Millionin10 2015 in review 6

There we have it, another year has passed and an interesting one it has been for us. This was the year I started this blog. It has been the first full year that I’ve been off of work and as a result we’ve tried to live by a fairly strict budget. We’ve had a shitty stock market and some serious medical expenses come our way but in the end we’re all doing just fine.

The Blog

It has been a year of blogging and writing for both me and my wife. January of this year I started this blog millionin10.com. It certainly has been a year of lessons when it comes to blogging. Besides writing some 60 posts, trying hard to post at least once a week, it has been a year of struggling with WordPress themes and plugins and more importantly trying to find a following.

Who knew blogging means selling your soul. Selling a product is hard, selling yourself is harder. It is not something that comes easy to me. It gets right-out awkward at times. I don’t mind doling out advice but every time I tweet about, why my blog is worth reading, I feel a little piece of me die inside. I know you’re not supposed to apologize for marketing so I won’t but that doesn’t make it easier.

I did make what I hope to be some long lasting relationships in the Personal Finance world. A special thank you to the Debt Free Divas at the debtFreeDivas.org for having me as a guest on the Midday Money Show.

Besides writing for my blog, I’ve also gotten back to my roots and did some coding, creating several online (and excel) calculators. They are all free so go check it out. I hope to create many more next year and if you have suggestions I’d love to hear them.

Portfolio

So now to the juicy information. Normally by this time of the year I should be able to write about the Santa Rally to the stock market and all would be fine. Not this year. There is still hope for a Santa market bump but it’s clear we’re not going to see market returns like we’ve seen in the past few years. Chances are, this year the market will close below last years close. As of today, our portfolio growth is still in positive territory but by end-of-year probably close to the 1 percent mark. These are not the double digit returns I’m used to. Since we live entirely of stock returns this doesn’t give me a warm and fuzzy feeling, especially this being the first full year of retirement. The growth this year (if any) clearly is not keeping pace with our withdrawal rate. I do have high hopes of a better year next year.

Let’s look at today’s portfolio in percentages. If you’ve followed my blog you’ll know I keep my investment strategies simple and I don’t care much for cash. So looking at the following may make you laugh, angry or scream.

• Retirement accounts: 45.56%
• After-tax stock accounts: 39.30%
• Investment property: 7.04%
• Real-estate: 6 %
• Cash: 2.1%

That’s right only 2.1% in cash. Most will argue that is way too low. There certainly isn’t enough as a buffer to buy more stock when the market goes down but then again, I’m not buying much stock any more. Many will argue there should be a 6-8 month emergency fund. I have explained before why I keep my emergency fund in stock. To me, cash carries more risk than investments. Yes the market is volatile (certainly has been this year) but in the long run goes up (btw, volatility does not equal risk). Cash inevitably will loose value through inflation.

As for my after-tax investments I currently have 92% of all investments in ETFs (exchange traded funds)

• S&P 500 (SPY): 68%
• Dow Jones (DIA): 14%
• NASDAQ (QQQ): 10%.
• Other: 8% (Amazon, and Google as either one of those will end up owning the world).

After-tax accounts with retirement accounts combined puts about 85% of my entire investment portfolio tracking the S&P 500. Like I said, keeping it simple and it certainly seems to have worked well for us.

It is harder to track my property investments as they don’t get appraised each year. Similar but smaller properties have sold for double what I paid for mine so I’m optimistic about what I own. I have no plans of getting rid of that investment for many years to come.

Budget/expenses

It wasn’t too far into the year that our expenses said goodbye to the budget and took its own course. Early on in the year it was pointed out by Mrs. M10 that family comes first. As usual she was right. My family back in the Netherlands hadn’t seen our kids in over 3 years and my parents certainly aren’t getting any younger. We booked a trip to the Netherlands and although we tried to keep the cost down by using skymiles and booking through AirBnb, the final tally ended up around $6,000. This expense was not part of the budget at the start of the year. Other than having a great time seeing the family a pleasant surprise on that trip came in the form of some Dutch exposure to my work. We were featured in a 2 page news article (circulation 700,000) and I also got my first TV appearance (skip to 1:50).

Our biggest blow to the budget came when our youngest broke his elbow. The break was such that it required surgery. It was when the bills for that arrived, that I realized my deductible was much higher than I expected. It totaled up to $12,700.00. About double what I thought it would be. Clearly we had an emergency fund and I was able to save some by making early payment arrangements. This was completely unexpected and certainly wasn’t budgeted for. We budget for medical insurance premiums and $100 in medical expenses but anything beyond that is a total crap-shoot.

