January 2015 Net Worth & Cash Flow Update

Since 2007, when I took a Personal Finance 101 college course,  I've been tracking every dollar I earn, spend, and invest. I do this for a few reasons:

1. As an accountant, I understand how important it is for a business to know where it stands financially. I work on corporate financial statements for a living so I am very familiar with Balance Sheets and Income Statements. For individuals, it shouldn't be any different. I am the Chief Financial Officer for my household and need to know the financial information for me to be able to make important decisions. If I didn't have a method for tracking my finances, I would constantly be worrying about if I have enough in my checking account to pay the bills, if I was saving enough, and that would cause a lot of stress for me.
2. I like to look at the trends in my finances. Having such a long history of data allows me look at trends in my spending, earning and growth. I love to track my progress of where I started and where I'm at today. 
3. It's fun for me! It's not a chore for me to track every dollar going in and out of my accounts. I am a numbers guy and I guess you can call this a hobby. I really enjoy using Xero to track my finances and I'm able to produce beautiful reports that help tell the story behind the numbers. Of course, I use Personal Capital and Mint.com as well but that's more for real-time information.

When I discovered the concept of financial independence in mid 2013, I've started making an effort to reduce expenses, increase income, increase savings, and make smart investment choices Let's take a look below at how I did for the month:

Net Worth (Down 1.2% from Prior Month)

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 $5,239 in my checking/savings accounts offset by $4,645 on my various credit cards for a total of $594 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. Right now, my net cash balance is sitting very low so 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: $798

• 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: $3,050

• My restricted cash includes: gift card balances, Health Savings Account cash, and other miscellaneous balances.
• I've created an 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: $4,941

• This investment portfolio consists of my Loyal3 brokerage account where I hold dividend growth stocks in high quality dividend 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 559 miles in January. 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  received an appraisal in November 2014 and it came in at $235,000. 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: $37,280

• I love watching my 401(k) grow and it's my goal to max out my 401k contributions for the second year. 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: $6,385

• I'm was able to max out my HSA in 2014 and I plan on doing the same in 2015. With an employer contribution of $750 for the year I am allowed to contribute $2,600. 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: $20,971

• 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 Intelligent Portfolios offering in Q1 2015. I most likely will take advantage of that since it will be free.  

Profit Sharing: $8,352

• 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: $72,989

Home Loan

I owe $169,561 on my 30-year 4.125% fixed rate mortgage. 

Retained Earnings

Retained earnings represents my net worth at the beginning of the year. I started off the year with $157,874.

Cash Flow

Income

Income decreased $456 from the prior month was pretty normal this month. No major unexpected income but I did get $250 from my employer as a contribution towards having an HSA account. 

Expenses

I spent approximately $1,660 for equipping my home office in advance of a part-time virtual tax preparation job I will be working on this tax season.  I also attended a financial planning conference in Las Vegas during the month and spent some additional money on travel and entertainment expenses.

Unrealized Gains & Losses

My taxable investments and retirement accounts experienced a large decline of $2K in January mainly due to the S&P declining 3.1%.  

Summary

January was not a great month for my investments and incurred expenses for setting up my home office causing my net worth to decline 1.2% from the prior month. Even though I spent a decent amount of money on my home office, I'm excited to be able to work virtually from home and create a second income stream. This will help me with my pursuit of ditching the cubicle and pursuing a life less ordinary.