Category: Financial Update

Financial Status Update – Jul 2020

Oh my, what a crazy 2020 so far. Not that 2019 or especially 2018 were tame, but COVID-19 and a rolling global shut-down knocked everyone back. Add-in a whole host of smaller events like Tropical Storm Isaiah hitting the East coast, historic flooding in China starting to affect some supply and industry, Kobe Bryant dying in a helicopter crash, etc…

But 2020 hasn’t been a bummer year for our Net Worth! We paid off our second/final auto loan and committed to maxing out our retirement accounts at of the beginning of the year, before Coronavirus hit. We continued steadily saving through it all, even though I was furloughed for a few weeks. I had made myself extremely useful in a number of roles; not quite irreplaceable but close. This limited the number of weeks I had to take off unpaid compared to others. Continuing to buy during the massive 30% dip (3/19/20 below) meant that we saw great returns on the way up. We didn’t Dollar Cost Average per se (http://prudentcoin.com/dollar-cost-averaging-is-timing-the-market/), but invested like normal as soon as we had the cash.

There were two financial moves we made but wouldn’t necessarily recommend, but happened none-the-less:

First, we changed my 401k plan’s allocation; it had been in a Target Date Retirement plan with 70% stocks and 30% bonds. We had been fearful of a market crash and it better fit our risk profile. After a near 30% market drop, but knowing it could drop even further, we decided to re-balance to a 90/10 fund. This ultimately made us more money when the market rebounded as bonds hadn’t dropped quite like stocks had. However, we wouldn’t recommend as we were going against our own investment principles and actually timed the market. Sure, it worked out this time… or did it?

By being in a lower percentage of stocks for several years, we were seeing lower returns than we would have if we were 90% in stocks. So, even though our portfolio fell less in March 2020, the greater returns of the stocks over the preceding years would have been more than enough to cover the difference (blue line is 90/10 and orange is 70/30 stock/bond with Vanguard Target Date retirement funds):

Source: https://markets.ft.com/data/funds/us/compare

Our second abnormal money move was… we had money left over from a cash-out refinance on our house last fall. We had put in a lot of sweat equity, given the kitchen and frankly the whole house was nasty when we bought it 2.5 years prior. We wanted to get back to a 75% LTV so we could finish a few more needed projects, like a garage that needs a new roof, door and opener, siding, etc. We maxed out our 2020 [Roth] IRA’s plus filled up the last of our limit for 2019. We did this in March, when the market was 20-25% down from it’s previous high, as we knew it was a good value. Even if the market went lower, we were content. We hadn’t planned on this, but it was too good an opportunity to pass up.

Since our last Financial Update was in December of 2018, let’s cover 2019 with a chart too. The major bump in the Fall was our cash influx and adjustment of our home’s value from the refinance and new appraisal. While that certainly was very nice, the major takeaway should be the steady growth from consistent contributions and staying in the market throughout the entire year.

2019 was a year of slow and steady growth, but it is exciting to see that in 2020, even with the crazy times, compound interest really becomes exponential as the balance adds up. But that doesn’t happen unless you make sacrifices on the front end. In 2020, we are saving ~50% of income + in our 9th year of delaying gratification and busting rear working 80+ hours a week. That’s what it takes to see this kind of growth after 5+ years into our FI journey. Our stretch goal this year was to hit a $320k net worth, and we are surprisingly on track to even surpass that. We will see!

We are not saying we’ve made it, but so excited how far we come after the sacrifices we’ve made. Please go back and read our updates and mindset from several years ago. As our net worth grows, it might be hard to relate if you are just starting out. But read our 2016 posts, especially: http://prudentcoin.com/being-frustrated-with-where-you-are-at-financially/ There is light at the end of the tunnel. For us, a solid Financial Independence (FI) is still 10 years out, but we have some FU money now. Start with the basics: save and invest, then save and invest more…

Financial Status Update – Dec 2018

What. A. Year.

A lot happened in 2018 for us…

  • Finished my Bachelors Degree
  • Received solid promotions with raises at both my full-time and part-time jobs
  • Had a baby
  • Paid off 2 loans

And 2019 is looking bright as long as we keep up the hard work and save, save, save!

PersonalCapital_2018_All

$149,238 – I upped the value of our home by $10k twice during the year to match a truer value.  Subtracting that, we saw an increase of almost $18k over the year.  Not as much as we wanted, but a solid gain on all fronts.

