Each month, I share a net worth update for the Brewing FIRE household. This brief summary of our financial standing serves as a progress report on our journey to financial independence.
In addition to giving a snapshot of our net worth, I will compare our progress to the previous month. I will also comment on any notable changes to our finances. Finally, I will share my “Chart of the Month,” which should add some color to my saving and investing strategy.
August 2018 Net Worth
We use Personal Capital to track our net worth. Personal Capital makes it easy to track all of our banking accounts, investing accounts, credit cards and loans all in one place. In addition, Personal Capital has a “Cash Flow” feature which compares your income and expenditures over time, helping you make sure you’re balancing your budget. Personal Capital also has numerous other functions for analyzing your investment holdings, asset allocation and performance, as well as some great retirement planning tools.
The dog days of summer delivered yet another all-time high for our net worth. This was mostly due to strong portfolio returns.
Cash: as I mentioned in last month’s update, we plan to maintain $10-15k in our checking account. One reason is that it will be our ‘first line of defense’ against any unexpected expenses. Another reason is that we need to maintain a minimum balance of $10,000 in our checking account to have the fee waived. I’m not a big fan of jumping through hoops in order to not pay people to hold my money. But I’ll just smile, grin and bear it for the time being.
We continue to funnel extra cash toward our mortgage in the hopes of reducing our total interest expense and paying the loan off early. We will keep doing this until better investment opportunities materialize.
Equities: our investment account balances saw a substantial gain of ~$22k (5%) this month, which is great! Unfortunately, monthly gains of 5% are unlikely to continue, because that’s not how the world works.
We got a slight bump this month from my company stock, which gained approximately 10% during August. I’m still working on reducing my exposure to 5% or less of my total equities balance (it’s ~9% now). Therefore, I will be selling some more shares in my Employee Stock Purchase Plan and my 401k in the coming months.
Home Equity: we made a $2500 contribution toward our mortgage principal in August. Combining this with a slight increase in the Zestimate, our home equity has had a modest rebound after last month’s beatdown.
Unfortunately, our well pump crapped out a few weeks ago ($3,000), so we won’t be making as high of a principal payment in September.
Additionally, we are in the preliminary stages of determining whether real estate investing should be part of our FI plan. We already dabble in this area. I’ve owned a multi-family house since 2007, and we currently rent out an apartment we built in our basement. I will begin investigating whether we can make property renting work in our area, and whether the market timing is right. Then we’ll decide whether we need to save up some more cash. Stay tuned.
Chart of the Month: Transportation Costs
According to the Bureau of Labor Statistics, transportation costs accounted for approximately 13% of the average consumer’s gross income in 2017. This is one of the oft-cited “Big 3” expense categories, housing and food costs being the other two.
The following chart shows how much I personally spent on transportation costs since 2010. This includes car payments, insurance, registration, taxes, gasoline, and maintenance costs. Also, I’ve graphed the percentage of my gross income spent on transportation costs each year.
Over the course of a few years, I was able to reduce my transportation expenses by nearly 60%. Here’s how I did it, through incremental optimization and my continual improvement methodology:
- In 2013 Mrs. BF moved in with me, which reduced my (almost) daily commute by 30 miles.
- In 2016, I changed offices from a building located 22 miles from my house to one located 1.7 miles away.
- I’ve never driven a vehicle that gets less than 30 MPG.
- The price of gasoline dropped by ~50% from 2013 to 2016.
- I vowed to never make car payments again in 2015 after paying off my loan.
- I started driving a cheaper, non-luxury car (that I paid cash for) in 2016, reducing both my maintenance costs and my property taxes.
As you can see, I essentially bottomed out in 2016. It’s impossible for me to spend less on transportation without ditching my car altogether, which is not an option where I live. Regardless, I’m pretty happy that my total spending for transportation is less than $200 per month. I can live with that.
Thanks again for following along with our monthly progress report, and please let me know what you think in the comments. Cheers!