I’m writing this at the end of January. By the time it posts I’ll be well into tax season. Ugh.
My investments and businesses have done well this year and I’ll owe money even though I paid quarterly taxes. So I’m in no hurry to file. š
While I’m slaving away getting details ready for my CPA, I wanted to give you an overview of how 2018 turned out financially.
I’ll include the caveat that these numbers are very rough (taken from Quicken) and have not been verified, audited, adjusted for tax purposes (i.e. no deduction costs taken out for my real estate investments), etc.
I try and explain some of the variances as you’ll see below, but there are always others that come out during the tax process.
What I’m sharing will provide ballpark insights into my finances, just not precise ones.
I say all this because I don’t want someone coming back to me in six months saying, “You said the number was this!” if I quote a different number sometime. LOL!
For those of you interested in historical perspective, here were my similar reports for 2016 and 2017.
Net Worth
Let’s start with what I consider my key financial measure: net worth.
I include all assets and liabilities when I calculate net worth, but I do have some special adjustments I use in getting to the final number.
That said, here’s the picture for 2018:
- Net worth was down -5.8% due to the stock market tanking in December. Net worth today is still be down from January 1, 2018, but only by -1.8%.
- This was the second worst annual performance since I started tracking my net worth in 1996. The worst was in 2008. It was also only one of two down years I’ve ever had.
- It was a bumpy ride. In January 2018 I recorded our highest net worth ever and that was surpassed in August (when we were briefly over $4 million). Then it all came crashing down. Oh well, it’s to be expected.
- We have now averaged 12.78% compound average annual net worth growth since I started tracking in 1996.
Not the best report card, but not the worst either. Plus, there’s good news below…
Budget Results
I had to make some adjustments to the numbers (like last year) to get a somewhat clear sense of what happened.
Income
- Websites: $145,305
- Dividend Income: $44,868
- Rental Income: $41,935
- Wifeās Job: $6,786
- Interest Income: $4,645
- Other Income: $2,905
Total: $246,444
I know. That looks like a very big number. But there are some HUGE caveats.
Let me explain…
Commentary
- The website number is revenue, so expenses aren’t taken out. I would guess that expenses are in the $35k range, so even with those deducted you can see that web businesses can be profitable.
- Most of the dividend income is on index funds in IRAs (rolled over from 401ks) which we reinvested automatically, so it’s not like we received it in cash. The dividends from our taxable brokerage account (which we also reinvested but could have taken out) was around $9k.
- Rental income was down versus last year due to some of the big expenses we incurred. January was a great month so hopefully we’re back on track.
- I’ve mentioned that my wife volunteers part-time at our church — or at least she did until they insisted on paying her. Not bad for a hobby she really enjoys.
- I am sitting on a ton of cash and that’s how I earned the interest while rates were very, very low. They’ve come up a bit and are now only very low. Ha! I have some ideas for deploying the cash to make it work harder, so stay tuned. I’ll update you if it works out.
- Other income is mostly from cash back credit cards. I may do a report on those separately as well.
Expenses
- Taxes: $15,510
- Travel: $12,438
- Food: $7,114
- Utilities: $6,777
- Christmas : $5,537
- Medical Insurance: $5,334
- Misc: $3,620
- Medical: $3,193
- Home Repair: $2,671
- House Insurance: $2,520
- Entertainment: $2,381
- Eating Out: $1,914
- Car Insurance: $1,600
- Gas: $1,093
- Life Insurance: $848
- Clothes: $754
- Furnishings: $732
- Car Repairs: $428
Total: $74,464
This needs some explaining as well…
- Looks like taxes are back up to my top expense list again! LOL!
- The travel costs were for our trip to Grand Cayman.
- Christmas includes $5,000 in gifts we gave as detailed in my retirement update.
- Medical Insurance is what we pay Samaritan Ministries.
- Miscellaneous includes all expenses too small to be in their own category. Small spending adds up!
- Medical is all the costs we paid ourselves including dental care (another big round of cavities for the kids), eye care (including glasses), my dermatology visits and physical, and miscellaneous medical.
- Most of the home repair was $2,280 for a whole house fan we installed this summer.
- Car insurance is going down! Both kids own their cars and are paying their own insurance!!!!
- The gas number is amazing. I went back and looked at gas costs the last two full years I worked. We spent $4,083 on gas in 2013 and $3,744 in 2014. Big savings by retiring!
- We are finishing out the last few years on our life insurance policies.
- Clothes includes about $750 of clothes we DID NOT need.
