):
“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.” END QUOTE
We still don’t know much more now than we did a month ago, although the grumbling I’ve heard coming out of Washington is that a number of legislators have realized it might not be the best thing to get rid of this whole Affordable Care Act without figuring out a way to affordably insure most of those that would lose coverage with a repeal.
Travel – $11:
I used our credit cards to pay our quarterly North Carolina and federal taxes. They charge a convenience fee around 2% for the privilege. Right now I’m working on spending $8,000 on a pair of Chase Sapphire Reserve credit cards so that I can snag 200,000 Ultimate Rewards points (worth $3,000 of travel or transferable to a wide selection of airline frequent flyer programs for many thousands of free flights). Check out current credit card offers if you like free travel as much as I do.
Service Charges – $8:
Mrs. Root of Good’s 401k charges small quarterly fees. In exchange we get institutional class Vanguard funds with expense ratios as low as 0.02% which saves us a lot of money on the $300,000+ balance.
Restaurants – $2:
I used two free coupons for Papa John’s pizza and paid $2 to upgrade one to an extra large. I obtained the free pizza coupons when I purchased a $25 Papa John’s gift card for $25 on Groupon last year. We also enjoyed some takeout tacos using a previously purchased gift card.
Gasoline – $0: Another $0 month for gasoline purchases. I finally had to refill the tank in early February. We also switched up the school transportation for our oldest kid and are now carpooling with another family instead of sending our daughter on the free school bus at 5:50 am. That will add about 120 miles per month to our routine driving, which means we’ll need to buy gas around once per month now. Not a bad trade off for an extra one or two hours of sleep each morning.
In the next several months I hope to solicit bids from a number of contractors to replace our roof. I expect this will cost around $4,000 to $8,000 which will probably be our largest expense all year. Most of our travel expenses are already paid for our nine week trip to Europe. By late January we finished booking 64 nights in Airbnb apartments for around $5,250 or about $82 per night. We purchased $5,800 worth of Airbnb gift cards in December 2016 so we didn’t pay anything out of pocket in January for the Airbnb rentals (and we still have several hundred dollars left over for future travel).
Net Worth: $1,718,000 (+$38,000)
Another month, another massive net worth increase. The stock market remained strong throughout January which was the primary driver behind our $38,000 net worth gain, bringing out total net worth to $1,718,000. This represents an all time high net worth for us.
The strong increase in net worth comes at a time when we are celebrating Mrs. Root of Good’s one year retirement anniversary. Not a bad way to end the first full year with both of us retired.
As I said in last month’s Financial Update:
“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.”
While some would freak out facing the loss of hundreds of thousands of dollars, I’m more of a “glass half full” kind of guy. Even after sustaining heavy portfolio losses of 30%, we would still have over a million dollars in our investment portfolio above what we are setting aside for the kids’ college costs. While we will feel a little poorer, it’s still a pretty sweet spot to be in.
Of course I have to disclose a big move in my portfolio during the month of January that helps me stare down huge market corrections. I moved $50,000 worth of equity mutual funds into the Vanguard Total Bond Market Fund (VBTLX / BND for those following along at home). Nothing more than taking some profits while the markets are at relatively high levels. Other than the $40,000 or so sitting in a money market, we didn’t have any bond positions prior to this move.
In absolute terms it’s not a big move at roughly 3% of our total investment portfolio value. But what it buys us is over one year of our $40,000 budget and probably closer to two years if we cut spending to 2015 levels.
Take note that this isn’t a move derived from fear or a gut reaction to current events. I saw the market hit a new all time high and I decided to make a small shift to secure a year or two of additional relatively liquid funds to protect against a prolonged down market. In another three to six months I might move another chunk of funds to bonds if stock market valuations continue their upward trajectory. I’m not calling the top of the market because I really have no clue where the market is going but I know where it’s been.
To quote Warren Buffett:
“Be fearful when others are greedy and greedy when others are fearful”
Those nasty market corrections strike when least expected. Now that we have almost $100,000 in near-liquid investments we can rest easy during all but the worst market dives.
In the meantime we spend very little mental energy thinking about investments and zero energy worrying about our investments. Life is too short and there are too many other exciting diversions demanding our time and attention.
How did the first month of 2017 treat you? Enjoying this rocket ship upward trajectory in the stock market?