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Our Money in 2012


Now that 2012 is over, let’s take a look back and see how we did financially. I have been keeping track of our income and expenses over the last 2 years and it’s quite illuminating. If you’re not doing this for yourself, you should try for a year so you can see where all of your income goes.


2012 savings

We did a good job on our savings in 2012.

Let’s start off with savings. We had a few months of setbacks due to the rental properties, but overall we were able to save $13,191. Most of the extra money went into the 529 plan for Baby RB40 and I invested the rest in peer to peer lending and dividend stocks. I will be quite happy if we can repeat this in 2013.

Net Worth

2012 Net Worth

Wow, I wish every year would look like this.

We did quite well with our net worth in 2012 as well. I just calculated everything and we increased our net worth by 25%! That’s amazing! How was it possible, especially since the SP500 went up only 13%? I won’t know for sure until I do taxes this year, but I think the major factor is that I sold off most of my Intel stocks and options holding when the stock was around $26. I then reinvested that fund into dividend stocks which generally did well. I also updated our properties value which was gave us a boost in the net worth department.

All in all, we did much better than expected in 2012. For 2013, our goal is more modest. I will be very happy if our net worth increases by 7%. I think this will be quite difficult because I don’t have a fat paycheck from Intel anymore.

Cash Flow

Here is a table for those of you who are curious.

2012 cash flow

Average monthly Income: $4,544. Our goal was to keep this above $4,500 so it’s right on target.

Average monthly Expense: $3,419. The goal was to keep it under $3,500 and we met it as well.

I’m going to stick with these same goals for 2013. All our income should rise a little this year so we might be able to over perform on the average monthly income goal, but we’ll see. It really depends on the rentals. If we can turn them around in 2013, we’ll improve our income quite a bit. I also need to bake in the tax for 2013 as well since I’ll have to start sending in a quarterly check.

2012 income

Various income streams in 2012

Good luck in 2013…

2013 will be the real test for us because it will be a full year without a regular paycheck for me. I’m sure it will have some ups and downs, but I’m very optimistic for 2013. Here are our financial goals this year.

Net worth: increase 7%

Saving: save at least $13,191 and invest in 529, peer to peer lending, and dividend stocks.

Average Income: more than $4,500

Average expense: less than $3,500 or less

I hope you like this revamped monthly cash flow format. It’s more compact and easier to read. Let me know what you think. Good luck to you in 2013!

If you need some help keeping track of your finances, you should try using Personal Capital to manage your budget. It’s a great free budgeting tool. It can help you keep track of your income, expenses, and net worth, all in one place. Personal Capital is geared for investors and have many great tools. See my review of Personal Capital and how they helped me reduce what I’m paying in investment fees.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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{ 31 comments… add one }
  • Glen @ Monster Piggy Bank January 4, 2013, 1:48 am

    Great review Joe, I think it is amazing that you were able to increase your nett worth by so much. That rental income in October sticks out like a sore thumb doesn’t it! I hope you have a bit more luck with it in 2013.

    • retirebyforty January 4, 2013, 10:06 am

      Thanks. We really need to turn the rentals around this year. I’m suppose to be making money, not losing it. 🙁

  • Sarah Park January 4, 2013, 2:07 am

    It’s great to hear 2012 was good to you financially. Hope it will get a lot better for this year.

  • My Financial Independence Journey January 4, 2013, 2:43 am

    That’s a nice excise to engage in regularly.

    How did you compare your net worth to growth in the S&P500? Did you adjust the S&P values to account for any new capital additions to your net worth? When I’ve done a similar exercise myself, I found that if I didn’t add hypothetical capital to the S&P500 for each new capital addition to my net worth, the numbers would be skewed heavily in my favor.

    • retirebyforty January 4, 2013, 10:07 am

      I just use the SP500 numbers from Yahoo Finance. They went up 13% this year right? I thought the new capital is already baked into the index.

      • My Financial Independence Journey January 4, 2013, 6:53 pm

        Any time you add or subtract capital from your investments, you should make an equivalent change in the S&P.

        For example: If I start the year with 10K and then half way through the year I add 5K from savings, it will look like I made a 50% gain vs the S&P’s 13%.

