May 2014 net worth update (+7.0%)

31-Dec-2013 30-Apr-2014 31-May-2014 MoM YTD
cash $13,500 $8,000 $7,500 -$500 -$6,000
savings $27,400 $22,300 $22,300 (same) -$5,100
investments $134,600 $148,000 $152,300 +$4,300
+2.9%
+$17,700
+13.2%
mortgage $187,600 $174,500 $153,000 +$21,500
+12.3%
+$34,600
+18.4%
net worth $345,900 $361,800 $387,100 +$25,300
+7.0%
+$41,200
+11.9%
liquid assets – debts $49,000 $36,700 $15,000 +$21,700
+59.1%
+$34,000
+69.4%
$ until FI $823,900 $890,600 $846,400 -$44,200
-5.0%
+$22,500
+2.7%

Finally an interesting month! May saw my first of two expected bonuses for the year. It was about 20% smaller than it was supposed to be (thanks stock market), which led me to get upset with myself for throwing a lot less at the mortgage than I had thought I would. But you know what? I threw more at my mortgage from my regular paycheck than I had planned on (almost double!) and I really can’t control how much my bonuses end up being – just what I do with them. I added the X% of my gross from the bonus to my donations budget and threw the rest of it at the mortgage – what else can I really do?

Now with this big jump, I’m looking at when I’ll surpass $400,000 in net worth – sometime between July and September most likely. And $500,000? Well that will most likely happen sometime next year, probably in the summer as well.

I decided to start tracking a new metric here: $ until FI. I’ve rounded the number to the nearest $100 like all of the other numbers. The formula I’m using is (Rolling monthly average expenses – Mortgage payment) x 12 months x 25 + Condo value – Current net worth. I thought it would be interesting to track this since it is not only affected by the current amount of money I’ve saved, but also by my current spending level. It is really strongly affected by small variations in spending. Some past numbers on this:

  • EOY 2010: $1,027,400 (average monthly spending $3,600)
  • EOY 2011: $856,500 (average monthly spending $3,300)
  • EOY 2012: $1,104,800 (average monthly spending: $4,220)
  • EOY 2013: $823,900 (average monthly spending: $3,730)

It sure has fluctuated a lot! So my number is definitely a bit of a moving target and definitely a ways away and I’m sure it’ll continue to change before I hit it, but it’s still interesting to see. If my spending this year ends up being exactly the same as last year, then I should lower the $ until FI marker by $100,000 to about $723,000 and if I lower the $ until FI marker by ~$100,000 each year, it should take me about 8.5 years to reach FI at my current spending.

Expenses: I spent $2,860 in May after the mortgage or $1,835 without it. So far, my total spending for 2014 is $19,880, which is $47,712 annualized (woo! the annualized figure is under $50,000!) To hit my $38,500 spending goal for the year, I need to spend no more than an average of $2,660/month over the remaining 7 months this year.

Some of my controllable expenses broke down as follows:

  • ($65) Summer pants – returned two of them. I’m so glad I ordered four because one of the colors I loved online, I didn’t love in person and vice versa with another pair.
  • $45 Skirts – a colorful, knee-length skirt
  • $91 Jewelry – since it is now summer and I’m not wearing scarfs like I do in the winter, I wanted some fun and cheap necklaces to use to accessorize. I bought three and my goal is to keep one or two and return the other(s). They were all 40% off at least!
  • $59 Running shoes. These need to be replaced every 6 months with how much I walk.
  • ($28) Tops - returned one of the button-downs I bought in April and bought another camisole.
  • [Total clothing spending in May: $102]
  • $235 Entertainment/Social – And we’re back to a more normal month for this year. [average this year: $229, last year: $224] This was about 80% date nights with a small amount going to cash withdrawals, a few movie rentals, and hanging out with friends.
  • $13 Eating out by myself [average this year: $12, last year: $25]
  • $327 Groceries – this was for two. [average this year: $245, last year: $152]
  • $176 Work lunches [average this year: $157, last year: $77]
  • $46 Internet - $7 less since I overpaid by $7 last month
  • $25 Household goods [average this year: $16, last year: $29] – I accidentally bought a four year supply of garbage bags. Go online shopping.
  • $77 Hair cuts – my annual hair cut.
  • $20 Eyebrows
  • $0 Toiletries [average this year: $11, last year: $31] – This is lower because some of these items have been lumped into groceries since we’re splitting.
  • $290 Recreation: a yoga mat bag and a yogitoes yoga mat towel, plus a 10 pack of classes at a barre place near work that I’m liking so far. The yoga mat towel made a HUGE difference.
  • $30 Travel – preparation for an upcoming weekend trip

