A little over a week ago, we celebrated this blog’s one year anniversary . Of course, the party wouldn’t be complete without the one year anniversary of net worth updates, too!
Welcome to that special update. Is it everything you dreamed?
If you’re new here, every month I share my savings progress towards a goal of nearly $1 million and an early retirement by age 37. If you’re not new here, you’re probably tired of hearing me explain the purpose of the net worth updates. So, onto the update!
April showers bring May flowers, and as I sit typing this in the early days of May, I can indeed confirm this to be true for our season. As the Minnesota winter made one last push of gloom during April, we were hit with overcast days and a few bouts of freezing rain. But Spring fought back, with a ray of sunshine here and budding trees over there.
In the end, Spring prevailed, and we were rewarded with blue skies, green trees, and bright, colorful flowers glowing across the fresh green grass. In a strange way, living in a place with such cold winters has a certain knack for making the good weather that much sweeter.
It’s a peculiar little note of the human psyche, that we tend to take the routine pleasures for granted until they’re taken away from us for a while.
“Through suffering comes wisdom,” said thousands of motivational pictures on instagram. I’ll say, “through brutal weather comes an appreciation for nice weather.” Feel free to overlay that text on a mountain or ocean photo.
In other April news, I spent a few days in New Orleans. The trip was 4 days of blissful, stress free relaxation. Getting there, was anything but.
I’ll spare you the details, in order to keep myself from becoming that annoying traveler who bores you to death with complaints about airline delays. You know the type. “Whaaa! Whaaa! My vacation didn’t go perfectly, and I had to spend time doing the incredibly strenuous task of sitting in a chair for a little longer than I expected.” Airline delay stories are the worst, so I’ll make mine as brief as possible.
Bad weather caused me to miss a flight for the first time in my life, and I spent an unplanned night in a Chicago hotel. Which sounds like a fun sidetrip, until I confess that “spending the night” is code for getting harassed by hobos on Chicago’s L Train, and “a Chicago hotel” was actually a smoke tainted motel room.
Once I did finally get to The Big Easy, New Orleans was everything I’ve come to love about it. The trip was a fun filled blur, complete with delicious food, good drinks, more delicious food, cool music, and yet more delicious food.
In other news, I got a promotion!
I’m now salaried at slightly over $80,000 per year, which will hopefully accelerate this whole savings process. I’m coming up on 4 years at this company, and in that time I’ve seen my salary grow by around $30,000. Definitely no complaints on my end, and I’m feeling very fortunate.
Outside the office, our landlord approved our request to get a dog, so the girlfriend and I started dog shopping. We’re looking to find ourselves a nice, medium sized rescue who fits in our apartment and gets along with our sassy cat. We’ve met some exciting options, so hopefully he or she can make an appearance in the next update!
Net Worth Update – April 2017
Now that we’re officially on year two of the updates, I’ve made a few changes.
- I’ve started tracking my net worth with Personal Capital, and it’s as awesome as everyone says it is.
- The Auto Loan is DELETED from the table, since I killed that sucker in March.
- I’m now reporting all my taxable stock holdings (the Vanguard and Merrill Lynch accounts) together in the Brokerage line.
- I’ve created a new line item just for the Roth IRA. The Roth used to be combined with the Vanguard account, which made no sense. Who makes the decisions around here, anyway?
All of these are minor nuisances. What actually matters, is my net worth increasing $3,500 over the month.
Cash: $2,995 (-$1,731)
I bought $1,100 of Roth IRA, which depleted the cash stack a bit. I’ll attribute the rest to last month’s absurd credit card bill, which I’m disappointed to report did not deflate as much as I hoped in this month. More details in the credit card section below.
Brokerage: $99,779 (+$2,338)
So close! Almost 6 digits.
This newfangled category now includes the Vanguard Index Fund and the Merrill Lynch account. The Vanguard Index fund invests in VTSAX, while the Merrill Lynch account includes mostly Vanguard ETFs and a few individual large companies. The breakdown between the two by the end of April was:
- $50,528 in the Vanguard Total Stock Market Index Fund.
- $49,251 in the Merrill Lynch brokerage.
401(k): $56,855 (+2,774)
I’m back on track to max out the 401k in 2017. This means contributing A TON to the 401k per paycheck. Especially because I reduced my contributions at the beginning of the year while I saved for other goals. With those goals out of the way, I’m making huge automatic contributions to make sure I contribute $18,000 in 2017.
Roth IRA: $17,931 (+$1,185)
My Roth is invested entirely in Vanguard’s REIT Index Fund. I like this allocation, since I otherwise have no exposure to real estate and do not own a house.
$1,100 of the increase was a contribution made in the first week of April. The $1,100 contribution maxed out my Roth IRA contributions for the 2016 tax year.
It’s nice to have my 2016 contributions finally taken care of. Now it’s just time start building up for 2017!
Rent Payable: $693 (+$3)
Utilities are still low. We’re in that nice spring season where neither the heater nor the air conditioning gets used much.
