Welcome to the third monthly update of 2017. We’re also one month away from the one-year anniversary of these updates (and this blog!) You did plan for the party, right?
Every month, I spill all of my financial guts in the form of a monthly net worth report. The goal here is not to brag, but to share my savings progress towards early retirement by age 37. Blogs sharing thoughts and ideas are great, but there’s nothing like seeing the actual numbers on a page.
March is usually one of the most fun months of the year. Here in Minnesota, the brutal winter starts to ease up a bit, and we start to see signs of life again. Both from the nature and the humans.
Elsewhere in the country, ski season is in full swing, which I usually enjoy for a nice one-week retreat.
Plus, I usually find myself traveling somewhere warm around Spring Break. I would say it’s a long lasting hangover from college, but I’d be lying. College is quickly falling further and further in my rear-view mirror.
I recently rolled over to age 27, firmly cementing me in my “late 20s.”
Who are you and what did you do with my youth??
I’m not usually one to get sentimental or reflective about ages. I passed the big 2-0 without a second of mourning for my teens. 21 was nice for the free drinks, I guess. 25 was probably my favorite, because of the drop in car insurance rates. Typical money blogger…
But for some reason, 27 hit me like a freight train.
I guess I always had this romanticized notion of The Late 20 Year Old. Well into their career with a house, family, white picket fence, you know… a real adult. And of course, adults are supposed to be vastly different creatures from the kids, the teenagers, the college students, and the new hires.
And yet here I am, feeling pretty unchanged from my 20-year-old version. Sure, I probably don’t make quite as many dumb jokes (you readers may disagree) but otherwise, we’re dealing with the same guy.
When exactly did the cataclysmic jump happen? I’m already preparing to blink and turn 30.
Alright, alright… Old man gripes aside, I’ve got a lot to discuss from March. True to the tradition, I did go on a ski trip. To Aspen, where I experienced the true sticker shock of $50 million homes.
I also snuck in a cheap weekend trip to Tampa, Florida, where I saw the scenic boat dock pictured at the top of this article.
My only boats on the trip were a set of borrowed kayaks, which the girlfriend and I used to paddle down a river home to tons of manatees. The Cows of the Sea – these gentle giants are quite the spectacle. We both agreed it was the highlight of the trip.
Now that I’m in my late 20s and time is suddenly traveling at warp speed, I’m feeling even more motivation to save and invest. If I’m going to hit my goal of retiring by 37, I’ve only got 10 years left!
And on that note… to the update!
Net Worth Update – March 2017
Car loan dead! Past $170,000!
Cash: $4,726 (+$950)
All kinds of activity here this month.
- Cash out: I wrote a $3,400 check to pay off the car loan.
- Cash in: My ski buddies paid me $1,400 for the ski trips that I previously fronted on my credit card. Someone please teach The Money Wizard about the time value of money…
- Cash in: A $1,100 tax refund from Uncle Sam. (If you haven’t filed taxes yet, and this is important… don’t forget!)
$4,700 is a little more cash than I usually like to carry, and this update reminded me that I still have $1,100 of 2016 Roth IRA contributions to sneak in before April 15. I’ll be topping off the 2016 Roth soon.
Vanguard: $66,626 (-$695)
Account balances at month end equaled:
- Vanguard Total Stock Market Index Fund: $49,729
- Vanguard REIT Index (Roth IRA): $16,897
I’ve gotten some questions to clarify my fund selection, especially after my recent article about How to Choose a Vanguard Index Fund.
Here’s the cliff notes version, until I come out with a more detailed post on the topic:
I invest my taxable money into the Total Stock Market Index Fund because it’s the most diversified stock fund Vanguard offers, and it also sports the lowest fees. I don’t feel the need for any bonds, since I’m still building up my portfolio. I’d rather take more risk early in exchange for potentially higher returns.
My Roth IRA invests in a REIT index fund. I chose the REIT for a couple of reasons:
- I don’t own a home, and my investments are almost entirely in stocks. A REIT gives me some diversification into real estate.
- REITs pay high dividends, which get taxed heavily outside of retirement accounts. By keeping the REIT in my Roth, I don’t have to pay taxes on these dividends.
Merrill Lynch Brokerage: $48,782 (+$255)
No additions, but this portfolio increased half a percent during the month. Score.
