June 2016 Financial Update
On a day to day basis, our net worth in June zipped around like a spooked jackrabbit chased by a wolf. That rabbit didn’t know the wolf’s name was Brexit. By the end of the month, nothing much changed, with our net worth increasing very slightly by $1,000 to $1,566,000. Income remained strong at $7,614 thanks to dividend payments at the end of the second quarter. Expenses continued to be low in spite of a hefty estimated tax bill coming due in June. Overall, our early retirement finances are looking great and our cash buffer account keeps growing.
The start of summer was remarkably mild here in North Carolina and we have enjoyed numerous days with temperatures in the 70’s. I expect we are escaping the heat just in time as we’re about to depart on a three and a half week road trip to Canada.
Let’s open the ledger book and take a peek at June 2016!
June investment income spiked to $5,165. The months of March, June, September, and December are big for dividends because our portfolio is all funds and ETFs that pay dividends quarterly or annually. Our total investment income for the first half of the year is almost $10,000, putting us on pace to hit and possibly exceed the total of $28,527 in dividend income received in 2015.
Blog income, shown as “other income” in the chart, plummeted to $642 in June after peaking at $8,950 in May. In May I received two months of payments from a large advertiser, which means June was much worse for blog income. My early retirement lifestyle consulting brought in $184 in June – a few hundred less than in May. It’ll all average out in the end. I’m glad I don’t have to rely on blog related income to survive in early retirement!
Deposit income of $1,522 mostly came from the sale of our 2000 Honda Accord. We are once again a one car family and don’t miss having a second car (but we are missing the ease of driving a sedan instead of the bulkier minivan). We sold the car for $2,300 to Mrs. Root of Good’s nephew who needed basic reliable transportation to get to class and work. $1,500 cash up front and the remaining $800 over the next few months as his financial aid comes in for the fall semester. So far this year we spent $8,200 buying our minivan and sold our two sixteen year old cars for $5,200 total, leaving us only $3,000 poorer due to car swapping.
The other $22 of deposit income represents the 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. I try to do all of my online shopping through one of these portals and the cash back adds up fast. Last month I received the $110 cash back for booking our January cruise through Expedia (while clicking through Ebates to get to Expedia). It’s a nice way to get a 10% discount on every cruise from a booking site we already use.
Travel income of $100 is part of the Barclay Arrival card $400 sign up bonus. It ended up being closer to $500 cash back on travel when you meet the $3,000 minimum spending requirement (earning 6,000 more points) and get the 5% point refund when you redeem points. To cash out the Barclay Arrival bonus reward points, I paid $394 toward our December 2016 Caribbean cruise then immediately reimbursed myself using the bonus points. Then I charged another $100 payment for the cruise and reimbursed myself using my last 10,000 Barclay Arrival reward points. In June we finished meeting the minimum spending requirement for Mrs. Root of Good’s Citicard American Airlines Aadvantage card for another 50,000 AA miles. Now I’m working on earning the 50,000 mile bonus on my own Aadvantage card. It’s a shame to pay full price for travel so don’t miss out on the credit cards that allow you to travel hack your way to a free trip.
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 June expenses:
Another month of modest spending. At $2,485, we were almost $1,000 under our budget of $3,333 per month (or $40,000 per year).
The top expense for the month was income tax at $1,250. Now that we are both retired, I’m including tax payments and refunds as expenses and income, respectively, since they are included in our $40,000 annual retirement budget. We started making estimated tax payments this year because we no longer have income tax withheld from paychecks at work. I asked the IRS to apply my $640 federal income tax refund for 2015 to my 2016 tax liability but they didn’t listen and instead sent me a check last month. Going forward, I’ll pay $600 every quarter and might be entitled to a small refund once I file taxes.
All other “core” expenses in June totaled about $1,200 so we are doing a great job keeping routine expenses low.
The next largest expense for June was groceries at $673. This is slightly higher than normal (here’s what we buy in a typical month) but includes $100 in Visa gift card purchases (to save $10 on groceries). I’ll be using those Visa gift cards for groceries in the future. We won’t spend nearly as much on groceries in July since we will try to clean out the fridge and freezer before departing for our almost month long road trip. Time to get creative with leftovers.
Healthcare spending totaled $199. Health insurance premiums were the bulk of that at $125 for our very impressive gold plated silver plan obtained through Healthcare.gov with some very sizable ACA subsidies. The other $74 was a copay for a doctor’s visit, six months of prescriptions, and four Sonicare electric toothbrush head replacements.