 

Our investments grew by more than 25% this year, between additional contributions and returns.  And to be honest, the market downturn at Christmas followed an overall poor year.  Meaning that we actually added more than Personal Capital gives us credit for; we just lost it in negative returns.  But we have a long-term view and use low cost index investing.

PersonalCapital_2018_Investments

 

The Home

We completed a lot of little things this year, postponing some needed items to 2019 or even 2020.  Much of the almost-a-need items, such as replacing very old, drafty windows or fix the leaking [detached] garage roofing, could be done now with a loan.  But we want to be debt-free besides the mortgage and have a solid cushion for when the next recession comes around.  Fixing the remaining big ticket items could cost $15-20k all said and done, and we don’t want those bills hanging over us just yet.  But the home has the value potential, so they will be completed for us to enjoy them well before we move out.

We did increase the value of our home from $200k to $210k within Personal Capital as it is easily worth that now.  That is $10k less than our new taxable value (we fought the city and won, reducing the taxable value by $20k!!!).  Zillow now zestimates the home at being worth near $270k which is crazy and probably not realistic.  But talking with a Realtor doing comps, we could sell the extra lot for around $46k and our home is still worth the taxable value if not more.  So, while we plan to keep the land intact for now as we really enjoy it, we have some hidden value when we need a bigger home or different location.

 

Loans

We paid off our 401k loan (used to complete needed renovations prior to moving in) and the second car loan (very early in 2018, if memory is right).  We just have our mortgage, a Home Depot no-interest loan for pre-move-in work, and a minivan loan.  All interest rates are very low (2.8% & <5%), so we are paying off the no interest loan due this year asap.  With our estimated tax return coming in Feb/Mar of 2019, we should have it paid off quickly.

 

Savings

We are saving a good chunk each pay period between what is automatically deposited into the retirement accounts and a HSA.  We have a goal to increase some additional savings into an IRA, but we are missing our goal.  We need to revisit that goal and redouble our effort.

 

Financial Status Update – Jun 2018

Quite a lot has changed in the last year and a half, both personally and financially.  Besides moving up at work and a growing family, we have also continued to save a large chunk of money each month.  In addition, we bought a fixer upper and continue to sort-of invest/dump money into it.  So where are we at?

PersCap_NW_2018_Jun

Our Net Worth has skyrocketed!  Well, sort of.  Part of this change from $50k to bouncing around $130k is that I have added in more accounts to Personal Capital; but we have also saved much more in the roughly eighteen months since the last financial update.  Let’s cover this one by one…

The House

We bought a house for $168k with 5% down so that we could do all the needed renovations (such as gallons of KILZ oil-based primer to cover all the smoke stains).  We essentially have a new house as the floors, kitchen, and bathrooms (save the tubs) are all practically new.  But we knew this all going in.  The home is in a high-value area; close to many well-paying jobs but far enough out that you aren’t in endless congestion.  The SEV x2 on our house is $240k (and in a few years after all the work is done and the market likely goes up farther it will probably be worth that), but a rather conservative estimate would be $200-205k.  The large bump in April 2018 in the Personal Capital chart above is due to me raising the value of the home to $200k from $190k, which was the appraisal before all the work was done when we bought it in July 2017.

Included in the kitchen renovations are nicer cabinets with soft-closing drawers and hinges, quartz countertop, and a custom layout.  The floor has a nicer pergo flooring through-out and we are working on finishing a part of the basement in addition to finishing the first floor.  And, we are fixing up the decent two-car garage and 15x30ft workshop; both of which have power and the workshop has natural gas with heaters hung from the ceiling.  And did I mention we have over an acre with only a two minute walk from a high-end downtown.  It’s a very nice place to live, and while taxes are quite high, it is the perfect place for us now.  And we only have $197k into the house so far.  Our best estimate is $210-215k depending on how much we fix up before selling in 5-10 years.

As an FYI, I use a manual value for my home value as opposed to Personal Capital’s Zillow “zestimate” because it is [in my opinion] wildly high and rather volatile making the growth charts hard to follow.  We currently have $44k in home equity given a conservative estimate of the home’s value.

 

Retirement Accounts

Besides two work retirement accounts, the wife and I each have an IRA with Vanguard (a company we highly recommend, by the way).  All said and done, we have roughly $50k in investment accounts, although either the market took a beating (I mainly use index funds) or Personal Capital glitched in syncing an account.  This is in addition to cash (~21.6k per PC) and other liquid assets held in non-linked accounts.

