Welcome to your regularly scheduled programming of some internet guy sharing all his random financial information with the world.
With the books closed on another month, it’s time to once again track my saving progress. Of course, the ultimate goal is a retirement in my late 30s, and these monthly updates are here to entertain and inform the onlookers, while serving the added bonus of holding myself accountable. For the curious among us, you can find a relatively amusing history of the progress here.
If I could sum up the month of February with a catchy title, I think I’d call February 2017, “Coffee Shop Month.”
The girlfriend has been slaving away on a master’s thesis, which means our usual monthly travels around the country have been replaced with slightly more short distance travels to the local coffee shop.
This is bitter sweet for My Money Wizards. On one hand, this month’s update will be short on the usual amateur iPhone photography, while on the other, I’ve had plenty of chances to pound the keyboard, and I’m excited about the stockpile of great topics heading your way over the next few months.
The flashiest activity of the month was no doubt attending the annual Red Bull Crashed Ice race, which is the sort of excitement Northerners find themselves in when the temperatures plunge. You may have seen this wild spectacle on TV, but in case you haven’t, imagine the most screwed up mashup of hockey, skateboarding, and motocross racing your mind can comprehend… then make it weirder.The cliff notes description of the event involves a bunch of people suiting up in hockey pads (minus the stick) then racing down an impromptu, man-made ice chute filled with turns, jumps, and general chaos.
Red Bull funds this whole spectacle free of charge, and the two-day event draws nearly 150,000 people from the Twin Cities every year, who all happily raise their energy drinks in toasting Red Bull for yet another insane publicity stunt.Hooray for frugal entertainment!
On the money side of the spectrum, I continued to ponder my living arrangements. I’m really warming up to the idea of investing in a duplex while living on the water. Since whatever residence I purchase won’t be an investment, this would reduce most of the negatives of home ownership (property taxes, closing costs, maintenance) while still letting me benefit from all the investment related positives. (cash flow, leverage, etc.) I’ll keep you updated.
Net Worth Update – February 2016
Confession: sometimes I redo the math on these updates five times over, because I can’t believe how quickly the savings stack is growing.
We didn’t hit a nice even number like last month, but $166,111 still has a nice ring to it. Let’s dive into the details.
Cash Savings: $3,776 (-$4,996)
Quite a busy month for the cash savings. I spent $7,000, but not on anything exciting. For the past few months, I’d been building up my cash in preparation to pay off the car loan. Once I paid off the car loan, or so the plan went, I’d then save like a madman in an attempt to max out my Roth IRA for the 2016 tax year. Based on my previous contributions and the IRS deadline rules, this would leave me having to come up with $4,500 between mid-February and April.
After lots of contemplation, I decided to play it safe. Instead, I paid off half the car loan and made a $3,400 contribution to my Roth IRA for 2016. This serves a couple benefits:
- I’m prioritizing the Roth contributions, which is the only item here with an actual deadline.
- I didn’t want to contribute all $4,500 to the Roth on the same date. I’d rather stagger my entrances for more of a dollar cost strategy.
- Although I still plan on saving like a madman through April, I’m not missing out on tax advantages if I don’t come up with $4,500 between now an April.
Really, the decision came down to a tradeoff between paying one month of interest on the car loan (about $25) or potentially risking the roughly $800 in tax savings from a maxed out Roth IRA.
Besides all this decision making, the cash account was bolstered by a pretty frugal month. I cut back on eating out considerably, and for the first time this year I kept my resolution of eating lunch out less than once per week. (Please, hold your applause, this should not be a noteworthy feat in a normal world.)
Vanguard Brokerage: $67,321 (+$5,983)
Big jump in value because of the previously mentioned $3,400 contribution to my Vanguard Roth IRA. Account balances at month end equaled:
- Vanguard Total Stock Market Index Fund (VTSAX): $49,690
- Vanguard REIT Index Fund (VGSLX) (Roth IRA): $17,307
For future monthly updates, I’m thinking it may make more sense to break out the Vanguard Roth IRA into its own line item, and possibly even consolidating the Vanguard Brokerage with the Merrill Lynch brokerage. Anybody have strong opinions one way or another?
Merrill Lynch Brokerage: $48,527 (+$1,053)
No notable updates here, so the $1,053 is all due to 2% returns on the portfolio during the month.
401K: $52,473 (+2,662)
I’m currently only contributing less than 10% of my pre-tax income to the 401K as I focus on the car loan and the Roth. I’m looking forward to bumping up this contribution to my usual 25+%, which would put me back on track for maxing out the 401K in 2017.
Rent Payable: $715 (-$2)
Still renting a 2-bedroom apartment close to downtown, and it’s still winter. This cost should drop slightly as the weather has started to warm up. (THANK THE HEAVENS)
Credit Cards Payable: $1,835 (+$657)
A pre-purchased plane ticket for two upcoming trips over the coming months pushed this month’s bill a little higher than January, but overall February was a pretty frugal month. The highest spending categories were groceries and dining out.
I plan on tracking this spending more closely in the future, so I should be able to provide more details within this section for future updates. Stay tuned!
Auto Loan: $3,436 (-$4,064)
Didn’t KO this sucker like I planned. Instead I took the planned $7,500 payment and split it into a $4,100 principle reduction and a $3,400 Roth IRA contribution. I should be able to get rid of this thing next month, then shortly thereafter contribute the last $1,000 into my Roth IRA.
Last month I concluded in awe at the power of investments, which increased my net worth $7,000 in 31 days, and all I had to do was bring my lunch to work and avoid a few trips to the shopping mall. Then February happens and repeats it all, but with an $8,000 gain this time!
I really hope the next bear market comes soon, because the market’s incessant march upwards is starting to make this guy uneasy.
Perhaps I’ll shift my after tax focus towards investing in a rental duplex, or maybe I’ll check out peer to peer lending. But the important caveat is I’ll continue saving, no matter what, because investing in productive assets can only help in this chase towards early retirement.