PoP Balance Sheet – December 2017

Welcome to our December 2017 Balance Sheet!

We use the structure of a monthly income statement and balance sheet in tandem to make sure we are keeping our expenses low and planting our pennies wisely. If you’re not already tracking your finances using these two methods, go to mint.com and get started today! If you have any questions about how we do this just post a comment and we’ll be sure to help!

If you had asked me on January 1, 2017 if I thought that the S&P500 would be up over 18% a year later (over 20% after dividends), I would have looked at you as though you were insane.  And yet, here we are.  Because we aren’t market-timers, the difference between what I thought the market was more likely to return (0%?) and what the market did actually return (>18%) didn’t actually make a difference in our actions throughout the year.

But, we did make a few changes, and our balance sheet is shaped a bit different than it was this time last year, too.

  1. The first way is a bit noticeable in that we bought Mr PoP his dream car, and then decided to take out a loan against it because the interest rate was so low.  So that added lines to both our assets and liabilities.
  2. The second was less immediately noticeable, but we moved money around within our accounts so that instead of aiming for a 90/10 stock/bond ratio across individual accounts, we aimed for it across our entire portfolio and did some fee minimization there.  I’m actually slightly embarrassed that we hadn’t optimized this earlier since now that our brokerage accounts are as big as they are, this will actually save us almost $1,000/yr on fees.
  3. The last thing we did is also a little noticeable, but we did it at the very end of the year so this is the first monthly balance sheet it shows on.  We transferred $25K from our taxable investment account to a Donor Advised Fund at Vanguard.  This will be where we expect our charitable giving will come from for the most part.  In a way, this money isn’t *really* our money anymore.  It’s earmarked for charity, so kindof already spent.  But we get to decide the timetable and what charities we get to give it to.

With all that, our net worth growth wasn’t the highest YOY change we’ve ever had, but it was still quite solid, coming in at a gain of $294.1K for the year.

Here are the numbers for December:

  • Our total assets went up $18.2K
  • Our total liabilities went up by $0.1K
  • Net worth went up by $18.1K 
  • Total net worth as of the end of December is $1,574.5K, which represents a 1.16% increase for the month

For the details…

dyerware.com


Assets

Brokerage Accounts

  • 401K accounts: $448.4 
  • Roth IRA accounts: $239.1
  • HSA account: $25.1
  • Taxable Brokerage Accounts: $252.6
  • Donor Advised Fund: $25.0
  • Total Brokerage Accounts: $990.3 

Real Estate (based on current market comparable sales)

  • Primary Residence: $269.0
  • Investment Duplex: $175.0 – we’ll be doing some duplex comps soon, so this value is due to be adjusted
  • Investment Residential Land: $160.0
  • Total Real Estate: $604.0 

Cars (based on “fire sale” pricing per Mr PoP’s research)

Cash Holdings

  • Checking Accounts: $32.2 – need to move some to taxable
  • Savings/Money Market Accounts: $11.0
  • Total Cash Holdings: $43.2

Total Assets: $1,667.5

Liabilities

Real Estate Loans

  • Primary Mortgage: $72.3
  • HELOC on Investment Duplex: $0.0 (re-advanceable)
  • Personal Loan – Used to Purchase $50K Duplex: $0.0
  • Total Real Estate Related Loans: $72.3

Car Loan

  • Loan on NSX: $19.3  – the interest rate is so low on this, almost all of the $727 payment went towards principal
  • Total Car Loans: $19.3

Revolving Credit

  • Credit Card Balance: $1.4
  • Total Revolving Credit: $1.4

Total Liabilities: $93.0 

Net Worth = Assets – Liabilities

Net Worth = $1,574.5, up 1.16% from November

 

How Close Are We Getting to FIRE?

New this year is a graph that Mr PoP and I are still trying to figure out how useful it is to us.

