Net worth Update February 2018 $293,647 (+$16,897)

See all other net worth update here.

Net worth is up significantly (+$16,897) in February with standard income and low expense. This gives our family its highest saving rate ever.

We are giving up on % differential and will now use absolute values for net worth update. When we would say my account gained 2%, did it gain 2% of $100 (2$) or 2% of $100,000 ($2,000). Real values put numbers into perspective.

Net worth: $293,647 (+$16,897).

Incredible gain! It was expected because of the tax planning of last year. There was no mortgage payment in January, the expenses were low, past Christmas.

Let’s see how each account made.

Vanguard (401k): $61,233 (+$4,378)

We are maxing out the 401k again this year, so that’s $18,500 averaged over 26 paychecks. There’s 50% match (up to 2% of salary) match by my employer. This adds $173 to the account for each pay day. Finally, there was market gain in January leading to 4k gain.

Vanguard Brokerage: $50,729 (+$3,362)

High gain due to strong market return. We are adding $500 per pay day to my brokerage account with an automatic deposit. We need to increase this amount otherwise we end up with too much spare cash.

Vanguard Roth: $16,655 (+$5,318)

Each New Year starts with a new Backdoor ROTH contribution. In 2018, we can contribute $5,500 to an IRA. We then convert it to a ROTH. We have to do this process since our family income is too high to contribute directly to a ROTH IRA. Bonds are getting a negative return (-$200). I have an uneasy feeling about holding bonds due to the low interest rate of the global economy.

Vanguard Roth: $16,527 (+$5,309)

Similar to above. This a spousal Backdoor ROTH. The strategy is the same, we contribute $5,500 to an IRA under her name, and then a few days later, we convert it to a ROTH IRA so it get grow tax free!

Cash: $24,528 (-$3,397)

Cash Balance are too high. I was accumulating them for Bank Account and Credit Card churning which requires large deposit or large balance. We’ll see in the next few months how I’m able to achieve these and where the money will go.

Debt

Mortgage is not moving at $712,748. Car loan is down to $6,356 (-$163). And credit card debt are at $7,000, down from the high of $9,000 in December. I never carry a balance, these are just current total.

Leverage Ratio: 71.21% (-1.26%)

That one is staying as a %. 🙂 It’s close to the lowest it has ever been (70.43%). I’m looking forward to it crossing below 70% this year. Total liabilities are at $726,146 while assets are at ($1,019,749). I keep the home value at $840,000 and I’m not moving it. Home evaluation sites are saying it’s worth $900k now. That’s fine. Once we sell, we will have to some repair, home staging and commission. Let’s keep it conservative low. I’d rather be conservative and surprised, than optimistic and sorry.

Expenses are under control. There was another emergency family travel for $923 this month. Food is still incredibly expensive in high cost California ($1084), also, we got 3 hungry mouths to feed. 🙂

Total income (post-tax) was $11,835 and expense $4,287 for a saving rate of 68.45%.  This is the highest saving rate I ever had. For kicks and giggles, if the emergency travel wasn’t there, the saving rate would have been upwards 75%! We are also cheating, there was no mortgage payment on this month. The cumulative saving rate for the last 12 months is 41.31%, up 1% from 40.15%. One of my objective is to get it to 50% by end of year. We are expecting high saving rate for next month as well.

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 !

Networth – December 2017 – $279,200 (+ 4.05%)

We’re back in December! The year is almost over. There was movement in November:

  • I refinanced the mortgage. There is an initial cost of $1800, but then there will be $560/month gain with reduced interest. So I go into my money in less than four months. See article: Getting paid $1000/hour
  • Some expenses:
    • Holidays with children on Thanksgiving holiday
    • New Dishwasher (!)
    • Some early spending on Santa Claus gifts.
  • Promotion at work-several salary adjustments. 7.3% increase and a one-time bonus – in shares – of ~ $28 000. I have to wait a few months before I remove it.