        • retirebyforty January 4, 2013, 10:25 pm

          Ahh, yes you’re correct. However, not all our net worth are invested in the stock market right?
          We have cash, real estate, bonds, car, art work, CDs, and other stuff that didn’t go up 13%.
          I think it’s still valid to compare how we did to the SP500. 🙂

  • JC @ Passive-Income-Pursuit January 4, 2013, 4:49 am

    I’m a big fan of keep detailed track of your money to see where it goes. Until you do, it’s very hard to keep just mental accounts of what you’re spending and where. Congrats on the goals for 2012 and increasing your net worth by 25%.

  • 20's Finances January 4, 2013, 5:57 am

    Nice job Joe! The rental sure hurts, but at least you are still building up equity and this year (knock on wood) should be better. There are only so many years in a row that can have such high expenses, right? That’s how I’d look at it at least.. We increased our net worth quite a bit, but it’s easier to do when you are just starting out. I love the charts!

    Oh, and I have a feeling you will blow your 2013 goals out of the water. I’m guessing 15% increase in net worth (unless the market tanks).

    • retirebyforty January 4, 2013, 10:08 am

      Thanks! Yeap, at least the rents paid the mortgages. Rental properties can take a while to turn positive, but hopefully 2013 will be the year for us.

  • Manette @ Barbara Friedberg Personal Finance January 4, 2013, 6:22 am

    Job well done for 2012. Congratulations! I hope that 2013 will be a better and more prosperous year for all of us.

  • Michelle January 4, 2013, 9:19 am

    Good job. Love how detailed this is. Hope 2013 is awesome.

  • Justin January 4, 2013, 9:34 am

    Nice work and thanks for all of the info. It really helps me out. I feel like I am in competition to be more frugal than you. Good luck in 2013, you are going to kill it !

  • SavvyFinancialLatina January 4, 2013, 11:31 am

    Great job Joe! I, also, love how detailed this is. I need to start tracking my income more. I have a general idea of how much we spend, which sometimes scares me, and know exactly how much we put into savings, and pay off debt.

    • retirebyforty January 4, 2013, 10:22 pm

      You should try it for a year. Keeping track of all our income and expense was very useful for us.

  • Lance @ Money Life and More January 4, 2013, 3:21 pm

    Seems like you’re doing very well! I’m sure the rental will start producing cash flow sometime soon (soon in terms of real estate of course)!

  • Jane Savers @ The Money Puzzle January 4, 2013, 7:10 pm

    Is the problem with the rentals poor tenants or were your repairs much larger than expected?

    You are involved in peer to peer lending at arms length. Do you ever make personal loans to people you know? I am not asking for money but there is a man I know who holds collateral based loans and profits from it. Would you consider this or is it too risky? It is too risky for me but has the potential to be a real moneymaker.

    • retirebyforty January 4, 2013, 10:30 pm

      The repairs were larger than expected because the previous owner didn’t maintain the property properly.
      I think 2013 should be free from big projects so we should be able to turn it around.

      I don’t make personal loans. My dad lend money for collateral – like a pawn shop. He charges a very large interest rate and usually make good profit. It’s tough if you don’t know how to value the collateral though. People have tried to pawn off fake jewelry and antiques with him quite a few times. He is doing this in Thailand.

  • Papadad January 5, 2013, 12:29 am

    Joe. Originally your plan was to retire with a net worth excluding primary residence of approx $1.5m.

    My question as of year end 2012, what is total net worth and how is it divided between retirement accounts, emergency funds, and non retirement accounts. Also what is approx equity in your condo? A half million dollar condo is a nice cushion for anyone but not counted in net worth.

    Ever use site http://www.networthiq.com ? Lot of interesting net worth data.

    Also really interesting your passive and active post retirement income strategy. I never did well in Portland real estate rentals. Between repairs, high taxes, and an occasional bum renter the passive income never amounted to much on the long run. It did build equity and would have been great had the entire market not tanked … Eventually bailed out at a small loss. 14 years of work but little to show in my case ….

    Am now done with the whole rental thing. I Stick to stocks or bonds or buy and sell on eBay…. Craigslist etc.

    Anyway. Great post as usual.

    Happy 2013 to you and mellissa and baby rb40.

    • retirebyforty January 5, 2013, 4:54 am

      Here is the post with my retirement goals. https://retireby40.org/2010/12/retirebyfortys-goals-exit-strategy/
      Our net worth is less than 1.5m at this point. I’m focusing on making the cash flow work without touching our retirement accounts.

      Our condo is only worth about $60,000 because of the drop in the market. It’s not a huge significant factor in our net worth.
      Approximate %
      retirement – 45%
      taxable accounts – 22%
      rentals – 32%
      other assets not including primary residence – 1%

      Sorry to hear about your real estate experience. I will try it for a few more years to see if it will work for us. I’m not oppose to bailing and going with REIT. The rentals have been a big headache this year.
      Thanks for reading!