In this one, we’re tracking month-by-month, two lines.  The blue one is an approximation of FIRE income – it is the sum of the last twelve months of net real estate income plus 4% of the most recent brokerage account balances.   The yellow one is an approximation of our FIRE spending, for which I’m using the last twelve months of what I’m thinking of as our “recurring spend”.  By that I mean our spending, net of all the crazy shenanigans we’ve been up to the last couple of years with remodeling and “fun car” spending.  The main reason we’re netting these out, is that we definitely won’t be pulling the plug with any big line items like this hanging over us.

dyerware.com


We’re still chewing on this visualization a little bit, because while it’s nice and succinct, it still omits some important information from our portfolio and spending patterns, specifically our empty lot (worth ~$160K) that instead of generating income is currently costing us ~$1,500/year, as well as the ever decreasing lifespan of our mortgage.  We also spend ~$9400/year on the principal and interest payment of our mortgage, so paying that off (and the value of the lot would pay it off and then some!) would decrease our outflow needs significantly, and even if we pay it off according to schedule it’ll be gone in 2026.

Do you take any future changes into account in your visualizations?

 

Tracking Investable Asset Growth

This first graph shows the growth of our investable assets (net of any liabilities against them), and shows the distribution of the various equity classes we hold. Pretty self explanatory.

dyerware.com


 

How Many Years Of Spending Do We Have Saved?

Here I’ve taken the total of our investable assets for each month and divided it by the expenses (excluding our investment property expenses) for that month. The idea being that this shows how many years we could live off of those assets at that rate and gives us a better idea of what lifestyle inflation (or intentional deflation) can do to the relative value of our savings.

dyerware.com


These values fluctuate in a much bigger range, because in high spending months (like February 2013 when we spent almost $7K paying off our car completely and February 2015 when we spent a bunch installing solar panels), the denominator is so much bigger. Because of that, it’s the overall trend we’re looking for.

Early Retirement Locale Index

Mr PoP wanted one more way to understand more viscerally how much we have in “investable assets”, so we’ve come up with what we’re calling our Early Retirement Locale Index. The basic idea is that we know how many years of savings we have at our disposal if we were to continue living in south Florida. (That’s the chart above.) But using the “magical” 25 years of savings necessary for early retirement, where would we have to move so that our current investable assets would cover 25x our COL adjusted current spending? (Note, this is purely for fun, we’re not intending to move. Don’t worry Mama & Papa PoP!) If you want to follow along, we’re using this Cost of Living Index from Expatistan, and using the average of the two big cities in south Florida on the list (Miami and Tampa) as our current COL index, which gets us 152.5. Our city isn’t on their full list, hence the average – but maybe yours is. Then we’re solving this equation:

Current Years Saved/ 25 = COL Early Retirement Locale / COL S. FL

15.22/25 = COL Early Retirement Locale / 152.5

COL Early Retirement Locale = 92.85

… which gives us the city of Durban, South Africa.

Well, I know we will have at least one set of visitors if we move to Durban!  A friend of ours from college met and married a wonderful woman who grew up not too far from Durban.  If she is any indication, I cannot imagine a more friendly place, with better tasting food.  And it doesn’t hurt that it’s near the beach and the weather would be similar to what Mr PoP and I are used to (albeit with the seasons reversed).

Here’s our journey through the ERLI so far…

  • January 2014 – Delhi, India
  • February 2014 – Quito, Ecuador
  • March 2014 – Kiev, Ukraine
  • April 2014 – Chiang Mai, Thailand
  • May 2014 – Madras/Chennai, India
  • June 2014 – Colombo, Sri Lanka
  • July 2014 – Bangalore, India
  • August 2014 – Yerevan, Armenia
  • September 2014 – Skopje, Macedonia
  • October 2014 – Brasov, Romania
  • November 2014 – Prague, Czech Republic
  • December 2014 – Mexico City, Mexico
  • January 2015 – Zadar, Croatia
  • February 2015 – Kiev, Ukraine
  • March 2015 – Cairo, Egypt
  • April 2015 – Bangalore, India
  • May 2015 – Niteroi, Brazil
  • June 2015 – Nowhere!
  • July 2015 – Skopje, Macedonia
  • August 2015 – Recife, Brazil
  • September 2015 – Ankara, Turkey
  • October 2015 – Lisbon, Portugal / Santo Domingo, Dominican Republic
  • November 2015 – Debrecen, Hungary
  • December 2015 – Tbilisi, Georgia
  • January 2016 – San Antonio, Texas or Louisville, KY – readers pick!
  • February 2016 – Lisbon, Portugal
  • March 2016 – Brno, Czech Republic
  • April 2016 – Vitoria, Brazil
  • May 2016 – Santiago, Chile
  • June 2016 – Johannesburg, South Africa
  • July 2016 – Thessaloniki, Greece
  • August 2016 – Gurgaon, India
  • September 2016 – Grand Cayman, Cayman Islands
  • October 2016 – Las Vegas, Nevada
  • November 2016 – Oakland, California
  • December 2016 – Hartford, Connecticut
  • January 2017 – Montevideo, Uruguay
  • February 2017 – Noweheresville – or maybe we can just live in the car?
  • March 2017 – Stuttgart, Germany
  • April 2017 – Bologna, Italy
  • May 2017 – Brasilia, Brazil
  • June 2017 – Nairobi, Kenya
  • July 2017 – Liverpool, United Kingdom
  • August 2017 – Christchurch, New Zealand
  • September 2017 – Mexico City, Mexico
  • October 2017 – Frankfurt, Germany
  • November 2017 – Galway, Ireland
  • December 2017 – Durban, South Africa

