At the end of each year I like to dig into my finances to do a bit of a review.
Since I have all my numbers in Quicken, it’s pretty easy.
And I thought you might find the results interesting — so I’m turning it into a post!
As a reminder, 2017 was my first full year of retirement, so it provides a good insight into how our finances might play out over the rest of our lives.
Net Worth Results
Net worth was up 11.6% thanks to an awesome stock market run. How long can it keep going up?
I record our net worth at the end of each month. 11 out of 12 months posted were the highest net worth I’ve ever had. Not bad for a retired guy. 😉
This included the fact that I put $35k of appreciated index funds in my donor advised fund this year. FYI, this is why there are no giving “costs” below — we did our giving from assets instead of from income.
We have now averaged 13.71% compound average annual net worth growth since I started tracking in 1996.
Sorting Out What Really Happened
My spending as recorded by Quicken is a bit off due to how I account for things.
For example, my largest spending category by far is “school” (which includes college costs for my daughter).
While I did pay these costs, I was then reimbursed from a 529 account. But since I didn’t take the money directly out of the 529 as the expenses came due (I made one big withdrawal at the end of the year) it looks like my cost of college this year was $30k (which it was not). So I backed out the reimbursed costs and just left in the ones I paid without reimbursement.
This was by far the largest adjustment I had to make but there were a few others. But I sorted through those to try and give the most accurate picture possible.
One other thing bears mentioning: the numbers below are not cash numbers, but income and expenses.
How does this make them different? A few examples:
- I sold about $70k in index funds when I thought I was going to buy more real estate. No impact on income or expenses, but it did contribute to my cash position. (Yes, I did have capital gains income but since this was a one-off, I didn’t include it in the numbers below).
- I had a major influx of cash as I withdrew from Lending Club and Prosper as loans came due.
- I had large tax refunds (almost $18k) but since they were not normal, I took them out.
Needless to say, my cash balance was way higher than what the numbers below imply.
Finally, these are not audited numbers. I’ll get to the specific details when I do my taxes (which I am just starting). Consider the numbers below as close but not exact.
Budget Results
So I moved a TON of numbers around to try and get to a true representation of what happened. Once I got them all settled out, here’s where I netted out:
Income
- Rental Income: $49,726
- Dividend Income: $8,674
- Other Inc: $3,980
- Wife’s Job: $2,623
- Interest Inc: $2,393
- Websites: $1,396
- Total: $68,793
Commentary
- I actually pulled the trigger on several discretionary rental income expenses this year (a couple remodels and a new parking lot upgrade) to lower my 2017 income. The tax return income numbers will be even lower as we’ll have depreciation deducted from what’s above.
- The dividend income is from my taxable account at Vanguard which invests in the Total Stock Market Index fund.
- Other income is from credit card rewards. I’ll write a separate post on how I made this much, but the big impacts were 1) paying for college with a credit card (no additional fees), 2) charging our travels (at 3% cash back), and 3) the point/cash bonuses I got when I tried travel hacking.
- My wife began working at our church in the middle of the year, so next year this number will be twice as large.
- The interest we earned was from two “high interest” online savings accounts that had substantial amounts invested in them.
- I paid every expense I could to make my online earnings as low as possible this year. I wanted to keep my income low so I can avoid taxes on my capital gains sales.
- One area that underperformed was my P2P investments. Both Lending Club and Prosper are earning very small returns, so I’m withdrawing money as fast as it becomes available.
Expenses
- Travel: $14,427
- Food: $7,766
- Taxes: $6,706
- Med. Insurance: $6,010
- Utilities: $5,653
- School: $5,500
- Medical: $4,544
- Misc: $4,086
- Car Repairs: $2,688
- Entertainment: $2,444
- Car Insurance: $2,404
- House Insurance: $2,301
- Eating Out: $2,237
- Clothes: $1,704
- Gas: $1,327
- Life Insurance: $848
- Home Repair: $743
- Furnishings: $526
- Christmas : $428
- Total: $72,342
Commentary
- I think it’s appropriate that “travel” is my largest expense by far in retirement. 🙂 We took two major trips (or at least paid for them) last year (Grand Cayman and Seattle) plus several small ones. I’ll detail the Grand Cayman trip in future posts coming up soon.