Our lease is coming due, and I breathed a sigh of relief when our landlord said he’s only increasing rent by $30 a month ($15 per person) next year.
I couldn’t be happier with our living arrangement.
Credit Cards Payable: $2,825 (-$207)
Another higher credit card bill than I’d like to see. A couple reasons for the unusual spending:
- The cancelled and missed flight fiasco meant I booked two last minute flights for $700. This cost was partially offset by some airline vouchers I can use in the future.
- In April, I paid for some reservations for our upcoming Alaska trip in May.
- I’m writing this update a week into May, which means an extra week of expenses added to the credit card.
One Year of Net Worth Updates
After one year of updates, my net worth has increased from $127,259 to $174,042 between April 2016 to April 2017. A $46,783 increase. Not bad!
The ultimate goal is still 10 years out, but so far I’m a little ahead of schedule. My career is progressing faster than I anticipated, my contributions have been steady despite a car purchase, and my portfolio has rallied higher than I forecast. The plan is working out!
Readers, how are you doing with your savings goals?
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Your taxable account is crazy high! Super jealous. Great job. You’re on track to hit $200k in no time!
Thanks Julie! The high taxable account is awesome for everything except tax season, haha!
Congratulations Money Wizard. The math nerd that I am calculates the monthly change in your total assets as 4566, a full 1221 more than the 3345 reports. Am i missing something?
Hey, good catch. This is why I shouldn’t draft net worth updates late at night!
Looks like I made a mistake when I was combining the brokerage accounts for the first time. The total assets and total net worth number is correct, but the brokerage account only increased $1,117 in April.
I’ll update the graphic in a bit. Good catch!
Woohoo! Congrats on that raise! Income increases are always wonderful news when paying off debt. Go you!
No debt here! Looking forward to putting the extra dollars right to work.
Love the updates, quite inspirational seeing how you can balance lifestyle/travel and still be able to sock money away! Reading these helped me realize I too can add more to my 401k without sacrificing lifestyle. Hopefully one day I can hit the max, too!
Awesome to hear, inspiring others is exactly why I publish these.
Good luck hitting the max. I believe!
Congratulations on the promotion!
In your first year you gained about $50k – do you know how much is from contributions vs market gains?
I’m a bit behind you so my net worth gains are mostly from contributions. It will be exciting to see my investments grow faster than contributions one day!
I just checked a few account records and did some quick napkin math. It looks like $33,000 from contributions, and $14,000 from compound interest doing its thing.
You did an article “Should I Invest in My 401k? (Even with High Fees?)” which basically said yes IF the company was matching investments…what if they are not? Terrible, I know but that’s the case where I work…would it still be in my benefit to invest in my 401k (with 1.35% fees) and no company matching? <<I am afraid that part wasn't addressed. Curious to see what your answer is…
If your company doesn’t match, feel free to prioritize a traditional IRA over your 401k.
After that, the Taxable Terry vs. Retirement Rick example from that article assumed no company match, and the example shows that a high fee 401k still beats out a taxable index.
Great update!
I just started following your blog and the timing couldn’t be better 🙂
I just opened a Vandgurd Total Stock Market Index Fund (although I could only afford the $3,000 account)…I decided to invest in this instead my employers retirement plan because I was getting absolutely screwed with high fees.
Out of curiosity how much do you put into your VTSAX per month?
What is a good percentage to shoot for?
Note: I already max out a ROTH IRA, but newer investor here would love some advice!
Awesome to hear! With a few contributions and the magic of compound interest, that $3,000 account will be a $10,000, lower fee admiral fund in no time. Enjoy!
I don’t contribute a set amount per month, although automatic contributions is an awesome strategy. For me, I find a set budget encourages me to spend what’s left over. So instead, I just try to save as much as reasonably possible.
PS – have you seen this article about high fee 401ks? The high fees might not be as bad as you think.
Thanks for the reply, and I wish I saw your 401k post sooner!
However, I still feel good about my decision in going with VTSMX instead…My employer offers a SIMPLE IRA plan with no index options.
I’d be curious to get your take on these fees below:
Sales Charge: 3.51% – 5.75% (every contribution I make gets a fee)
Distribution and/or Service (12b-1) fees: 0.22%
Expense ratio: 0.77%
Other expenses: 0.14%
However, my employer contributes 2% regardless if we put money into the account or not. So what I’m doing is letting that money build up in the SIMPLE IRA while I put my own money in VTSMX.
Would love to get your advice on this?
Even though I’ve already made the decision haha
I’m just much more confident investing in Vanguard compared to my employers rinky dink plan.
The fees are definitely high, although the 12b-1 fee should be included in the 0.77% ER. Not sure if the 0.14% of other expenses are included in the stated ER or not.
Like I mentioned in the high fee 401k post, usually 401ks/SIMPLE IRAs are worth it up to about a 2% ER. But if yours really doesn’t offer index funds, I can definitely understand why you’d feel more confident investing in Vanguard.
