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2014 Goals and Financial Update – May

by retirebyforty on June 4, 2014 · 33 comments

in cash flow

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In 2012, I left my engineering career to become a stay at home dad/blogger. Before I quit, we saved all my paychecks and lived on our other income streams for 12 months. The dry run showed us that I should be able to quit work without sending our family into a financial tailspin. Tracking our cash flow was so useful that I kept it up. So far we are doing fine and we should have plenty of warning if our finance starts to run into some trouble.

May was actually a very unusual month for us. We spent part of it on vacation and that increased our expense. Another big expense was getting our rental home ready for sale. Now the good news, our 4-plex sales closed at the end of May and we got a sizable cash infusion. You can read the details below.

Let’s go over our 2014 New Year resolutions first. Going over them at the beginning of every month will enable me to see how we’re doing and keep the momentum strong.

2014 New Year Goals

Invest $50,000 in tax advantaged accounts

We added $3,479 in May.

For 2014, we saved $26,225 so far and we are about 52% toward our goal. Alright! We’re half way there.

  • Mrs. RB40 401k: +$1,629
  • My solo 401k: +$1,450 I will break down the business income and expense in our monthly newsletter so if you’re curious, sign up with our email list.
  • RB40 Jr’s 529: +$400

Done! – Generate $12,000 in passive income

I’m going to have to redefine this goal. We are getting rid of our rentals so that income is gone for now. We did make a profit, though. We made about $60,000 on the 4-plex. I think tax will be about 25% (federal and state) so I’ll just add $45,000 to our passive income. Of course, this pushes us way pass our goal. I’ll count it as a win this year.

For 2014, we made $43,367 so far.

Get Leaner – currently 19%

I’m trying to get back in shape after 18 months away from the gym and reduce my body fat percentage from 20% down to 17%. I’m not sure if I can achieve this goal. May was tough because we were on vacation for part of it. I also bruised my ribs from a fall so I haven’t been able to work out for almost 2 weeks now. Hopefully, the situation will improve in June.

Done! – Travel

We had a big family trip to Hawaii and it was great. We went snorkeling, saw some lava, took a helicopter ride, and had a very relaxing time.

Done! – Blog Goal

My goal this year is to exceed 120,000 pageviews/month. We surpassed that goal in March and continue to improve. Yes! Thank you everyone for helping me reach this goal.

Net Worth (+1.8% YTD, +0% MTM)

Our net worth was basically flat in May. The stock market went up, but I overestimated how much the 4-plex was worth.

For 2014, I’d like to see 8-10% increase in our net worth, but I don’t think that’s going to happen. We’ll see how the rest of year goes.

If you need help keeping track of your finances, try using Personal Capital to manage your budget and net worth. It’s great to see how your finance is doing day to day. Personal Capital is geared for investors and has many great investment tools. See my review of Personal Capital and how they helped me reduce what I’m paying in investment fees.

2014 goals finance personal capital

You can see you Portfolio Allocation easily at Personal Capital.

Cash Flow

may cash flow finance Take Home Income (target > $5,000)

If only every month is like this… The cash infusion from the 4-plex sale gave us a lot of breathing room. Now I just need to figure out what to do with the money.

Mrs. RB40’s Paychecks: Back to the normal 2 paychecks month.

Online income: My take home was quite good this month at $2,723. That’s already excluding tax withholding, retirement saving, and 529 saving. I will break down the online income in our monthly newsletter so if you’re curious, sign up with our email list.

Dividend and interest: $395. A slow month for the Dividend portfolio. June should be much better.

P2P lending: Not too bad at +$68. Our current ROI declined from 7.9% to 7.7%. I’m starting to think about how to exit this investment before the economy heads south. See how we did with Peer to Peer Lending in 2013.

Rentals: Whew, the 4-plex deal is finally wrapped up. We should be done with the rental home in June and then I’ll see if we can do a 1031 exchange into another rental home. It’s going to be a busy couple of months.