- As detailed in my Blue Apron post, we’ve been around $11k-$13k in food costs for the past three years. This is right in the range of a “moderate cost meal plan” for a family our size. If you add “food” and “eating out” we’re at $10,003 for 2017, but my daughter was gone for five months so the lower-than-normal amount makes sense.
- Taxes include property taxes, income taxes in Michigan (where my rental properties are), and state and federal quarterly estimated taxes.
- Medical insurance is our monthly costs with Samaritan Ministries.
- Utility costs include TV, electric, gas, cell phones, water, and trash.
- School includes the non-529 reimbursed costs we paid (i.e. those costs that came out of pocket). We didn’t take out all tuition costs from the 529 so we could claim tax credits. In addition we had travel costs (to move out there plus my daughter to come back at Thanksgiving and Christmas), and school/room supplies.
- Medical costs were mostly driven by the ten (yes, ten) cavities that my daughter had filled this past year. In addition we had costs for my wife’s eyes (new glasses and contact issues), cost of my trainer, and the annual fee for our dental plan.
- Miscellaneous is literally a catch-all and has been $4k to $5k for many years now.
- Remember that $10 car I got? Well, it needed a lot of work. Almost $2,700 worth of work to be exact. 🙂
- We have two big entertainment costs: our gym membership and movies.
- Clothes is one area where we can save some money this year. I simply need to stop buying them altogether as I have enough to last me years.
- Home repairs included a new garage door spring, sprinkler repair for a busted pipe, and a fence post repair which blew down in a wind storm.
- Furnishings included a portable AC unit for our bedroom that made the summer bearable. We have central AC but our bedroom is the farthest room from the fan so we get little cooling up there. We’re also directly above the garage and directly below the attic, two places that heat up easily.
- Christmas is simply the cost of presents handed out. There were other gifts whose costs were placed in different categories including the trip to Grand Cayman (in “travel”), covering the condo cost for my parents in Grand Cayman (in “travel”), and the cell service we cover for the kids (in “utilities”).
In the end, the income and expenses were a wash, which is pretty much what I thought they’d be. And as you can tell from the overall amount we spent, we didn’t compromise on anything.
2018 Estimated Budget
Looking ahead, here are the high-level numbers for our 2018 budget:
- Income: $114,110
- Expense: $79,504
Some commentary on what’s included:
- Income will go up in two main areas: ESI Money and Rockstar Finance. The other numbers from this year should hold firm. There’s some upside on the web income, but I like to be conservative.
- Expenses should be about the same as they were in 2017 — I don’t see why they would be much different.
Those are the details for 2017 and our plans for 2018.
Any questions or comments?
Dear John,
Interesting post with good insights. Our two largest expenses are also travel and food.
Similar to your $10 car, we drive a 20 year old second-hand car that costs us sometimes just a little bit more in gas and maintenance but we also feel its still worthwhile to keep. Once you’re retired, you’ll have more time, time to travel and eat more conscious – so naturally travel costs go up and food costs remain one of the highest, that was the same for us last year! While we could use our own time to fix stuff on our home and have also time to do very tactical grocery shopping from Basel, Switzerland to both, France and Germany as both countries are a 10 minute drive from our place and offer significant geographic arbitrage opportunities.
Cheers,
Matt
Hi ESI,
Thanks for sharing such a great level of detail on your income and spending. You are really tearing it up. So blog income in 2017 was $2K but in 2018 this will jump to $45K or so? And this all came from Rockstar Finance or is a large contribution of this from the growth of ESI?
You are doing great. I suspect you will have a very wealthy retirement, indeed.
As for me, I’m still feeling my way through the different options since the career derail. I’ve been extremely busy between passion projects, job searching and family. I am really grateful.
