Well folks, we’re in the middle of a pandemic. It’s amazing how much life has changed since I wrote my last blog post a month ago. I am certain that the next few months will bring even more change.
I’ll cover my regular monthly financial stats in the first several sections of this post and share some more general thoughts on the coronavirus and its impacts in the last sections.
Financially, February was a rocky month for our investments. Net worth declined significantly by $114,000 to end the month at $2,117,000. The silver lining is that income for the month remained very strong at $5,298 while expenses totaled only $2,618.
Let’s jump into the details from last month.
Investment income totaled $620 in February thanks to interest income from our bond holdings. Next month will bring even more investment income since our equity mutual funds and ETFs pay dividends quarterly at the end of March, June, September, and December with some payments arriving at the beginning of the next month. Here’s more on our dividend investments.
Blog income, shown as “other income” in the chart, totaled $2,493 for the month. While still respectable, my blog income is trending down since I haven’t been publishing as many articles each month.
My early retirement lifestyle consulting income (“consulting”) was $1,358 for the month of February which represents 10 hours of consulting sessions. Raising my rates in January didn’t seem to have any impact on February consulting bookings. However I have noticed since the recent drop in the stock market, my new client bookings have almost dried up completely. Fortunately the weather in North Carolina is improving so a slowdown is welcomed at this point.
The “deposit income” totaled $825. The deposit income includes $300 that came from cash back and incentive bonuses from the Ebates.com and Mrrebates.com online shopping portals (some of which was earned from you readers signing up through these links).
If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card.
The remaining $525 of deposit income is the sign up bonus from a US Bank Business card. I completed the spending requirement for this card in January and was able to cash out the reward points in February.
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Now let’s take a look at February expenses:
In total, we spent $2,618 during February which is about $700 less than our target spending of $3,333 per month (or $40,000 per year). Utilities and groceries topped the spending categories for the month.
Detailed breakdown of spending:
Utilities – $834:
The city water, sewer, and trash bill was $138 for February.
The natural gas bill (for the water heater and furnace) totaled $94 for the month. February was another warm month so our heating bill was lower than usual.
I paid $602 for electricity which covered February’s bill and left us with a huge credit balance. The utility charges a $1.50 convenience fee to use a credit card so I usually charge a big lump sum at one time so that the convenience fee is negligible as a percentage of the payment. These big payments help me hit credit card minimum spending requirements for new sign up bonuses too.
Groceries – $814:
We spent $814 on groceries during the month of February. Part of the higher than normal expense was the purchase of $300 in Walmart gift cards that will be used for groceries over the next month or two. I used a 10% cash back promotion to buy discounted Walmart gift cards, so I bought a bunch.
Otherwise our grocery spending was fairly normal in February. We stocked up a bit to prepare for any supply chain interruptions caused by the coronavirus outbreak. Otherwise it was business as usual.
We cooked a ton of good food during February:
General Merchandise – $386:
I spent $286 on Walmart gift cards under the 10% cashback promo. I also bought $100 of Amazon gift cards to take advantage of a different cash back promo on my credit card.
I am allocating the expense for these gift cards to “general merchandise” since we don’t know exactly how we’ll spend them over the coming months.
Travel – $312:
This category of spending no longer brings the same level of joy given the massive interruptions to global travel and leisure.
During February we were very busy booking two different trips. One trip is already cancelled and the other trip has a lot of uncertainty right now.
The first trip takes Mrs. Root of Good and I to Madrid, Spain for an almost two week jaunt around the northern part of the country in October. Last month, we booked all of the lodging, flights, and in-country transportation. Here is how we did it:
- 34,000 American Airlines miles plus $56 for each round trip ticket RDU-MAD
- 4 nights in several different AC Hotels for 40,000 Marriott points in total
- 3 nights in a Madrid Airbnb ($209 worth of Airbnb gift cards)
- 3 nights in an Airbnb in the northern mountains ($239 worth of Airbnb gift cards)
- $8 for an airport hotel in Madrid (balance paid for with Expedia points)
- $146 for a rental car for 8 nights
So far we are hoping we can still go on the October trip to Spain. It’s over six months away so there is at least a chance that the coronavirus will be receding and largely contained by then.
Most of the expenses are cancelable with or without penalty at various points in time, so our maximum exposure if we do end up cancelling the trip last minute will be about $300. However we may cancel sooner if travel providers offer penalty free cancellation policies. And then rebook when the current virus scare is over.
If you are interested in booking a place through Airbnb, feel free to use my Airbnb referral link to save $40 off your first stay.
Our second trip was an 11 night cruise from Tampa to New York City by way of Aruba and Bermuda (among other islands). Norwegian Cruise Line just cancelled all sailings for the next month so we’ll get a full cash refund of the price paid or 125% of the price paid in a future cruise credit to be used by 2022. I don’t know which option we will choose since we don’t sail on Norwegian a lot. But the free 25% bonus would be nice.
I booked the cruise for four of us for free using the Ultimate Rewards points from our Chase Ink Preferred business cards. It was just over 200,000 points for a $2,600 cruise ($1,300 per cabin). The Ink Preferred card offers a 25% bonus on travel redemptions using the UR points.
