The Big Scratch – May 2017 Net Worth Report

We haven’t had a bad month yet. Our net worth continues to rise. We can thank Mr. Stock Market for that of course, but we also have to give ourselves a big high-five for maintaining a high savings rate each month.

If you are curious about how such diligence can pay off, just compare our net worth from one year ago (May 2016 ~ $514,000) to today (~$725,000). That’s an increase of $211,000!

I would also like to note that in this time we have had a plethora of unexpected expenses, including one $3000 tree removal cost (I promise to stop talking about this soon), medical expenses, and a few spur-of-the moment vacations ( I’m addicted to hot springs).

Maintaining a high savings rate means that the unexpected barely makes a dent and we can calmly go on with our lives. As a general rule, we invest as much as we can as often as we can regardless of market performance.

 

May 2017 Net Worth

The table shows the balance sheet for the beginning of the month April 2017 and May 2017.

 

Year-to-date results

Net worth in January 2017 was $663,042.

January 2017 to May 2017 difference = $62,740! This total includes:

Increase/decrease in home equity = $2,599

Investment contributions = $37,512

Earnings/losses = $22,629

 

Investment Contributions

Our financial savings goal for 2017 is $83,042. It includes investing the maximum to the 401k, Traditional IRA, Health Savings account and the brokerage account.

This has become a stretch goal for us due to a lower than expected raise and bonus. Regardless, I am going to continue to aim for it and possibly find some ways to generate additional income this year.

*Nearly 100% invested in low-fee index funds (VTSAX – Vanguard)

In April, we contributed to:

401k* = $2,416

Trad IRA = Fully-funded!

H-S-A* = $454

Vanguard Brokerage = $3,000

Dividends (re-invest) = $0

 

Total = $5,870

*My employer contributes a match of 10% of my base salary to the 401k. My contributions to these accounts are automatically deducted from my paycheck. I never even noticed it’s gone.

 

Savings Rate

Our net income savings rate goal for 2017 is 70%. A high savings rate can be reached through decreased spending and/or by increasing income.

In April, we realized a net income savings rate of 65%! After a rough start in January, we are now at a cumulative SR of 66%.

If we continue to keep our expenditures low, our saving rate will begin to approach the 70% range.

Savings rate on net income is calculated by Total Saved + Mortgage Principal paid divided by Total Income minus taxes and charitable giving.

NISR = Total Saved + Mortgage Principal / Total Income – (Taxes + Charitable Giving)

 

Investment Income

Our net worth minus our home equity is $461,931. These funds are held in equities and a minor amount in cash. These monies will provide us passive income during our FIRE (Financial Independence/ Retire Early) years along with income from our rental property.

ER accounts include Roth and traditional IRA, brokerage and cash

 

We will consider FIRE when our investments and cash reserves equal $937,424, each bucket is fulland the rental property is paid off. This conservative goal allows us a safe withdrawal rate of 3.5% assuming we need $32,800 investment income per year. We will also have an annual profit of $7,200 from the rental property bringing our allowable annual retirement spending to $40,000.

We aim to live off of $35,ooo or less in retirement so this FI goal should allow flexibility.

 

We have some traveling to do at the end of May. Plus, Little Miss becomes a 2nd grader!

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3 Responses to The Big Scratch – May 2017 Net Worth Report

  1. Every month I read your net worth report and every month I’m gobsmacked by your awesomely high savings rate.

    One quick question – what’s the thinking behind the adjustments to Net Income for charitable deductions? The adjust for mortgage principle I can understand – the portion of your monthly mortgage that goes towards the loan isn’t really “spending”, it’s just transferring money from one account (checking) to another (loan). The interest portion of the monthly payment is, of course, real spending.

    But removing the charitable giving effectively increases your savings rate by reducing your total income. Is it that you don’t see the charitable giving as a discretionary expense and thus shouldn’t be included in spendable income (which is essentially what the denominator in your Savings Rate is)?

    • ska@thejollyledger.com says:

      Thanks for commenting Money Commando! I remove the charitable giving primarily because it is an expense that is deducted from my paycheck. Realistically, I do have a choice to spend on charity, but since it is tax deductible, I just choose not to include it in my spendable income. Really, I could go either way and you make a good point, although it wouldn’t change my overall results by much. I calculate a gross savings rate as well to include all expenses, including taxes, and it hovers around the 55% mark.

      • It’s always interesting to calculate both net and gross savings rates. If you average a net savings rate of ~70% and your gross is around ~55% then your total taxes and charitable contributions must be around 15% of total income. That seems reasonable.

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