Networth – January 2018 – $276 749 (-0.83%)

We are now in 2018! A new year begins. What happened in December?

  • Many, many pre-payment of all kinds for taxes. Money that should come back in the next few months.
  • Several credit card openings for churning.
  • Some unexpected expenses due to illness in the family. 🙁
  • Christmas! Santa decided to spoil the kids this year.

The Networth is therefore slightly downward! But these are investments that will payoff in the next few months when my taxes refund will come.

Assets: 996 139 (-0.37%)

  • Liquid: $18919
  • Property: 840 000 $
  • Investment 401 (k): $57 018 (+ 4.56%)
  • Investment Brokerage: $47 395 (+ 3.33%)
  • Roth IRA Investment:
    • Myself: $11313 (-0.05%)
    • Spouse: $11193 (-0.09%)

Liabilities: $707 362 (-0.46%)

  • Car loan: $6518 (-2.44%)

I want to pay off that loan The interest rate is 3.24%, do I get 3.24% return with my cash in my emergency fund? No… but I want to accumulate $15000 in floating cash so I can churn several bank account bonuses.

  • Mortgage: $712 748 (-0.18%)

Debt/asset Ratio: 72.21% (+ 0.13%)

Total net worth: $276 749 (-0.83%) Usd
Converted to CAD: $348 192 (-1.69%) Cad

In December, we still get a savings rate of 14%, the income are $19113 (3 paychecks!) and expenses of $17530 (phew!…).

Why the loss of money then? Good question. I made my update late (we are already in mid-January!) and there seems to be an error of 3k and 1k on investments and credit card respectively. I may already be at 280k as a net worth. I will ignore it and the next month will surprise me instead !

2018 Objectives

This blog serves me as a reminder to stay on track. In 2018, I give myself goals in order to raise my play level.

  • Lose 20 pounds.
  • Accumulate $2500 in churning of credit cards and bank account bonuses.
  • Obtain a savings rate of 50%.
  • Publish 2 public tools.

Lose 20 pounds

At the end of 2016, I had reached a maximum of 250 pounds. I was scared. I was now as close to 300 pounds as 200. I started eating better at the same time as I started this blog. During the year 2017, I reached a minimum of 214 pounds and I am now back to 220. I want to reach the symbolic number of 200 pounds. I went from “obese” to “overweight” according to BMI. Financial independence is also about working on your future health. There is no point in being rich but being sick. We cannot guarantee the future, tumor, cancer, or other incurable diseases. But we can guarantee that taking care of your body now can only have positive impacts for the future.

Health/Caring for yourself No tumors, cancer, etc. Tumors, cancer, etc.
Taking care of yourself Healthy Future Future Not healthy
Don’t take care of yourself Future not healthy. Extremely unhealthy future

While taking care of oneself does not guarantee to be healthy in the future, I can guarantee that not taking care of you, guaranteed not to be healthy in the future. So pragmatic optimism is the right way to go. If illnesses there must be, having taken care of oneself can help to get through the different treatments. The attitude and the placebo effect help.

The first 30 pounds were relatively easy, I cut sugar intake. The next 20 pounds will be more difficult!

Accumulate $2500 in churning account bonus credit card.

I started at the end of 2017 and the first bonuses will accumulate in 2018. I make ~ $1300 easily with these first bonuses. I think it should be possible to do the equivalent over the next nine months. I could have put $3000 as a goal, but it seems ambitious. I have to stretch the bonuses in time due to the expense prerequisites. Several offers also arrive by mail, we’ll see what will be available!

Obtain a savings rate of 50%.

My weighted savings rate over the last 12 months has decreased from 45% to 40%. I want to bring it back to 50%, which is aggressive given our house and our three children. However, several factors will play in our favor.

  • The refinancing of the mortgage frees up a large amount of interest and increases our payment of principal.
  • A salary increase of more than 13% in 2018.
  • Trump’s tax reform benefits us because it adds a new tax credit of $2000 per child which I did not have access to in 2017. It also reduces the rates of taxation of different levels even if it limits the deductions of state taxes. In total, it should be a winner. The 401 (k) limit is now $18500 instead of $18000.

