Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.
SteveDH is retired, and he and his wife have two grown kids. By the time he retired in 2008, he had reached his retirement asset goal of $500,000. His goal now is to ensure his savings last as long as he does. Read his bio to learn more about SteveDH. SteveDH is on Team Roger, with Certified Financial Planner Roger Wohlner.
Keep reading to see his net worth report, updated for April 2013. Following the analysis from SteveDH, Roger Wohlner will offer his own thoughts and guidance from his planning perspective.
Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.
Analysis from SteveDH
Spring –- maybe, maybe not -– that’s how April went. It seemed to be just another “good news, bad news” month as far as the weather and the finances go. The good news was our spending habits remain modest and we’re doing the things we want to do within our budget. The bad news was the tax man.
With bills of $840 and $280 to the Feds and state respectively, cash flow was lower than it should have been, but still respectable. We spent 80% of our fixed income and 65% of total income. Strong market performance made the balance sheet look pretty good as unrealized gains approached $6,000.
April also began a new quarter, which means I look at the balance sheet from the previous quarter in more detail. I generally use my income statement far more than the balance sheet for managing finances, but a thorough quarterly analysis is worth the effort. The first quarter of 2013 was OK. Although the balance sheet only grew by $4,427, asset depreciation for the car, truck, and pre-paid expenses obscured both cash flow and investment performance. Cash flow for the quarter was $7,495, helped by $2,163 in interest, dividends, and capital gains. At the same time unrealized gains of $6,564 pushed net earnings to $14,059.
Since stock market performance was fair and our dividends were reinvested our average annual return (IRR) for the first quarter was 8.3% as computed by Quicken. Nevertheless, I’m not overly enthusiastic about 2013 in general. First I fear the evil empire (Wall Street) may be blowing another equities bubble, and I’m dreading the inevitable “adjustment.” Secondly, I’m turning a watchful eye towards the Fed who may very well temper their actions, reducing their balance sheet — and mine at the same time.
Looking forward to May.
More activity will be the focus for May 2013 -– both physical and financial. Expenses for yard and garden maintenance as well as preparation for the June cruise will increase our spending. There are also a few other projects around the house that may drive spending as I start to pare down my to-do list. Summer is coming, but when the good-times roll the cash usually follows.
Feedback from Roger Wohlner, CFP
Nothing drastic, but as I looked at your balance sheet I’m not sure I understand why your automobiles are included and why you track depreciation (unless they are in some way used in a business capacity). Cars in my mind are an expense and not an asset, except to the extent that they might have some trade-in value down the road. I’m guessing that at some point they will be replaced and the value of the old car would lie in what you can get as a trade-in.
Other than that it seems that you continue to keep spending in check which from what I can gather from your summaries is the key to maintaining your retirement. A couple of questions that you might consider:
Once Social Security kicks in for the two of you, how much more positive cash flow will this provide? As interest rates move up (as all of us “experts” have been predicting for the past few years) how will this impact your situation? Do you have enough in stocks to keep you ahead of inflation?
I’m not saying that you are doing anything wrong but these are the questions that someone in your situation should be asking in my opinion.
Updated May 23, 2013 and originally published May 22, 2013. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.