2017 - Financial Year In Review

2017 has been a better year than 2016 in terms of finances. Our good health still remains our greatest blessing. I wish to thank the powers that be for this incredible gift. As we get ready for 2018, I want to look back at last year and review finances. The format is going to be very similar the 2016 post, which can be found here.

Total net worth

This is a sum total of all the liquid assets, investment assets minus all the debt, which is our mortgage loan. Property value is not included.

Beginning of year balance (Saturday, January 14, 2017): $90,120.35
End of year balance (Saturday, December 16, 2017): $163,332.47

Net Change: +$73,212.12
Percentage Change: +81.24%

Liquid net worth

This includes a total of all the liquid accounts.

Liquid net worth change

Beginning of year balance (Saturday, January 14, 2017) - $161,230.18
End of year balance (Saturday, December 16, 2017) - $44,321.82

Net Change: -$116,908.36
Percentage Change: -72.51%

Paying off the mortgage is the reason why our liquid net worth is low.

Investments

This includes change in value of investments in 401k, Roth IRA and taxable accounts at the end of the year.

Investments through 2017

Total invested (Saturday, December 16, 2017): $100,354.41
Total value of investments (Saturday, December 16, 2017): $115,376.71

Change: +14.97%

Debt

2017 is a wonderful year where we paid off our house and eliminated all debt.

Saturday, January 14, 2017: -$124,913.24
Saturday, December 16, 2017: $0

Change: Debt eliminated!

Total Expenses

Total expenses in 2017 are insanely high because I am counting the mortgage pay off as an expense.

2017 Total expenses: $144,977.76
2017 Total expenses (without mortgage pay off): $19,797.58

2016 Total expenses: $32,385.66
2016 Total expenses (without mortgage payments): $19,530.03

Change: +347.66%

I think the interesting thing here is that we are able to live on less than $20,000 per year if we don't have a mortgage, and this includes home insurance and property taxes.

Food

2017 groceries and eating out: $3,226.18
2016 groceries and eating out: $2,688.83

Change: +19.98%

I am not sure how we spent almost $600 more in 2017 compared to 2016...I am going to keep a close eye on this in 2018.

Computer related expenses

2017 computer expenditure: $1,456.29
2016 computer expenditure: $2,149.85

I am kind of surprised that I spent over $1,400 on computer related expenses, and this number is kind of high considering I did not build a gaming machine in 2017. More than 50% of the expenses is for one item - the MSI 1080Ti. I really need to take it easy with computer related purchases in 2018.

Change: -32.26%

Video game purchases

2017 video game purchases - $222.60
2016 video game purchases - $179.50

I said I intended to keep the game purchases low in 2017, and I failed at it. Considering the Steam backlog I have, I really shouldn't be buying any more games until I finish a significant portion of it.

Change: +24.01%

Unplanned big expenses

2017 Unplanned big expenses: $348.00
2016 Unplanned big expenses: $3361.27

Fortunately, 2017 has been kind of us in terms of unexpected expenses. I am hoping it will be the same in 2018!

Change: -89.65%

Conclusion

My financial goals for this year include maximizing 401k, Roth IRA and HSA. and budget for fun, so that I can spend money guilt free. Overall, I am very happy with the progress we made in 2017.

Month In Review - July 2017

Disclaimer - It must be noted that I like analyzing data and trends. So the observations I am making, are just that. They are not be interpreted as complaints. I am very grateful to the powers that be for all the good fortune we have been bestowed in life. 

July has been a relatively expensive month. Even though we stayed under $1000, we definitely indulged in a few things. 

Food spending accounted for $272.40, which is definitely on the high side. $77 of that was spent on two meals (each), which were worth the money. One of those meals was a chicken fried steak. I haven't had one in a very long time, and I thoroughly enjoyed it. 

Chicken fried steak

We spent some money on computer peripherals, and electronics.

I purchased a mechanical keyboard, and it feels excellent. I cannot imagine going back to a membrane keyboard. Considering how much I type each day, I did not mind spending a little bit of money on a keyboard. I have a feeling I am not going to need one for several years. The membrane keyboard was purchased in 2013, and its still working. I expect the new mechanical keyboard to last at least just as long.

This being summer, utility bills  are going to be on the higher end. The bills I paid in July are for the month of June. Bills for the month of July (which will be shown in spending for August) are significantly higher, but I expect this number to go down.

