July 2014 Financial Update
I’ve been expecting a stock market dip for most of the year and it finally arrived in July. So what, right? We were left with a little bit less in the investment portfolio (if losing $19,000 is “a little”). But life is still very good for this particular early retiree. In July, we spent a bunch of money and made even more than we spent.
$8,225 in total income during July more than paid for all of our our monthly expenses of $3,779. The surplus of income over assets keeps going into a cash account which is currently hovering around $35,000 to $40,000. Having too much cash in early retirement is a good thing, right?
Our biggest source of income in July was from this blog. At $2,125, this was the blog’s best month of income ever. It’s mostly a matter of multiple months of payments falling in July (accounts receivable from April and May from one big affiliate advertising network, two months of google adsense revenue, and some other miscellaneous advertising revenue). July’s great month of blog income follows an anemic June blog income of just a few hundred dollars. Long term, it looks like $600-800 per month is a reliable guess for income from this blog, subject to normal monthly fluctuations.
I also did well with my freelance writing income at $750. This reflects writing a total of five articles during May and June for Daily Capital and Investor Junkie. Between the freelance writing and blog income for July, it’s almost $3,000. Which is more than what we spend in an average month. It’s hard to believe I’m getting close to covering our monthly expenses with this little side hustle that I started almost a year ago with the intent to maybe make a few bucks per month above my web hosting fees.
Mrs. Root of Good is still working, hence the salary income. However she didn’t actually go to work at all in July because she negotiated an extra five weeks of fully paid vacation time. You can negotiate pretty hard when paid employment becomes optional.
After a strong month of investment income in June (over $5,000), we received another $1,830 in dividend income in July bringing our total dividends for the second quarter investing period to over $7,000. That brings the total investment income year to date to just under $12,000, and puts us on track to surpass our $22,300 of dividend income during 2013 since December is the largest month for dividends for our portfolio historically.
“Deposits” totaling $1,052 includes the final payment of a business loan we made to family in 2013, a $500 reward check for signing up for a credit card, and $17 received from some random class action lawsuit (Jamba Juice maybe??). A quick note on the loan to family: so far we have lent relatively small sums (under 1% of our net worth) to family and we have always been paid back eventually, and mostly on schedule and typically with interest. General advice is “don’t do it”, but we will in limited circumstances when it makes sense for certain reasons (as long as losing that loan wouldn’t seriously impact our finances).
I sold Mr. RoG Jr’s nine year old high chair for $30 on craigslist. We used it for all three kids, ruined the seat cushion somewhere along the way, and the thing still sold for about what we paid for it nine years ago. Maybe advertising it as clean, having a removable tray and smooth white plastic finish helped move this puppy to a new owner and slightly fatten my wallet in the process! One thing is certain: not having that bulky high chair in our cozy little dining room is awesome.
The last item I want to mention in the income section is the “Travel income”. While we do sometimes get paid to travel (like we did with the $400+ of free travel with the Barclay Arrival Plus card), the $881 of travel income reflects converting some cash from Canadian dollars back to US dollars as well as $625 in AirBnB apartment rental refunds. Spoiler alert: for those following along on our summer road trip to Canada (through Philadelphia and New York into Montreal), we cut the trip a little short and received a refund for the weeks of apartment rentals we didn’t use.
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.
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Now let’s look at July expenses:
After spending less than $1,000 during the month of June, we were relative spendthrifts in the month of July. Some of that was planned, like the $1,372 we spent on our summer trip to Canada. Other expenses, like our annual home insurance and auto insurance bills totaling $1,072 come due in July every year (which makes for an expensive month!).
We also had “unexpected” expenses like replacing the four tires and getting an alignment on the 14 year old Honda Accord ($602) while we were in Canada (read more about the scary flat tire in the middle of nowhere). I say “unexpected” but we actually expect these types of costs and explicitly budget for them in our $32,000 per year early retirement budget.
