What is a millennial personal finance blogger worth?
A year ago, I didn’t do a net worth post.
It’s a shame that I didn’t, because the contrast would reveal this as the single best financial year of my life so far!
This time last year, I owed about $197,000 in student loans. I had only recently contributed about $2,000 to my HSA,1 and my then-girlfriend-now-wife and I had only recently paid off our final auto loan.2 We were saving for the down payment on the townhouse we live in, but we knew we’d either have to wait a year to purchase or rely in part on gift3 money to make the down payment without mandated PMI.
Today, we have about $55,000 equity in our house. We have invested over $13,000 in self-directed retirement accounts,4 and Mrs. Vigilante has invested nearly $10,000 in her pension. Mrs. Vigilante is one year closer to a guaranteed pension payment that would likely cover about half of our yearly spending for life. And due to admittedly poor tax planning, we are expecting a giant tax refund in early 2017 which will be used to help us add some value to the home (a deck) and front-load our IRAs for 2017!
Barring any major catastrophes or abysmal returns, we expect to close out 2017 with over $50,000 invested in self-directed accounts, about $10,000 in emergency funds, and potentially the ability to accelerate our savings dramatically the following year due to increases in income and decreases in spending.
In sum, it’s a great time to be a Vigilante! Here’s the breakdown:
What made this year so big for us?
Since last time, we have had a gigantic boost to our net worth due to a few pure-luck factors: first, a significant, mostly merit-based pay raise for Mrs. Vigilante including back pay for a couple of months, and second – the Winter Wedding Windfall Wonderland!
With limited exceptions including paying down an interest-free credit card carrying the balance for our washer and dryer, this unexpected money was placed in traditional IRAs, used to provide for living expenses while we increased other contributions, and used as gift money for friends and family members. So, our unexpected luck really helped bump our net worth in what would have already been a banner year!
What does this mean for our ability to live on passive income?
I sometimes like to disregard net worth and instead think of our “worth” in terms of progress toward our goal FI number. In other words, what matters isn’t what’s left over if we liquidate assets and pay debts: it’s our progress toward having a passive income that can meet our basic needs.
The single most important indicator of our progress is a theoretical, wildly inaccurate approximation of two competing numbers – our expenses, and our current passive income based on whatever withdrawal rate we are comfortable with. When our passive income (that we can safely withdraw) outpaces any loan payments and necessary expenses, we’re financially independent!
Now, this is all purely theory. If Mrs. Vigilante and I were to stop working today, we couldn’t actually make any penalty-free withdrawals from our retirement accounts except for her 457(b). But, for the sake of bragging on the internet, if we apply a 4% withdrawal rate to the entire lot of investments, we could withdraw about $864.16 this year. 7 That’s about $72 per month in usable passive income we generate today!
Unfortunately, we also have a couple of outstanding loan obligations: a mortgage payment and student loan payment. So our monthly income available to pay for our lifestyle, after these loans are taken out, is….drumroll…$2,984.96 in the red!
Obviously, we have plenty of work to do. But here’s to 2017 continuing the upward trend! May your New Year be as bountiful as our last!
- I rushed this contribution so that my future contributions would be investible and to have a bit of a health emergency fund. Luckily, the investments have done very well to date (about +13%) and there’s been no need to withdraw a penny! Unluckily, I prioritized my SIMPLE IRA, and so those awesome returns have been on my smaller investment account. Win some, lose some.
- I had a small 1.5 year old loan. I had purchased my first car to be able to drive to my first law job, but all I had to pay for a car was my most recent paycheck from a slightly-over-minimum-wage job. Mrs. Vigilante and I made a lump-sum payment in August 2015 on the loan to finish it off, and I paid her back in installments with interest through Halloween.
- Here read as “loan,” since we are repaying it!
- Our goal was $10,000, and we weren’t sure we could do it. Feels good, but also feels like we should be a bit more ambitious!
- $2,000 is not investible. I may move my HSA money to another account, but for now, this $2,000 is more aptly categorized as "cash." The investible HSA is $195.
- Note the August post included only my assets. Now, both mine and Mrs. Vigilante’s are in the table. But there’s still a pretty dramatic change to mine alone!
- $23,604 in investment accounts, less $2,000 non-investible in the HSA leaves us with $21,604 invested. 4% of our investments is $864.16.