Each month, I break down my finances and financial progress.  This serves primarily to keep me accountable.  I hope it also helps others see the power of an income centric approach to early retirement investing.  Today’s report covers the month of December 2018 with year to date updates.

music selection:  “I Want A New Drug” — Huey Lewis And The News

weigh-in:  197.0 +0.4

ASSETS:

Wells Fargo (taxable): This finished the month at 26,378 down from 28,124 at last month end.  That is a 6.21% monthly loss.  Year to date, this account is down 4,303 or 14.02%.

Interactive Brokers (taxable): Here I finished the month at 159,221 down from 239,105 last month.  That is a monthly loss of 33.41% and a year to date result of minus 50.83%.  There is no putting lipstick on the pig.  I got cut in half by being over exposed to volatility.

Interactive Brokers (tIRA): This account is down to 146,729 from 158,135 last month.  The monthly loss is 7.21% and my year to date result is a 10.01% loss.  The account is narrowly trailing the benchmark.

HSA: This account is down 769 on the period to 2,567.  That is a 23.05% move in the wrong direction.  For the year, I am down 833 or 25.61%.  This account is expected to decline a few percent a year (excluding new contributions) as I spent from it for doctor’s appointments and medication.

Checking: Cash is down to 8,588 from 8,747.  That is a 1.79% decrease from last month.  Year to date cash has changed by minus 28.51%, driven by spending and transfers to HSA.

Total investable assets come to 343,483 down 21.48% from 437,444 last month.   The year to date mark is minus 35.14%.  I am down heavily versus the S&P benchmark including after deducting spending.

Don’t forget to see the long term trend at Lizard King’s Transparency Page.

LIABILITIES:

Home: paid

Car: paid

Income tax: I have a 12,945 tax asset on deposit with the service.  Because of the mishap with UVXY, I expect to have a trivial tax liability this year and should even qualify for the maximum ACA subsidy.  Net tax rate could be negative for 2018.

WITHDRAWAL RATE:

I have automatic withdrawals from my taxable investing accounts set to provide a cash income of 25,000 a year.  Against a liquid net worth of 343,483 that is a withdrawal rate of 7.89%.  I earned 1,248 in options premium income during the month of December and cleared  36,176 in options for the year or 1.45 times budget.  Additionally, my income centric approach to investing includes 27,111 in expected distributions, dividends, and interest for the year or an additional 108.44% of budget.  In the event of a downtown, I should be immune to the need to “sell at the bottom”.  At the same time, I can expect steady and robust growth to keep ahead of inflation.  Together, my budget is covered 2.53 times over by portfolio earnings.  This is a great comfort as the portfolio balance declines with the market correction as I am not obligated to sell shares into a downturn to meet budget.

SPENDING:

Spending was 2,592 for the month, which is over the 2,000 target as is normal during Christmas.  For the full year I spent 26,559.  Without the 5,000 or so I spent on Stansberry products, I’d be well under budget and should be under budget going forward.  I am however 1,559 over budget for the  year.  It won’t count as spending because I classify movements from one account to another as “transfers” rather than “spending” but cash will deplete by 3,450 in January to further fund my HSA.

OTHER INCOME:

I earned 150 this month or 138 after payroll taxes for my efforts at the Memorial Hills UD municipal water board.  It is a small amount but over a year’s time it adds up to another full social security credit.  This should improve my eventual payout when I reach qualifying age.

Devour your prey raptors!

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Financial Transparency as of 31DEC2018

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4 thoughts on “Financial Transparency as of 31DEC2018

  • December 31, 2018 at 10:43 pm
    Permalink

    How much of the decline in asset value was due to repricing of fixed income /long equities and how much was due to equities/options trading? In a year with 2 corrections, option selling strategies (covered calls or cash secured puts) would be expected to rack up big losses. In hindsight, we should have bought volatility (long straddles/strangles, long calls/puts) last summer when volatility was suspiciously low and asset prices suspiciously high for a world undergoing the economic policies of the great depression: trade wars and rising interest rates.

    Compared to buy & hold, options strategies are time constrained. So there’s no way to hold a losing position through a dip, other than to double down and roll to a longer duration position. Your on-sale equity and bond positions will go back up, but options trading losses are forever.

    Yet when a strategy fails one year, that doesn’t mean it will fail the next. I would be reluctant to switch strategies to what would have worked last time. After all, what are the odds of a double correction in 2019 too?

    Reply
    • January 1, 2019 at 10:34 pm
      Permalink

      The problem was one of leverage. I kept writing new puts on margin after getting assigned rather than stepping out of existing positions or accepting weak covered call income. When we had a 20% decline, 25% stop losses on 100% exposure led to greater than 20% losses. I’ll need some time to sort out the mess I’ve created.

      Reply
  • January 1, 2019 at 11:39 pm
    Permalink

    Thanks for sharing your info VR. I follow a lot of FIRE bogs and this type of info is the most useful IMHO.

    I just put up two posts for the end of 2018 as well. They are here:

    https://seekingalpha.com/instablog/3010451-123098567432/5251445-financial-report-december-2018

    https://seekingalpha.com/instablog/3010451-123098567432/5253734-time-start-hoarding-cash-early-retirement

    For my taxable account I have $411,121.05 invested 50/50 into VHDYX and VIHAX. Current value is $365,645.80, i.e. down 11.06%. The good news is that for 2018 my average dividend growth came out to 11.95%. My dividend income is very close to $14,000 per year based on 2018 payouts. I’m going with a dividend growth strategy and have focused on it at the expense of yield. My overall dividend yield is around 3.39%. I don’t expect to have 11.95% div growth every year. When I make projections I just a 6% div growth rate as that is what the S&P 500 has had averaged out over the last 30 years or so. I hope I will do better than 6% but I will keep it low for projections.

    My immediate goal is to get to $18k per year in dividends with my taxable account investments. I also have $100k in my 401k/Roth IRA0 and 17 years vested in a pension. However I don’t include those in my calculations for early retirement. To retire early I want $18k from dividends in my taxable account. I believe I can hit that goal in 3 years. I’m 42 right now. Age 45 is what I have had in mind for the last decade or so, and it looks like I will make it. I’m not planning to completely stop working, but to switch to “side hustle” or part time work. If I can make $10k per year that would be fantastic and more than enough. I’m thinking about things like being a part time night auditor at a hotel, or work part time at a movie theatre, or do part time low level tech support (telecommute). I think any of those would be a huge quality of life improvement.

    I’ve been in IT for almost 20 years and I’m ready to get out of it and do something else. IT is too demanding in terms of being on-call all the time, requiring inconvenient maintenance windows and having no life. I’m tired of getting called on weekends, vacations, etc. Just this Christmas break I had to work. I hate never being able to do anything because I am always obligated to work at any time at the drop of a hat. It can also be extremely stressful work. Although it doesn’t bother me anymore due to my savings. I have to fake being concerned when SHTF and boss types start jabbering about how critical XYZ is, and such and such must be done immediately. I’m not ready to leave just yet. So I have to pretend like they still have power over my life.

    Anyway, rant over. Happy New Year VR.

    Reply
  • January 13, 2019 at 7:35 am
    Permalink

    Thanks for the update. Have a good 2019. Expecting more volatility this year and a lower stock market. We will see what happens.

    Reply

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