A major financial windfall came from canceling our flood insurance. After having seen my neighbors get out of the mandatory flood insurance, I made the right move of hiring an engineer to evaluate our property elevation. Like my neighbors, it turns out I’m above the flood-zone. So after FEMA gave the go-ahead, I got permission from the mortgage company to cancel flood insurance and did so accordingly. To my surprise, FEMA insisted on returning 2 years of premiums because I started this process right before renewal. I got back a whopping $4,600.00. Not only a nice sum to get back but a big relieve on future budgets as the annual premium for this year’s flood insurance was $2,500 and it has climbed by hundreds each year since we’ve had it.

As for the usual budget items we did okay on some and not so good on others.

Gas and Electric was budgeted at $2,640.00 for the year and came in $546 under budget at $2,094. I switched out my remaining CF bulbs with LED bulbs, wattage-wise they’re not that far apart but LEDs will last a lot longer. Our house is now completely LED(ified). I felt compelled to do so after I wrote an online LED calculator, available to you for free, that shows you how much you can save switching to LED.

Groceries were budgeted at $9,600 and we came in $668 over. We’ll need to figure out if for next year we adjust this item or try to spend less. I don’t get the impression we’re overspending. I did eat an awful lot of chips this year.

Gifts given, budgeted at $300 for the year came in at $801. This does not include the Christmas gifts yet so add another $200. This one is a bit tough to handle. I personally don’t think all of our teen nieces and nephews should still be getting gifts from us (certainly never worked that way in our family) but I also don’t want to look like the cheap-ass uncle. We did lower the “nephew/niece gifting” to $25 from $40 but that still adds up to $240.00. The budget also includes one of our kid’s birthday parties which came in at $100.00. We give gift cards to the kids teachers at $40, again not sure if that is something everyone does. Certainly not something that was done when I grew up, but then again teachers in the Netherlands were better compensated than teachers today in the US. We spend $200.00 on Father’s and Mother’s day and I’m afraid to propose not doing that.

Clothing was budgeted at $1,200 for the year and we came in about $82 below that. I’m good with the jeans and sweaters I bought some years ago but given that we have 2 fast growing kids I’m pretty proud we came under.

Discretionary was budgeted at $2,400 for the year and we totally blew that. We came in more than a $1000 over that at $3,389.00. We buy memberships at most of the entertainment we visit and although that saves us a bundle by getting these, parking at all these venues is still taking a huge chunk of our budget. We had some pet turmoil that came with medical bills (and worse) and adoption fees that added several hundred to the expenses. We’re sad we lost our companion Daisy this year but are happy to welcome our new cat Captain Awesome. It does tend to cost a bit.

Fuel was a good one this year. Budgeted at $1440 we came in $444 under at $996.00. Gas has been cheap this year. Let’s hope that with oil at what it is today it will remain cheap for next year. Who knows?

Home repair/household also missed the mark this year. We spent $812 over the budgeted $600. Not good although in all fairness $580 of that was for the engineer that got us out of the flood insurance.

All other items like insurance, mortgage and fees came in at what they were budgeted for. There are few surprises when it comes to fixed monthly payments.

In summation:
Budget for 2015: $60,788
Spending in 2015: $72,911

That is more than $12,000 over budget. In our defense, given $10,148 of unforeseen medical expenses and an unplanned vacation to the Netherlands: not that bad. If not for those two items we would actually have landed below budget.

Next Year

Well, next year we’ll keep doing what we’re doing. I’m really hoping that medical calamities like we saw this year are a 10 year events and not annual. I also hope next time it will be me breaking something and not one of the kids.

I’m hoping the stock market will fare better than it did this year.

As far as the budget is concerned, despite the overages on our budget, set aside the unexpected items, we came in very close on target.

• We’re already dealing with a 30% increase on medical insurance premium. I certainly hope that won’t be an annual increase (wouldn’t put it past the powers that be).
• We’ll again try to get our discretionary spending under control. One thing we can do is find free parking around all our memberships. If the winter keeps going as it is, that should be doable.

I of course hope to see all of you back next year and hopefully we’ll get a good dialog going in the comment sections of future, past and present posts.

I wish everyone who celebrates it, a very Merry Christmas. For those that don’t, Happy Holidays and as always: good luck reaching your financial goals.