This month was reasonably average for spending, which was nice!

I would love to get my spending down closer to 2011 levels, but as I looked over the electricity bill I just got, I’m realizing that may not be completely possible, ignoring lifestyle inflation. For example, my property taxes and HOA dues went up a combined $900 this year.

Electricity rates are up about 7%, so even though I am using less electricity than I did last year, I’m paying more. In 2013, I spent $699.36 on electricity. If I take the amounts from the bills I have so far and otherwise project with last year’s usage and this year’s rates, I will end up spending $709.57 in 2014 on electricity. I used 8,702 kWh in 2013 and that forecasting shows about 8,361 to be used in 2014, about 4% fewer kWh used while spending about 1.5% more $-wise. I realize that the actual $ increase for electricity is pretty small, but it is still an increase and not a decrease, despite my efforts to reduce the kWh used.

Savings: $22,300 (same)

These funds are spread across a Chase savings account, a general online savings account, a checking account that gets free ATM fees anywhere in the world, and my health savings account.

I’ve decided to keep the Chase savings account open even though I could now close it with no penalty as it has come in handy a few times, for example to get a deposit rather than a statement credit for credit card rewards and then immediately send them to the mortgage. Plus, it is only the opportunity cost on $300, which at the Ally online savings account rates loses me $2.55/year.

Nothing interesting is going to happen here for a while…

Investments: $152,300 (up $4,300 or +2.9%)

This includes my Roth and Traditional 401(k), my 401(k) employer matching (fully vested!), my Roth IRA, my taxable investments including stock index funds and Series I Savings Bonds.

The change here comes from:

  1. Over $2,000 in stock market gains and interest (more than I put in this month!)
  2. April paycheck 401(k) contribution and employer matching

Mortgage: $153,000 (down $21,500 or -12.3%)

Some statistics here:

  • 2.5%: the interest rate on my 5/1 ARM
  • February 2018: when the interest rate on my mortgage is set to reset, possibly to 7.5%
  • 2.5: years of payments eliminated with this month’s pre-payments
  • $20,900.00: extra payments made on the mortgage this month (woo!)
  • $43.50: interest this month’s extra payments will save me on the next regular payment
  • 35.4%: portion of my regular payment went to interest (originally was 59%)
  • 57.3%: amount of equity in my condo, assuming purchase price
  • 46.5%: amount of the mortgage I’ve paid down

Now this was an interesting month for the mortgage! I threw pretty much all of my bonus at the mortgage (minus the X% of gross to my charitable donations budget). Doing so shaved off 2.5 years of mortgage payments, saved over $40 of June’s interest cost and got me only 3.5% or $10,000 away from having paid off 50% of the mortgage. I’m currently estimating that I will hit that marker around September.

I also found quite a bit of extra money in my checking account when I zeroed it out at the end of the month, which resulted in a $3,000 extra principal payment from my paycheck instead of the usual $1,800! That meant I saved ~72% of my regular net income this month, in addition to my bonus!

TOTAL: $387,100 (up $25,300 or +7.0%)

I ended 2013 with a net worth of $345,900, so I’ve seen a change of +$41,200 or +11.9% so far this year. I’ve set the y-axis on this graph to $465,000 so we can see how my net worth grows towards that throughout the year.