A big part what made me want to switch is the fee below:
Sales Charge: 3.51% – 5.75% (every contribution I make gets a fee)
So if I put in $212 I get knocked with a $7-8 fee every time.
I mean that just seems like robbery to me.
My employer contributes 2% regardless if I put money into the account, so I guess I will just let them keep doing that while I invest more confidently with Vanguard.
Yeah sales charges are pretty ridiculous. Looked at another way, if you maxed out your SIMPLE IRA every year, you’d be paying about $500 in fees. ($12,500 * 4% = $500)
On the plus side, one time sales charges aren’t as devastating as an ongoing expense ratio. Over a 30 year career with a maxed SIMPLE IRA returning 7% (ignoring employer matches) a financial calculator shows that no sales charge ends with a portfolio value of $1,180,759 while a 4% sales charge only reduces the value to $1,135,529.
I really appreciate your insight…let me pick your brain once more.
This is still all very new to me…
Please note that these are on-going sales charges every time me or my employer makes a contribution…The one good thing is my employer will contribute 2% regardless if I put any money into the account or not.
So if you were in my shoes knowing the ridiculous fees and circumstances of my SIMPLE IRA plan…what would you do honestly?
Stick to the SIMPLE IRA or open up a VTSAX with Vanguard?
Side note: I already max out a ROTH IRA.
Thank you for your advice,
Evan
Congratulations and I wish you continued success.
I’ve been on the same track since my wife died in 2006. I’m 54, currently debt-free (including my mortgage) and, to mirror your table, I presently have: $255,000 (cash), $550,000 (post-tax investments), $450,000 (IRA) and $450,000 (401k) — all invested in index funds. I receive $15,000 from a life-time annuity and my salary is $130,000 — I put 18% into the 401k and save about 50% of my take home pay. My net expenses are about $25,000/year.
My wife were together for 20 years and lived way below our means as she was 19 years older than me and we know she would retire before me. Unfortunately, she died of a brain tumor in January 2006, just seven weeks after diagnosis. So now it’s just me.
I’m considering retiring, but don’t know what I’d do so, until I figure that out, I’ll probably keep working.
So sorry to hear about your wife. I can’t even imagine.
On the money side of things, you’re financially independent in every sense of the word. Congrats! Those numbers mean you’re looking at a 0.6% withdrawal rate, which blows away the standard advice of 4%.
Coupled with social security kicking in after a few years, and your finances look better than invincible.
It sounds like you enjoy your job though, so for now take pride in knowing work is completely voluntary! I hope to get there one day! Thanks for sharing.
BTW – here’s what I’d do in retirement.
Hey Wizard!
Congrats on the progress. I’m curious what your disbursement strategy will look like with your projected draw beginning in your 30s? I am on pace to be in a similar situation and want to make sure I’m putting my money in the right places in order to draw pre 59 1/2.
My plan is a Roth IRA Conversion Ladder. I’ll convert my 401k to a Traditional IRA, then to a Roth IRA. I’ll live off my taxable accounts while waiting the 5 years for the ladder to kick in.
This is yet another reason why I max out my 401k every year, aside from the obvious tax benefits.
Hey Money Wizard,
Can’t remember how I came across your blog about a month ago, but you referenced Root of Good’s IRA Conversion Ladder article (great read). I picked through his articles and decided to come back to your blog for a different perspective on FI and early retirement.
After reading a few or so of Root of Good’s articles, I decided that early retirement is possible and talked it over with the wife. Brought her on board and combed through our budget (I use the Mint app by Intuit. I don’t have it tracking investments, but I have a spreadsheet for that) to reduce unnecessary spending and contribute more to savings (401k, taxable accounts, IRAs). I figure we might early retirement in 15.5 years (age 42.5 for me). Of course, this is dependent on a lot of variables: no raises, 7% ROI, etc.
Couple questions for you: (if you’ve addressed this in other articles, please feel free to lead me there instead of having to re-explain something)
– What’s your plan for housing in early retirement? Rent forever? Buy a house if your investments grow better than expected and don’t know what to do with it?
-I’m currently paying off my car, should I pay it off faster or keep paying it and just invest the other money?
Sorry for the long comment. I know the article is only a few days old, but I appreciate that you take the time to reply to every comment. Looking forward to reading more articles to come!!
Thanks,
JJ
Hey JJ, glad to hear you found your way back.
I’m okay with renting forever, but I like the idea of raising a family in a stable environment, so I will probably buy a house one day. It will be something cheap enough that I can either pay it off before early retirement or support the mortgage with income sources outside of a day job (passive income, rental property, etc.) I wouldn’t buy a house without a wife and plan for kids, so my ace in the hole is that I haven’t yet combined finances with the girlfriend. Doing so would give me more down payment power and more income capacity.
The car payment depends on your aversion to debt and interest rate. Personally, I paid mine off immediately, but my interest rate was 4%. The stock market could easily return less than 4% over the short period of a typical auto loan. If the loan was closer to 2%, I’d have felt more comfortable carrying the debt.
Hope to see you around!