Publish at least 2 public tools.

I’ve been working on several micro-tools recently. The first is a version of Personal Capital that connects different bank accounts and credit cards in a single view. Very convenient to get a glimpse of your financial situation. Another tool is a dynamic RRQ simulator. It allows you to quickly see the payments to which you will be entitled and allows you to make simulations. My last tool is a credit card selector. It shows you which card to use among the ones you own in order to maximize your points.

All these tools are still in beta phase, but I want to publish at least 2 in 2018, either in Google sheets format, either in mobile application or on a Web site. To be continued. 🙂

Conclusion

To keep me on Track, I will update the status of my goals every quarter, as a business.

  • First quarter – April 1st, based on results from end of March.
  • Second quarter – July 1st, based on results from end of June.
  • Third quarter – October 1, based on results for the end of September.
  • Fourth quarter – 1 January 2019, from the results of the end of December 2018.

With that, I will have no choice but to be honest with myself!

Let’s Go!

Paying Phone Calls

A few days ago, I made two phone calls that brought me $1600. The two calls were made following 2 hours of work. So we’re talking about a job that reported $800/hour NET, or $1100/hour before taxes.

How?

First Call

The payment of my mortgage is due every beginning of the month: January 1st,  February 1st, etc. The month in which the payment is made account for the accumulation of interest. For example, if the January 1 payment is made in December, the interest will be accounting for the month of December rather than the month of January. Interest will therefore be calculated in 2017 and not in 2018. Finally, interest is deductible in the United States.

Payment of $2900, including $1700 of interest. Following the deduction, I save $553 in federal and $158 in California. Total: $711

Note: This does not come back to the same as losing the interest deduction for 2018. Trump’s tax reform for 2018 changes the rules. It makes itemization for deductibility more difficult by giving a higher basic standard deduction. Furthermore, it reduces the tax rate, which means that a deduction in 2017 is worth more than in 2018. Finally, even if none of these arguments were true, it is always better to get tax refund earlier than later.

Second call

I started Credit Card Churning. I went with the Chase Ink Business Preferred card. It gives 3% on certain expense categories such as telephone, Internet, Office supply, shipping. There’s a 80,000 bonus points sign-up bonus. These are worth $800, or $1000 if spent on travel. You have to spend $5000 on the next 3 months with the card to get the bonus. So I will redistribute some of my expenses on this card. In order to meet the required spending, gift cards can also be bought as well.

There is a $100 annual fee on the card, but I downgrade the card next year before it renews to avoid a second annual fee. All Chase maps allow the points to be transferred so they are not lost.

Grand total of both calls: $711 + $1000-$100 = $1611. To get $1611 net, I would need about $2200 of income, or $1100/hour. Incredible! I would have a lot of difficulty, aside from being CEO of a big company, asking people to pay me $1100 per hour for any of my skills.

Think about it the next time you negotiate price, or try to find a rebate for an item. How much are you paid/hour while doing that? If it’s higher than your current job, it’s worth it ! What is the value of your time?

Annual Expenses

Since October 2016, I’ve been meticulously tracking all the family expense. I now have a complete year of tracking. What does it look like? What surprises will we see? Is transport the highest expense as people like complain? Am I buying full of crap? Probably. Let’s see the breakdown.

Expense Monthly Annual Comment
Mortgage Interest 2255 27060 Holy crap this is expensive
Property Taxes 1411 16932  
Groceries 968 11616 Family of 5
Mortgage Principal 866 10387 Minimum required principal payment. I paid more.
Mortgage Credit Margin 561 6732 Same as ^^
Travel 524 6288 We travel a lot!
General Merchandise 401 4812 What am I buying?
Restaurants 279 3348 Wow.
Utilities 259 3108 AC is 50% of this
Home Improvement 222 2664  
Electronics 197 2364 We are a nerd family
Children 176 2112  
Fees 171 2052 We had certain legal issues
Home Maintenance 164 1968  
Car Loan Principal 159 1908  
Insurance 105 1260 House + cars
Clothes 96 1152  
Entertainment 89 1068  
Car 86 1032  
Gift 67 804  
Pets 57 684  
Phone 53 636  
Gas 50 600 Look where gas is!
Education 45 540  
Internet 37 444  
Health Care 31 372  
Car Loan Interest 21 252  
ATM (Cash) 19 228  
Hobbies 14 168  
Personal Care 10 120  
Postage 10 120  
Charity 8 96  
Online Services 7 84  

We know about the 4% rule. You need 25 times your annual expense money in your stash to live up for 30+ years of your investment. What happens when we convert each of our family expense as part of the required stash?