401K: $54,081 (+$1,608)
Time re-up my contributions to make sure I’m on pace to max out the 401K in 2017. I had previously dropped down my paycheck’s contributions to less than 10% of my pretax income to pay off the car and max out the Roth. With those two goals out of the way, I’ll ramp up the 401K contributions to over 25% of my paycheck.
Rent Payable: $690 (-$25)
I don’t think we turned the heater on all month! Hallelujah. Hopefully the nice weather continues.
Credit Cards Payable: $3,032 (+1,198)
Holy credit cards. I don’t think I’ve ever had a $3,000 credit card bill.
The huge bill was mostly due to putting some group ski costs on my card, and buying vacation expenses for the summer. This should level off in future months.
Auto Loan: $0 (-$3,436!!)
Debt free and loving it! Thanks Dave Ramsey! Just kidding, I don’t agree with Dave.
Although I could have almost paid cash for my $13,000 car, I ended up taking out the smallest loan possible in order to get an extra $1,000 off the sticker price. I intended to pay the loan off immediately, but I missed some savings goals and prioritized my Roth IRA over the loan.
All said, I paid 1 month of interest on the loan. In March, I knocked the sucker out cold!
This loan was my first experience with debt. Even with such a small loan, I was amazed at its crippling power. Saving became more complicated, investing felt like I was running in place, and I never felt in control.
If you’re currently struggling with debt, you’ll be amazed how easy money becomes once you’re free.
What about you? How did your month go?
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Ahhh, sorry about those “late twenties.” I hit 25 this year and it sucks! Suddenly I’m supposed to be a mature adult or something. 😉
We had a pretty spendy month for March, so we’re looking to get more on track in April (especially on our food costs).
Food costs continue to be my weakness. I’ve have some better luck by waking up early and packing lunches. That said, I just came off a Thai takeout meal.
Time to get back on the wagon!
Congrats on the net worth increase! As someone who wished she started saving when she was younger, it’s really nice to see how you’ve figured out your financial goals at such a young age.
As for my net worth, it’s been pretty flat this month because of wedding expenses we’re paying for ourselves. After it’s all done, would be interesting to see if the wedding will put a dent into my net worth. If not, that will just further show the power of compounding interest.
Weddings are killer. Would be awesome if your net worth came out unphased!
Brittany and I will be turning 27 this summer as well. Hoping it does not hit us too hard. Makes you rethink how you spend your time.
March was an expensive month for us. We are going on vacation to Virginia Beach this month, which added extra expense.
On a GREAT note. We sold are old 2005 Chrysler town and country for more than we paid for our newer car! We plan on doing a full post about this in the future.
Long story short my sister sold us her 2006 Hyundai Santa Fe for trade-in value. When we saw the Chrysler town and country on craigslist about Kelley Blue Book value. A big win ??
Now that’s winning! Congrats on gaming the car system!
I’d like to propose that 7 is still in the mid range. We all have a vested interest here! Next year it may be harder, but we’ll say you’re in your mid twenties for now.
Get used to no mental changes / aging as you get older. I still feel & think like I did when I was in my twenties, but my twenty-something self would think I’m now a dinosaur, and he may be right.
Your mathematical generosity is appreciated, but my 20 year-old self firmly viewed anything north of 26 as late twenties.
I like your approach better.
As always, great month article. I have a question for you. I’m learning that my 401k’s ER’s are high, btwn 1% – 1.56%. I also invest in a Roth IRA and do Charles Schwab’s intelligent portfolio investing which i think the ER is only whopping low 0.15%…Strictly referring to the ERs, do you think I’m better off investing in either my IRA or intelligent portfolio rather than my 401k? I’m aware of 401ks being pretax and IRA posttax investing. Curious as to what your response is…Thank you!
This is a complicated question depending on a lot of factors. I think you’ve just given me an idea for an upcoming post!
In general, even a bad 401K is still better than a taxable account. The main reasons being:
1) dividends and any capital gains grow tax free in the 401K, whereas they get taxed every year in a taxable account.
2) By deferring taxes, you can invest larger sums up front to let compounding work
3) If you’re getting a company match, you don’t want to miss out on any free money.
4) You can always roll over your 401K into a lower fee 401K, if you ever switch jobs to a company with a better 401K plan.
The case for investing in a high expense ratio 401K becomes stronger the higher your tax bracket and the less time you plan on spending at the company.
