Cruising through Fall – October 2017 Financial Update
October was another great month for us! We had a blast, blew some money on a quick jaunt on the high seas, and enjoyed the outdoors. And grew $42,000 wealthier while having all that fun. No complaints here.
In financial terms, our net worth climbed to $1,978,000. Income remained steady at $4,573 while total spending for the month of October remained modest at $1,748. Given that we don’t even spend our current income, I’m starting to unravel the mystery of why our cash balance continues to grow month after month. Spending less than we make – an old habit we can’t kick.
Fall is slowly descending on North Carolina. The leaves are finally changing colors and falling off the trees. Mornings are chilly while afternoons are mild. We haven’t turned on the heat much this year, but that will change soon with forecasted highs in the 50’s and 60’s over the next week. Thanksgiving is just around the corner which means lots of turkey and family time (and some family members that are turkeys).
Investment income totaled $1,096 for the month of October. This is the last dribble of quarterly dividends from funds that pay at the end of the third quarter. Our equity mutual funds and ETFs pay dividends quarterly in March, June, September, and December. During other months investment income tends to be much smaller. We are well on our way to earning roughly $30,000 in dividends for 2017, as we have in the past.
About half of October’s investment income came from our taxable brokerage account investments which means we can spend the money without withdrawing it from IRAs or 401ks.
Blog income, shown as “other income” in the chart, remained steady at $2,568. Not a bad figure given how infrequently I’ve been posting lately!
My early retirement lifestyle consulting income climbed to $845 in October after a big fat $0 for September. I can’t explain why this little side hustle ebbs and flows like it does. If it remains this busy I’ll look closer at raising rates to reduce demand.
Deposit income of $62 was cash back from the Ebates.com and Mrrebates.com online shopping portals. If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did. When shopping online, I always check to see if I can score some extra cash back by using one of those online shopping portals (and it usually pays off!). I paid for a cruise in October (more details later in this article) which will lead to $40 cash back in the next month or two.
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 October expenses:
For the fourth consecutive month, our spending remained below $2,000 per month. In October we spent $1,748. That’s slightly more than half of our budgeted spending of $3,333 per month (or $40,000 per year). Travel and groceries made up almost all our spending for the month. Gotta eat and go to fun places, right?
Travel – $928:
We found a last minute cruise deal out of Miami on the MSC Divina. So we booked it six days before the date of sailing. Here’s the price breakout:
- Cruise fare – $744 (we’ll end up with ~$64 refunded due to Ebates and the MSC Voyager club discount/refund)
- Mandatory gratuities – $175
- Miami light rail tickets – $9 (MIA airport to downtown, then free trolley to Port of Miami)
- Flights RDU-MIA $0 ($330 each but we used 22,000 (x2) Chase Ultimate Reward points to get free last minute flights).
As a family, we sailed on the MSC Divina in December of 2016. We loved it so much that we jumped on this deal when we saw it. This time around it was just me and Mrs. Root of Good. We call it a 13.5 year wedding anniversary present to ourselves because we’re awesome. It’s the first time cruising without kids since our honeymoon 13.5 years ago.
The airfare was expensive in points terms for a 2 hour flight, but it made sense to fly instead of drive and pay for gas and parking. Timewise, it’s about six hours door to door to fly versus 12-13 hours driving (which means overnight hotel at least in one direction). We also used our Priority Pass Select card (a benefit that comes free with the Chase Sapphire Reserve card) to get a free meal and frosty beverage in the Miami airport plus $180 worth of to-go candy and beef jerky at the Corona Beach House restaurant/market.
In selecting expensive flights, we thought to ourselves:
We have money so let’s spend it to gain convenience and comfort because what are we saving it for after all?
I could have booked less convenient flights for a significant points savings that would have us leaving home at 5 am instead of 7 am the day of the cruise (and be dead tired by 3 pm!). Or book flights with very little slack in the schedule to get to/from the airport and cruise ship (and freak out if the plane or the ship isn’t on schedule). Or we could have waited six extra hours in the airport to save $80 worth of points (and arrive home at midnight). In the end, we decided to go first class (well, still in coach but you know what I mean) with a flight schedule that got us to Miami at a reasonable time and got us back home without excessive hurrying or waiting. Not driving twelve hours home was worth every point expended!
Interested in cruising? Check out all the posts in my “Going on a Cruise” series:
Groceries – $609:
Groceries were a little higher than average but nothing to be concerned about. We spent around $150 at Walmart which gets lumped into “groceries” but routinely includes non-grocery items like clothing and random household or automotive stuff. The same happens at Aldi occasionally. We bought a $12 ceramic frying pan that’s included here in “groceries”. That’s the price we pay for automated, simple categorization at Personal Capital.
Charitable Giving – $50:
We bought a $50 Walmart gift card and gave it to our kindergartener’s teacher so she can buy supplies and technology gear for the class. The neighborhood school our kiddo attends was one of the worst schools in the district several years ago, but it’s been improving steadily over the years. The gentrification of our neighborhood certainly helps.
Education – $48:
$38 for a year’s worth of field trips for our kindergartener plus $10 for both of us to join the elementary school’s PTA.
Healthcare/Dental – $39:
$23 for lab tests for a routine physical. Theoretically this lab work would be covered for free with our insurance since it’s preventative medicine. In practice, as everyone knows, healthcare billing doesn’t always work out like we think it should. In order to avoid hour upon hour of phone calls, emails, scanning and sending forms, appeals, and other ugly nonsense to appeal this $23 charge (and possibly end up paying it anyway), I simply whipped out a credit card and resolved this issue in a couple of minutes. Mental health has its price and it’s somewhere around $23 in this case. Having plenty of money is nice.