The Chase Ink Business Preferred card is still available for sign up with an 80,000 point bonus if you are interested.
Flights to and from the cruise ports were booked on American Airlines and Southwest using points plus $5.60 per ticket in taxes. The AA flights are fully refundable per the airline’s temporary coronavirus cancellation policy. Southwest flights booked with points are always fully refundable.
So the end result for our cruise appears to be $2,600 cash in our pockets or $3,300 in Norwegian Future Cruise Credit. The downside is we’ll be self-quarantining here at home in Raleigh instead of enjoying what would have been (absent a viral pandemic) an incredibly awesome voyage on the high seas.
If you want to score more free travel from credit cards, there are several other cards currently offering 50,000 points or more. These points can be redeemed for $500 cash or $500+ in free flights or hotel stays. Compare travel credit card deals.
Healthcare/Medical – $142:
Our 2020 healthcare premiums are $123 per month thanks to very generous Affordable Care Act subsidies that we receive due to our low ~$40,000 per year Adjusted Gross Income. The benefit of being “poor” on our tax return.
The remaining $19 in medical expense is my monthly dental insurance premiums for 2020.
Electronics – $38:
After years of procrastination I finally bought a solid-state drive for my ancient but powerful desktop computer. I got this 240 GB Sandisk SSD from Amazon for $38.
Since cloning the old operating system hard drive onto the new SSD and making a few cable swaps and BIOS setting updates, the newly updated computer is faster and more powerful than the day we bought it many years ago.
Automotive – $24:
I used a $6 coupon to make the annual state safety and emissions inspection $24 instead of $30. The inspection revealed I needed a $5 parking light bulb which I just ordered from Amazon. Installation takes about one minute. The inspector still approved the car but made me pinky swear to replace the light bulb (which I will do).
I was tempted to let the shop take care of the bulb replacement for $20 to avoid the inconvenience. But I don’t mind minor auto repair like changing an easily accessible light bulb.
Education – $18:
Elementary school yearbook for $18.
Cable/Satellite – $18:
We pay $18 per month for a local reduced rate package due to having a lower income and having kids. 30 mbit/s download, 4 mbit/s upload.
Gifts – $16:
Some gifts for our daughter’s upcoming birthday. There’s a good chance the birthday party will have to be canceled due to virus concerns. But at least we have a gift that will provide hours of fun and entertainment.
Clothing – $14:
A thrift shop visit to get some longer pants for our little guy. He’s already too tall for the pants we bought in the fall. Hopefully these pants will last into next winter.
Restaurants – $2:
Our laughably low restaurant spending included a $2 soda at Moe’s. I rode my bike up to our local Moe’s thinking I was redeeming a free burrito coupon but as it turns out a soda purchase was required. Still not a bad deal for a huge burrito, a big drink, a bag full of chips, and several containers of salsa.
We also continued our Chick Fil A free food spree. Every week they seem to give away free food on their app. February was no different. It’s a four mile round trip through the neighborhood on my bike to pick up these beauties:
Gasoline – $0:
We didn’t buy any gas for the minivan in February. We’ll probably top off the tank in March or April though.
Total Spending for 2020 – Year to Date
Two months into 2020 and our spending totals $5,300 for the year. This is $1,367 less than the $6,667 we budgeted for two months out of our $40,000 annual early retirement budget.
We were ramping up our travel bookings for the remainder of 2020 with several big trips planned so far. Given the current uncertainty around cruises and other international trips, I don’t really know what we’ll be doing this summer and fall.
If we cancel all of our trips due to coronavirus-related travel restrictions, then we may end up saving a lot of money at the expense of missing out on a lot of fun. I don’t mean to gloss over the real suffering and loss of life from the virus, but so far the most concerning direct impact to me is the loss of convenient travel opportunities.
Monthly Expense Summary for 2020:
- January – $2,682
- February – $2,618
Summary of annual spending from all years of early retirement:
- 2014 – $34,352
- 2015 – $23,802
- 2016 – $38,991
- 2017 – $31,708
- 2018 – $29,058
- 2019 – $25,630
- 2020 – $5,300
Net Worth: $2,117,000 (-$114,000)
February was a wild month. Our net worth shot up by $100,000 in the first third of the month. Then it slowly went down in the middle of the month. Finally, our net worth dropped very rapidly by month end. From the highest value to the lowest value in February, we lost a quarter of a million dollars.
As we all know now, the last days of February foreshadowed the sharp and rapid drops to come in March.
In last month’s update I wrote:
The market feels overly optimistic since it seems like nothing makes the market waver for long. Not an almost-war with Iran and not a major virus outbreak in China. At least not yet.
With the clarity of hindsight, we can see that the market was frothy with unbounded optimism in early February. Our 10 year economic expansion was long in the tooth and we were overdue for a correction. Here it is in all its ugly glory!