May 2014 Net Worth Graph

And let’s take a look at how I did on April’s goals:

  1. Find and buy a second skirt. (I’m currently eyeing eShakti.) DONE! I love it!
  2. Use my debit card for the small transactions – under $6 restaurants, under $15 2% cashback, and under $30 1% cashback. DONE! This was pretty easy to do. I finally came up with a simple way to track this. Since Barclaycard expanded their definition of “travel” costs, I’ve gone back to using that as my default credit card.
  3. Decide what to do about the new yoga studio. Do I want to buy a yoga towel or a better yoga mat? A better bag to make carrying my yoga mat to work and then to yoga easier? What I have now (an $8 yoga mat, no towel) is definitely not going to work if I want to keep going to hot yoga. DONE! I did buy a yoga mat towel and a bag and the towel has made things much better. I’m still having troubles with the heat, so I decided to try the barre studio by work for 10 classes to get into better shape and then try hot yoga again (with a 10 drop-in commitment).
  4. Enjoy spring! DONE! This one was far too easy.
  5. Trust my gut instincts more at work. I’m no longer a newbie and I do know more than I think I do. PASS! I’m definitely improving here, but now things are changing again a bit and figuring that out over the next few weeks is going to be interesting.
  6. Send $1,800 to the mortgage on pay day. SUCCESS! I actually sent $3,000 to the mortgage on pay day and I think I’ll end up sending another $100 with the regular June payment :)
  7. Add X% of the gross of my bonus to my donations budget and send the rest of it to the mortgage. I am super excited about how my finances will look at the end of May! DONE! My donations budget is at last pretty much in the clear and I’ll probably make my next donation in August since I’m trying to make at least $100 of a donation at a time.
  8. Clean the balcony. PASS! We cleaned part of it?
  9. Call my parents four times. (I’ve been lacking on this lately.) PASS! I think I might have called them four times. Definitely at least twice.

Apparently I should make harder goals! Now for some new goals for June:

  1. Go to the barre place by work twice per week before/after work.
  2. Commit to some form of exercise each weekend day, any of: a) 30-60 minute walk, b) 45 minute run, c) any distance/length of bike riding, d) going to a morning class at the yoga studio near my place (three time choices!), or e) doing some sit-ups and push-ups at home. Log it in Google Calendar too.
  3. Send $2,000 to the mortgage on pay day.
  4. Keep my total spending (including the mortgage!) under $2,400. This should be do-able, especially since I don’t have to pay for groceries.
  5. Enjoy the first of our summer weekend getaways!
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  1. #1 by plantingourpennies on June 1, 2014 - 5:47 pm

    Glad it was a good month for you! I like your way of calculating the $ til FI, too. Like our own run-rate calculations it shows the impact that high spend months (or years) have on FI.

    How’s the new yoga studio and mat towel treating you? Is the towel microfiber? I’ve seen other people use them, but I just use a hand towel to dry off mid-class and my JadeYoga mat is pretty sticky (in a good way) so haven’t given the mat towel a try yet. But the towel over the whole mat also seems pretty sanitary as long as it’s easy to clean and doesn’t get all static-y from the washer/dryer.

    • #2 by Leigh on June 1, 2014 - 6:23 pm

      I’m having some troubles getting used to the heat, so I’m trying out a barre place to get into better shape for a month or so and then I think I’ll try the yoga place again. Work is looking like it should calm down in another month and make a regular workoit schedule easier.

      I mostly went for the yoga mat towel since I have a $7 yoga mat and it was cheaper to get a mat towel ($47) than to get a better yoga mat. This is also easier to clean as I just toss it in the washer after each class and then hang it to dry. It is a yogitoes skidless mat towel.

  2. #3 by The Stoic on June 1, 2014 - 6:45 pm

    Congrats on another stellar month.

    I have to say I’m really impressed at the attention to details you have concerning your finances. Seriously, how many other women out there know how many kwh they used in electricity last year? Your depth of analysis in your personal finances has always impressed me.