 

How was your balance sheet in December? Where would your savings land you today? 

22 comments to PoP Balance Sheet – December 2017

  • Jonathan

    May I ask what spurred the decision to open a Donor-Advised Fund? I’ve been following your blog since day 1 and giving has never shown up in your statements except in very small increments. I was pleasantly surprised to see the big give to the DAF, as I feel that giving is a very important part of a well-balanced life. Do you anticipate funding the DAF regularly, or was this a big one-time tax strategy that should enable your giving for a long time?

    • We gave a bit more this year, a bit over $1,000 – and want to keep giving that at a minimum. When late in the year it was looking like this was our last best chance to itemize deductions on our tax return combined with perhaps the last time our marginal tax rate would be this high for quite some time, we decided to pull the trigger and front-load $1000/year – $25K using a 4% SWR into a donor advised fund.

      We went with a Vanguard Charitable account, so our “bigger” donations will come out of this since the min is $500 per donation, but I expect we’ll still cash flow the occasional smaller gift throughout the year. Right now the game plan is that we’ll each pick a charity for $500/year to start.

      I suppose time will tell if we end up adding more to the DAF in years to come – and it will probably depend on what any future income streams look like. With taxes as they currently are (especially with the higher standard deduction), it only really makes sense for us to do big lump sums since our total itemized deductions tend to be so small. Adding $5K/year to our itemized deductions in any year during our marriage wouldn’t have impacted our taxes (and even after the recent tax reform, adding $15-20K/year wouldn’t impact our taxes), so in that case there isn’t a benefit, and only a drawback to “locking the money up”.

      • Patrick

        When you say, “perhaps the last time our marginal tax rate would be this high for quite some time…” does that mean that you are pulling the trigger soon? 😀

    • mrplantingourpennies

      We started giving more to charity when we realized we had “enough.” I would imagine at some point charitable giving will become a bigger question for us, but it could be decades from now.

  • It is majorly bonkers what the markets returned this year. They returned more than we put in this year.

    Congrats on opening the Donor Advised Fund! We opened one in 2016 and I’ve quite enjoyed its format of doing donations versus our prior way. I don’t count it in our net worth since it’s not really our money anymore.

    Congrats on a financially strong 2017! I showed my husband the Expatisan cost of living calculator idea and he thought it was really cool. So maybe going forward, we will pick a city every month too :) We would actually be in the US with our December spending, which is really exciting!
    Leigh recently posted..Our $23,000 Big Wedding ReceptionMy Profile

    • Yeah, I went back and forth as to whether or not to include the donor advised funds in our calculations/list. In the end, I left it there for now, since it’s likely going to be funding the bulk of our charitable spending, and we have always included that as budgeted amounts (and I was too lazy to go in and remove those amounts in trailing years to make it closer to apples-to-apples going forward).

