January Financial Update

January Financial Update

We spent $13,425 in January! Yikes! We bought a new (to us) car for $8,700, leading the way to our highest spending month ever. Without the car we spent a pretty typical $4,725. We took two trips in January and it was nice getting back in the travel game.

Expenses

January financial update

Vehicle – $9,302: obviously buying a car really threw our spending out of whack. I’m going to have a separate post on our car buying experience, but in summary, we replaced an older small car we had purchased used with a newer small car we purchased used.

Travel – $1,522: my wife went on a girls’ trip in January and had a blast. We also took a quick weekend trip just the two of us. For both ventures we were able to use miles to get free flights. We also used points on our two-of-us trip to score a nice downtown hotel for free. Almost all of our points & miles stash comes from credit card signup bonuses.

Other Services – $762: we blew this category up! We bought a new cell phone and finally cut the cable cord. Best day ever! We still had to pay our January cable bill, plus we prepaid 4 months of DirectTV Now so we could get a “free” Apple TV. The move away from cable will save us $1,000 compared to 2016.

Food – $601: a very typical food month.

Merchandise – $539:  we had a few special events in January  “requiring” gifts and new digs. For some reason I’m always surprised at how much we spend on this category, I think I need to just accept it…

Entertainment – $409: the aforementioned special events also lifted our entertainment spend. I’m not suggesting we shouldn’t go out with friends for their birthdays and what-not, I’m only saying those nights-out always end up costing more than you think.

Home – $276: this is so brilliant. We’ll never have a mortgage payment again and January was free of any property tax, HOA, decor or repair costs. We can’t do better than this 🙂

Waiting To Be Zapped – $14: I tried out some Twitter advertising which seemed somewhat more effective than Facebook. I’m still not convinced any of it is worthwhile so for now I’m going to keep my focus on creating content and not disengaged clicks from social media.

Annualized Spending

january update annualized

Our projected spending for 2018 is looking like it’ll surpass 2017. This is entirely caused by the $8,700 car purchase. Sans car, we are actually looking to come in below 2017. The primary influence on our non-car spend will be a projected decrease in Travel spending. We don’t plan to slow down our traveling, it’s just that our big trips in 2018 present more opportunity to use points and miles. Plus the largest pieces (flights and hotels) of our 2 major trips in 2018 are already booked.

Annualized spending is the closest thing to a budget we have, though really it’s tracking our spending trends not placing artificial limitations by category. Might just be semantics, but if you can’t tell, I’m anti-budgeting.

Savings

January Savings

All of our income comes from our well-paying, cubicle-dwelling jobs that we’re waiting to be zapped out of. In the meantime we’re trying to bank the surplus they create. In January, we spent almost as much as we made (fail). Our meager savings rate was driven (like what I did there?) by the new (to us) car purchase.

No car savings

Excluding the car we had a pretty great savings month. Our pay in January was a bit higher than usual due to the timing of our paychecks. Really though it’s not fair to exclude the car… so alas, we saved 2.8%, we’re trending down along with the rest of the country.

Net Worth

january update net worth

Our net worth continued it’s steady surge higher, gaining $19,480 in January. We once again rode the hot market to an all-time high, though the first week of February is bringing us back to reality.

Investments

January Portfolio

Our portfolio balance is a much more meaningful measure of our Financial Independence Progress than net worth. Net worth includes the value of our house and checking accounts, balances we don’t plan on spending down in the future.

Did I mention the stock market is hot hot hot? Our investment balance increased $29,888 in January, it’s biggest monthly increase ever!

We contributed $10,621 to our retirement accounts in January, including a $5,500 contribution to my Roth IRA. This counts as a 2017 contribution, which means I can add another $5,500 in 2018. Roth IRA contributions are limited to $5,500/year, but you have until the tax return due date (April 15th) to make contributions for the prior year.

Roth contributions are not tax deductible, but they grow tax-free. Contributions to Traditional IRA’s are tax deductible, but income limitations prevent us from participating. First world problems.

In addition to our contributions, our employers matched $1,628. This includes matching on our 401k’s and a $500 contribution to my wife’s HSA. Free money shore is nice.

The remainder of our portfolio growth came from market appreciation – $17,639. Now that is cool. We “made” more from the stock market than our jobs!

Are all those gains a good thing?

We don’t withdraw anything from our portfolio, we’re buyers not sellers, which means the incessant climb up is not ideally timed. The surging stock market only means the cost of entry is getting higher and our purchasing power is decreasing. February is looking like it may reverse this trend a little and offer a few sales on the stocks. We’ll see how strong my convictions are when a true “correction” happens and our net worth starts dropping…

Just to clarify, when I say stocks are going on sale I don’t mean to imply I’m trying to time the market. Don’t do that. It doesn’t work. My investment strategy is to buy into passive ETF’s and hold them. That’s it. The end. Most of our portfolio balance is held within 401k’s. If your 401k doesn’t offer passive ETF’s then I’d recommend plugging it into a “Target Date” fund. 

Math

A quick explanation on the disparity between our net worth increase ($19,480) and our portfolio gain ($29,888). Our net worth didn’t increase in lock-step because we had major activity in accounts outside of our “portfolio” (checking accounts). First, we bought a car for $8,700. Second, our $5,500 Roth contribution came from our checking account, which gives a bump to investments, but really it’s a net $0 impact on our net worth – we just moved money from one bucket to another more productive bucket.

If you’re mathing along with me you know there’s now a $3,792 discrepancy going the other way, which is explained by increased savings in our checking account from wages. It’s pretty cool that despite buying a car in January we were still able save money for the month (un-humble brag). Small used cars are the best!

Personal Capital

I track all of our investment balances in Personal Capital. It’s the best. It takes about 15 minutes to set up and from then-on everything updates auto-magically. They recently enhanced their retirement planning tools and they’re so bomb I’m going to do a separate post showing how I use them. You can also use Personal Capital to track all of your spending automatically and set up budgets. I don’t personally use it to track spending though, I use Excel for that (see this post on why).

Personal Capital is completely free. If you signup through this link I may receive a small commission, but it remains free to you.

Conclusion

Another banner month. The new (to us) car purchase was a little sooner than I had anticipated, but it really calls out the benefits of living below our means. I know we’re incredibly fortunate to earn the salaries we do, but we can take some credit for resisting lifestyle inflation. Having a savings rate that hovers around 50% allows us to absorb unexpected costs with less stress and impact on our lives.

Ok that’s all for January, live in a small house and drive small used cars.

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