- Furnishings are house-related costs that aren’t house repairs. Furniture is a good example. This past year we bought new curtains for our bedroom and we got a new vacuum.
- Nothing but maintenance for the cars this year. It helps when you 1) don’t drive much and 2) buy reliable vehicles (2 Subarus, 1 Toyota, and 1 Honda).
There were a few other costs that need to be noted:
- Depreciation: $64,000
- Giving: $56,620
- School: $27,424
Explanations as to why these were not counted above:
- I am depreciating my investment in Rockstar Finance as it relates to my net worth. This is simply a paper transaction that lowers the value of an asset. I plan to fully depreciate it just in case it implodes. LOL! In reality it’s probably worth twice what I paid for it at this point.
- Giving was not done from cash but from index funds being transferred to our donor advised fund and then distributed. No cash impact, but we did have a reduction in assets.
- School costs were reimbursed from our 529. I didn’t count the distribution in income and thus didn’t count the expense either.
2019 Estimated Budget
Looking ahead, here are the high-level numbers for our 2019 budget:
- Income: $180,010
- Expense: $89,554
You may be wondering why I have these numbers and not ones closer to 2018’s results.
I’m conservative by nature. I know, that’s a shocker. Anyway this is why income is down and expenses are up. This is probably a worst-case scenario as we always seem to have more income than I project and we never spend everything.
So in reality 2019 will probably look a lot like 2018.
In addition, I don’t include things like dividends on my retirement budget since they get reinvested and not distributed. My budget reflects cash in and cash out.
So those are our results for 2018 and plans for 2019.
Any thoughts, comments, or questions?
How was 2018 for you financially?
Mike H says
ESI,
Your income to expenses is nothing short of amazing!
This is a wonderful gap and you wonāt be able to help but accumulate more net worth while on retirement.
It is also great that the 529 is able to cover all the education costs.
Really impressive work!!!
Razorback 14 says
Nice āleaderā informationāā
Leading by example has always proven well for others.
Thanks for caring enough to share your personal information, ESI.
As always, I learn so much by your āleadershipā messagesā-
Iāve been charting my NW since 1977 when I graduated from the University of Arkansasā- go Hogs!
Keep up the great work!!!
Brenda says
Powerful. Question ā would you share your top dividend paying stocks/shares that allows for 43K of revenue? Also how was 12% annualized growth achieved from 1996. Are you placing cash into these accounts? Thanks.
ESI says
They are simply Vanguard index funds. I think they pay something like 2% dividends, but if you have enough of them they can still earn $40k. š
Yes, the 12% is a combination of savings and growth.
JeffB MI20 says
I got about $45K in dividends last year on about $2.0M in our taxable brokerage account and $31K in our NonTaxable Accounts.
Perpetual Novice says
That auto maintenance number blows my mind. We have three cars – moving to four next year for a family of 5. They’re older (all with 100k+ miles) and in 2018 I spent $5100 on repairs. We are looking to update my wife’s vehicle in 2019 and in 2020 it will be time to get a car for my twin daughters. Hoping to see that number drop as we get “newish” cars. Thanks for sharing this.
ESI says
Well, we don’t drive far these days, so that helps. š
Little Seeds of Wealth says
Thanks for sharing ESI! It’s pretty amazing how you guys manage to avoid lifestyle inflation and continue to remain diligent about your expenses despite your resources.
Also good reminder that some expenses will go down once you retire.
Phillip says
ESI: Given your net worth, why do you buy life insurance?
ESI says
We got policies years ago that were at very good rates. We are in the last years of those now and decided to keep them “just in case”. Once they reach their 20-year expiration, we will let them lapse.
Young Limey says
Awesome, congrats on passing another milestone last year, even briefly. Cheers to a positive 19!
M22 says
M22 Update:
My Net Worth also declined in 2018 from $4.26M to $4.09M, which was a decrease of 4.15%. I didn’t think that was too bad considering the December market adjustment, and that we in retirement have earmarked $300K in non-retirement funds for travel. In 2018 we spent $127k which was a major contributor to New Worth decline ((3.1%), as we did 10 trips. (China, 3 luxury cruises (22 days LA to Miami on Viking, 12 days in the Baltic on Silversea, a European river cruise), 21 days in Honolulu, Mackinaw Island, Florida, etc). Some of that spending was also to deposit on 5 luxury cruises in 2019 (just finished 26 days on Regent from Sydney to Singapore).