Now that this big refinancing is done, my next item in my Todo list is to optimize my taxes for 2017 due to the change on the mortgage deductions and property taxes of the new tax bill. I would therefore pay my taxes of 2018 in 2017.

I will also deposit money in the children’s accounts “Custodial”. I can put a certain amount away from tax every year, I have not done it this year.

In November, we had $8 130 in spending for a savings rate of 40.19%. Our average of the last 12 months is 45%.

Assets: 999 881 (+ 2.48%)

  • Liquid: $26511
  • Property: 840 000 $
  • Investment 401 (k): $54 532 (+ 5.25%)
  • Investment Brokerage: $45 867 (+ 6.21%)
  • Roth IRA Investment:
  • Staff: $11319 (+ 0.33%)
  • Joint: $11203 (+ 0.41%)

Liabilities: $720 681 (+ 1.88%)

  • Car loan: $6681 (-2.37%)
  • Mortgage: $714 000 (+ 1.92%)
    • The refinancing was done on a larger amount. With the rate at 2,875%, I’ll take it easy on extra payments.

Debt/asset Ratio: 72.08% (-0.42%)

Total net Worth: $279 200 (+ 4.05%) Usd
Converted to CAD: $354 171 (+ 2.39%) Cad

Net Worth-November 2017-268 337 (-10.84%)

Already November, we arrive at the end of the year. The Republican Party in the United States has a completely insane tax reform. Hard to know if I will save tax or not. A lot of political strategy. One thing is for sure, they want to add 1,500,000,000,000,000,000 dollar debt over 10 years… This is completely imposed on the philosophy of this block. Pay first, rather than shoveling the problems forward.

There are some changes.

I decided to set the house price to $840 000 for 3 reasons:

  • An appraiser came and after inspection, he confirms that our house is worth 840 000 according to the current market.
  • Zillow and RedFin changes the value of the house too often. That makes big changes in net worth.
  • When I sell the house, I will have to pay some fees, which will decrease my profit.

In short, too many variables possible. I do not know for now. If there is profit in a few years, good, if not, too bad. We'll adjust the net value at this time.

So my net worth decreases for this month as a result of this adjustment. This brings us back to the level of three months ago, which is not so bad.

The other big change, I refinance the mortgage. Following several calculations, this reduces our rate from 4.25% and 6.25% to 2.85%. An economy of over $18000 over 3 years, even taking into account the short-term renewal fee (~ $3000). The new mortgage is a variable rate, but that is fixed for the first 3 years. When we do the math, we spent maybe 15 hours on the mortgage renewal. This gives us a salary of $1200/hour for this job.

In the short term, this has a negative impact on net worth, but we should get into our money in five months, and then it will be just profit. To put in perspective, $18000 US is $23000 Canadian, thus 2.3% closer to the famous million.

Assets: 975 699 (-3.55%)

  • Liquid: $7655
  • Property: $840 000 (-4%)
  • Investment 401 (k): $51 809 (+ 5.28%)
  • Investment Brokerage: $43 186 (+ 4.50%)
  • Roth IRA Investment:
    • Staff: $11281 (+ 0.11%)
    • Joint: $11156 (+ 0%)

Liabilities: $707 362 (-0.46%)

  • Car loan: $6843 (-2.31%)
  • Mortgage: $700 518 (-0.44%)

Debt/asset Ratio: 72.50% (+ 2.25%)

Total net worth: $268 337 (-10.84%) Usd
Converted to CAD: $345 904 (-7.83%)

We had some major expenses in this month:

  • Payment of property taxes ($5681!)
  • Medical emergency for puppies ($1200!)
  • Several restaurants for a good cause of family visit. 🙂

Despite these exceptional expenses, our cash flow is-$193, a negative savings rate of-1.46%, I expected a lot worse. Our savings rate over the last 12 months is still excellent at 43.38%, with an average of $6662 savings per month.

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.