Best,
Mike
Well, the $45k is a guess at the moment, but there’s some very high upside.
ESI Money alone will earn a minimum of $20k, but could be as high as $40k.
Rockstar is new to me so its numbers are simply an educated estimate now (past results plus my plans) but it could be almost anywhere on the map. You’ll have to wait until next year’s report to know for sure. 😉
If you ever want to get into the online world, start a blog, etc., just let me know. I’d be more than happy to help you.
hi ESI,
I’d love to get into the online/blog world. Any insights on how to get started?
I plan to write a bit about that here (since it deals with my finances), but you should also check out RockstarFinance.com/bloggers. There’s not much there as of now, but we’ll be adding a lot of how-tos to it over the course of the next several months.
Thanks, ESI. I’ll likely take you up on this.
Best,
-Mike
I like the way you track in detail. Can you message me on how you use quicken to do so? My wife and I use i monthly spreadsheets but we would like something that helps us look at the bigger picture YOY. Any help is appreciated.
It’s pretty simple. You enter in all your information (cash spending, credit card charges, bank info, etc.) into Quicken. When you do this, you assign expense categories to each charge.
Once the info is in, Quicken spits out reports to tell you the total spending by category.
Wow, I just read your post on Samaritan Ministries linked in this post as I had not seen it before. So you’re only paying $378 a month for coverage for a family? That’s pretty good. As the healthcare debacle in America continues to go back and forth I’m taking the healthshare ministries a lot more serious these days.
Great post and looks like you’re situated for a profitable 2018
No, it’s $500 a month (see the “Medical Insurance” line above, not the “Medical” line.)
The first is what we pay SM for coverage and the second is our out of pocket costs related to medical treatment.
Still, a pretty good deal.
Got it thanks. That is still good
ESI did a post on Medi-share as well
https://esimoney.com/medi-share-review/
I just started Medi-share this January 1. Family of four, oldest participant 47 yrs old. $300 per month (on the $10,000 deductible plan).
We view it as major medical. We expect to pay unless we have serious medical issues and actually we like it that way.
So far as I have dug into the details more I like Medi-share even more than when I signed up. I haven’t had any medical bills yet but we do have some pharmaceutical costs and they are not covered under any of these plans. However medi-share is part of the “New Benefits” program for prescription drugs.
When I was preparing to go off insurance I asked our pharmacy about cash prices for a couple of the drugs. $56 for one and $110 for the other. I then went and looked at what was being billed to our insurance plan. We had great insurance. It literally paid for everything with great discounts. $22 for the $56 and $59 for the $110. And this was not a price that was shown as a discount negotiated by the insurance plan. This was the actual amount billed to insurance total. So I called up the pharmacist and asked about it. She explained that is the maximum price that insurance will let them bill. Insurance simply won’t pay any more than that so that is all they can bill. So I said so let me get this straight. Since insurance says you can’t bill any more than that you are fine only getting that much money but once I no longer have insurance and I pay in cash and I give you the cash immediately up front and you don’t have to file paperwork with the insurance company and wait for them to pay you, then you are going to charge me 2 and a half times more for the same drug simply because you can? She says well that is how insurance works. I said don’t you have a discount for paying in cash. That is the cash price. That is the price we charge for paying in cash, there is no discount above that. I was clearly not happy with her and told her it seemed like highway robbery. She again explained that is how insurance works and people who don’t have it understand this. Quite dismissive but in her spot she probably has heard these complaints before and she works for a drug store who sets the policy not her individually. I explained I would have to shop prices then and she said I understand, most people without insurance do she said.
Wow that all seemed crazy to me. There was zero receptivity to any kind of discount that wasn’t pre-negotiated through the insurance company. It’s a very messed up system that cash pay is paying double what insurance plans are paying but it is what it is (Keep in mind that price is not what I paid. Insurance still picked up most of that cost. I paid almost nothing. That is simply the amount that was billed to insurance. So while I paid $5 or $10 insurance was paying the other $20 or $50, but now without insurance they would be charging $56 and $110 dollars. It’s just highway robbery.
