Revealing Rich Frugal Life’s 2024 Mid-Year Financial Review

Today, I’m sharing our family’s 2024 mid-year financial review.

Here in the Rich Frugal Life household, we typically perform a deep dive into our finances at least twice a year.

During this review, we compare our year-to-date spending to the budget, analyze our investment portfolio allocation and targets, and assess how we’re tracking towards our annual goals.

Mid-year financial review process

We typically perform many of the same tasks during our mid-year financial review as we do for the year-end review. 

By reviewing our budget and investments during the year, we can make corrections or changes if we are veering too far off track in any one area.

Sometimes that means creating an action plan to rein in spending if we’ve gone over budget, or reallocating investments. Other times, we may decide to just adjust the targets themselves.

Financial planning should be an iterative process. Rigidly sticking to a budget or target you set under different circumstances or using assumptions that are no longer viable can lead to unwanted stress or feelings of deprivation.

Here’s a look into our 2024 mid-year financial review…

Our Current & Target Investment Portfolio Allocation

During our mid-year financial review, we compare our current portfolio allocation to our target allocation to assess how we’re tracking. We also discuss and update our investing strategy, if needed.

As shown in the table below, our current portfolio allocation has made some progress towards the new investment targets we set at the start of 2024. Given the size of our investments and how we’ve surpassed our personal threshold for financial independence, we decided that it was time to de-risk our portfolio a bit. Our goal is to shift towards a 60/40 portfolio, with the 40% being comprised of income generating assets (bonds, cash and dividend stocks) and 60% being focused on growth. 

Overall, our investment allocation is not too far off from where it was 6 months ago, but it’s moving in the right direction. See our 2023 year-end portfolio update for more on how we invest our money and the changes in investment strategy we decided to make in 2024.

As mentioned therein, the transition is expected to be gradual and mostly prospective, since any rebalancing of our non-retirement accounts would require selling assets and triggering tax payments on gains.

Investment allocation of our Financial Independence portfolio, as well our current targets, for major asset classes:

Mid-year investment income update

Our dividend and interest income has continued to grow, as we continue to use Mr. RFL’s salary and benefits to boost our early retirement portfolio. As our investment portfolio grows, so does the passive income we earn just from holding these investments.

During the first six months of 2024, we earned $18,954 in dividends and interest!

That is a 44% increase over last year’s $13,413, double what we earned for that same period two years ago, and several multiples of the $3,630 we earned five years ago.

For the first time since we began this journey, our passive investment income has surpassed half of our pretax expenses… 53% coverage to be exact!

Approximately 80% of the dividends and interest we’re earning come from outside of our formal retirement accounts, so we’ll have immediate access to that income in early retirement. For now, we will continue to reinvest our earnings.

I’m expecting our total dividends and interest for the year to come in at between $39,000 – $40,000, but this number will continue to grow as we invest more.  

Year-to-date Dividend and Interest Comparison for 2022 vs. 2023 vs. 2024

Net Worth Update

The snowball effect is well underway. Our net worth continues to grow at a rate that has surprised us both. Mr. RFL is still making a very healthy income which adds to the balance each month. But our portfolio has also taken on a life of its own. It’s been fun to watch.

That said, because of the higher percentage of assets we have invested in the stock market, our net worth is now much more closely correlated to the stock market. Temporary downturns hit us harder. However, that doesn’t scare us away, because we’re playing the long game (as should most investors).

Current break-out of our net worth:

Mid-Year Budget Review

As you may know from our monthly expense reports, I track and review our actual spending every month.

Despite my obsession with tracking our spending, we don’t worry much about how that spending compares to our budget. Why? Because we’ve already reached financial independence, as well as our definition of “Fat FIRE”. We’ve also historically saved between 50 – 80% of our income.  

Budgeting is still an important part of our financial strategy because it outlines a spending plan which is based on our values and goals for the year. Having a budget and tracking expenses keeps us aware of where our money is going and ensures that we don’t veer too far off track. But it’s flexible.

I perform a full year-to-date comparison of budget twice a year, during our mid-year and year-end financial review.

Our 6-month YTD budget to actual comparison:

*Does not include charitable contributions made. We don’t share that information publicly and prefer not to treat charitable giving as an “expense” against our budget to encourage ourselves to be more generous (since we tend to want to manage and reduce “expenses”).  Additionally, approximately half of our annual giving is now made from the Donor Advised fund we opened in 2022, which is already excluded from our net worth.

Budget Review

Although I try to budget month by month, I don’t always get the timing right. There are always some variances.

We weren’t significantly over in any one category during the first half of this year, except for vehicle maintenance. My 9-year old SUV needed a lot of work this year. Fortunately, our home maintenance costs were lower than expected, which offset these overages. The remaining variances were all pretty small or related to the timing of expenses.

I expect us to be at or below our overall budget by year-end. But this review also shows me that we have room to indulge a little more during the second half of the year.

If you’re interested in more details of our spending or what we include in each of the categories above, you’ll find that and more in our monthly financial updates.

That’s it for Rich Frugal Life’s 2024 mid-year financial review. Stay tuned to see how the rest of our year goes…

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Featured image by Rich Frugal Life (views from Shenandoah National Park)

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