      Glad your husband likes the cost of living calculator. It’s been a rather enjoyable 5-10 minute “vacation” every month figuring out where it would put us and seeing what looks good there! With your HCOL in your current home, I’m not surprised you’re landing in the US already. There are lots of significantly lower cost locales in the US compared to your own (as in what – pretty much the entire rest of the country?)! =)

      • I was a little surprised we are in the US already! It’s still a little weird looking at our numbers combined. I find the condo value a little difficult to account for with these things, so I have just been calculating years of expenses as (monetary assets)/expenses/12, without the mortgage in the expenses value. That’s probably somewhat underestimating things since we’re sitting on $500k of equity in the condo alone.
        Leigh recently posted..Our $23,000 Big Wedding ReceptionMy Profile

        • Yeah, I tend to leave the house in as an expense, but then don’t count the equity in it as an asset. It’s on the conservative side, but if we keep the mortgage, we still have to pay it through 2027, which is still a long time from now!

  • Great year! I passed a major milestone the last week of 2018–after a year plus of my ex living there with his new family and my name on the mortgage, our marital home has been sold for a tidy profit! I have a nest egg, he’s digging out from debt, everyone’s happy.

    Also I landed a full time job, so I can expect much greater net worth gain in 2018! (I’m also getting married!)
    Frugal Paragon recently posted..A Lady with a Barbell #1: Approaching the Squat RackMy Profile

  • Question: do you max out your HSA yearly, or are you just aiming for a cushion in there and doing other things with that money? I haven’t been able to figure out fees for our HSA versus other options, but I’m trying to decide if I should put more in my HSA or in my 403(b).
    Leah recently posted..So, you’re having a baby: diapers (and wipes)My Profile

    • We max out the HSA every year – but we’re capped at the individual contribution level since I don’t have a good HSA option for my health insurance.

      Our HSA fees are a tad higher than 401Ks, but remember if the $ goes in from your paycheck, you don’t pay FICA on it. So that gives you a 7.65% bonus on the employee portion of FICA, and *then* no income tax on it! For us, we’re willing to look the other way on that slightly higher (still well under 1% fees) since we have banked that 7.65% bonus (and the income taxes too) in the beginning. But it is a little restrictive since we will need to spend the $ on health items or pay the full taxes and a penalty.

      If your choice is between an unmatched 403b and HSA, I think HSA might be a decent option because of the FICA issue, but you might want to start saving a pile of historical health receipts that you can use if you ever need to pull $ out of it.

      • We’ve got a matched 403(b). I contribute more than enough for the match but not enough to max out. I could come close to or perhaps max out this year if I don’t fund my HSA, but it’s a stretch on our income. So it’s always this debate of how much to fund retirement versus HSA.

        I have been using the HSA to reimburse ourselves for expenses, and then I throw that money into savings and appreciate that I got a tax benefit on it.
        Leah recently posted..So, you’re having a baby: diapers (and wipes)My Profile

  • Is there any easy way to look at market return versus my own contributions into retirement? I don’t see that on either interface page for my two places I have brokerage/retirement accounts (TIAA and Schwab). So my “personal rate of return” is really high, but I don’t know which part is from contributions or from growth in my holdings.
    Leah recently posted..So, you’re having a baby: diapers (and wipes)My Profile

    • Personal rate of return is from the growth of your holdings, based on the days you personally bought shares. So that is the rate of return :) I find it somewhat hard to find on the Fidelity website to see the $ return, but Vanguard separates it very nicely.

    • If you keep an excel spreadsheet of deposits, withdrawals, and the dates you made them, you just use the XIRR formula. (It’s for the “internal rate of return”, which is the implied rate if the market had been absolutely smooth the entire time you were investing.

  • I re-organized our holdings last year to take advantage of the lowest fee funds available in every account. We have an ideal stock/bond split and a domestic/international split. It was similarly an “oh, duh” moment, since the discrepancy between what firms charge can be big. Now we don’t hold more than two funds in each account and re-balance twice a year. And it’s much easier to look at and comprehend since there’s fewer funds.

    • Yeah, ours was a pretty similar “oh duh – why didn’t we do this sooner?”. I had been loading up on bonds in my 401K to offset our 100% stock in our taxable account because it was easiest to log in and change from work, but Mr PoP as it turned out had a much cheaper bond fund in his plan. So now he holds pretty much all the bonds in his 401K.

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