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July 18 Net Worth Report: A Rocky Start

Posted by on 6 August 2018 in Net Worth Reports

I’ve always claimed that I started Ordinary Dollar to build a blueprint to early retirement and show that anybody (even an ordinary person) can achieve it.

An important part of this blueprint is being transparent about my own finances. And now it’s time to put my money where my mouth (or my typing fingers) are. Honestly, I’ve been hesitant to hit publish on this blog post — but here goes!

In this post you will find an outline of my income sources, a breakdown of my expenses, and a snapshot of my total wealth.

Unfortunately, not all goes to plan. This month I spent more than I saved. Not exactly great for a blogger than claims he can help people reach early retirement!

Actually, there’s a good reason why I spent so much money this month. And it turned out to be a very interesting lesson: although I spent more than I earned, my net worth still grew in July. What!?

Want to learn how I grew my wealth despite saving nothing this month? Read on…

Why do I post Net Worth Reports?

It’s very scary opening up my wallet and showing the world how much money I have. It forces me to consider some very confronting questions like “have I made the right decisions in life?” and “am I strong enough to show the world my failures?”.

But overall I think that there is value in documenting my journey to early retirement. Not only can people try to emulate my successes but — perhaps more importantly — they can avoid my failures

So here’s a full view of my income and expenses, and net worth, for July 2018. If you want to check out my other Net Worth Reports, you can check them out here.

What happened this month?

July was such a magical month for me. I spent most of the month in Europe on vacation. I don’t typically choose to go on long, expensive vacations. However, a close friend of mine was getting married in Italy, so I figured that I should make the most of my time in Europe. It was amazing!

Unfortunately, this means that July is not an accurate indication of my spending and not good baseline to compare future months against. But I made a commitment to share my financials every month, so I decided to do a Net Worth Report anyway.

As you can see below, I spent over $5,000 on the vacation — and this doesn’t count the flight and hotel bookings I paid for months ago. It was probably closer to $8,000.

This raises an obvious question: was the vacation worth it?

A photo of people swimming in the sea

Swimming in the beautiful Mediterranean Sea!

Everybody is different and there is no single right answer. Personally, I believe that taking time away from work is very important for my well being. And on this trip I made sure that I deleted my work emails and calendar from my mobile phone. There was no way that I could possibly have done work… and it felt absolutely liberating!

That being said, I’m not sure that a 5 week European vacation was necessarily the best use of money. There’s probably more frugal ways to get the same mental health break. So I think for my next vacation I will think more mindfully about how best to spend my money. Stay tuned!

Income Statement

The European trip has made my spending look very strange in the month of July. This has a few effects on this month’s income statement:

  1. Salary is lower in July. I was able to use paid vacation time for the first part of my trip (which was in June) but the majority of the vacation in July required unpaid leave. This means that my salary income will be lower in July compared to June.
  2. Rental income is artificially higher in July. This is because I collected half of June’s rent and all of July’s rent when I returned from my vacation at the end of July. There (unfortunately) wasn’t an increase in rental income per week.
  3. Spending categories look very weird in July. All my vacation spending is accounted for in the ‘vacation’ category in my income statement. And because I only spent about one week of July at home, this category will account for most of my spending (and some other categories will look strangely empty).

With that in mind, here is my Income Statement for July:

As you can see, I had to continue to pay my mortgage during July and somehow I spent a lot of money on groceries. However, I was able to avoid a number of other bills by putting temporary pauses on them (e.g. gym membership). That saved me a bunch of money. Small win!

Overall in July I spent $4,058 more than I earned.  Ouch! Let’s hope that this isn’t a common occurrence.

Balance Sheet

Despite spending more money than I earned in July, I was still about to increase my net worth in July. What?!

This is a good lesson in the value of automated money management and appreciating assets. While I was on vacation, a number of things happened:

  1. I saved into my retirement account. I automatically deposit part of my salary into a retirement account that is invested in stocks and bonds. While I was away, not only did I deposit money into the account, but the account’s investments grew in value. Bonus!
  2. My investment account grew in value. I didn’t deposit any money into my investment account but the ETFs that I have invested in grew in value.  They literally made money while I was relaxing on vacation.
  3. I continued to pay down my mortgage. I automatically pay down my mortgage every week and continued to do so while I was on vacation.

Here is my Balance Sheet for July:

So after 5 weeks in Europe spending lots of money, I was still able to increase my net worth by $4,139 (1.3%) in July!

This month’s key insight

Every month I plan on sharing one key insight that helped me grow my wealth — and that might help you do the same.

This month’s insight is:

Buy appreciating assets (e.g. stocks, property, bonds) as soon as you can!

Wealth is rarely made by simply saving the income that you earn. Unless you have an extremely high paying job (think CEO), then you won’t ever save enough money to retire.

Retirement is reached by using your income to purchase assets that grow in value. The earlier you purchase these assets, the quicker you can retire; that’s the beauty of compound interest. I’ll do a detailed blog post on how to take advantage of compound interest soon.

And with that I’ll end this Net Worth Report. Stay tuned for August’s report, which will show my spending behaviour in a typical month. Until then, good luck on your journey to early retirement!

All the best,

Dan's signature

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