Instead of the monthly updates we had been doing in 2019 (prior to August when our resolve fizzled out magnificently), we are looking at doing quarterly updates on our finances, our networth, and interesting happenings (if any). This is Q1 2020.
Q1 2020 was eye-opening, not in a bad way. Q1 was really the first opportunity we’ve had to evaluate base monthly spending since mid-2019. In July 2019, we paid off the house and officially became mortgage and debt-free, again. (You can read more about HOW we did it, here). However, in the months since, many have had large one-time expenses that have skewed our monthly expense figures. Car maintenance in August; camping in September; new tires in October; and, holiday spending in November and December. So, January, February, and March became a litmus test of sorts.
Income-wise, we were noticeably up. This is due to tax returns in March. All told, we netted almost $7,000 in returns thanks to RRSP contributions. Employment income was as-expected for the most part. It was a little down for Calm in January as she was still on short-term medical leave but February and March numbers were more indicative of the ‘expected’ for the year.
On the expense side of the equation, many of the categories were similar to Q1 2019 figures. The exceptions were groceries, gas for the car, and discretionary expenses like restaurants, entertainment, and household. All of these were down.
We can’t really explain groceries; it could just come down to more efficient use of sales. The gasoline cost reduction is most obvious and is due to Calm being at home in January on med leave and most recently for COVID-19 and Calm working from home, so no commute.
Overall, our savings rate was 46.3%. This includes March, which saw our highest savings rate EVER in a single month – 87.22%! Q1 also demonstrated to use how little we spend, generally. With no rent and the house paid off, our monthly expenses should average well under $2,000 – probably around the $1,700 mark – which means our baseline annual expenses are somewhere around $20,500. Quite low for a middle-class DINK couple.
… the above numbers include the installation of the steel roof on our house. Since we had already saved for it in 2019 and had assigned it its own line in our 2019 Year In Review, let’s pull it out and see what our real savings were for Q1 2020:
Our savings rate for Q1 2020 balloons to 84.1%, or over $23,200 in the first 3 months of the year. We like this figure better, not because it’s larger, but because it more accurately outlines how we performed in the quarter. The roof came out of 2019 money, not 2020. The $23,200+ figure is indicative of Q1 2020 money only. We believe it’s a better metric.
HOUSE! – $290,000
Emergency Fund – $11,864.96
Retirement – $34,161.32
CCs (transitory) – $67.53
Our new steel roof went on in January and it looks great. It weathered the rest of the winter very well, as well as a few rainstorms. Our real estate agent suggested that the roof could increase the value of our house by approximately $10,000-15,000. We have a sought-after starter-type home in town and it’s the only one with a steel roof so we estimated on the high end of that range. Our house value has been bumped up to an estimated $290,000.
In response to COVID-19 (which we’ll discuss more later), we decided that a wise move was to boost our emergency fund. Previously, we held a shade over 4 months of expenses. We boosted that to about 7 ½ months, which should provide an added buffer from whatever unpleasantness that comes out of COVID-19.
We also started investing for retirement. That’s (obviously) the Retirement line under Assets. In February, we reopened our RRSPs with Questrade and began to contribute in earnest to ensure the maximum possible tax return and to make swift inroads on the retirement front. As of the end of Q1 2020, we had contributed a book value of $38,000.
Now, the market value reflected in the Asset line is less than that because of the market correction we’ve all experienced. Luckily, our losses (-10.1%) are less than many have experienced to date because we chose to invest in a broader one-ETF solution than choosing an index (i.e the S&P 500) and throwing all of our funds into an ETF that tracks it.
Our one-ETF solution for the time being is VGRO and we’ll have more information on why we chose it in a later post. I suspect for at least the time being, we’ll have it as the primary holding in our retirement accounts and we’ll supplement with other index-specific ETFs or individual stocks as we see fit.
Finally, all debt is transitory credit card debt and is paid off regularly so we incur no interest.
Our networth gain was $24,915.41, despite the market ‘losses’. Pretty good, all things considered!
Journey to FI
Based on a FI number of $750,000, we are now 4.6% of the way there – a +2.0% increase over the end of 2019. Our FI number is calculated through out Retirement value only at this point.
Well, as with most people, life has been impacted by COVID-19. Cents has been driving Calm to a nearby city most Friday afternoons for regular treatments for a pinched lower back nerve – hence the medical leave. Luckily, the procedures are deemed essential and the clinic is open through all of these lockdowns. She’s also improving!
We’ve adopted the term QuarantineFI to inject some levity into things, and to describe our finances during this weird time of working from home and its associated positive impacts to our expenses. We’ve bumped up our emergency fund due to uncertainty but it’s more of a precaution as we’re both employed in a relatively recession-proof sector. We’re lucky for that.
Our employers have told us to work from home at least part of the time. Calm is home all of the time for now, while Cents is home two or three days a week. The benefits to working from home were felt immediately. Calm doesn’t have to commute anymore so we’re doing less mileage on our vehicle, paying less for gas, and implicitly spending less on regular vehicle maintenance. There’s also the benefit of not having to wear business casual attire anymore, so we’re doing less laundry (less business clothing to wash) and showering less often, because really, who do you we have to impress? We expect this to help us reduce realized expenses by $100-150/month while keeping income at the same level.
Unfortunately, this change in reality due to COVID-19 means that we will not be travelling back home for Easter as Cents’ parents (with whom we regularly stay when we are back in town) have advised us to stay put and reschedule later. That’s smart. They’re both seniors so it is best to limit socialization at this time. So that’s what we’re doing: not travelling 700 kms roundtrip in April. Again, less gas and mileage.
Lastly, we’re about to start seeds for our 2020 garden. Peppers will be started this weekend and beans and peas will be started outside shortly. After that, squash will be started indoors. Then we’ll plant carrots and lettuce. We’re doing more peppers this year and Cents will be putting in an in-ground bed for the squash once the ground is more pliable, which should be the Easter weekend.
For now, that’s all. We’re going to keep on saving and investing at these lower market prices to lower our cost/share and allow us to realize some actual gains sooner rather than later.
There will likely be some posts coming soon specific to investing, since it’s relatively new to us, and maybe some other topics, then, of course, we’ll have another quarterly in July – Q2’s Review!
Until then, keep your sticks on the ice, everyone. We’re all in this together.
~Calm ‘n Cents