According to my Integrity Policy, I want to let you know that this post contains Personal Capital referral links. Personal Capital is a free service. They are looking for high-net worth individuals as possible customers for their financial advisory services, but the expense tracking and retirement planning tools that I recommend are free of charge.
This month was epic! In some ways, it was my doing, and it other ways, it wasn’t. Let’s take a look at the numbers.
Account | Last Month | Balance | Change |
---|---|---|---|
Personal Checking | $8,190.25 | $6,311.58 | -$1878.67 |
Real Estate Operating Account | $1,715.27 | $1,774.87 | $59.60 |
Real Estate Cash Flow Account | $1,640.25 | $2,298.12 | $657.87 |
Credit Cards | -$7,291.31 | -$6,568.82 | $722.49 |
Retirement - After Tax | $39,812.67 | $44,301.84 | $4,489.17 |
Retirement - 401(k) | $51,061.64 | $65,528.05 | $14,466.41 |
Retirement - IRA | $4,175.02 | $4,502.52 | $327.50 |
Asset - Home | $408,438.00 | $437,000.00 | $28,562.00 |
Asset - Rental 1 | $55,324.00 | $55,692.00 | $368.00 |
Asset - Rental 2 | $71,228.00 | $70,703.00 | -$525.00 |
Mortgage - Home | -$383,724.42 | -$383,500.43 | $223.99 |
Mortgage - Rental 1 | -$44,907.39 | -$44,849.78 | $57.61 |
Mortgage - Rental 2 | -$48,624.26 | -$48,561.03 | $63.23 |
Student Loan 1 | -$23,172.61 | -$23,050.70 | $121.91 |
Student Loan 2 | -$14,404.72 | -$14,328.95 | $75.77 |
Student Loan 3 | -$5,338.12 | -$5,242.80 | $95.32 |
Net Worth | $114,122.27 | $162,009.47 | $47,887.20 |
Holy cow! That’s an increase in net worth of almost 42%!
The biggest factor in this increase was increase in value of our primary residence (which is finally out from underwater after 8 years, but that’s another blog post), but the second most powerful factor was the one I’m constantly harping on. When the market is down, what should you do? Buy! When the market was down, what did I do? I bought! I bought with every penny I could find!
I never try to time the market, I just buy according to my investment policy statement every time I get paid. I also happened to get a little lucky this past month. I had a check come in from one of my contracts that wasn’t earmarked for taxes or any other expenses, so almost everything I earned this month went into the market. I happened to purchase within a day or so of the very bottom of the recent correction. When the market came back, it came back big time for me! It was almost like having a time machine that took me back a full year and allowed me to buy at those prices!
Everything else performed as expected this month: Rental income, student loan and mortgage payments, and all the rest.
This coming month (and most other months!) will be comparatively modest. I’m investing as normal, but I’m also traveling to Thailand for major dental work. Though that will be much cheaper than seeking the same treatment in the US, it will still be a pretty expensive month. I still hope to see my net worth increase.
Blog Income
As I mentioned in my Integrity Policy, I want to make sure I share any and all professional relationships and compensation I make as a part of this blog. In October, I made $4.28 in Google Ad income. I received $100 in referral payments from Personal Capital. I had a few clicks to my iTalki link, but nobody has taken a lesson so I haven’t received any lesson credits there this month. Thus, my total income for the month from the blog was $104.28.
Note: I report Google Ad revenue as it as earned, and any other income when it is paid.
Retirement Update
Our net worth is up $47,887.20 this month, which is pretty darn unbelievable (and unlikely to be repeatable!). We hope to be able to retire in 47 months. Based on our plan for investing and purchasing properties, we are on track.
With equity and bond accounts totaling $114,332.41 at the end of September a 4% Safe Withdrawal Rate would allow us to take out $381.11 per month. My rental properties, after all expenses, vacancies, and short and long term maintenance are considered, produce $465.00 of safe cash flow every month.
Safe Monthly Income: $846.11 (+$64.28 to Last Month)
% to Goal: 16.92% (+1.28% to Last Month)
Want to Know How to Track Your Expenses This Closely?
It’s really easy. Sign up for a Personal Capital account, which is completely free. It’s how I track my balances across time, and allows me to project all my retirement progress without doing any work at all. As a disclaimer, if you sign up with Personal Capital, this site may get a referral fee depending on the size of your portfolio.
Good for you–keep up the good work of paying down those debts and saving/investing your earnings! You’ll be pleased when the debts are paid off, I’m sure! 🙂
I think we’ll actually retire with much more debt than we have right now! The rentals won’t be paid off, but they’ll cash flow pretty prodigiously so that debt won’t be a problem. The only other debt we have right now is the primary residence mortgage (we’ll probably sell in the next year or two) and the student loan debt (which is so low interest that just continuing to pay it on schedule and investing instead comes out ahead mathematically). All our debt (except for our condo) is at ~4%. We’re in no rush on that kind of interest rate!
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Just curious – how are you using the separate RE Operating Account and Cash Flow Accounts?
The operating account receives all rent distributions at the end of the month. It’s the account that pays taxes, insurance, utilities, repairs, and any other costs. On the 15th of every month, I have a automatic transfer (technically, one transfer per property) set up for the “safe” cash flow for each month, which goes into the cash flow account. In theory, the cash flow account is spendable. In reality, at this time it’s accumulating and being put towards future properties. Once we RE, that account will be the real estate portion of our monthly income.
I like that approach. I might just adopt it myself. 🙂
The one thing that I’m deciding is whether its worth adopting multiple operating accounts (one per property) to insure against the risk of one of the mortgage companies or other billers overdrawing the account or something [1]. Of course, this is a total pain with multiple properties and only really matters if I’m also keeping our capital reserves in the operating account. If we split those off into a separate account (and setup monthly transfers per property from the operating account into the capital reserves account), then this might be a better setup.
-Cody
[1] See “Step 6: Instruct All Debt Service Payments to Automatically Draw Upon Either the CCDA or a CCDA-Linked Account” in http://www.joshuakennon.com/how-to-manage-your-cash-using-the-central-collection-disbursement-account-method/
Hello, just curious you have little to no cash what if your job was lost and/or a renter stopped paying. how would you pay your debts as well as everyday expenses?
Hi Jen, thanks for commenting!
I usually keep about a month’s expenses in my everyday checking account, but I always have at least six months of PITI in reserve for the rentals in the rental accounts (at the moment I actually have nine months worth of PITI across the two rental accounts). I could easily pay for the mortgages of my properties even if all of them were vacant at once for quite a while, even if I had no income, though obviously that would point to a situation where everyone would have much worse problems than holding on to investment properties!
As to my own everyday expenses, a month of cash gives me more than enough time to liquidate from my taxable investments if the need arose. Even in the apocalyptic scenario of a total stock market collapse and vacant rentals, there’s still plenty in bonds to be able to liquidate and cover costs for a good long while at reduced expenses. My personal feeling is that an emergency fund need not be in cash, but rather be liquid in the near term, and that I only need sufficient cash to bridge that period. Hope that makes some sense.