Hey Money Wizards, welcome to the end of summer net worth update.
Shed a tear folks, shed a tear…
If you’re new here, every month I share all my progress towards a nearly $1 million portfolio and an early retirement by age 37. Since money tends to be a pretty taboo subject IRL, I hope that by sharing all my details here, you just might find something helpful towards your own situation.
Where to start with August?
Well, after months and months of broken record updates, the kitchen remodel is finally finished. Sure, it’s a few months behind schedule, but I’ve watched enough House Hunters Renovations to know that’s just par for the course.
I’ve also watched enough House Hunter Renovations to know that so is blowing the budget. Which we did in glorious fashion.
Our original napkin math budgeted $10,000 for the renovation. Looking back, that might have been a little ambitious given that we planned on blowing out a load bearing wall and replacing ALL the appliances, flooring, cabinets, and counter-tops.
Thankfully, we also mentally prepared ourselves for 50% overages, because hey, that’s what happens when you’re dealing with house stuff. That turned out to be a wise move, because the total bill came just over $14,000. Ouch!
I felt a little down about that, right until I considered how much work was actually done, and how much money we actually saved. It turns out, similar renovations run the money muggles over $30,000. But through a mix of research, coupons, and deal hunting, we saved $1,900 in quantifiable discounts and rebates, thousands more on our product choices, and untolds more on labor.
How, you ask? Well, I’m devoting a whole post to that next week!
Now’s also the part where I’d plaster some glorious before/after pics of the renovation, but that will have to wait for next week’s post too. 😉 How’s that for some suspense?
In other news, I also attended Minnesota’s annual August tradition – The State Fair!
The Minnesota State Fair is an extravaganza like nothing else, complete with food, drinks, rides, and of course… the state’s fattest pig.
Speaking of food, the fair was truly a blur of a binge fest. I went with a group of friends, and our game plan was strength in numbers. With so many in our group, we thought for sure we’d be able to divide and conquer all the decadently disgusting yet delicious snacks at the fair.
Before I knew it, we were passing around guilty pleasures like druggies on a bender. Corn dogs, french fries, cookies, giant pretzels, pizza slices, popcorn, waffles, cookies, and honey drizzled ice cream all bombarded my poor, unsuspecting stomach in a matter of hours.
I woke up from my food coma wondering where all my cash went…
The most frugal trip to the fair? Definitely not. An absolute blast? Definitely! I’ve certainly blown $60 in worse ways.
Speaking of blowing money, I dropped nearly $200 on my first “materialistic” purchase in a while.
Tired of constantly brushing The Money Pup and The Cash Cat’s hair off my feet whenever I walked around the house, I said enough is enough. My futile attempts at sweeping were no match for the dense fur coats of the animals. So, I caved, and I bought myself one of the fancy-pants robot vacuums.
I did pick one of the cheapest ones possible (the Eufy 11s) but that didn’t mean I was any less worried about the dreaded buyer’s remorse.
My delivery came a few days later, and I gotta say… it’s amazing. Absolutely amazing.
What’s interesting, is a few weeks later, I found myself just as excited about the gadget as day one. Which is interesting, especially since hedonic adaptation says we usually get adjusted to our purchases.
But then, I did some more reading. It turns out, there’s significant research that shows more happiness usually comes not from adding super-cool things to our lives, but instead removing those things we hate.
Which sort of explains my fascination with this robot vacuum thing. At first glance, I added a gadget. But in reality, I actually removed a chore I hated doing. And because of that subtle difference, science claims I’m slightly less likely to experience buyer’s remorse. Something interesting to consider the next time you’re sweating bullets over a spending decision.
Now, after that lengthy introduction of all the ways I wasn’t frugal this month, what’s my net worth looking like?
Net Worth Update: August 2018
Wow, that’s a surprising increase. Let’s look closer:
Cash: $17,458 (+$3,430)
I’ve been pleasantly surprised with how quickly this balance is growing ever since I adjusted down my 401(k) contributions from over 25% to 7%. I talk about my reasoning for doing so here, and I’m hoping it will allow me to diversify into real estate a little quicker.
That said, the cash balance won’t stay this high for long, due to an unusually large credit card bill I’ll pay off soon.