$98 for utilities is our water/sewer/trash bill from the city. I paid the June natural gas bill in the first few days of July. I was a few days late paying the $24 gas bill (oops!) and they hit me with a $0.24 interest charge. I don’t have the bill on auto-pay because I want to optimize my utility spending each month to meet minimum spending requirements on credit cards. I prepaid our electric bill earlier in the year to meet minimum spending requirements on a credit card, so I won’t have an electric bill until the end of the summer.
Restaurant spending of $62 covered our family plus one more adult at a Father’s Day lunch (a made up holiday here in the US for all you international readers) for Mrs. Root of Good’s family. It was a last minute event and those who set it up didn’t realize it was $15 per person until it was too late. The restaurant’s affordable weekday lunch prices double on weekends. Lesson learned for next time – suggest a restaurant that doesn’t double prices on weekends. At least the food was better than expected!
The home maintenance expense of $60 covers gift cards for Lowe’s I bought on ebay at a $15 discount.
$58 in automotive spending covered all the replacement parts and supplies to rebuild a portion of the air conditioning system in the Honda Accord we just sold. The expansion valve clogged and the high pressure fill valve failed leading the system to evacuate itself in a messy volcano of refrigerant and compressor oil. I could have taken the car to the shop and paid somewhere around $700 for the repair. Or spend $58 in parts and supplies and several hours under the hood. You know which one I chose. After a valiant effort the air blows cold and the pressures on my manifold gauge set were in line with expectations. I think I did it.
By the way, Autozone and other parts stores have tons of tools that you can “rent” for free by putting down a deposit. Just “pay” for the tool and get a full refund when you return it within 90 days – it’s legit. I borrowed a vacuum pump, leak detector and oil/dye injector gun for a deposit of $250 (since refunded).
Cable expense of $34 is our 50 mbit internet connection from the cable company. You didn’t think we would waste money on cable, did you?
$23 in travel expenses represents the fees I paid for the privilege of paying my $1,250 tax bill by credit card. The tax bill represents almost half of the $3,000 minimum spending required for my latest American Airlines Aadvantage card which will yield 50,000 miles (enough for a free flight to Europe in the off season or two domestic round trip flights any time). More spending equals more free miles since there seems to be an endless flow of credit card offers with enticing sign up bonuses.
$12 in gas covered a partial refill for the Honda Accord before I delivered it to my nephew plus a gallon for our lawnmower. I also filled up the minivan for $36 using an Exxon gift card purchased last year.
Year to Date Living Expenses
At $22,530 year to date spending, we have exceeded the $20,000 budgeted for the first six months of the year by a few thousand dollars. This includes the minivan purchase in March, so if we keep under spending our monthly $3,333 budget (like we do many months) then we’ll be back on track in a few more months. I’m guessing by August or September we’ll be back on budget for the year.
July and August should be fairly low cost months since we’ll be traveling for half of each month on a road trip through the US and Canada and have already paid for all of our vacation lodging expenses.
Monthly Expense Summary:
- January 2016 – $2,293
- February 2016 – $2,030
- March 2016 – $10,911 (includes minivan purchase)
- April 2016 – $1,829
- May 2016 – $2,979
- June 2016 – $2,485
Net Worth: $1,566,000 (+$1,000)
Another month of gains (just barely). Though the headline reads a $1,000 gain because of rounding, the exact increase was $258 for the whole month. That’s still positive territory, right?
It’s hard to believe June’s finish line was so close to the starting point given the volatility throughout the month. The day Brexit hit the markets, my portfolio was smashed particularly hard because of my asset allocation’s tilt toward 50% international investments. The British pound dropped 7% overnight against the USD while other foreign currencies suffered fates almost as bad. The stock indexes in the UK and Europe also dropped heavily. Combine huge exchange rate losses with underlying market losses and your international investments hurt. A lot.
I’m reminded how it feels to lose $70,000 in one day (almost three times what we spent in all of 2015). I was pretty busy the day the markets crashed the most so I didn’t have time to babysit my portfolio. It’s just as well since there’s not much to be done. Eventual losses totaled $90,000 by day four. In hindsight, my “do nothing” approach paid off once again since the market has mostly recovered since the Brexit crash. Shrug, do nothing, collect dividends, and move on.
These market hiccups, burps, and farts are nothing more than distractions from a long term investment plan. When they hit, the natural response is “how rude!”. Then the gassy stink dissipates and we remember that the occasional expulsion of gaseous substances is a natural byproduct of digestion; a sign of a properly functioning system.
A new all time high net worth brought us within $500 of hitting the $1.6 million milestone earlier in June but we got knocked back a bit from that goal. Maybe July will bring us to new territory? In any event, I’m going back to doing nothing.
Times could be better, but they could also be a whole lot worse. No complaints from the Root of Good family.
Did you Brexit the market or stick it out through the slaughter? Are you back in positive territory with your investments?