Current thoughts on the Coronavirus
As I write this in mid-March, cruise lines are shuttered, airlines are cancelling flights, country after country enters a phase of social lock down where only essential trips to the grocery store or healthcare facility are allowed. Shuttered businesses will take a huge hit to profits and underemployed workers may face a similar hit to their paychecks.
The economic fallout of the chaos caused by the coronavirus is still unknown. We don’t know at this point if the virus will have a limited or severe impact, or fall somewhere in between. One scenario has the virus stamped out soon by shutting down most travel and non-essential social intermingling. The opposite extreme could see the virus flourish for months or years to come and kill tens of millions globally.
Some sectors of the economy will continue to face exceedingly high pressures. There will likely be collapses of businesses and bankruptcies in the hardest hit industries.
I don’t know if these economic losses are already baked into the stock market correction we experienced over the past month or whether we’ll continue to ride the bear market down further and further.
However if I have to use my crystal ball, I can see that in another five or ten years the stock market will be higher than it is today. We had a good solid 10 year bull market and now we may have a few soft years in the market where things trade flat to down. Or maybe the optimists will win and we are already near the bottom of the market.
The truth is I don’t really know where the market is headed and no one else does either.
The best course of action is to stick with your regular investment plans, continue maxing out your 401ks and IRAs as you always have and enjoy these much cheaper stock prices compared to recent months’ lofty valuations. Invest as much as you safely can if the market continues its march downwards.
But temper your aggressive investing with a dash of practicality. Don’t go crazy. Keep enough liquid funds at hand to cover you and your family if times get tough. In recessions people lose jobs, take pay cuts, and have a hard time finding new jobs.
During the 2008-2009 crash, we knew we could live on one income if one of us lost a job, so it was no big deal to operate with a minimal cash reserve each month. Perhaps that is your situation or perhaps you need a larger emergency fund to provide some peace of mind (and food).
Personal impacts from the Coronavirus
So far we have felt the impact of the global pandemic in two ways. One is the cancellation of our upcoming cruise. We won’t be traveling much any time soon.
The other impact is the cancellation of public schools across the state and much of the nation. Per the school district, this is our spring break for the next two weeks then we’ll see what happens after that. Maybe we go back in April or maybe that’s it for the school year and we all go back to school in August. Lots of uncertainty and lack of guidance since they just announced school closures. I think the growth of new cases in the next few weeks will be instructive.
Financially, our portfolio has dropped quite a bit. I’ll have more info on March’s fun in the next financial update but by the low point mid-month we were down over $500,000 from the February highs. The portfolio has since recovered a bit but $100,000 daily ups and downs are commonplace for us now.
However, the value of the portfolio is only relevant to our long term financial success. Day to day or month to month volatility isn’t something to fret over in the short term. We have over $200,000 in high quality bonds and cash reserves so we will be able to keep on living at the same level of spending for many more years to come without touching our equity holdings.
As far as reacting to the market’s drop, we aren’t intentionally trying to reduce our spending now. Not yet. That time may come if things get rough and this is a multi-year recession. But for now I see no need. I’d like to keep on enjoying my money and help out the economy by spending on our wants and needs.
On the preparedness front, we are pretty well stocked in our fridge, freezer, and pantry in case we can’t go grocery shopping for several weeks due to quarantine or supply chain disruptions. Store shelves are still mostly stocked here (other than toilet paper!), so we’ll have to see how bad it gets.
I have 10 books on reserve at the library to keep us busy, and Netflix should remain fully operational throughout this emergency. I have a sizable backlog of video games to play. We should be able to lounge around the back yard and maybe even go out for walks and bike rides even if everything is closed (just don’t come within 6 feet of me!).
At this point, I think all we can do is prepare for the worst but hope for the best. I’m ready to hunker down for a few weeks or a few months if that is what it takes to defeat the pandemic.
Since I’m no epidemiologist I don’t really have an educated guess as to what happens next.
To those that are skeptical of the severity of the coronavirus, I will say that I am taking it very seriously. If you’re under 60 it’ll probably be the flu or a non-event and you have a very low chance of dying. If you’re over 60 and/or have underlying health issues this thing is rather severe. And if you’re young and you get it you may be okay but your age 60+ family, friends, neighbors and strangers you encounter on the street might not.
The media loves to sensationalize things but this time around concern is warranted. It’ll take a period of sacrifice up front to nip this thing in the bud, get everyone healthy again, and get me back on my cruise ship.
Before I wrap up, I’ll leave you with some good news. Some countries have figured out how to stem the tide of the coronavirus infections. China and South Korea were two of the hardest hit countries early on. Daily new cases in each country measured in the hundreds or thousands. Total infections currently stand at 80,000+ in China and 8,000+ in Korea.
However their new daily cases have dropped to single or double digits. That means very few people are catching coronavirus in China and Korea today. Those countries aren’t coronavirus free but they are getting very close.
Through heightened screening and testing, social distancing, and isolation they have dramatically reduced the prevalence of coronavirus in their countries. The question now is whether other countries can, and will, follow suit to bring an end to the spread of this virus.
That’s all I have for this month. Stay healthy and I hope to see you here next month!
What’s your take on things? Are you prepared for the next few months of uncertainty?
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