Are you saving enough to max out the 401K and your IRA?
Yes. I’m somehow able to max out my 401k and Roth and invest in the intelligent portfolio as previously mentioned. Since my last post I’ve been strongly pushing my employer to get lower cost index funds into our 401k (bc company match is almost nonexistent) and am happy to report it appears all my tenaciousness is proving fruitful. Thanks for your detailed response!
Congrats and great job. It takes discipline both in the workplace, with saving and investing to make this happen. I’m gonna try an catch up to you so please keep posting these. I got a nice boost this month with annual raises, bonus and tax refund all in one month.
Ever consider investing a consistent portion internationally like you do with REITs? US stocks and international stocks have pretty similar historical long term returns but over shorter periods they aren’t always correlated. You now have a 10 year time horizon now that your are 27, haha.
Check out this post by Ben Carlson. http://awealthofcommonsense.com/2016/12/diversification-is-no-fun/
Thanks Dan. About 20% of my 401k contributions invest into international funds every pay check. With the now 10 year horizon (haha!) and recent US run-up, it’s probably about time to reevaluate my overall strategy though.
Yeah and I thought stocks were pricing before the election. Just have to keep adding every month and stick to an asset allocation that you can hang on to during down turn. Mine is 30% US stocks, 30% International & emerging, 20% Canadian stocks and 20% Canadian bonds.
Interesting allocation. Are you from Canada?
Yeah I am, I’m a little overweight Canada from a market cap perspective – i think Canada is about 6-8% of the global market. I figured it would be good to still have a sizable amount in Canadian dollars though as i will live here when i retire. Canadian stocks actually round out international and US markets nicely with 20% energy and 15% mining and materials making up our stock market. Kinda like a developing market with a more stable currency.
A lot of Canadians have half their equity allocation in Canada, that seems to be the rule of thumb here. I figured settling my Canadian allocation halfway between market cap weighted and half my equities would be something i could stick with over the long term.
The 20% bonds is to make sure i can re-balance into a downturn and stick with my strategy.
I notice you’re diversifying your portfolio a bit between REITs and stocks. I’m curious of your thoughts on rebalancing. Do you have a plan to rebalance your portfolio every so often? I’ve heard that can reduce volatility and increase returns – both of which increase Sharpe ratio.
I really like this article about it:
https://www.fool.com/retirement/assetallocation/pick-a-portfolio.aspx
I don’t specifically rebalance the REITs since they’re limited to the $5,500 Roth IRA contribution. I’d have to either reduce my exposure or buy outside of the Roth. Since it makes up such a small percentage of my overall portfolio (less than a 10%) I’m hoping the $5,500 Of yearly dollar cost averaging should be enough.
Personally and emotionally March was somewhat of a rollercoaster. The company I work for was bought over mid last year, and now we’re starting to really see some changes, although I’m usually up for change, when you can practically see the domino affect of your department being dissolved it just hits you. As well as adding to the fact that your own manager and others “aren’t worried because I (they) retire in a year” doesn’t give a lot of confidence on your own position :/……Lets just say I’m making sure my resume is current, and keeping some extra cash on hand.
On a personal side, I’ve officially applied for my Masters of Science in Engineering Management, to compliment my Mechanical Engineering degree. Also to relieve some stresses, did a quick weekend trip to Vegas with the rest of my family to attend an annual offroad race, was nice to just get away and relax, and actually got a pretty good last minute deal using the Vegas.com app (not an endorsement but the deal was pretty awesome).
Then as far as money goes, continuing to hack away at my student loans by putting around half my monthly income towards it. I save another $1k, and have also been enjoying the simple, easy to follow cash back rewards of my Ally Visa (have you done an article on cash back/reward cards?). I fully contributed to my Roth IRA for 2016, but now looking into converting my traditional Roth, to the new TD Ameritrade Essential Portfolio’s Roth (still looking into the whole hybrid robo-investment platform).
As far as my stocks go, my hand picked brokerage account has been rockin (Openfolio March review stated my portfolio was up 4.29%). I’m pretty aggressive and even if things drastically fall tomorrow I’d sell nothing and buy more mmmuuuuaaaaahhhhhaaaaahhhaaaa.
TLDR;
Sooo yaaa, what a time to be alive and in our 20’s amirite haha.
Wow, that does sound like a roller coaster.