The other $16 of healthcare spending was monthly premiums for our health insurance plan that’s mostly paid for with ACA premium subsidies. ACA looks to be mostly intact going into the end of the year. Other than the routine minor billing squabbles, the ACA is working out pretty well for us to provide good insurance at nearly no out of pocket cost.
FYI, open enrollment just started and runs through December 15 so head over to Healthcare.gov if you need to sign up for 2018. I took a peek at our premiums for 2018 and they will be just over $1,000 per month however we’ll still pay less than $100 per month for the premium after the generous income based subsidy tax credit.
Gas – $36:
Our monthly visit to the gas station.
Restaurants – $15:
A box of fried chicken and biscuits for the family from Bojangle’s. This is the In-N-Out Burger/Whataburger for fried chicken (and only available south of the Mason-Dixon line other than a sole location in Pennsylvania).
Cable/Satellite – $14:
$14.99 per month for 30 mbit/second download speeds and 4 mbit/second upload speeds with no data caps.
Automotive – $6:
We spent $6 on a replacement key for our minivan. The minivan only came with one key when we bought it used last year, so I figured a spare key would be a good idea. Otherwise if we lose it, then we’ll be paying $150-200+ between locksmith fees and/or a new key from the Toyota dealership. The key has an RF chip in the base of it for security, but I found a nifty Youtube video that allowed me to program it for free in a few minutes (something locksmiths charge $60-80 for) by cloning the existing key I have. I’ll still have to drop a buck or two at Walmart or the hardware store to get the key custom cut to match the master key.
Year to Date Living Expenses for 2017
Ten months into 2017 and we have only spent $20,896. That’s more than $12,000 below the $33,333 budgeted for the first ten months of the year.
The highest expense category is travel which is no surprise since we’ve spent 10.5 weeks on the road this year.
We’re taking baby steps to spend more (like that last minute cruise) but still not spending all that we could. However there will be years with large unexpected expenses (or large expected, but lumpy, spending), so I’m okay under spending our budget potential in these early years of early retirement.
Monthly Expense Summary for 2017:
- January 2017 – $3,378
- February 2017 – $2,108
- March 2017 – $1,388
- April 2017 – $2,981
- May 2017 – $1,829
- June 2017 – $2,629
- July 2017 – $1,616
- August 2017 – $1,390
- September 2017 – $1,824
- October 2017 – $1,748
Net Worth: $1,978,000 (+$42,000)
October marks the twelfth consecutive month of net worth gains. The last time we lost money during a single month was October 2016 when our net worth dropped to $1,618,000. Since then we’ve been on a tear with five digit gains almost every month. We’re up more than a third of a million dollars in the past year.
I’m hoping we avoid the fate of Icarus. For those not familiar with Greek mythology, I’ll save you the trip to wikipedia. Icarus was a young man with wings crafted of wax and feathers. “Don’t fly too close to the sun, son” said Icarus’ father Daedalus. As kids are wont to do, young Icarus didn’t listen and soared too close to the sun with his “amazing” wax and feather wings. Long story short, the wax melted, the wings fell apart and Icarus died. As we glide onward and upward toward the mythical $2 million mark, I hope we can maintain altitude and stay at these levels for a while. I hope our wings don’t melt this close to the sun.
In financial moves, I’m planning several things for year end 2017:
- harvest capital gains – about $4,000 gains from selling a $14,000 mutual fund position
- continue my Roth IRA Conversion Ladder – planning to convert ~$5,000
- fund my solo 401k to create a tax shelter for income from Root of Good – $18,000 into Roth solo 401k; $6,000 into traditional solo 401k (for the RoG employer portion).
- fund a his and hers Roth IRA – $5,500 x2 = $11,000
By the end of this financial fancy footwork I’ll accomplish the following:
- reduce taxable holdings by $14,000
- reduce cash on hand/money market balance by $21,000 (currently at $48,000)
- increase traditional IRA/401k space by a net of $1,000
- increase Roth IRA/401k space by $34,000
My initial Early Retirement financial plans were destroyed by this whole “Blog Makes Money” phenomenon. As I mentioned in my article on the Roth IRA Conversion Ladder, I initially planned on converting $25,000 to $30,000 per year from my traditional IRA to my Roth IRA and use the proceeds from sales of equities in my taxable brokerage account to fund my annual living expenses.
As it turns out, this blog makes money. That threw off the Roth IRA Conversion Ladder completely. Now I’m spending income that comes from the early retirement consulting and Root of Good, plus the dividends from my taxable account. Then, I use any excess funds plus some modest sales from the brokerage account to fund the Roth IRA/401k totalling $29,000. On top of that I’ll still convert several thousand dollars from traditional IRA to Roth IRA each year.
I’m still achieving the same end goal as the Roth IRA Conversion Ladder which is to increase funds in the Roth space to allow tax free and penalty free withdrawals before age 59.5.
As part of this year end tax planning and shifting money around I might move more funds out of equities into bonds. Throughout 2017 I have shifted $110,000 from equities into the Vanguard Total Bond Market Index. If the market keeps going up, I’ll take some more profits and continue this shift. I also moved $15,000 from a money market account earning 1% to five year certificates of deposit earning 2%. That’s an extra $150 per year interest income.
Want to finish the year on a strong note? Here’s 11 tips to get you there.
How awesome has 2017 been for you? Excited about the holidays coming up soon?