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?

 

Income

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.

 

july-2014-income

 

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).

 

Expenses

Now let’s look at July expenses:

july-2014-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).

 

july-2014-ytd-expenses

 

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.

 

july-2014-net-worth

 

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?

 

 

25 comments

  • I know it’s not smart to time the market but I actually have been holding off investing for the past 2 months because I felt a correction brewing. However, that’s just my Roth IRA that I went without contributing towards. My Roth 401(k) and ESPP still go bought using the good ol’ dollar-cost averaging route.

    Congrats on still being a millionaire!

    • This morning I got an email saying my “vanguard transaction has been completed”. What? Sweet, my partial pension rollover from a previous employer was deposited into my account today. After the recent correction. What kind of luck is that? 🙂 Time to buy $21,000 of something. Now let’s see what’s on sale!

  • Totally agree with your “sanity in the markets” stance, we remain invested no matter what happens–gotta be in it for the long haul. I love your high chair-selling success story! Our goal is always to buy used and then aim to re-sell for about what we bought it for. I’m impressed that you were able to recoup the value 9 years later!

    • It’s too much work (and generally not very successful) to jump in and out of the market, so I do what I do best: very little. 🙂

      That high chair was gone so quickly I think I might have under priced it. I didn’t even haggle with the guy and offered him the lower price I had just posted. I figured he needed the $5 price reduction more than I did. Oh well, less junk in the house, more cash in the pocket. And one less item in the landfill.

  • The market losses continued into August. My spouse asked how our investments are doing. I replied, “…remember that $35k pickup truck I test drove at the dealer but didn’t buy?…Well, imagine we bought TWO and gave them away!” 😉

  • I’m with you on welcoming market declines. Since I am still accumulating assets, I love the fact that I can get more bang for the buck. I also need to start taking advantage of some of the crazy credit card rewards you post about. I just spent $4,000 on a fence at Lowe’s and I should have put it on a card that pays cash back or gives hotel/airline points. Since I pay cash for everything, I usually just ignore the offers.

    MDP

    • When I was still working and accumulating assets, I LOVED it when the markets went down. I got to buy more shares on sale. Now I recognize there has to be the up and down otherwise we’ll have some crazy bubble and it won’t end well for most of us.

      As for credit card spending, definitely get on board! I have a chase freedom card that pays 5% back on categories that rotate each quarter, and Lowe’s was on the 5% rewards last quarter. Free $200 back for spending money where you already spend it. This quarter is 5% back on gas. Or get a 1.5% cash back card like the capital one quicksilver card – 1.5% back on everything. Put your utilities, cell phone, etc on there and pay it in full each month. I’m personally a fan of the cash back / gift card rewards (since it’s money in your pocket or gift cards at places you shop already like lowe’s or walmart/target). But there are great deals on the travel rewards cards too (barclay’s is one I like and they give 2% back, and Citi AAdvantage American airlines card and Starwood Amex card are also good deals). Check out my Credit Cards page if you haven’t seen it.

      I look at it as a few percent back on virtually everything you buy. I don’t think using a credit card personally changes my spending habits, and I get free money back from them (as well as an extra month or two before the bill is due).

  • The markets go up slowly and down quickly. That is the most frustrating thing about the swoons. It takes 7 months to eek upward and in 3-4 sessions all the gains for the year are gone.

    All we can do is stay the course and hang on. Keep expense ratios super low, set your asset allocation and save more.

    • That’s what we do – control the factors we can when it comes to investments. Low expense ratios and sticking to our asset allocation. I just rebalanced yesterday for the first time in a while. And moved to some slightly lower expense ratio funds.

  • Even with the stock market correction, you guys are still doing awesome. And the five week vacation through Canada looked amazing! Since I recently quit my job, I won’t have much cash to invest this month. A larger correction in the market would be helpful for me.

    • While you are adding to investments, declines in the market are always welcome. It can be disheartening to watch your recently invested fortunes shrink, but long term getting more shares per dollar invested is a good thing for sure!

  • My net worth for July went down by $20K due to the decline in the stock market, which is quite similar to yours! I am trying to learn how to be comfortable with the declines and may even embrace it as I have some cash reserves which I would like to either buy a rental property or invest in dividend stocks.

  • I saw your post title yesterday and immediately went to see if one of the ETFs I was targeting had dropped. Sure enough…by $4! So I grabbed some. I love it when the market goes down, since I’m interested in the long term horizon. That’s awesome that you are making income off your blog!