Spending for the month of July 2017

On the investment front, a total of $15,747.84 was invested in various account throughout the month of July. This included contributions to 401k account, taxable account and dividend reinvestment. 

Our net worth grew by 4.996% to $128,532.13. Cash holdings accounted for 35.879% and the rest is investments. We are very close to reaching $100,000 in investments. This would be an exciting milestone for us.

Net worth for July 2017

Goal for the month of August would be to keep things under control, and spend less than $700 for the month. Our spending so far is at $411.91, which leaves us $288.09 for the rest of the month...its going to be challenging.

Month In Review - June 2017

Disclaimer - It must be noted that I like analyzing data and trends. So the observations I am making, are just that. They are not be interpreted as complaints. I am very grateful to the powers that be for all the good fortune we have been bestowed in life. 

We were on course to to spending less than May 2017, which was an amazing month for us, but it wasn’t to be. I ended up switching auto insurance from GIECO to State Farm, and I made a payment of $221.65.

I switched from GIECO to State Farm because GICEO kept rising up the prices steadily over the years, and State Farm was offering better coverage, roadside assistance and lower premium.

Our overall expenditure for the month of June is $859.85.

Without the insurance payment, we would have spent a total of $638.20, which is $52.6 less than the month of May.

Overall spending in June 2017

Another interesting thing to note, our food spending (groceries and eating out combined) of $284.51 was the highest in the last 18 months. I did not go check the spending for 2015, but I am willing to bet I did not spend as much in any given month in 2015. I am not particularly concerned about this, but as always, I am going to continue to look for ways to minimize waste.

I am going to predict that the month of July is going to be a little bit more expensive. We might even go beyond our ideal target of staying under $1000 per month because we have some plans for the weekend of July 15th. I will also be buying some games and maybe a mechanical keyboard. I am not decided on the keyboard yet.

Importance of Tracking Expenses

If I had to pick the one habit I had that helped me stay out of debt, and maintain control over my finances during my college years, and throughout my working life so far, it would be tracking my expenses.

To give you an idea of how this has helped me, check my net-worth graph from September 2014 to June 2017. During this time, I paid off my house, and maximized both retirement accounts.

Net worth over the years

Understanding my spending patterns also helped me cut down on food waste (among other things). Here is a breakdown of spending on food (groceries and eating out) over the years. Compared to the year 2011, where spent $4938.77 on food, we only spent $2688.83 in 2016! We saved over $2000 on food without compromising on quality of life! To me, this is the very definition of minimalism. Reducing waste, being intentional about spending and maximizing the quality of life in the process.

My own version of the spreadsheet is a little cumbersome, and it is not suited for everyone. Therefore I decided to create a very basic spreadsheet which gives you a platform to begin the process of tracking your expenses. Once you get into the habit, you can customize this as you see fit.You could also use this to create your own spreadsheet in excel, so feel free to make a copy of it and change it to your heart's content. The idea here to be able to look for patterns, and make changes in your life that are advantageous to your goals.

You can view the spreadsheet HERE.

I understand this might be a difficult task for some, but personally it was worth the effort to be meticulous about tracking spending. I also created a video tutorial on how to use it.



If you are a college student, I especially recommend this, because I started doing this in college, and it has helped me immensely when I entered the job market.

Why not use Mint?

This is a reasonable question, I suppose. I personally do not want to give all my information to Mint. I am not comfortable with it.

Filtering data, and getting the information I need is very simple provided I enter the data correctly. If you are someone looking to skip the data entry part, then you have to look elsewhere. This spreadsheet won't help you.

I also found Mint lacking when a single transaction combines multiple categories. As I have shown in the example, a single transaction might contain groceries, computer peripherals, household items etc. Mint does not analyse each item within the purchase (at the time, it might be different now), and it would only show me the overall expense. This was not helpful for me, so I decided to create my own solution.

Conclusion

I strongly suggest you try this for a week. If you feel its too much work, then you could look for a more hands off solution. You are no worse off than before.

Feel free to ask me any questions you might have.

Month In Review - May 2017

We started the month of May with the intention of doing better than we did in April which was a fantastic month with $790 expenses. We knew it was going to be difficult to live within $790 especially because we were going to visit family in a different state. 

With the baseline of monthly expenditure being $1000, we decided to contribute the difference towards a vacation fund. So far in two months, we contributed $518.64 towards this fund. 

