Our total spending this month was $28,243.94. Wait, what? It’s not an April Fools’. Let me explain. Earlier this month we transferred $25,000 into our Vanguard Charitable account. We’ll do a future post on it to explain in more detail. Though we still have control over the investment, the money no longer belongs to us, so we’ll count that as a net spend this month. The $25k was taken out of our taxable investments, which explains the very little movement in that category in our net worth update despite some nice market gains. We were really excited to see we were still in the green after this big transfer. Our non-mortgage, non-charitable spending was $1,524.94, which is excellent compared to the last couple of months. The table at the end of this post does not include the Vanguard Charitable money.
Personal Capital Retirement Planner Review
Late last year a friend pointed me over to the retirement planner at Personal Capital, and recently I have been exchanging some correspondence with the company in regards to this blog which reminded me of the tool. I wanted to take a moment to highlight it this month and briefly point out some of the useful and cool features. Personal Capital is a net worth tracking website. Frugal Paradise has no affiliation with them and we have no vested interest in you using them or not, but my opinion is that this is definitely a website worth checking out. You can link your financial accounts so that you are able to see all of your finances in a single space. Whether you do it with PC, Mint, or your own excel spreadsheet, it’s extremely important to track this data. If you are comfortable with it, using one of the free online services makes it much easier. Besides the retirement planner I describe below, they have a host of other financial tools, and offer a free consultation with one of their financial advisors when you sign up.
Personal Capital has taken net worth tracking one step further than many sites out there, providing a pretty comprehensive planner to estimate your retirement success (or failure). The thing I really like about it is that it’s easy to use even if you aren’t tracking all (or any) of your investments on their site. You can just enter the amount of the investments that you have, your income, future spending events, etc., and it will Monte Carlo the heck out of your data until it can estimate whether or not you are going to run out of money in retirement.
As an example, I entered our financial data to run the simulation shown below (just entering your current assets and your yearly savings is enough to run it). I listed retirement as 10 years from now, with an annual after-tax spending rate of $65k. I excluded social security and didn’t include any future major purchases (like education, cars, etc). Just keeping it simple. 5000 Monte Carlo simulations later (this is like a brute force calculation where market returns are chosen using probabilities based on historical returns, and then the calculation is repeated over and over again until there are enough statistics), we’ve got an 84% chance of getting through retirement with some dollars left over. Check this out:
This took me about 3 minutes to generate, from start to finish. You can edit assumptions like your tax rate in retirement, inflation rate, and life expectancy. You can add a whole plethora of future spending/income events to encompass anything that might happen. If I could change anything, it would be to make the annual return and standard deviation editable. Currently the only option is to adjust your investment style between “highest growth” and “highest safety”.
One thing you might notice from looking at this is that we could die with 11 million in the bank or a big fat zero, even with the same initial conditions and growth settings. This just goes to show that no matter what, our (your) plans are going to require some flexibility. This simulation assumes we’d be pulling out $65k a year, every year (inflation adjusted) whether the market booms or crashes, which in reality probably isn’t true. Personal Capital, maybe you could add a feature that would allow a reduced spending during down years? Allow the user to choose a reduced percentage of their full spending value for years when the market goes down by more than a certain amount. I’d be really interested to see that data!
In any case, you’ve got nothing to lose by trying out the retirement planner. You need to sign up for an account but you don’t have to provide any financial information if you don’t want to. If you try it out, let us know what you think!
Monthly Spending Summary
|Total||$3243.94||Not bad! Total without mortgage was $1524.94.|
|Mortgage||$1719.00||Just principal and interest.|
|Auto payment||$353.60||Yes, we have a car loan. But in our defense it is at 0% interest.|
|Utilities||$184.69||A slight improvement over last month. I'm hoping for much less next month!|
|Vacuum cleaner||$146.28||We didn't get a Dyson...but at least we saved several hundred dollars!|
|Vet||$85.28||Apollo got a full checkup and some meds|
|Pharmacy||$70.00||This includes $40 on Flonase from Costco, which hopefully will last a LONG time.|
|Internet||$42.42||AT&T, not Comcast!!|
|Home supplies||$40.05||I can't even remember what this was. I know there was some dish soap, and some of those green scrubber pads.|
|Security System||$35.99||I did not set it off ALL MONTH!|
|Gas||$31.66||Made up for last month|
|Alcohol and Bars||$27.50||Yep, we had a night on the town with four drinks between the two of us.|
|Cell phone||$27.00||Monthly fee for my phone. Mr. Paradise has pay-as-you-go, which comes as a $100 charge approximately once a year.|
|Entertainment||$20.70||Two hot fudge sundaes, ice skating, and museum visit. A day in the life!|
|Toiletries||$17.19||Giant box of razor refills for Mr. Paradise.|
|Pet Supplies||$9.65||Apollo got some new toys.|
|Clothing||$3.70||A button and some thread. Exciting!|
|Parking||$3.60||Parking for our night on the town.|
|Coffee shops||$3.50||Mr. Paradise had a few caffeine emergencies. We bought him some bottled soda for his office to try to help with this.|