      • papadad January 6, 2013, 11:43 pm

        Yes – real estate was a good life lesson. I am pretty handy too…did many repairs myself…but difficult in some markets to really make things work unless you want to be in it for the real long term, get things paid off quickly, have an area where values are staying steady or appreciating, where neighborhoods are regularly revitalizing, etc.

        As I read below… your monthly cash flow is essentially from earned income of Melissa, your earned income from stay-at-home business activities, blog, etc, as well as the divident/interest/gains as generated from non-retirement accounts?

        As for the gains/dividents/etc that are held in retirement accounts – guess they stay in retirement accounts building total networth ? ie, compound / grow those accounts vs live off the cash flow generation since that would come out with substantial early withdraw penalties ?

        one issue i see more and more are “the retirement account rich” who are basically sitting pretty well from retirement account standpoint but not able to access this money or leverage this money for early retirement due to taxes and withdraw penalties before age 59.5 They remain corporate slaves while they “count down” the clock to 59.5 …. some, sadly, have dropped dead before they made it. So much for early retirement, eh?

        It’s unfortunate too that so much percentage of total retirement money is set aside “pre tax” a (even with advent of roth IRA and roth 401K) and most savers assume this is somehow “good” …. seeing the tax deferral as a boon to compounding of their money but failing to realize that taxes likely will be much higher in the future when it comes time to withdraw funds (and pay taxes on said funds).

        It’s the same mistake people made to falsely assume housing prices always go up. Taxes always go down later in life… both hypotheses are false …. It’s a good lesson and blog topic in understanding how to build a nest egg that balance tax deferred saving against ability to safely and completely access funds without penalty or strings attached. Especially important if retiring before 59.5 The govt touts IRA and 401K as a boon to investors….they tell you how to and where to save…but they are not quite as forthright when sharing all the rules or making things easy when it comes to spending down your nut.

        Prosperous 2013

        • retirebyforty January 7, 2013, 3:19 pm

          Yes, our monthly cash flow is from earned income and taxable accounts only.
          We are reinvesting any dividend/gain in the retirement accounts there. We are not planning to withdraw until we’re in our 60s if things go well.
          Having a nice retirement account mean I can reduce contribution and quit work to try something else.
          You’re most likely correct about the tax rate. That’s why I encourage workers to invest in the Roth so they’ll have more options.

  • James @ Free in Ten Years January 5, 2013, 7:54 am

    I really like the format of your reporting. You did amazingly well in 2012, congratulations. Hopefully the real estate side picks up next year.

    • retirebyforty January 6, 2013, 1:34 pm

      Thanks! Hopefully the economy continue to get better so I can meet my 7% goal. 🙂

  • Buy & Hold Blog January 5, 2013, 8:46 pm

    Thanks for the detailed analysis. Would love to find out (after you do your taxes) on why your net worth still increased by 25% when stock market increased in only 13% in value. Also, you have a nice online income going.

  • Brick by Brick Investing January 6, 2013, 6:20 am

    Great detailed post, I love reading these. It gives me inspiration to know I can quit my job and still make things work.

    • retirebyforty January 6, 2013, 1:36 pm

      Thank you for the encouragement. Good luck to you as well.

  • Integrator January 6, 2013, 8:14 am

    The dividend income area is one that you may be able to drive substantially by reinvesting some of your online income into dividends. The natural increases in dividends will produced nice income growth for you every year with no effort on your part.

    • retirebyforty January 6, 2013, 1:37 pm

      I think you’re right. I will continue to invest mainly in dividend income in 2013. I’ll probably channel off a small amount to invest in peer to peer lending, but the income will still be pretty small because I don’t want to risk a lot of money there. The rentals will probably take a few years to be a good income generator.

  • Elizabeth @ Broke Professionals January 6, 2013, 9:07 am

    I’m really glad you did this – I’d been reading your monthly updates all year, and I really had convinced myself that you and your wife were making substantially more than my husband and me. Seeing your annual totals, I realize that we’re really on the same level, which is going to make your advice TOTALLY more applicable to my life in the next year. Thanks for the “Bigger” picture 🙂

    • retirebyforty January 6, 2013, 1:38 pm

      That’s great to hear. I think we were making more money when I was working as an engineer, but it seems like we’re on the same level now. Good luck in 2013! 🙂

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