Expense Annual Required Stash LCOL Annual LCOL Stash
Groceries 11,616 290,400 8131 203,280
Mortgage Interest 27,060 676,500 6765 169,125
Travel 6288 157,200 6288 157,200
General Merchandise 4812 120,300 3368,4 84,210
Mortgage Principal 10,387 259,675 2596,75 64,919
Property Taxes 16,932 423,300 2539,8 63,495
Restaurants 3348 83,700 2343,6 58,590
Utilities 3108 77,700 2175,6 54,390
Home Improvement 2664 66,600 1864,8 46,620
Mortgage Credit Margin 6732 168,300 1683 42,075
Electronics 2364 59,100 1654,8 41,370
Children 2112 52,800 1478,4 36,960
Fees 2052 51,300 1436,4 35,910
Home Maintenance 1968 49,200 1377,6 34,440
Car Loan Principal 1908 47,700 1335,6 33,390
Insurance 1260 31,500 882 22,050
Clothes 1152 28,800 806,4 20,160
Entertainment 1068 26,700 747,6 18,690
Car 1032 25,800 722,4 18,060
Gift 804 20,100 562,8 14,070
Pets 684 17,100 478,8 11,970
Phone 636 15,900 445,2 11,130
Gas 600 15,000 420 10,500
Education 540 13,500 378 9450
Internet 444 11,100 310,8 7770
Health Care 372 9300 260,4 6510
Car Loan Interest 252 6300 176,4 4410
ATM (Cash) 228 5700 159,6 3990
Hobbies 168 4200 117,6 2940
Personal Care 120 3000 84 2100
Postage 120 3000 84 2100
Charity 96 2400 67,2 1680
Online Services 84 2100 58,8 1470
         
Total 113,011 2,825,275 51,801 1,295,024

This is enlightening! From this, I know that pets ownership is going to require $17100 of additional networth. Our family restaurant habits require us to get $83700 more! We can improve there. Our current travel requires us to keep $157200 – another large amount. Many of these expenses are easily compressible. Finally, our food is costing us $290,000 – wow, three kids. To keep up with our current property taxes, we need $423,000 – double wow.

I need to expand General Merchandise into better sub-categories. It represents 8% of my retirement budget. It currently includes items such as home supplies, but also gifts and worthless craps that I buy on Amazon.

The last puzzle piece is the LCOL (Low Cost of Life) move before retirement. The cost of housing will drop by 75%. The cost of everything else should drop by about 30% according to numbeo. To be conservative, we kept the cost of travel exactly the same since these are not affected by local cost of life or currency.

This gives us the needed amount of 1.3M. If we cut the unneeded expenses, which include legal fees, entertainment, restaurants and travel, we end up with 1M. We went from 2.9M needed in our current HCOL area to 1.3M, 1.0M if lean, in a LCOL area. The difference is significant, less than 50% of the original amount.

Advertisements

I added some ads on the blog. I put off my ‘Ad-Blocker’ to see them.
How awful !! They are everywhere, up in the header, right in the side-bar, right in the middle of the text (!!!) and at the end of the page.

I’ll tweak it in the next few days … the side-bar advertisement does not bother me too much, and the one at the end of the post is fine. But something that interrupts your reading or an advertisement that changes your browsing experience, that is not correct at all! I prefer to have a well targeted and useful advertising rather than this mess. I am still at the experiment phase.

Finally, with the translation of the blog in English, I want to do experiments with the  audience. I will have to split the mailing lists to reach each sub-group, but I do not think it adds more workload, I believe I can reach a certain financial niche with the Quebec / USA aspect. To be continued! 🙂