In the interests of verification & transparency & full disclosure & such, I’ll keep our books open.
Consider these numbers our base situation going forward. On the first of each month I hope to update our net worth, our budgetary performance, my observations, and some lessons learned. As you may notice, I use Mint to track our finances.
I’ll start with account balances and then move on to our budget.
We started the month of March with a net worth of $2,213,929 and as of today, 3/15/17, our net worth is $2,200,489, for a decrease of $13,440 mainly due to market fluctuations.
Our liabilities are:
The biggest liability that should stand out is at the bottom: “MorganStanley Client…” with a balance of $56, 925. We use a full service broker–again, a subject for a different time–who gives us access to a signature loan in the amount of roughly $600,000 and carrying an interest rate of 4%.
Two years ago our daughter needed different schooling, so we sold our cabin in the sticks–jeez, a THIRD subject for a different time–and moved into an excellent school district in a nearby city of middle size. The house we bought cost $310,000 and we did roughly $20,000 of remodeling.
I was carrying the cabin on the books at $399,999 based on an objective appraisal, but the local market was illiquid, so after two years of ratcheting the price down $10K every two or three months, we found a buyer at roughly $320,000. We paid off most of the signature loan but held back approximately $30,000 in cash because practically all of our investment gains are on paper, meaning that if we sold to raise cash we’d incur at least a 15% capital gains tax. 15% > 4%, so we’re carrying a loan balance which costs us less than $200 a month. Being in debt twists my guts a bit, but the math is valid.
I manage the $497,916 account myself, although I’m a buy-and-hold guy and haven’t traded in this account in several years. I’ve made some terrible trades in my time, but this one holds my best ones: Apple, Berkshire, Phillip Morris, and Amazon. I caught the first three during 2001-2005, and Amazon in 2012-14.
Apple, incidentally, is the best trade I ever made. I caught it in 2004 at a split-adjusted cost basis of $1.21. Today it’s trading at $139 and it carries an annual dividend of $2.28 a share. I have 1,400 shares.
The other accounts are managed funds, a low-fee Vanguard S&P fund, and IRAs. The use of managed funds is widely frowned on but given our financial situation I consider them preferable to low-fee index funds. That’s yet another subject I’ll have to get into later.
Finally, our physical assets (with one weird exception.)
The “budgeting account” is our emergency fund and annual expenses–property taxes, etc.–that we save for every month. It’s empty right now due to unexpected auto repair expenses, and the roughly $4,500 in property taxes we just paid.
On the third line I track our daughter’s 529–a type of educational investment account that receives advantageous tax treatment. Mint won’t update it automatically; it’s been a while since I did it by hand.
Our “Vacation Fund” is another item we budget monthly for. Just went on a vacation; hence zero.
Yeah, I carry my Ranger on the books. Debatable whether I should, but I love my truck and, at least where I live, it’s an extremely liquid asset.
Our “safe withdrawal” budget is roughly $4,100 a month, which last month we came in on.
We’re on track to hit a 2.6% withdrawal rate this year, which is excellent because 4% is generally considered safe (meaning that 4% of an investment pool with certain characteristics will theoretically last forever.)
Flying in the face of conventional wisdom, as long as we hit $4,100 a month I don’t sweat the categorization of individual purchases. After 11 years of early retirement, I’ve got a pretty good handle on things.
In conclusion: this is our baseline. As I said, check back each month for updates.