Cashing Out and August 2022 Financial Results

Welcome to Rich Frugal Life’s August 2022 financial results!

Before we get into the numbers, here’s a little bit about what we were up to last month.

We have a kindergartener

Our little one officially started public school this month!

She is loving it and so are we. Kindergarten is a whole new experience than preschool was, from riding the bus with the big kids to doing homework each night (yes, they already have homework).

It’s sometimes hard to believe we’ve been parents this long already!

Cashing out

After recognizing that we needed to lower the percentage of our investments in Mr. RFL’s company’s stock earlier this year, we finally pulled the trigger.

This month we cashed out $60,000 worth of stock options. Some of this money was reinvested, but the majority went towards our donor advised fund.

Although the market is super volatile and we are bullish on Mr. RFL’s company, it was a great time to cash out. The company’s stock price has done really well, especially compared to the overall stock market, which was still down by around 15% year-to-date.

Before cashing out, we were hovering at a portfolio allocation of 10-11%, which is well above my risk tolerance. In general, greater diversification leads to lower risk. For now, we’ve decided that getting that balance down to between 7-8% is good enough, but we’ll continue to monitor it.

I’m a Plutus Awards finalist!

I’m so thrilled to share that Rich Frugal Life was selected as a finalist for the 13th Annual Plutus Awards ‘Best Financial Independence and/or Retire Early’ content award!

There are some big names and amazing folks in the category this year, so it is a huge honor to be recognized amongst them. I am both excited and humbled to be selected as a finalist in this category for two years in a row.

I want to express my gratitude to everyone who reads this blog… and a special thanks if you also took the time to submit a nomination!

Blogging is a lot of work, but the feedback I’ve gotten from the community and getting to meet like-minded individuals (usually virtually) makes it all worth it.

Without further ado, here are our August 2022 financial results, with all the juicy details of this month’s spending, passive income, savings rate, and investments.

Why share the details of our spending and finances?

Because I’m nosey and enjoy reading about other people’s spending habits and net worth.  Maybe you do, too.

Everyone’s financial situation is unique.  However, I believe there is value in sharing information to provide context and normalize the discussion of money.

Seeing other people happily embrace simpler lives gave us the confidence to begin our own journey to financial independence and a lifestyle we believe will be healthier, happier, and more fulfilling.  I’m just trying to pay it forward.  Sharing our finances each month also helps us stay accountable.

Other information useful in reading our monthly financial results

Did we just buy a money pit?

We bought a complete fixer upper in late 2018… with a toddler.  When we moved across the country for Mr. RFL’s job, housing costs were much higher than we were used to.  So, we decided to just go for it when we found a great deal on a fixer upper.

We’ve been working on projects ever since, trying to do as much as we can ourselves to learn some new skills and save money.  Since the costs of a whole home renovation are significant and non-recurring, we don’t include them in our monthly expense budget.  However, we do share renovation costs each month for full transparency.  

How we define an “expense”

The table below shows all expenses for the month, excluding renovation costs.  Principal payments on debt are not included.  As a former accountant, I don’t view principal payments as “expenses,” since they directly reduce debt and increase net worth.  We don’t anticipate having any debt in retirement. 

August 2022 Financial Results

Net Worth

I will no longer be talking about net worth in our monthly financial updates.

However, come back to the blog next week for our first ever net worth reveal!

Investments

Similarly, I will also be reducing the amount of information I share about our investment balances in the monthly financial updates going forward.

We’ll still regularly share our investing strategy, portfolio allocation, and other information that we believe to be helpful. However, since we have already reached financial independence and significantly surpassed our FIRE Number, a full update each month no longer seems necessary.

For the first time since purchasing our home four years ago, we actually had a negative net investment to our Financial Independence (“FI”) portfolio this month… by a lot!

As mentioned above, when we cashed out Mr. RFL’s stock options we didn’t reinvest all the proceeds. The majority of this money was allocated to our donor advised fund for charitable giving, which is excluded from our FI portfolio.

Regularly tracking our investments and net worth has been a big factor in our financial success.

You can also easily track your investments and net worth, as well as plan for retirement, for FREE with Personal Capital (affiliate link).

Debt

We currently have $174,300 in debt, the majority of which relates to our mortgage. Because our mortgage only has an interest rate of 2.5%, we rarely make additional principal payments anymore. 

Savings Rate

Our after-tax savings rate this month was 95%!

Although our savings rate typically hovers between 70 – 80% these days, cashing out of $60,000 of Mr. RFL’s stock options this month provided our rate with a healthy boost.

We use an after-tax rate since it allows us to better assess our true living expenses and savings rate over time. While we currently pay a lot in taxes, we’re also still bringing in a high income. Our taxes should be much lower in early retirement.

How we account for equity compensation

For the purposes of managing our finances, we record equity compensation when we owe taxes on that money.

For stock, we report the gross value of shares granted as equity compensation on the date they vest, since that is when taxes are calculated and withheld. Any changes after that date are treated as capital gains or losses when the shares are sold.

For stock options, we add the fair value of options to our statement of net worth (or balance sheet) on the date they vest. However, since no income is reported or taxes owed until they are exercised, no income is reported immediately. Stock options are exponentially more volatile than shares, and can quickly become worthless. The value of our vested options can experience significant swings in value along with changes in the share price.

August 2022 Financial Results: Monthly spending

Ok, full disclosure time! The table below shows our expenses for the month, along with some additional thoughts (or excuses).