Misc income: $827 refund from the Oregon state tax.

Expense (target < $4,500)

We have another high expense month due to our Hawaii vacation. The expense should be back to normal in June and I’m looking forward to it.

This month I used Personal Capital to track our expense and it worked pretty well except the housing expense. We pay property taxes once a year, but I want to show it on our monthly housing budget so I manually add that in.

Housing: $2,163. Mortgage, HOA, and 1/12 property tax.

May 2014 finance goal cash flow

Travel: $1,570. This is the second half of the trip and the expense includes home rental, helicopter ride, groceries, and eating out. We spent about $3,500 on this trip. That was pretty expensive, but we won’t have any more big travel expense for the rest of the year.

Groceries: $642.This month is higher than normal because I purchased a $150 Asian grocery store gift card. We got $30 bonus and we’ll spend it over the next couple of months.

Taxes: $235. This is another local tax payment to the county.

Pets: $203. Our cat was sick and we were trying to figure out why. She passed away before we could find out what was wrong. It was probably cancer or kidney failure.

Cash allowance: $200 for discretionary spending.

Insurance: $192. That’s auto, home, and my life insurance.

Clothing/shoes: Mrs. RB40 got a new pair of boots. I got a new Hawaiian shirt.

Surplus (+$46,635 YTD)

The number is skewed from the 4-plex sale. I guess we can call it a year.

Our saving this month is +$40,986.

Piggy Bank 2013

  • Travel fund: $0 Done traveling this year.
  • Roth IRA fund: $1,034. Maxed out 1 Roth IRA so far and will work on the other one when we have a little more cash.
  • Slush Fund:  $40,986.

How about you? Did you have a good month? 

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{ 33 comments… read them below or add one }

Petra June 4, 2014 at 1:11 am

I would say: not bad, for a month in which you travelled.

My May was OK: I got a bit of extra income and the stock market was kind. I always donate a lot of money to a charity in May, though, so a lot of that surplus money “disappeared” again. Hopefully my money is out there doing some good work :-)

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retirebyforty June 4, 2014 at 8:43 am

Yeah, if we take the real estate out of the equation, we’d be a little bit negative. I guess it could be worse.

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Clarisse @ Make Money Your Way June 4, 2014 at 1:30 am

Sorry to hear about your ribs, I hope you will soon full recover from it. I had a bit expensive month because of lots of occasions. I had my birthday celebration with my friends and family.

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HappyLater June 4, 2014 at 1:36 am

Congrats on your progress. I admire your openness, this truely serves as an inspiration to others. Wish you a good recovery for your ribs.

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Chris June 4, 2014 at 4:44 am

Congrats on the rental sale.

I think you should do a post that debates the pros and cons of a 529. (assuming you haven’t already).

I personally prefer using a Roth IRA for that purpose. Sure, you still have to pay capital gains tax, but the 10% penalty is waived. Plus you don’t have the “use it or lose it” issue.

I would put some in a 529, but not all of your education savings.

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Cindy June 4, 2014 at 5:53 am

From what I’m reading, Mr. and Mrs. RB40 already have Roth IRA’s that they are maxing out annually. Jr would only qualify for his own IRA if he is earning money, which is unlikely at his age (although some parents do find a way around this).

In some states, there are tax advantages to a 529. My state offers a 20% tax credit, up to a certain cap. There isn’t a “use it or lose it” on 529′s, but usually there is a penalty (and you have to pay back any tax credits) if you use the money for non-education expenses. 529′s have their drawbacks, but overall they aren’t a bad way to invest towards education. I used one like a savings account during the year while I was in graduate school for the tax credit; I’d invest all the money for school throughout the year, and then withdraw it when tuition was due. Saved myself hundreds of dollars in state taxes going that route.

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Chris June 4, 2014 at 6:39 am

“Use it or lose” is a bad way to put it, but there is a disincentive to not using it. I think it’s great for the situation you had, but not for all.