Brokerage: $121,540 (+$4,589)
Just a bananas crazy month for the stock market. The S&P 500 was up 3% during August, which is especially nuts when you consider that’s about 1/3 of the average year’s expected returns. In one month! (Typically, the market returns 9-10% a year, with inflation usually bumping down the “real” returns by 2-3%)
I’m not sure how much longer this rise can last. Then again, I’ve been asking the same question for the past 6 years. Which is just more proof why it’s silly to try to time the market. Instead, like Dory from Finding Nemo, the wise investor has to just keep investing.
That said, I didn’t make any contributions to the after tax brokerage, because I’m saving up for a rental property. My breakdown remains:
- 50% in Vanguard’s Total Stock Market Index Fund. (One of the 6 legit index funds I talked about last week!)
- 30% in a mixture of Vanguard growth, value, and bond ETFs.
- 20% in individual stocks, back from the days when I thought I could beat the market. I’ve now wised up and decided not to trade individual stocks.
401(k): $109,523 (+$5,181)
More insane returns driven by a bananas market.
The $1,000 of contributions represents my 7% contribution mixed with the employer’s matching.
Last month, a few readers asked what my 401(k) was invested in. Ask and you shall receive!
Like all my investments these days, I choose to go with the lowest cost index funds available. The breakdown of those index funds are:
- 50% in Large Cap US Stocks
- 35% in Small Cap US Stocks
- 15% in International Stocks
The higher percentage of small cap and international exposure tilts my 401k towards a little more aggressive allocation. I’m comfortable with this since I may not touch these investments for a while.
Roth IRA: $25,004 (+$606)
Hey, passed $25K! The Roth is invested entirely in VGSLX (another one from the list of 6 legit index funds).
It’s hard to believe it’s already September as I write this, which means I need to get onto maxing out my $5,500 of allowed Roth contributions this year.
Rent Payable: $771 (+$8)
My half of the mortgage, utilities, and anticipated home maintenance. (We allot 2% of the home’s value to expected maintenance each year, or $300 per month. This lets us pay for any miscellaneous house expense’s stress free.)
Credit Cards Payable: (+$1,479)
This unusually high bill includes some of the typical work expenses, which will be reimbursed. More notably, it includes half the rental cost of a MASSIVE ski condo for me and 8 of my skiing buddies, who are heading to Big Sky, Montana this winter.
Because I’ll eventually get reimbursed for this $1,600 bomb, I’m not including it in this month’s spending report. Although it does explain the entire $1,500 increase in credit cards payable from last month.
Total August Spending: $2,053
Surprisingly, almost exactly on target!
Groceries: $88
Unusually low, but mostly just a quirk of timing. I took a huge grocery store trip on the last day of July, which carried me over for most of the beginning of August.
Entertainment: $201
The previously mentioned state fair madness, a beer fest, a minor league baseball game, a few brewery trips, and a round or two of mini golf for good measure.
House Expenses: $85
Paint is expensive! I bought a couple gallons in anticipation of repainting some interior rooms.
Other: $354
The vet is expensive too! The Money Pup had to make a trip, because his seasonal allergies were getting the best of him.
The good news? His symptoms are cured! The bad news? A new $60 per month prescription.
Final Thoughts
Pretty crazy that despite a pricey robo-vacuum purchase, event tickets to a beerfest, wild spending at the State Fair, and a several hundred dollar vet visit, I still came in right around budget. (And somehow, far below the average American’s monthly spending.) Just goes to show the power of taming The Big 3.
BTW – if you’re looking to start tracking your own net worth, I still think Personal Capital is the way to go.
Readers, how was your August??
Hey Money Wizard,
thank you for all you do! I’ve found your posts insightful, helpful, and a delight to read. Keep on keeping on!
I also want to ask why you present rent payable each month as only that month’s liability instead of your total half of the mortgage plus what you know you’re going to put away for miscellaneous expenses? I can’t remember if you provided an explanation in a previous post or not and haven’t had a chance to go back and look. I ask because it seems misleading to say you owe $775 when considering your total net worth if you’re actually liable for 1/2 of the mortgage and miscellaneous expenses each month and you know those amounts ahead of time.
Thanks again and I look forward to following your progress towards your goals!
Thanks!
I don’t follow your question though. Rent payable includes my half of the mortgage and all other fixed housing expenses.
The total monthly mortgage is something like $680. All other miscellaneous expenses (taxes, insurance, etc.) and maintenance fund contributions (2% of house value per year) are another $620 or so. Meaning $1,300 per month for both of us. We then add whatever the monthly utilities totaled, which usually brings the number up around $1,400-ish, and we split that in half. I include that final $700-ish as rent payable.
