May 2016 Financial Update
May proved to be another good month financially for us. Our net worth continued its upward march with a $13,000 addition, bringing total net worth to $1,565,000. Our income ballooned to $10,826 while our spending increased slightly to $2,979 to almost match our monthly spending target.
Summer sneaked up on us this year. The hot, humid air that just appeared in North Carolina is a reminder that spring is no longer with us. Fortunately, we’re escaping the heat by heading north to Canada for a couple of weeks. Our kids have four more days of school before they are out for the summer, which means us parents get to sleep in seven days per week.
Now for the May numbers!
May investment income dropped to just $59. Since our portfolio is all funds and ETFs that pay dividends quarterly or annually, the months of March, June, September, and December are big for dividends. We should receive a few thousand dollars during the month of June. In 2015 we earned a total of $28,527 in dividend income.
Blog income, shown as “other income” in the chart, was well above average at $8,950. This represents two months of payments from a large advertiser, which means June might be an abnormally low month for blog income. My early retirement lifestyle consulting brought in $503 in May, more than doubling the revenue from March and April. I’m still aiming to live off of four percent of our portfolio but this month’s blog income and consulting income way more than covered our living expenses (and total year to date blog/consulting income almost equals year to date spending). I’m still not convinced that the blog income is a reliable source of funds indefinitely, but it looks like it’ll remain strong in the near term.
Tax income of $640 is our federal income tax refund. I asked the IRS to apply the refund toward our 2016 income tax liability and they screwed up (which might cost me a little due to underpayment penalties as I file quarterly estimated income taxes). Before 2016 I didn’t include income tax refunds or income tax payments in these expense reports, but now that we are both retired, I’m including tax payments and refunds as expenses and income since they are included in our $40,000 annual retirement budget.
Travel income of $394 is part of the Barclay Arrival card $400 sign up bonus. It’s actually 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. I’ll charge another $100 payment for the cruise and reimburse myself using my last 10,000 Barclay Arrival reward points. Right now I’m working on meeting the minimum spending requirement for a Citicard American Airlines Aadvantage card for another 50,000 AA miles. Don’t miss out on travel hacking your way to a free trip.
Deposit income of $279 comes from the 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. I finally 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.
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 May expenses:
We almost hit our target budget of $3,333 per month (or $40,000 per year) in May with $2,979 of spending.
The biggest expense this month was our home, auto, and umbrella insurance policy premiums coming due for the year, totaling $1,022. We pay:
- Home policy – $589 per year
- Auto policy – $272 every six months
- $1 million umbrella policy – $162 per year
Grocery spending was slightly higher than average at $601 for the month. We stocked up on some staples at the twice per year sale at our Food Lion grocery store ($0.25 off all store brand items), so that pushed our monthly grocery bill up a bit.
Home maintenance was a big spending category in May. I had to call a plumber when a routine drain cleaning (pulling off the P-trap to remove a clog) went sour. I twisted the pipe leading into the wall drain too hard and sheared the pipe in two. Then I couldn’t get the pipe out of the wall drain. Eventually I gave up and paid the $89 our neighborhood plumber charges for a house call (even though it took him all of ten minutes to remedy my botched job including going slowly and showing me how to do it right next time). My first big DIY fail in a while.
It wasn’t a complete bust though. He explored inside and underneath the house and provided some good tips on other plumbing issues I have (such as the busted pressure reducing valve in the crawl space). I also got a quote for replacement of three toilet shut off valves (the joys of owning three toilets…) and the hot water shut off valve in the kitchen. The 44 year old original valves that came with the house were worn out and wouldn’t shut off completely. The plumber came back a few days later and charged $225 for replacement of those four shut off valves, three of which required a blow torch – something I’m not skilled at. Not a bad price to remedy what could be a huge inconvenient mess without operational water shut off valves.
He also quoted $269 to replace the pressure reducing valve or $389 to replace the PRV and relocate the main house shutoff to the other side of the crawl space where I could shut off the main water supply by simply reaching an arm into the crawl space. After researching the PRV assembly I realized I could easily remove the PRV and install a new one since it’s a matter of unscrewing the old PRV and screwing on the new PRV then tightening the bolts holding the PRV on. I found an exact match for the old valve, a Watts 3/4″ Pressure Reducing Valve for only $72 at Amazon, so I saved almost $200 versus the plumber’s quote for parts and labor. I also had to buy 12 and 18 inch adjustable wrenches for $12 total to complete the job. Without doubt, those wrenches will come in handy the next time I work on the plumbing or the car (that’s June’s DIY project).