Isn’t there also a “penalty” fee if you use it for non-education expenses?

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retirebyforty June 4, 2014 at 8:47 am

That’s a great idea. I need to keep that in mind when our kid goes off to college. So any earned income goes into the 529, right?

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retirebyforty June 4, 2014 at 8:46 am

Here is one I wrote a while back – http://retireby40.org/529-saving-plans-college/
You can transfer the 529 to other relatives so it’s not really use it or lose it. I’m pretty sure, someone will go to college at some point. :)
We try to max out the Roth IRA first and then contribute to the 529.

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SavvyFinancialLatina June 4, 2014 at 6:38 am

Awesome on those financial goals! We have been bleeding money lately and I haven’t figured out how to stop the bleeding. Our expenses have jumped significantly since we bought a house, and now I’m just trying to figure out how I’m going to tackle in reduction of expenses. I guess it’s lifestyle inflation, but I really don’t want lifestyle inflation.

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retirebyforty June 4, 2014 at 8:48 am

Sorry to hear that. A house is quite expensive, but it’s a place to live. I’d say don’t worry about it much. I’m sure you’re already doing a good job.

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John June 4, 2014 at 6:42 am

Nice work Joe, especially for a month you traveled! Sorry to hear about your ribs, so hopefully those will get better this month. Our May was good with having a near record month for our business and throwing a pretty good sized chunk into our SEPs.

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Leigh June 4, 2014 at 6:53 am

Congrats on selling the 4-plex!

“Maxed out 1 Roth IRA so far and will work on the other one when we have a little more cash.”
-> Sounds like you now have enough cash to max out the other Roth IRA :)

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david June 4, 2014 at 6:56 am

Would love to see a piece on the SEP/Solo 401k, why you chose one over the other, how/where you set it up etc… it’s such a niche thing in the tax code, but would be helpful/useful for other self employed folks like yourself. Thanks.

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retirebyforty June 4, 2014 at 8:51 am

Here you go – http://retireby40.org/vanguard-individual-401k/
Basically, I could contribute more with the solo 401k and that’s why I choose it. I think SEP is a bit simpler for everyone involve.

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Jason June 4, 2014 at 7:04 am

Congrats on the good month, but I disagree on a minor accounting issue. I don’t believe you should count the sale of your 4-plex as income. If you sold some stock at a profit, and then purchased other stock, you wouldn’t count those capital gains as income. What you have is just a transfer of assets. Let’s say theoretically you take the proceeds of the 4-plex sale and reinvest it in a new unit – would you count buying the new unit as an expense? I doubt it, which makes it a little bit of a double standard to call this income. Same idea if you redeploy this capital to buying stock – you wouldn’t count the purchase of stock as an expense, its just a transfer of capital, so can you really count the sale as income?

Regardless of any accounting issues, you’re on a great track and it’s fun to watch your progress!

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retirebyforty June 4, 2014 at 8:52 am

I wasn’t sure how to account the 4-plex sale. I look at it as the IRS would.
It is a bit confusing. Maybe I’ll break it out to another category – capital gain. That way it won’t screw up the passive income category.

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Mom @ Three is Plenty June 4, 2014 at 7:32 am

Sorry to hear about your kitty – it’s always tough. Cats especially don’t show any symptoms until it’s too late to do anything :(

Congrats on the sale of your 4-plex though – no more landlord headaches for Ms RB40 from that property at least!

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retirebyforty June 4, 2014 at 8:53 am

Yeah, we still miss her. Not much you can do anyway if it’s cancer or kidney failure.

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Dividend Mantra June 4, 2014 at 8:32 am

Joe,

Another very solid month. Really inspirational, especially the online income.

And congrats on the 4-plex! That’s something worth celebrating. Anxious to see where you’re going to go with the cash.

Best wishes!