That makes sense, let me clarify what I meant. You’re taking a balance sheet approach in showing your net worth, and it is misleading to not include your full half of the mortgage within your liabilities. For example, if it’s an $80,000 mortgage and you’re liable for half, I’d expect to see $40,000 on your personal balance sheet as a liability. At the same time, I’d expect to see the corresponding value of the home as a line item in your assets. So if you have any equity in the home, your net worth may actually be understated above!
I hope this clarifies my question!
Ah, I gotcha.
Yeah, I might make that adjustment if/when Lady Money Wizard and I combine finances. Until then, it’s all technically in her name.
If I did add the house to the balance sheet, my net worth would increase another $15K or so due to equity.
Hey Money,
Any thought to pulling some funds out of the market for the next correction? I know you said that you can’t time the market but we all know good things come to an end and cycles do happen. I made the decision to take 25% out so I still gain if the market continues upward but I have some funds to re-invest on a correction. Your thoughts ??
I’m not a fan. It’s too much like market timing which almost never works out long term.
If I’d have pulled out back in 2013 when I thought the market was due for a correction, I’d be tens of thousands of dollars poorer today. And there’s no guarantee even a large correction today would bring prices down to 2013 levels.
$14,000 for a kitchen renovation sounds pretty amazing to me. I’m interested to see the post with more details about your experience.
Watch for next week’s post!
Nice net worth increase Money Wizard! When you only spend $80 on groceries in a month I can understand how it happens!
We tried out one of those robot vacuum things a few years back and ended up being disappointed. The sensors couldn’t detect table legs and whatnot, and the robot continually bashed into the furniture and walls. Our furniture and house isn’t fancy, but we didn’t want things dented up.
Thanks Mr. Tako!
This vacuum has some sort of sensor that usually stops it short of the furniture. It still runs into stuff occasionally, but it’s more of a soft tap, especially since the bumper has some give to it.
Are you still going to max out the 401k for 2018 despite reducing your contribution? I’m fully funding a Roth 401k and 2 Roth IRAs due to my wife and I (25 and 24, respectively) being on one income while she is in school and therefore being in the 12% bracket after standard deduction, but I’m debating whether to reduce my 401k contributions to save up for a 10%+ down payment.
No, I won’t max out my 401k this year.
The correct order of investing post might help you out a bit, although specifically saving for a downpayment is the one scenario I didn’t include. Beyond that I think it’s a mix of how much you want to become a home owner and what you expect real estate to do it in your area. Guy on Fire just published an interesting post in favor of investing rather than putting down a large downpayment. (Article here)
Not sure if any of you heard of pet insurance, (I personally have trupanion) it has saved me a bunch of money and has also saved my pet from being put down.
Surgeries costing 8k plus per knee not including physical therapy (paid for also by pet insurance).
Lastly the insurance pays for on going meds because of injuries.
Anyway figured I’d though that out there.
Thanks for the suggestion. Although I wasn’t super impressed with my pet insurance options when I ran the numbers for our guys.
https://mymoneywizard.com/is-pet-insurance-worth-it/
Love reading your posts, very straightforward and an easy read! Try GoodRX for that prescription. We don’t take meds but the beagles do and it saved us a ton. Usually only works if it’s a human medicine though.
Thanks!
Speaking of real estate and mortgages, are you familiar with capital gains when you sell a home with the new tax cuts? I read your article about the different tax cut brackets but I believe the information mentioned was more towards capital gains for stocks/mutual funds and didn’t know if you knew if the proceeds of a sale of a home falls under the new tax rules. Also, how do you keep your grocery bill so low? Have you ever posted something like a weekly/monthly menu of what you make to keep it so frugal that I just haven’t come across on your blog yet?
Great post! I am the proud owner of a (2nd hand) iRobot vacuum robot, and I must agree with you – it’s some of the best money I’ve ever spent.
I’m curious though, as to why you opted to spring for a brand new model. Maybe it’s different from where you live, but where i live (Denmark), there’s a huge 2nd hand market (for everything really, not just electronics). You can find almost anything, at half the price.
Will you share some of your thoughts on that topic?
I think 2nd hand is a great money-saver – and sometimes you also get to wave the “I-saved-the-planet- from-some-more-plastics”-flag around every now and then (when you buy used stuff – you could obviously shy away from plastics altogether, but that’s kind of difficult!…) 😛
Thanks 🙂