Sounds like you’re on the right track though. Nothing you can do other than update that resume and make sure you’ve got some liquid assets in case something happens. I’d probably try to sneak in a few interviews too, just to see what’s out there.
btw, good job putting such a huge chunk towards your student loans!
I’ve only done one rewards type article on the Chase Sapphire Reserve:
https://mymoneywizard.com/chase-sapphire-reserve-review/
28 hits even harder! If anything, the “success” I thought I achieved in my mid-twenties doesn’t seem as successful when I’m in my late twenties.
I think you hit the nail in the head for the quarter life crisis. Certain things seem extremely successful in the mid 20s, but just ho-hum in the late 20s.
Age is just a number though, and it’s totally irrational to have such a wild swing in perception. Or at least I need to keep telling myself that!
Congrats on paying off the car loan! I’m hoping to do the same in about a week from now.
I turned 27 a few months ago. It hit me hard as well. I received an invite for my 10-year high school reunion in a year. That was a shocker haha.
I need to check out with kayaking with manatees. Looks like a lot of fun!
I am not prepared to started getting decade old high school reunion invites!
I’ve both kayaked and snorkeled with the manatees. Pros and cons to each. Snorkeling is probably cooler overall, since you can go underwater and swim right up next to them. You don’t get as good of a view on the kayaks, although I find boat piloting a lot more thrilling than swimming.
I’m new to the site, brought here from a Yahoo Finance article I read today. Thus far, I like what I’ve read, you remind me a lot of a younger Mr. Money Mustache who I idolize.
Quick Question; why haven’t you purchased a house yet with all of this money you’ve saved up? I’ve always looked at a home as a giant piggy bank that you are forced to throw a lot of change in every month in the form of a mortgage, and unlike rent it’s an investment. What are your thoughts on this?
Thanks Colton, glad to hear you’re enjoying the site!
I do not think a primary residence is an investment. Unlike an investment, a house returns 0% over the long term, plus it costs you a ton of money to own. Here’s an article I wrote that shows just how expensive houses are:
https://mymoneywizard.com/hidden-costs-of-owning-a-home/
The piggy bank concept is true for people who struggle with saving, but a disciplined saver can find much better uses of their capital IMO.
All that said, I will probably buy a house one day to hedge against inflation and for the non-financial benefits (family stability, ability to customize, etc.)
Hey good net worth for such a young age, FI will be a breeze. I agree with the way you set up the vanguard after tax and tax deferred funds. If people don’t realize debt is like drowning, they have a lot to learn. Good luck and get rid of Merrill(high fees)
Thanks EL!
Fees aren’t too bad in the Merrill account. About 75% of the account is invested in low fee Vanguard ETFs and a few large individual stocks. About 10% of the account has higher fees than I’d like. I’m a little worried that selling those will trigger a large taxable event, so I’ve been looking into my options.
Awesome update for March and net worth for only being in your 20s. Every year that passes seems to make time go by quicker and quicker it seems. Do as much as you can now. Travel, have fun, but balance with saving and investing. Like you, I don’t own a home so REITs make a great proxy for real estate investing. I picked several REITs instead of a fund though VNQ does look interesting for quick diversity. Inspiring to say the least. Keep up the good work.
Thanks DivHut!
Congrats on continuing to move forward! I got to celebrate the final payment of my student loan today and paying off my car, the last of my debt, this week. I’ve been delaying figuring out what to invest in, but after reading your blog and a couple other blogs going VTSAX route seems to be the way to go. Just wish I had started even sooner, but at 26 now still have a good amount of time.
My one question is, when you refer to your credit card, is that just the balance you have until the next bill or are you carrying that over to the next month?
Thanks for sharing.
The credit card amount is always the total amount outstanding on all my cards. So it includes the last statement cycle and the transactions not yet due. In other words, almost two months of spending.
Oh I am with you about debt! I only have one non-mortgage debt left and that’s my student loans. Because of the interest being low (2.7%) and being tax-deductible, I feel like I have the luxury to prioritize my savings goals over it.
But seeing that $370 minimum payment coming out of my checking account and having to budget around it is just plain annoying! Crippling is a good way to describe it like you said because everytime I find myself with some extra cash, I have a mini-anxiety whether to invest or put it towards the loans. I dream of the day when that $370 goes straight towards my financial freedom fund!