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retirebyforty June 4, 2014 at 8:54 am

Thanks Jason. I think the online income will decrease a bit over the summer, but our expenses should decrease also. I’m not sure what to do with the cash. We’ll see…

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Quinn June 4, 2014 at 11:09 am

Thank you for sharing!

Very inspirational and a great example for those looking for alternatives to life!

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Justin June 4, 2014 at 11:29 am

Looks like a great month, Joe! Selling your 4 plex certainly helped pad the numbers a bit. :)

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Financial Samurai June 4, 2014 at 4:33 pm

Nice job Joe. What do you plan to do with the $40,000 in proceeds while you wait?

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retirebyforty June 6, 2014 at 9:19 am

I’m not sure. We’ll try to roll it into another property with a 1031 exchange, but it might not work out. If not, it will probably go into a conservative bond/stock mix.

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Colin June 5, 2014 at 9:25 am

Congrats! May for me has been expensive (as was April) due to a trip to NOLA and the final purchases for the apartment my gf & I share (a dining table & chairs & a 65″ LED LCD).

The good news though is that while the TV (and stand I needed to purchase) were expensive, I recently got the AmEx Blue Cash Preferred card. I got 3% cash back by purchasing the TV & stand from Sears (roughly $75 in cash back from that purchase) and $150 in an account credit for meeting the 3 month spending requirement ($1k in the first 3 months) so this will reduce the credit card bill by about $225…add in about another $225 in cash back rewards I have on a Fidelity AmEx card (2% cash back on ALL purchases) and the costs drop by about $450 in total!

June should be even better…the stock market for the end of May & so far in early June has heated up a bit and I have 8 Vanguard funds paying out dividends in the middle of this month and 2 Fidelity funds paying out in July…so there should be a nice infusion of dividend cash back into my retirement accounts. Almost up to 4% return on investments so far this year (I’ll take it considering we can’t have years like last year all the time).

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retirebyforty June 6, 2014 at 9:22 am

Nice job on the cash back. 65″ TV is huge though. Do you really need that? :)
Dividend cash back is great. Next month will be much nicer for sure.

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Colin June 9, 2014 at 10:30 am

Haha, perhaps not but with how far away the furniture is from tv, the old tv I had (46″) looks so small from 13 feet away. The 65″ looks pretty nice from how far away we are sitting…plus I needed it (okay, wanted it) for the World Cup and while the old TV works, it’s was bought in ’07 right when 1080p TVs were coming to market. The old TV is in the loft for our guests now.

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retirebyforty June 9, 2014 at 11:05 am

Ahh… 13 feet is pretty far. That’s a big apartment. Most apartments are pretty small.

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mike June 5, 2014 at 7:38 pm

Hi Joe:

congrats on May. I bet it must be a huge load to get rid of the 4 plex.
Im curious you said your networth was flat for May.

1. Does that mean you made no gains in the month of May on any of your accounts that have stocks or bonds or mutual funds, etfs, etc. ie. in the 529, IRA, and 401k??

2. also, since you sold the 4 plex for a 39k profit wouldn’t that have increased your networth substantially. I guess Im wondering if you counted equity in your real estate towards your networth. I think you should!

if that is the case, are you guy’s millionaires yet!

cheers,

Mike.

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retirebyforty June 6, 2014 at 9:27 am

I counted the 4-plex equity in our net worth. The price was a bit lower than I expected and the cost/fee were pretty high. That offset the gain from the stock gain. Anytime you sell a taxable asset, your net worth will go down a bit due to tax and fee. Unless you already deducted tax from your net worth…

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Addison June 5, 2014 at 7:51 pm

You had an amazing month, especially considering that you were vacationing! Don’t give up with the fitness / body fat goals. It’s hard for all of us, but worth it!

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Derek Olsen June 17, 2014 at 8:56 pm

This is all so wonderful. Thanks again for putting it all out there.

It’s really inspiring to see everything you are doing.

Thanks!

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