PersCap_Investments_2018_Jun

 

Speaking of retirement…  There are two scenarios I am tempted by.  First is a semi-retirement starting at 50 years old and then working part-time for another 10 years as a well-paid, but no-benefits-package consultant.  This simulation is at a 63% chance, and a decent/median chance of working out just fine:

PersCap_Retire50_30kYear_2018_Jun

 

The other option is to retire at 60 years old after having worked full-time for 40+ years.  Both options delay taking Social Security until age 70 (the current age to receive the highest monthly payments) and a conservative estimate of only $25k/yr combined for the two of us.  This second option results in a 77% success rate and a median ending portfolio value of a million dollars more than the first:

PersCap_Retire60_30kYear_2018_Jun

 

The nice thing about these two plans, and the real one I finally decide on, is that I don’t have to decide now.  I just keep putting in the work now; earn more money and save more money and invest more money.  And, options will open up.

 

Miscellaneous

A short section, but I did want to clarify that the Net Worth above doesn’t include sundry consumable items up to and including vehicles.  In fact, we have one auto loan and I haven’t even offset it with the value of the vehicle that is worth maybe a thousand dollars more than the loan (need to set a reminder to add that in to make it a fairer value).  We are also working on paying off a <$5k loan from a 401k to help with the home remodel, along with a no interest credit card from Home Depot.  And that about sums up where we are at.  Oh, thanks to paying cash and some help from work tuition reimbursement, I do not have any college debt having just completed by Bachelors in Business.

 

I wrote in 2016 that I was very frustrated with where we were at financially.  We have definitely made up lost ground, but we are not there yet.  But all of this only happened because we have been saving, saving, saving and increasing our income by working hard and smart…

Financial Status Update – Nov 2016

So… We did it!  And a month early!

The goal at the beginning of the year was to reach a $50,000 combined balance in all our investment and savings accounts.  We just climbed over that last hill with some automatic contributions and a rebound in the market (mainly oil stocks) after Trump was elected.

perscap_nw_2016_nov

 

NEW GOAL: Blow by $75,000 and reach $100,000 before the end of 2018.

 

Being Frustrated With Where You Are At Financially

Yesterday I posted our Sept 2016 Financial Status Update.  While our savings are growing and we are getting on the right track, I feel horribly behind.  We are a year or two away from 30 years old, and have only just started making decent money.  The multiple irons in the fire are starting to pay off.  But my plan of “earlier” retirement in my early 50’s seems impossible many days.

Here is the current estimate given actual savings rate, a retirement at age 50, and with working a little bit part-time from 50-65 ($15k/year).  I delayed taking Social Security until age 70, and conservatively estimated an annual benefit of only $20k combined for my wife and I (SS is heavily underfunded and currently estimated to pay 76% of benefits after 2037 – link).  There is a chance I would run out of money before I turned 70, and a really good chance of completely running out of savings in my early 80’s.  Very bleak.

perscap_retire50_actual_2016_sept

perscap_retire50_actual_incomeevents_2016_sept

Astute readers will notice there was a $700 drop from yesterday to today in total savings/investments.  Got to love market volatility, mainly from oil prices and the Wells Fargo scandal.  Good thing I am a long-term investor as I have many years and decades to weather these storms.

 

What gives me some hope though is that the “$18,908 per year” that Personal Capital “sees” me saving each year is probably a low estimate since I have only been using them for a little over a year and I have already saved $23,000+ in 2016 so far.  With the same numbers, except increasing annual savings to $25k, I have a better chance of retiring at 50.  I won’t be living it up at $45,000/yr nor will I leave an inheritance, but there is a good chance I wouldn’t run out of money before I die.

perscap_retire50_25kyear_2016_sept

 

And if I increase the savings to $30k per year, I am even better off.  I should be able to save that much money in all of my retirement and investment account combined, but it will take some effort.  And it looks like it may be required if I want to retire at 50-ish.

perscap_retire50_30kyear_2016_sept

 

This last chart looks amazing with a 98% chance, right?!  To make this happen, I only need to save $30k per year and work until I am 65.  Not ideal and probably overkill for my needs, but it lets me know that my actual retirement is probably somewhere between 55-65.  Hence the frustrated title.  Some get frustrated and give up; most have at least thought about it.  The only way to change the numbers is to make more and save more, which I am working on.  Perseverance, hard work, and being uncomfortable with where you are at are key to getting ahead.  But it is a painful process.

perscap_retire65_30kyear_2016_sept