At that time I had not looked into the discounted benefits programs that Medi-share has.
When I got more details I went and checked on the drug prices for those same two drugs when presenting the Medi-share discounted plan.
$28 and $56. WOW! The Medi-share drug discount plan was getting me a price that was slightly higher than my insurance plan on one drug and actually cheaper on the other one.
Medi-share is also part of the PHCS medical network and have pre-negotiated discounts with all doctors and hospitals in that network. They also have discount plans for participating dentists and vision stores.
As I have learned more about how Medi-share works behind the scenes they are doing everything they can to operate just like and insurance plan. Pre-negotiating discounts for all kinds of services for you just like insurance would do. But they are very careful to constantly warn you they are not insurance.
When I see how important it appears to be to have a big network negotiating and buying down costs for you versus being a stand alone single buyer with no buyer power, What Medi-share is doing from a network stand point is just spectacular in my view. You don’t have to use any of their discounted providers of course. You just would pay full price or have to do your own negotiating in those cases. My first experience with negotiated discounts was like talking to a toad stool. I am sure they wouldn’t all be that way but what a great benefit to have Medi-share participating in already known large provider networks that can get you the same kinds of discounts insurance does.
The PHCS network that Medi-share is a part of is not a Medi-share specific thing, neither is the New Benefits plan for the prescription drugs. These are large networks that other known insurance companies use. Medi-share has just joined into those networks to get the negotiation power that they bring. In fact Medi-share tells you not to tell medical providers you have Medi-share because they know that will be meaningless to them. They tell them to give them your Medi-share card and tell them you are part of the PHCS network, because that network is well known in the medical field.
Like I said, I haven’t had any real medical incidents yet, but so far I love how Medi-share is setup. And of course I love the price too. $300 per month for a $10K deductible and my closest obamacare plan would have been $1,550 per month with a $6000 per person deductible and a $12,000 family deductible. So if a couple family members had some costs we would pay almost $31,000 out of pocket before insurance would pay a thing. So yeah, that’s not even insurance. That’s just a different form of highway robbery.
Apex: thank you for the many details on the RX costs. We just finished with Cobra and currently on a medical plan offered to my company’s retired employees. The cost is high per month, $1,900 for the 2 of us but the company provided funds to offset the cost but the “bucket” of funds will run out in 4 years so we will need to pursue other options later. Not looking forward to that time but your details and ESI’s really helps. Just need to stay healthy and enjoy our retirement travels.
I too think it’s appropriate that travel is your biggest expense, well done! Looking forward to the Grand Cayman post.
They (there will be many posts) should be fun. I’m writing them now and it feels like a book — so much to include! I will certainly share pics too! 😉
Yes, Photos!! Hmm, perhaps you can turn it into a book!
Looking good for 2018 – thanks for sharing this!
I’d love to learn how you make money from your blogs / websites if you would be up to sharing!
Check out RockstarFinance.com/bloggers as we’ll be adding just that sort of stuff there. (It’s sparse now, but will grow.)
And be on the lookout for an announcement next week from Rockstar (if you’re in the directory, you will get an email) designed to help bloggers grow their blogs. I think it will be something you’ll love. 😉
That sounds awesome ESI. Can’t wait to see what you guys come up with at Rockstar for helping bloggers grow their income.
Listened to your podcast with Pete from doyouevenblog and it was awesome. As a newbie blogger it was great to hear about all the strategies you use to bring in income from your blog, as well as the ideas you have for the upcoming year.
Interested in what you mentioned about some of the products people were creating. What’s the range of prices on some of these “run of the mill” ideas?
Thanks -Matt
They are all over the place, but most are at least a few hundred dollars! Not bad if you can sell quite a few of them.
Based on this quote “as you can tell from the overall amount we spent, we didn’t compromise on anything.” It sounds like you are living life right.