    Cheers
    The Stoic

    • #4 by Leigh on June 1, 2014 - 9:13 pm

      Thanks!

      I’m pretty sure my boyfriend doesn’t know how many kWh he has used in the last year, but I have a spreadsheet for that :) I don’t like that the electricity company only shows one year of history, so I keep my own spreadsheet!

  3. #5 by NoTrustFund on June 1, 2014 - 8:13 pm

    Great post- I love the new $ until FI feature.

    Let me know how you like barre class- I tried one and didn’t love it but I think I just need to try a different studio/teacher.

    • #6 by Leigh on June 1, 2014 - 9:19 pm

      Thanks! I like the $ until FI feature too. It’s definitely going to be a moving target for a while and I will probably come up with more specific numbers when I get closer.

      I tried one place a couple times and I didn’t like the studio/teacher very much at all. This other one is much better. People seem friendlier rather than comparing the size of the rock on their ring fingers. Plus, I found the exercises more fun! I decided to commit to it for 10 classes and then see how I feel since at that point I will be in a bit better shape. All of the classes don’t seem like much fun when you’re out of shape, so it’s hard to figure out how much I like it!

  4. #7 by John Pham on June 1, 2014 - 9:15 pm

    Wow! That’s a big payment on the mortgage way to put a dent on it. That’s almost a down payment for a single family home where I come from. Keep up the good work.

    • #8 by Leigh on June 1, 2014 - 9:20 pm

      Thanks, John! Unfortunately, single family homes are around $700k+ here. I bought my two bedroom condo for about half that.

  5. #9 by dan23 on June 2, 2014 - 4:12 pm

    Money to FI. I like that. I have been tracking time to FI using the nper function – due to spending increases I have been stuck at near the same time for the past few years.

    For the calculation, I use 3% (*33) which is probably overly optimistic if indexing. 4%, like you use, almost certainly is. Wade Pfau has a post showing how the success of the 4% rule in the US for 30 year retirements is an abnormality (http://wpfau.blogspot.com/2012/05/may-i-add-part-vi-to-retirement.html). And you are aiming for >30 years (though on the other hand you will have some social security). Also, people generally underperform results from these kinds of studies as people have imperfect discipline.

    You can play around with this site, which I think is awesome, to see what works given your assumptions(http://www.flexibleretirementplanner.com/wp/planner-launch-page/). It also allows you to insert future social security payments, and can treat 401k, roth ira, and taxable separately.

    To illustrate using some assumptions in line with your numbers (18K yearly tax free SS with COLA at 67, age 31 retirement with 1,028,500, 15% tax on investments, stable spending, it can support 30.5K at a 90% success rate or almost exactly 3% – and that is including social security.

    • #10 by Leigh on June 2, 2014 - 7:25 pm

      I’m not really that concerned with being precise at this point in time since it’s (at my current estimate) 8.19 years away, which would put me in my mid-thirties and I don’t really know what my ‘number’ will look like at that point. I’m mostly concerned with giving myself some level of target.

      At the end of 2010, I was 46.22 years away from FI. I cut that down to 10.95 years by the end of 2011, up to 14.01 at the end of 2012 with increased spending due to buying my condo and then down to 6.12 at the end of 2013 thanks to my income going up. I’m back up to 8.19 years to FI now since I’m expecting a reasonably significant drop in income for the year (and hence reduced savings), but this year’s income is probably more realistic to use in estimates going forward. So things are definitely jumping around a lot.

      Why do you say that 3% is overly optimistic? What % do you think should be used?

      • #11 by dan23 on June 2, 2014 - 8:18 pm

        3% is probably overly optimistic because everything I have heard about its source for extremely early retirement is the same dataset that pull the 4% number for 30 years left to live, which involved the US stock market being an abnormality internationally (it is reasonable to think that future 40/50 year asset returns will be lower than historic). In addition, even if we have the same expected return and SD as the past, 3% is slightly too high using monte carlo and assumes 0 taxes (or to think of it in a different way, the percentages when people quote 3% and 4% refer to the money you draw, not your spending).