Another “unexpected” (but budgeted) expense was the failure of our sump pump in our crawl space. We sit in a low lying area and ground water infiltration from the water table is unavoidable. The way we deal with the water is a small sump pump recessed a couple feet into the ground in our crawl space along with permeable gravel that lines the foundation underneath our house.
I knew it was down there somewhere but didn’t know much about it until it quit working. Heavy rains led to a miniature flood underneath our house (just enough to snuff out the pilot light on our hot water heater). I identified the suspect sump pump (which lasted over 10 years!) and replaced it with the exact same model, the best-in-industry “Zoeller M53 Mighty Mate Sump Pump“. At $130 or so, it wasn’t much more expensive than house brands at Home Depot or Lowe’s, and it should last a long time. I also bought some minor plumbing fixtures to hook the pump up to the exterior drain line and some knee pads for all the crawling through the muck and gravel underneath the house (“what early retirees do for fun in their free time!”). I also learned all about sump pumps and saved myself at least a few hundred dollars compared to calling a plumber. It was another busy month of fixing things around the house.
July’s grocery expenses, at $495, are close to our long term average. We had a very cheap month of groceries in June because we left our fridge and freezer almost empty and didn’t replenish the pantry with non-perishables. After we returned from Canada in July, we restocked the fridge and freezer. We also visited the Asian grocery store and spent about $70 on different sauces, seasonings, condiments, dried goodies, and noodles. We continued to use the Extreme Grocery Shopping strategies to keep costs down. We don’t cut our grocery spending to the bone, which helps us keep dining out expenses to a minimum (like the $27 we spent at restaurants in July).
Rounding out our expenses for the month were $11 for a year of T-Mobile cell phone service for Mrs. RootofGood and $10 which covered our internet expenses for July (we prepaid the internet bill a few months ago and we are finally back to owing them money each month).
Gas expenses of $21 doesn’t mean we didn’t drive anywhere. We were on vacation for most of the month, and I included the gas for the 2,300 miles we drove in the “Travel” expense category (total Travel = $1,372 for the month of July).
We budgeted $32,000 per year for retirement, so seven months of spending should be $18,667. At almost $15,000 year to date actual spending, we are still a few thousand under budget for the year. August shouldn’t be a very expensive month. But there is a good chance we’ll take care of some major home maintenance items like a new roof and new siding in the fall. This might cost $10,000 to $15,000 depending on the options we choose (or way less if we DIY). So we may bust our budget for the year, but the roof and siding should last for 20 to 30 years and it’s not likely we’ll spend anywhere near that much in the near future. We have the cash sitting around and stock markets are near an all time high, so keeping our house in good repair is probably a good use of extra cash at this point in time.
Net Worth: $1,425,000 (-$19,000)
We had what I would classify as a minor reduction in net worth (-1.3%) in July. Nobody gets happy when they lose money. But I’m not really sad either. When you have a bunch of money invested (like we do), you get accustomed to making and losing a lot each month. If you don’t get accustomed to swings in net worth, you usually bail out of the investments (at the worst time) and continue working forever. No thanks.
$19,000 is a lot of money (more than we have spent all year) but you have to keep the net worth fluctuations in perspective. We’re still slightly richer than we were on June 1, 2014. And over $100,000 richer than we were on January 1, 2014.
Here’s what I said about losing money in the stock market in June’s monthly financial update:
I actually welcome declines in the stock market occasionally because it keeps sanity in the markets. If the markets continued going up month after month after month, some folks would get the wrong impression that steady 20-30% annual returns are the norm (which isn’t true – don’t bank on more than an average of 8-10% long term).
The occasional loss in the stock market is not bad at all. It’s actually good for the long term health of the markets. You need a little fear to counterbalance the greed.
There’s a pretty chart showing the slight downturn in net worth. It was getting a little dizzy watching the NW numbers increase every month, and now they have finally reached a plateau. Where will the net worth go in August?
How did you do in July? Did you avoid the minor stock market downturn? Feeling squeamish about having your money invested in the market? Spend too much? Save a bunch?