A quick note on pressure reducing valves. If you are on municipal water service, you receive water at whatever the municipal system provides it. In my case, my water pressure was 110 psi. That’s almost double the 60 psi recommended for houses. High water pressure can cause leaks or damage toilet fill valves, faucets, hot water heaters, and clothes washers. High water pressure also leads to higher water use since turning on a faucet “full blast” (as my kids love to do) leads to a much higher flow rate. The pressure reducing valve limits the pressure coming from the municipal water supply to a level that’s manageable for common household plumbing fixtures and appliances.
After installing the pressure reducing valve, we immediately noticed the extremely noisy toilet fill valves became barely audible. We no longer hear the hiss of the ice maker refilling. Water pressure in our sinks and showers is still adequate. In hindsight, high water pressure explains all of our busted garden hoses that exploded or started leaking, the cracked fill valve on our dishwasher, the water hammering, and the hard to fix leaks from plumbing fixtures.
I’m glad I called the plumber since the pressure reducing valve was an issue that I didn’t know existed. It makes perfect sense in explaining the occasional plumbing issue we’ve experienced over the years. I’m hoping to experience a noticeable reduction in our water bill. At the least, we’ll save money on repairs, extend the life of appliances, and enjoy quieter water throughout the house.
You don’t have to spend $89+ on a plumber to check your water pressure. Water pressure gauges are extremely cheap. This one is $9 at amazon. Buy it and screw it onto your hose connection outside your house or to your clothes washer cold water connection. If it’s over 60 psi, you may want to look into a pressure reducing valve. You may not have one, or it may have failed over the years. The PRV is usually located at the beginning of your clean water plumbing where the municipal supply comes into your house. If you’re on well water you may not have a PRV (I’m guessing).
Home improvement 101 is over. Back to my financial update.
Rounding out the home maintenance expenses was another $50 for some weed killer spray, fire ant killer, and some plumbing supplies to replace the faucet for the kitchen sink (my next plumbing DIY project).
The $394 travel expense was discussed under “Income”. It’s another payment toward our December 2016 cruise and I used Barclay Arrival card reward points to pay for the $394 cruise expenditure.
$132 for utilities is our natural gas bill and our water/sewer/trash bill from the city. 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. Unfortunately I haven’t figured out a cost effective way to eliminate electric bills completely without dropping tens of thousands on a solar panel array.
Healthcare spending totaled $131. 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 $6 was our share of the biopsy from Mrs. Root of Good’s minor surgery on her arm last month. The biopsy was negative as expected, so no worries!
Gifts of $114 included $90 in cash to our son for his birthday. That’s the main way our kids get spending money right now. Mrs. Root of Good and the oldest daughter are assembling photo books to give to her fifth grade friends as they part ways and head off to different middle schools. We spent $24 for photo prints for that project.
General merchandise of $52 was a run to Walmart for miscellaneous stuff around the house.
Entertainment expense of $38 includes a $1 computer game for me and $37 to pay for the rest of the year for our half of the family Netflix account shared with my parents.
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?
Not shown on the expense summary graphic (but included in total monthly expenses) are:
- $17 on restaurants – $10 for donuts, $6 of Chinese dumpling take out, $1 Outback steakhouse blooming onion
- $12 for automotive – 2 cans of r134a refrigerant – oops, another DIY fail – more on this next month!
- $4 for electronics – random USB cables for the kids’ tablets; they consume cables routinely by being rough on them
And that’s how you live an okay life on just under $3,000 for one month!
Year to Date Living Expenses
At $20,044 year to date spending, we have exceeded the $16,667 budgeted for the first five 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 we’ll be back on budget for the year.
I don’t expect any large expenses in June, so there’s a good chance we spend well under our $3,333 monthly budget.
July and August should be fairly low cost months too 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
Net Worth: $1,565,000 (+$13,000)
The headline number keeps going up and up. Every time it does this I expect it to drop the following month because that’s how it goes – up and down, up and down, like a ride at the fair.
I just celebrated my 1,000th day of early retirement at the end of May. During that nearly three year period, our net worth has increased by a few hundred thousand dollars. I’m not expecting that to happen over the next three years since Mrs. Root of Good is no longer working. However, if the blog and consulting income remains the same as it has been over the past year, we will only have to dip into our investment portfolio a tiny amount to fund our living expenses.
No matter what, I don’t think we will run out of money in early retirement even if my blog income dries up completely. We’re spending a very conservative 3-4% of our portfolio value each year, which should last us indefinitely. In the worst case we would spend most of our portfolio by the time we hit our 60’s at which time we would start drawing our $24,000 per year Social Security benefits.
Now it’s time to get back to enjoying the freedom of early retirement. And the carefree days of summer are a perfect symbol of that early retirement spirit!
Still riding the market up, up, and up? How did you do financially in May?