As a business valuation nerd, I’d love to know the expected return you have on Rockstar. Did you factor in increased monitization or are the numbers based on last year’s profits.
I will give my Rockstar numbers next year, once I’ve had it a full year, and have experience with the site.
But for now to answer your question, I bought Rockstar based on the potential I saw (discounted, of course) and not simply on past earnings.
Great content as always. You had a busy year for being retired. It is always interesting and thought provoking to read about how people are managing their finances during early retirement.
Averaging 13.71% compound annual net worth growth since you started tracking in 1996 is super impressive! Kudos to you on such an amazing financial journey so far.
Stories like yours continue to make it easier for me to stay focused on my path towards financial independence, and providing my family with the future they deserve.
Thanks for sharing!
Wow that rental income is amazing. I’ll have to look through your archives to see how many total units you have and the breakdown.
Really looking forward to the new Rockstar plans! All the best.
What I love about your post is that you actually spend money. There are so many FIRE blogs that I read that seem to have, in my opinion, miserable monthly budgets. They don’t eat out, they don’t watch TV, they don’t drive a car, etc. One question I had is about gifts. What about Birthday, mother’s day, Father’s Day, Anniversary gifts? My wife and I feel like we can buy what we want when we want so gifts to each other isn’t an issue but we have 4 adult kids and a grandson. I didn’t see a budget for gifts only Christmas.
Haha! That’s true — I do spend. Wait until you read the Grand Cayman posts. 😉
We don’t spend much on gifts since 1) we buy what we want when we want it 2) we just give the kids cash and 3) we don’t trade gifts with my parents since we literally send them money and they send us the same amount back, so we eliminated that nonsense.
Any other gifts that pop up are small, so it’s not worth having a separate “gifts” category. We put those costs under miscellaneous.
Hey ESI. Thanks for sharing your numbers. Realistically I think it’s hard to spend less than 60k a year…but that’s just me. Healthcare would be a big worry for me if I FIREd so it’s nice to see you have made it work. Just listened to the whole DYEB podcast. Good stuff!
It amazes me how low your taxes are at $6706.. can you break those down.. I retired this past year, however, the wife is still working for awhile.. Once she retires, my goal is pay MINIMAL taxes.. however, I live in Ca now, but will move back to Midwest, however, property tax alone will be $6k on a $450k house.. is your rental property tax included in that number?
thanks
remember this is what I paid in 2017 and I may need to pay more in 2018 to cover 2017, so don’t read too much into them.
But here’s an overview:
Michigan estimated tax payments (where my rentals are): $2,642
Real estate taxes (our home): $2,184
Federal estimated tax payments: $1,000
Colorado estimated tax payments: $880
All real estate taxes for my properties are counted as expenses for the properties. The amounts above are my personal expenses.
It depends where you live in the Midwest, of course. Chicago is a lot more expensive than a suburb in Indiana. I can’t remember what we paid in real estate taxes in Michigan but it was no where near $6k per year. And a $450k house there would either be a good-sized place on a lake or a mansion.
I like your numbers. It shows that you do not have to exist on your income but that you can live with what you income is.
I know you have mentioned this in the past that some things are a lot lower in retirement. Seeing that now you have a full year and then some in the history books, what surprises if any have you encountered both good or bad?
With my wife retiring in June it will be interesting to see they dynamic that is set into motion with her replacing her commitment to teaching to being retired from teaching and what she will do to recreate herself.
I actually have it on my list to post on what expenses go up and down in retirement, so stay tuned.
But our biggest expenses throughout our lives have always been 1) savings, 2) giving, and 3) taxes. see this post for details:
https://esimoney.com/spent-17-income/
All of those are down BIG TIME in retirement! 🙂
The rest of the savings are there but minimal.
I would argue that those aren’t really expenses because they are all dependent upon income. Or maybe another way to put it would be living expenses. Those are the ones that have to come out of disposable income. It would be interesting to see where your real expenses changed in retirement.