        I use 3% in my own estimates (though I look at 4% too just so I get a mental boost from hitting more milestones), but believe that 3% is the very good case scenario for traditional investing for ~50 year retirements. As I have a few buffers I do not count in my estimate (social security and some other funds I expect), I do not think it is too outrageous to use 3% in my estimate, though I would be positively surprised if for the next 30 year run, 3% as sole income turns out to be safe for all start points for 50 year + retirements.

        >40/50 year SWR, really depends on what you expect of the future (asset class returns and SD) and assuming you get that right, what failure rate is acceptable with random paths to get to those returns/SD. Here is another article by Wade on this, where a plausible scenario is outlined for a 2.5% SWR for a 40 year retirement with 90% paths successful. http://wpfau.blogspot.com/2012/04/lower-future-returns-and-safe.html. He has got a lot of posts/articles on the general concept that SWR being widely used are too high/not safe, especially if you assume lower future asset class returns.

        Factoring in some taxes (depending on income and where you live) and the fact that you maybe hoping for more like 50 years+ and I think we are closer to 2%. I would put a high probability (though not a guarantee) on 2% being sufficient for any retirement length.

        If you are relying solely on the money used to generate the X% for a 50+ year retirement, I would not be comfortable using above 2.5%, though this is pretty speculative. I don’t think any plausible reading of the data suggests higher than 3% has a comfortable probability of working.

  6. #12 by evenstevenmoney on June 3, 2014 - 7:19 am

    I think it’s great havign a FI number in there, like looking at a mountain first from miles away and then climbing to the top.

  7. #13 by mateo on June 5, 2014 - 12:53 pm

    Thanks for the link dan23. There are some great articles and discussions over at mrmoneymustache.com regarding the 4% rule.
    http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/
    http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/

    In short, if you keep your expenses low and have some flexibility and a safety margin, the 4% rules still seems to be OK. People will obviously keep debating, but I’m sticking with 4% in my calcs too.

  8. #14 by Janine (@apenny4athought) on June 11, 2014 - 7:56 am

    You are so close to 400K! That’s so impressive at your age! Soon you will be at half a million!

  9. #15 by Ram on June 13, 2014 - 5:38 pm

    Hi I stumbled upon your blog while searching for personal finance journeys on the web, because reading others journeys keeps me motivated and stay on track. In the last day or so I have read about 8-10 of your articles and one thing I saw was about your passive income in which you mentioned income from dividends. Not to be a spoil sport here but with your tax bracket or even if your lower your tax bracket by maxing our your 401K you still pay taxes on the dividends right in taxable account? And on side note wouldn’t it be better to have the dividends reinvested than having a payout?keep it coming!!

    • #16 by Leigh on June 14, 2014 - 8:36 am

      “Not to be a spoil sport here but with your tax bracket or even if your lower your tax bracket by maxing our your 401K you still pay taxes on the dividends right in taxable account? And on side note wouldn’t it be better to have the dividends reinvested than having a payout?”

      For now, I have dividends reinvested. When I have more than one fund in my taxable account, I’ll leave them in cash and then re-invest them into the appropriate fund.

      I do max out my 401(k), but it doesn’t change my tax bracket even though it does still save me plenty in taxes. And yes, I do pay taxes on the dividends in my taxable account.

      I’m not tracking dividends to retire on them, but simply to track amounts of income that don’t come from my W-2. If you are in withdrawal mode, then dividends are an easy way to withdraw money from your investments without paying capital gains. I don’t have any plans to retire on dividends though – I would retire on a SWR. Probably lower than 4%, but I’m using that as a target for now since even that is reasonably far away and I’d rather shoot for that and then adjust to a new number to reach than shoot for the further number from the beginning.

  10. #17 by Ram on June 13, 2014 - 5:43 pm

    As someone mentioned in the comments Mr money mustache..here is the link of his interview on madfientist podcast http://www.madfientist.com/mr-money-mustache-interview/

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