  • I am curious simply if in your computing your net worth you include your home/equity or ?

  • Dude, do you ever stop? I swear, it looks like you score a perfect 100 on the frugal/efficiency scale every month. Your ability to fix problems by yourself and squeeze out every last dollar is truly amazing. Has the lack of W2 employment made you more frugal? Is there a NW point where you plan to increase your spending and reward yourself a bit for decades of frugality? Keep up the good work. I look at your updates as a nice goal to shoot for each month.

    • Ha ha, thanks!

      I don’t think I’m more frugal now than I was when working. In fact, I think I might be a little looser with the purse strings now that we have met our FI goal. I don’t mind fixing things around the house in general (especially if it’s mechanical or requires troubleshooting). And it’s often easier to just DIY instead of spending time finding a competent contractor and overseeing their work, then following up if there are issues.

      I think we are at the point now where we can start to reward ourselves for frugality. I have switched from “save save save” to “what are some things I can spend money on to make life easier or better?”. For example, I want a new(er) cell phone because my old one (I bought used for $50) is falling apart and won’t recharge or hold a charge. So I’ll probably drop $100-125 on a Samsung Galaxy S3 phone (used, of course). I think there are a couple newer versions of the Galaxy available, but I just need a simple but reliable phone so don’t see a need to get whatever is the latest and greatest. I could get by with my current phone or repair it (maybe) or go phoneless (what I’ve been doing this week) and I would be just fine. But $125 for a phone (with free service through freedompop) is a tiny price to pay for a powerful pocket computer with camera and mobile data (that can play games and videos too!). I don’t think I’ll ever get past comparison shopping and buying used when it makes sense.

      Maybe if we hit a net worth of $2 million in today’s dollars I’ll start to pay less attention to squeezing out the savings. But then again, I think it’s ingrained in my. It’s how we built up our wealth so quickly.

  • Great job on the net worth front. Very impressive.

    Regarding the inevitable market downturns – part of my investments for the last two years have been in selling put options (and then selling covered calls for those times I had to actually purchase the stock from the puts). Have done fairly well, but the beauty is that you can make money when the market is going up or down. In fact, I can make more on options when stocks are volatile and going down, as long as we don’t get a seriously prolonged downturn. It is one way to make up for some or all of the downturns in stock, fund, and ETF holdings during those times like July.

  • Thanks for sharing your income and expenses for July. Your blog earnings are pretty impressive. Why does it fluctuate so greatly month to month? Montreal is a great city to visit. I enjoyed it there a few years back. Enjoy the rest of your summer.

    • Blog income was high in July due to receiving multiple months of advertising revenue in one month. June was lower as a result of some payments being pushed into July.

  • Wow, your blog income is awesome! It’s making me think of taking up blogging again & trying to build something of it. I live quite well on $800-$900 a month so to think I could just do that full-time is sooo tempting…

    What was the number that you became FI at? I’ve set my FI # at 1M in net worth, but since it’s still at least 5-10 years away I know things will probably come up. But when I reach FI I don’t envision my portfolio totals/NW going down… in fact, I anticipate just the opposite – that 1M is my “minimum” and then from there it’ll just keep snowballing faster than I can take money out. Might be part wishful thinking, might be part truth due to compound interest. I’ve heard though that once you have a million, the next M is a lot easier. Plus, my idea of being FI is getting to pick and choose what jobs I want to take – maybe working part-time or doing some angel investing – but not being tied to the 9-5 grind like most of America seems to be. 🙂

    • Lots of bloggers don’t make nearly that much cash especially in their first year. But you seem to have a good handle on investing, real estate, and finances more generally. So who knows? 🙂 You could probably generate $900/month if you really devoted yourself to blogging quality stuff and building a following.

      Our “number” was around $1.4 million and we didn’t have quite that when I decided I was retired. That $1.4M included plenty of surpluses and set asides (for college and other kid costs mostly) and didn’t include me making any money doing anything else ever. We are fluctuating around that $1.4 million today though (Mrs. RoG’s income, blog income, plus some modest stock market returns over the last year).

      If you follow the 4% rule, odds are that your portfolio will continue to increase over time. The 4% rule (which is really closer to 3.5% if you’re retiring in your 30’s) means you have enough to withdraw the 4% each year, adjusted for inflation, even in the worst of times (or 95% of the worst of times, that is).

      So if you have $1M of investments, and spend under $1000 per month, you will definitely continue to grow wealthier over time!

Leave a Reply

Your email address will not be published. Required fields are marked *