December 2014 Net Worth & Cash Flow Update

Starting with December, I will be publishing my Net Worth and Cash Flow updates. I really enjoy getting to see other bloggers net worths and income statements and how they have their money allocated among different categories and watching it grow. I've pretty much optimized my finances as much as I can and I'm focused on saving as much as I can while balancing investing in myself.

 I discovered the concept of financial independence in mid 2013 and ever since then, I've started making an effort to save even more. 

I've been tracking my finances since 2007 using Microsoft Money. That software has been phased out and I've made the switch to Xero accounting software. I really enjoy using Xero to track my finances even though it is meant for small businesses. 

Net Worth

Cash in Banks

I prefer to combine my Cash in the bank and Credit Card balances together to arrive at Cash in Banks. I currently have $4,214 in my checking/savings accounts offset by $1,321 on my various credit cards for a total of $2,893 net cash.  I put as many of my expenses as possible on credit cards so I can earn the most rewards possible. Since I pay off my credit cards every month, I don't really consider the balances actual "debt" and therefore just net the end of month balances against cash on hand. I'm working towards increasing cash reserves on hand to get to my ideal 3 months expenses for around $6K. 

Current Assets

Prepaid Property Taxes: $958

• I like to amortize my property taxes since it is about $160 per month and I don't like to show such a big hit in only a couple months of the year. I had paid the 2nd installment of my property taxes in November when I refinanced, however, it's not due until April 2014.

Restricted Cash: $2,842

• My restricted cash includes: gift card balances, HSA cash, and other miscellaneous balances.
• I've created account for my HSA Cash that has $2,000 in it. I include it in restricted because it's "restricted" cash and more like a healthcare emergency fund. I don't plan on using my HSA cash for medical expenses for the time being since I plan on using a rewards earning credit card for my expenses and reimbursing myself later on down the road when and if I may need the cash. 

Taxable investments: $5,006

• This portfolio consists my Loyal3 brokerage account where I hold dividend growth stocks in the following high quality divend paying companies: 

Car

I purchased my car in April 2014 and paid $8,240 in cash. I had financed a vehicle before and it was one of my huge financial mistakes in life. I am keeping it on the books at purchase price but continue to check Kelly Blue Book value every month or so to see if the value has dropped. I drive less than 5,000 miles a year so I don't expect my car to depreciate significantly from month to month. If I see the value drop more than $500 from my purchase price, I would book an adjustment and hit depreciation. My 2003 sedan currently has 110k miles, of which I only added 200 miles in December. I don't expect to have much depreciation because I keep my car garaged, drive very few miles, and perform regular maintenance. I plan on keeping my car for as long as possible. 

House

I recently received my appraisal for my refi and it came in at $235,000. This is is a significant increase from my previous appraisal in May of this year at $218,000. I purchased the house in Fall 2008 at $183,000, so at this appraised value it represents an increase of 28%.

Retirement Accounts

My retirement accounts consist of the following:

401k: $36,911

• My 401k passed the $35K mark! I love watching this account grow and it was my goal to max out my 401k contributions for the first year in 2014. I am currently invested in Vanguard 500 Index Fund Admiral Class (VFIAX) that has a low 0.05% expense ratio. My plan provider charges 0.34% on assets. I'm pleased with the low fees, however, when I plan on leaving my job in 2015, I would like to rollover funds to my IRA at Schwab and save even more on fees.

HSA Investments: $6,128

• I'm was able to max out my HSA this year. With an employer contribution of $750 for the year I am allowed to contribute $2,550. I am 100% invested in  Wells Fargo Advantage Index Fund Administrator Class (WFIOX). It tracks the S&P 500, and has an expense ratio of 0.25%.

Traditional IRA: $21,567

• My IRA is fully invested in the Schwab US Broad Market ETF (SCHB). I like this ETF because of it's low expense ratio (even lower than the comparable Vanguard ETF - VTI). I am looking forward to Schwab's Intelligent Portfolios offering in 2015. I most likely will take advantage of that since it will be free.  

Profit Sharing: $8,389

• This account is from a former employer. I am fully vested and am unable to take a distribution until age 59.5. No further contributions will hit this account so it will be purely investment gains/losses from here on out. I would love to be able to consolidate with my IRA, however, it just isn't an option for this account. 

Total Retirement Accounts: $72,996

Home Loan

I owe $169,800 on my 30-year fixed rate mortgage. I was able to refinance my FHA mortgage in November for a lower rate at 4.125% down from 5.0%  and to a conventional 30-year. This will result in about $240/mo savings, $75 of that being the elimination of FHA mortgage insurance that I've been paying since September 2008. To date, I've paid nearly $5,500 in FHA mortgage insurance! What a waste! I'm glad that I finally had enough equity in my home do to the housing market rebound and that I can finally take advantage of the low interest rates. 

Retained Earnings

Retained earnings represents my net worth at the beginning of the year. I started off with nearly $100K and will add another $58K to that from 2014 earnings. 

Cash Flow

Income

I had a pretty good year in regards to earnings. I took home gross pay from my job of $90,515 which included my regular salary, stock compensation, and a bonus. This was my highest earnings year ever and I really didn't expect it to be starting out in the year. 

Expenses

I spent way more this year than I have in years past. I was renting a small apartment close to my job, moved back to my house, had to repurchase appliances and furniture, and made some other home improvement upgrades.

Rental Income & Expenses

In spring of 2013, I decided to rent out my house and move closer to work so I could eliminate my commute and live a more urban lifestyle. That came to an end in Fall 2014 when I decided I would try and sell my property. I had missed the boat on selling as I only received one offer I wasn't crazy about. I made the decision to move back into the house and try and refinance. I was successful in refinancing and made my house more comfortable to live in. I had a small net loss with the property in 2014 and won't have any further income or expenses going forward.

Taxes

This year, I tried to minimize the amount of taxes I paid by maximizing contributions to tax-advantaged retirement accounts. I expect to get a federal and state refund in 2015 for about $2,000-3,000. 

Home Appreciation

2014 was very kind to my house. I purchased my property for $183K in the fall 2008 and had experienced a decline in the values each year after. Finally, in 2014, I saw home values start to rebound in my neighborhood. I got an appraisal in May for $218K and then once again in October for $235K. I had estimated my house value at $219K at the beginning of the year so I had about $16K in appreciation for the year.

Realized Gains & Losses

A significant portion of my realized losses during the year was due to the sale of the stock compensation I was vested in during the year. It vested at a higher rate and subsequently went down in price during the time my company's trading window was open. Nothing I could really do about it and I didn't want to hold onto the stock because I didn't want to risk it going down further. 

Unrealized Gains & Losses

My taxable investment and retirement accounts experienced the nice growth that the stock market provided in 2014. I am trying to decide on a better way to display this information but wanted to exclude it from income since I have no control over how my investments perform. 

Summary

Overall, 2014 was my best year yet financially. I saw my home value increase, retirement accounts grow due to maxing out all available contributions and the nice return from the stock market. I surpassed $150K in net worth which is a huge milestone for me.