Our expenditure for the month of May is $690.80

We managed to spend $99.77 than the previous month. We consider this a huge win for us because we were able to reduce waste very aggressively without compromising on fun or quality of life.

Expenses for the month of May 2017

For the month of June, I intend to reduce eating out, because we are planning for some fancy dining next month.

Spending in 2017 thus far -

Month in Review - April 2017

We began this month with the goal of spending less $1000 for all expenses. We are fortunate enough to have a paid off house, therefore we felt that this was something we could accomplish. I didn't have any big expenses that I could foresee for April. I paid off the tax dues last month, so the only spending categories we had to care about this month were regular expenses. 

Keeping track of expenses, and consciously avoiding spending mistakes allowed us to stay under budget. It wasn’t as difficult as I thought it would be, it just required some vigilance on our part to ensure that easy mistakes wouldn't be made. 

Summary of spending in April

Spending per category in April 2017

For the month of May, I intend to maintain the same budget, and spend less than $1000. I need to do a better job at managing groceries and eating out expenses. We did a great job until the 28th of this month. On the 28th, we went out to eat at a sit down restaurant, and that cost us $32 (I am generous when it comes to leaving tips). We definitely enjoyed the experience, but felt that getting take out would have been more fun, and would cost us less. 

Spending in 2017 thus far

Spending in 2017

The huge spike in spending for January 2017 is because we paid off our mortgage, and March was an expensive month because taxes were due.

Paid Off Our Mortgage

We paid a total of $3,572.87 in interest in 2016. I began thinking about it over the course of the last few weeks. I did not see much of a reason to keep paying interest to the bank when I have the funds to pay off the loan in full.

Between my interest earning accounts, I earned a total of $2,738.51. Therefore having the mortgage cost me $1,148.17, that's $3.17 per day. between Monday, February 1, 2016 and Saturday, January 28, 2017.

It got to the point where having the money in the bank isn't increasing my net worth.

Interest paid in 2016

There have been several good arguments made in favor of not paying extra towards the mortgage and investing the money in the stock market in mutual funds, like S&P 500.

However, I realized this particular argument does not fully apply to my situation. I have enough money to pay off the mortgage in my CD and Savings account. So my choice comes down to investing the money as a whole in the stock market or liquidating the CD, and combining it with funds in my savings account, to pay off the mortgage.

Now, there will be folks out there who believe that investing the money as a lump sum in the stock market in an S&P 500 fund is the way to go. They are not wrong. I want to make that very clear. I have a feeling that doing so will put me ahead in the long run.

I just don't have the courage to do so.

I would rather pay off the mortgage and invest what I would have paid towards it in the stock market every month.

With this strategy in mind, I called the bank on Monday, January 23, 2017, to close my 60 month CD and have them deposit close to $100,000 in my online savings account. They closed the CD without any issues, and the money was deposited in my savings account on the same day. I received an email confirmation from the bank about the account closure.

CD account summary

I had to pay $1081.77 in early withdrawal penalty, so my initial balance of $100.905.97 was reduced to $99,824.20, which was deposited into my savings account.

Savings account summary

I initiated a transfer of $126,000 from my savings account into my checking account at 7:34PM on the same day. The money was deposited into my checking account on Friday, January 27, 2017.

I called the mortgage company first thing in the morning, and got the necessary details about paying off the loan. I was told that I need to pay off the balance through a wire transfer. I was given all the necessary details needed to include on the form, such as the ABA number, destination account number etc.

I went to my local bank and initiated the wire transfer at 9:24 AM. They received a confirmation at 9:31 AM. The process was very simple, and it cost me $12.

Checking account activity

At 9:45 PM on the same day, my account status on mortgage account was updated.

Mortgage paid off!

I was told that I am going to receive my escrow balance check, and satisfaction of mortgage within 30 days. The mortgage company is going to contact the county clerk office to update them regarding this, so that I can receive my tax bill.

I will have to contact the homeowner's insurance company and have them remove the lender from my account and send me the bill for home insurance going forward.

My liquid net worth (including investments) has of course dropped significantly, but I am fine with that, considering I do not have mortgage payments anymore. I intend to put a savings plan in place, and hopefully save close 95% of my pay check, and I would imagine that it will grow over the course of the next few years.

My current net worth after the pay off