*Does not include monthly spending for home renovation of $348, or charitable contributions made, which we don’t share publicly or treat as “expenses” (to encourage more giving).

Housing-Related – $721

Housing-related costs include mortgage interest paid, and a monthly allocation for property taxes, insurance, and HOA dues. 

We recently received our property tax bill for 2022 and were pleasantly surprised to see it decrease again this year… despite the significant increase in property values! Because I anticipated a increase, I’ve been accruing at a much higher monthly rate that was actually needed. As such, our monthly allocation will be adjusted down to true this up for the remainder of the year.

Insurance – $452

This category includes our premiums for auto, term life, personal liability, and health insurance.

Health insurance premiums are withheld from Mr. RFL’s paycheck, but all our other insurance plans are paid annually or biannually.  We allocate an amount for auto insurance each month since the cost is high, but other insurance premiums are included here only when they’re actually paid.

Food – $614

Our food spending returned to normal this month, with the majority being spent on groceries.

Mr. RFL and I went out to eat or got coffee a few times this month during our day dates. We also ordered fancy take-out twice. Since we used previously expensed gift cards to pay for a couple of these outings, not all the costs hit in August.

This month we also prepaid for some school lunches, which will be an occasional treat for our daughter. Since this represents food purchased outside the home, I’m including it in our restaurant budget. However, I’m also tracking it separately for inclusion in our annual compilation of kid costs.

Overall, I’m happy to see that we’re still under budget for food despite the drastic increases at the supermarket lately.

Household Consumables – $37

This category includes most of the non-food consumables used in our household, such as toilet paper, shampoo, skincare, laundry detergent, cleaning products, etc. Nothing exciting this month.

Utilities – $398

Utilities includes electric, water, gas, and security. 

This is double what we spent last month! It’s really hot here in the summer and our electric bill is finally showing it.

Medical – $181

This is for my annual skin cancer check with the dermatologist, dental cleaning with x-rays, a prescription and OTC medical supplies.

Fees – $95

We paid $95 for the annual fee on the Chase Sapphire Preferred card that we got last year. So far, the $1,200+ worth of free hotel nights we were able to redeem for our New England road-trip this summer (just from the sign on bonus) has made the annual fee well worth it!

We’ll hold the card for at least one more year to finish using up our points and assess if the new $50 hotel credit and other rewards make it worth continuing to hold. However, this card is certainly worth looking into if you’re ready to dip your toes into travel hacking!

Note: The credit card link above is my referral link.

Entertainment & Learning – $27

This category is for television, streaming music, books, games, concerts, and other family activities.

We typically pay for Spotify and Hulu. This month included a monthly fee for my Discovery+ subscription that I forgot to cancel before my subscription renewed. I also spent $10 on two steeply discounted magazine subscriptions via Amazon (affiliate link).

Alcohol – $125

After a couple months with $0 spending in this category, we finally refilled our wine fridge during Fry’s 25% off wine sale.

Child Care – $257

Now that our daughter is in kindergarten, we no longer have to pay for preschool and childcare during school hours. Yay!

However, at the request of our daughter, and after considering the benefits to our whole family, we’ve recently decided to enroll her in after-school care a couple days a week.

According to our daughter, after school care is basically a play date after school. However, it’s one that doesn’t also require me to sit there and watch the whole time, as I typically would. I know the extra socialization is important for her since she’s an only child. She gets to have more fun with her friends, and I get more free time, so it’s a win for both of us!

The cost of this extra care is minimal and we’re fortunate to be able to easily afford it. However, since it’s no longer a necessity for our family, it now falls under the “wants” grouping.

Kid Activities & Other Purchases – $209

This month we paid for our last month of swim lessons for the year. We also purchased school photos, as well as an extra pair of kid headphones and a larger water bottle as requested by her teachers (affiliate links).

Furniture, Tools & Other Home Purchases – $76

We ditched mediocre take-out pizza a couple years ago and now make our own most Fridays. Our current pizza pan has perforated holes in it, which annoyingly lets cornmeal or flour fall through, burning the bottom of my oven and making a mess everywhere. This month I bought an upgraded pizza pan (affiliate link) to finally remedy the problem.

I also purchased a wireless keyboard (affiliate link) so I can more comfortably use my standing desk with a laptop.

Finally, I decided to give Stasher bags a try (affiliate link). We’re trying to reduce the amount of single-use plastic we consume, so I’ve been looking for an alternative for snacks and freezer storage. These seem a bit pricey to me, so we’ll see if they live up to the hype.

August 2022 Financial Results: Other Income

While the majority of our income still comes from W-2 wages and related employee benefits (i.e. 401k match), we’re continuing to build our passive and other income streams.

The total non-employer related income earned this month was $888.

Interest & Dividends

We earned $741 in interest and dividends this month.

While not as impressing as our quarter-end investment income, it’s still nice to have truly passive income.

Reselling

I made $21 selling kid’s clothes on the secondhand market this month.

Cash Back Rewards

We received $76 in cash back rewards this month.

This included our quarterly cash back rebate from Rakuten (referral link – Get cash back on your online purchases, plus a $30 bonus after you spend $30)

We strategize the timing of expenses and charge everything we can in order to maximize credit card rewards. However, we always pay the full balance due each month.

That’s it for our August 2022 financial results. How’d your month go?

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