One of the main purposes of this blog is for me to track my progress to financial independence which I am well on my way to achieving. Each month I share the details of all investment accounts and the changes from the previous month.
Note: if you’re just joining us you can view my most recent net worth update here.
A mixed bag. That’s what February was. Every rental has startup costs and my latest rental has been no exception. At first glance I thought the basement floor drain was simply clogged with tree roots. I’ve had a similar problem before and a simple call to Roto-Rooter got the job done. This time however I was told the existing pipe beneath the concrete was disintegrating and Roto-Rooter wouldn’t be able to get through to clear the drain. Thankfully the guy from Roto-Rooter was nice and explained that it probably wasn’t worth trying. They provide a great service, but they aren’t cheap.
I was able to get ahold of a plumber that came recommended from my realtor I’ve known for years. One reason I don’t already have a relationship with a plumber is because this is only the second time since 2012 that I’ve ever needed one. He came out and said the floor drain needed to be replaced. Even though it only serves as a drain for the furnace, code says you need to have a floor drain if you have a water heater. While they were removing the floor drain he said they would replace the main drop from the upstairs as well as the drain situation for the nearby washer. I could have actually saved some money by doing the concrete work myself (no thanks). He quoted around $1500 and I just got the bill back for $810 – Score for awesome and honest plumbers!
Switching gears, we finally got out snowboarding for the first time this year. It was a great warm evening and Miss QCI and I were enjoying our time outside. I wish I had a cooler story to how it happened, but the night ended with Miss QCI breaking her wrist. She simply caught an edge and went down. Unfortunately it wasn’t a simple break and she had to have surgery. A plate and screws now connects her bones. While we’ll be fine financially, it really made me think about just how fast people can enter financial distress. We’re lucky in that we have great insurance and I luckily switched to a Cadillac plan this year from our HDHP. With some of our new activities and seeing some injuries last summer I thought it was a worthwhile switch especially since I don’t have to pay insurance premiums through my employer. When it comes to our financial freedom, insurance is something I think about most. This injury was a wake up call of sorts. We need to absolutely be prepared for something like this to happen if we have to purchase our own, crappier insurance. One appointment ran $2800 and the surgery was over $7000. We may still hit our out of pocket maximum with our $300 deductible plan. On the plus side Miss QCI will be out of her cast by the time we head to Hawaii in April. She’s already back to teaching workout classes albeit in a modified way so she definitely isn’t letting the injury get her down.
Since Miss QCI left her job it has been our list to move everything to Vanguard. I last did this in 2015. What’s fascinating is when you do a direct rollover from a 401k to Vanguard, there isn’t an easy way to direct which funds you want to invest in unless your 401k provider will attach a memo or note with the check. Of course you can do an indirect rollover and then send the check to Vanguard with a note, but this would cause funds to be out of the market even longer. I do not remember this being the process in 2015. Of course over a massive investment horizon the few days is probably meaningless, but it seems to be a process that can be improved. We did ask the helpful folks at Vanguard and they said we could send a letter to the same processing center stating which funds to invest in with the incoming checks. Perhaps this is the problem, a disconnect between those that process the checks and the people we speak to on the phone. She is also rolling over a cash value pension to her Vanguard IRA which hasn’t been in our net worth updates. Putting this extra ~$7500 to real work will feel good.
At the same time we are also rolling over her after-tax 401k, also known as a Mega Backdoor Roth. It’s not a huge amount since it was only recently available at her employer, but this is an extra $13k which will be rolled over into her Roth IRA. What’s interesting here is that this has to be an indirect rollover, meaning that she is issued a check instead of sending it to Vanguard. There are some intricacies here where some employer plans will issue two checks, one for contributions and the other for earnings.
If you are issued two checks, the earnings can be rolled over into a traditional IRA. In her case she is being issued one check for both earnings and contributions. There is still an option to get the earnings into a traditional IRA, but you can also just pay taxes on the earnings. [UPDATE: Miss QCI’s check for her after tax 401k included only contributions. Apparently her employer included the earnings in the pre-tax rollover. This simplified things significantly and it’s important to be aware of this possibility.]
This Bogleheads wiki page has been the most beneficial source of information on the topic. I’m still learning myself, so be sure to do your research for your own situation.
If you follow the market it won’t surprise you that we lost a lot of money in February. If you don’t, good for you! This is the first time in a while that our investments lost money in a month and I didn’t worry about it one bit. It’s important to remember this was just a small drop. In fact, we lost only slightly more than we gained just in January of this year. I view our investments as a back stop to our rental properties and the income produced by our still full time jobs. When decide to scale back work, it will continue to serve this purpose so I won’t worry even if our account falls 50%. We’ll be in an even better position from a cash flow perspective as we pay off one rental in the middle of this year.
Mr.QCI Net Worth
Cash: ~$20,000 (+$0)
P2P Lending: $9,338 (-$772) – I am reducing my allocation to p2p which will be directed towards paying off my new rental property)
401k: $74,905 (-$3,392)
Vanguard Rollover IRA: $84,124 (-$4,094)
Vanguard Roth: $38,638 (-$1,965)
Vanguard Taxable: $121,880 (-$7,501)
Individual Stocks/Other Investments: $2,072 (-$63)
HSA (amount invested only): $21,789 (-$1,124)
Total Investments: $352,746 (-$18,911)
Assets: $475,000 – This is the estimated value of my properties based on the purchase price and some appreciation our area has seen over the past few years and includes sweat equity. You can see my real estate holdings here.
Liabilities (4 Mortgages): $288,570 – (Updated: January 2018 – I plan to update this every 6 months or so, but I pay down about $10,000 of debt every year)
Net Worth: $559,176 (-$18,911)
Miss QCI Net Worth
Cash: ~$18,000 (+$3,000)
401k: $105,915 (-$2,503)
Vanguard Roth IRA: $35,998 (-$1,533)
Rollover IRA: $4,799 (-$244)
Vanguard Taxable: $77,627 (-$4,019)
Total Investments: $224,339 (-$8,299)
Net Worth: $242,339 (-$5,299)
Investments (what really matters): $577,085 (-$27,210)
Projected retirement income (assuming 4% rule): $23,083/year
Net Worth: $801,515 (-$24,210)