2018 Income was about $109K (no change from 2017), and I only consider taxable income thus does not included dividends or interest in retirement accounts since they are reinvested and have yet to tap any of my retirement assets but that will change next year when I have to start RMD and also start my SS at 70. Had $33K in itemized deductions and tax liability of $3840. Received a federal refund of $7530 a week ago today and no taxes due to the state of Georgia.
2019 is off to a big start with markets reverting back. My Net Worth as of today, 3/1/19 is $4.37M which is a nice increase of 6.9% so far this year.
ESI – I also have a rental property so interested in some details of yours. Was the $42K 2018 Income gross or net? What were your expenses and your depreciation? Did the properties provide a positive cash flow after depreciation? I enjoy your blog!
M22
https://esimoney.com/millionaire-interview-22/
ESI says
Net income on the rental properties but not depreciation taken out. My CPA does that when she completes my taxes.
The properties were paid for in cash, so they have positive cash flow. š
Here’s my summary of them shortly after I purchased them:
https://esimoney.com/financial-details-of-my-real-estate-investments/
Financial Samurai says
I am impressed that you guys have $4 million net worth levels, yet spend less than $100,000 a year. Itās really great.
Have either of you guys thought that you will die with too much? Or is too much up until the state tax limit of $11.4 million per person?
Iām really trying to spend more money in 2019 and every single year. I havenāt been able to keep up with wage inflation! As a result, Iām looking at a nice house in Hawaii. But big houses just seem like a waste of money and property tax expense.
To answer your question, my net worth grew about 6.5% in 2018, but I was up more than 11% at one point. At the end of the day, Iām shooting for about a 5% net worth increase a year, so Iām satisfied with 2018.
2019 is shaping up to be ridiculously good given the markets and stuff.
To the good life!
Sam
ESI says
Yes, I’m wondering about that. We are working on updating our wills now, so we’re having lots of discussions about when and how to distribute our money.
We will likely add another “big” trip to our list this year (we’re looking at Destin, FL) plus head back to Grand Cayman (this time for maybe a month), so that will help.
Once you get your place in Hawaii, we’ll add a new trip to see you. š
M22 says
In my case, Income was $109K and we for the most part spent it all, and then we spent another $127K on travel. Trying to spend down the assets is difficult. Retired nearly 4 years ago, but now my Net Worth is $600K more.
M22
JeffB MI20 says
I want to hit those travel goals! We plan on doing a bunch of long cruises in a few years.
C-S says
Just curious if youāve ever wished you had spent a little more prior to this stage of your life?
M22 says
II would say no regrets. I had good income, and 6 weeks vacation and 10 holidays before retirement and we did travel domestically and internationally a lot while working.
117 says
Thanks for sharing ESI… good job for you! I’m curious to see what you do with your cash- I assume you are at least in a high yield account? I know market timing isn’t recommended by many but I have a high percentage of cash that I’m not sure what to do with… but at least I’m getting 2.25% now (CDs aren’t that much better and I want liquidity… in case the market tanks!). BA is .09%.. ridiculous! I’m very intrigued with getting into rentals but at 55… not sure I can deal with that now… maybe that ship as sailed.
I can’t believe the details you guys track- I just can’t get myself to itemize to that level of detail. Yikes! Maybe because I know that silly purchases add up… however I do commit to saving first and don’t deviate that. And I watch things like a hawk daily.
ESI says
Yes, my cash is in “high yield” accounts — but they don’t feel very high! š
The tracking is second nature to me. I’ve been using Quicken for so many years and it tracks everything.
Braapin_bogie says
Thank you for your blog. I love reading it. Can someone explain to me the best way to roll over my 401K into an IRA. I am mid-40’s.
ESI says
I would send an email to the company you want to use to hold the IRA (Vanguard, Fidelity, etc.) and they will direct you to the best process.
Braapin_bogie says
Thanks. I guess I was looking for guidance/advice on the implications of that type of rollover and risks/downsides. Do you have an article on this by chance? I realize it is likely a long and perhaps complicated question. Thanks!
ESI says
I do not have an article and it’s not really that complicated.
Google it, read a few of the top articles, and you’ll have the basics down quickly.
Mark says
I am impressed how you keep your expenses to 75K. The eating out is under 2K, not bad my eating out is more like 9k. I need to get that under control. When calculating your networth, do you attach a value to your websites?
ESI says
I do to Rockstar Finance (as noted above) since I purchased it and know it’s relative value.
I do not for the others since they were created from scratch.
Ed says
Just curious about how to use the ādonor advised fundsā for charitable giving. Iām interested in setting up one also.
Thanks.
ESI says
https://www.nptrust.org/what-is-a-donor-advised-fund/