My costs have gone up, not down. It all comes down to kids. I have kids in middle and high school yet. Doing way more driving. More activities. More school costs. More food costs. More clothes costs. More everything costs. Once the kids are on their own the savings will be huge. Until then, I expect high inflation costs right through early retirement.
Luckily because of Medi-share, medical costs are not expected to be much different than when I was employed.
Agree about the kids. We are a couple years from them being on their own.
I’m also spending less on transportation (driving fewer miles so gas, maintenance, etc are all down), clothing (no need to buy business clothes, get dry cleaning, etc.), and food (less eating out).
Hi ESI money,
Loooong time lurker here… one interesting thing to note in your expense list – Life insurance. Having retired and possibly fully funded for the rest of you and your spouse life, do you think it is something necessary. Want to get your perspective on that area of planning?
You’re right, I don’t really need it.
But I’m about 15 years into a 20-year, cheap set of term policies (one for me and one for my wife), so I figure “why not?” and just let it ride. Eventually it will expire and if I kick it between now and then, my kids will be a bit better off.
I do love a great annual spending post, especially one that’s realistic and shows that spending money that’s within your values and means is actually a good thing. Thanks for sharing ESI!
Someday I’m going to quit my day job and help people set up and organize their budgets so they can all have this same clarity. And of course, it’ll be set up amazingly to track all those tax expenses.
Can’t wait for that Grand Cayman post. That just might be my next international trip.
You would love Grand Cayman! And after my post, you’ll know all the ins and outs. 😉
Guess I’m one of the few to notice you are getting out of P2P lending. I’m so glad to see this. For me, I lost over 50% on them. It sounds great when you fund a loan at 15%, but on small investments, I got .20 interest but Prosper took .02 (or more) or 10% of my small return. Then add defaults on top of that, even though I only went with A credit borrowers. I just don’t believe it’s a good investment and it’s good to see someone else agrees with me.
Love this entry, and all the details included. I’m semi-retired but not FI. Plan to be soon. Well maybe I am, depending on how you crunch the numbers. Basically I spend 80% on mortgages and fixed expenses and 20% to savings. But when you include mortgage pay down, my savings rate goes up to close to 50% and fixed expenses go down. I started my road to FI a few years ago and have made great progress, but have no where near 25 times income in savings.
Look forward to your posts.
Are you raising cash with stock sales or just reallocating?
I was initially selling to use cash to buy more properties when housing prices decline. Then I bought a business (RockstarFinance.com) instead.
Nice financial tips ESI. Thanks for sharing this with us.I found it very useful .and now keen to learn how to make money from blogs.
Wow, your quarterly estimates are nothing! Of course, we no longer have kids to pay as dependents, and most of our income is wages and pensions, but our quarterly taxes are $5500 including Fed and State of Oregon. That’s not counting $6800 property tax.
Your dependent(s) probably help. When we had three kids at home we paid almost nothing. Also, I’m guessing your rate is lower because it’s not wages.
It’s probably a combo of a couple things that makes the difference:
1. Houses are less expensive here.
2. Tax rates are lower on those less expensive homes.
On income tax — yikes! I just Googled “Oregon state income tax rate” and almost fell out of my chair!!!!
As for federal taxes, lots of advantages in owning real estate. 😉
Yes, Oregon taxes are grim. It’s a reason we may be moving in retirement. It’s not easy when you’ve built a life in a place and have friendships in place and your kids are grown up. We moved from LA to Portland in 1989 and it was much easier to form friendships when our kids were in school. Still, we’re considering it.
Don’t forget – there’s no sales tax in Oregon. And there’s a pretty awesome quality of life available to Oregonians, even those with modest incomes, especially if one enjoys nature. Our taxes provide great parks, support for arts, good roads, public schools that function, health care for about a quarter of the population, and much more. Just sayin’ because, for me, keeping this in mind reduces the pain of paying those taxes.
Hi. How are you preparing for the potential of long term care expenses for one or both of you? Do you intend to self fund out of assets?
At this point we are, but it’s subject to change…