income statement balance sheet

Erik’s Income Statement and Balance Sheet – 1st Half 2017

Erik Thoughts of a Mastermind 31 Comments

Many personal finance bloggers provide net worth, income and expense, and goal updates each month for their financial situation. Some of these bloggers go in-depth into the details and are fully transparent, while others will tell you at a high level their net worth and how it changed during the month. In 2017, I’m becoming a fan of being fully transparent with my life and I also believe you, my reader, appreciate it as well.

In this post, I want to lay it all on the line: I’m going to give you an in-depth look at my balance sheet, income statement, and talk a little bit about areas for improvement going forward. First, I will give you a high level overview of my assets and liabilities, my income, expenses, and taxes over time, and my savings rate for the first 6 months. Then, I will dive deeper into the details for my income and expenses and discuss my goals for the next 6 months.

My sincere hope is that you look at my transparency around my finances and look to take steps to make your financial situation better. I truly believe that everyone can get their financial situation in order and can be successful with money. It doesn’t matter how much you make, it doesn’t matter how much you have currently. By taking steps each and every month to earn money, save money, and invest money, you will be on the road to wealth.

Wealth is the ability to fully experience life.” – Henry David Thoreau

Erik’s Financials at a High Level

First, I want to show you a high level view of my balance sheet and income statement. At the beginning of the year, I had a net worth of $68,919. At the end of June, my net worth is $96,073. This number is my assets minus my liabilities. The assets include my cash in my checking and savings accounts, my house and car, my 401k, IRA, HSA, and any other investments. The liabilities includes my credit cards, my mortgage, and my security deposits.

I was lucky to graduate college with only $8k in student debt, which I paid off in 2015, and while I did take out a loan on my car, I paid it off promptly in the few months after to keep my financial situation liquid. I’ve missed out on some market gains, but still am doing pretty well for 25.

2017 Balance Sheet over time

2017 Balance Sheet Over First 6 Months

In 6 months time, I have been able to increase my net worth by nearly $30k through a combination of building my investments, and paying down my mortgage. I will go into more detail later in this post.

For my income, investments, expenses, and taxes, I break them out below. So far this year, I’ve made $56,178, invested $16,002, paid down my mortgage $9,934, spent $16,590 on various things, and paid $12,333 in taxes.

2017 erik's income statement over first 6 months

2017 Income Statement Over First 6 Months

I really like looking at this table because it tells me the story of each month. In February, I received a nice bonus from work and was able to put $5,500 into my Roth IRA, and paid off an extra $2,800 in mortgage principal. Also, I break out taxes, because it’s interesting to see how taxes affects my savings rate.

Now, I will go into the details for each line item.

An Examination of Erik’s Balance Sheet

I break up my assets and liabilities into high level categories: cash, property, investments, credit card debt, mortgage debt, and miscellaneous debt. Each of these categories includes multiple accounts. Becoming wealthy is about increasing the quality and quantity of assets you have, and decreasing the liabilities you have.

Assets

As mentioned above, my assets includes my cash in various checking and savings accounts, my house and car, and my investments in various accounts (401k, IRA, HSA, taxable, and business accounts).

2017 erik's balance sheet assets

Cash

For cash, I could be a little more aggressive with my investments given my cash situation, but I like having at least $5-7k in cash from a psychological standpoint. I never know what will happen to my house, my body, or my life. Therefore, I treat my savings account as my emergency fund. As you can see below, my total cash has been relatively constant between $5k and $12k. erik's balance sheet cash balance over time

I’m fairly comfortable where I’m at right now with cash, but wouldn’t mind having at least $15k in cash when I’m done hitting my debt paydown and investment goals (more on this later).

Property

For property, I have a 2014 Volkswagon Jetta which I bought last February, and a house, which I bought July 2015.

Erik's balance sheet property 2017

For my car, I reduce the value by multiplying each month by 98% to simulate depreciation. This is not a scientific method, but it works for now.

For my house, I’m taking the most recent appraisal value (August 2016). I’m skeptical of Zillow’s Zestimate because earlier this year, my Zestimate was $360k, but then dropped to $315k, and now is back to $340k. I would rather not see big peaks and valleys in my net worth, and as a result, I’m keeping the house value at the appraisal value.

Overall, I’m happy with my property valuations and these numbers will be staying relatively the same over the next few months as I’m not planning on buying another car or another house!

Investments

I have a few investment accounts, some tax advantaged, some taxable, and one business line item. For the tax advantaged accounts, a 401k account, a Roth IRA, and my HSA. For taxable line items, I have a taxable account with some shares from the company I work for, and RSU’s from the same company. I’m happy my 401k balance has nearly doubled, but this is far from being satisfactory if I’m going to have a fat tax-advantaged retirement account 🙂

2017 erik's balance sheet investments

2017 was the first year I contributed to an IRA. Technically, I contributed the max for 2016 and haven’t contributed anything in 2017. I want to change this soon, and will look to max out my 2017 contributions in the next month or so.

My 401k account is a Roth 401k and I’m contributing about $800 a month. I’ve upped this contribution a little bit more to 10% of my salary, but am always tinkering with this number. I’m also thinking of switching to traditional because I was recently promoted and got a decent raise (post to come 🙂 ).

I’m maxing out my HSA account since this is almost free money… I put pre-tax dollars in and can spend those dollars without paying any tax – such a good deal!

Overall, I’m generally pleased with my investment growth, but will have to stay consistent with my contributions.

Liabilities

For liabilities, I have 4 credit cards, a mortgage, and security deposits for my roommates. My one roommate never gave me a security deposit, which I’m a little upset about, but haven’t (and won’t) taken action.

2017 balance sheet liabilities

For my credit card debts, these are generally below $1,500 a month. I put all of my purchases on my credit cards and average 2% cash back. I pay off my balance each and every month.

My mortgage is a 5/1 ARM at a 2.625% rate. So far, I’ve paid off $9,934 in mortgage principal – a combination of regular and pre-payments. I’m currently at roughly 85% LTV and have PMI to pay each month. To get rid of PMI, I will need to pre-pay roughly $20k of principal. I want to address this in the next 6 months, by either accomplishing it, or getting a solid start on it for 2018.

Net Worth: Up $27,154 From Beginning of Year

For the year, my net worth is up $27,154, mainly driven by an increase in investments of $16,002, and a decrease in mortgage of $9,934.

2017 balance sheet net worth over time

In the second half of 2017, I expect my net worth to hit $100k, and my investments to increase at least $15k, and my mortgage to decrease $10-20k.

One area of improvement that I see is increasing the distribution of my net worth to investments. Right now, my house makes up roughly 50% of my net worth (roughly $48k of $96k). I’m not sure if I want to address this concern this year given my goal of getting rid of PMI.

An Examination of Erik’s Income Statement

To get to the balance sheet, we must examine what happens behind the scenes: what is my income and expenses by month? Tracking your income and expenses is incredibly important in personal finance. What gets measured gets managed!

Income

Currently, I have 3 streams of income – 2 active and 1 passive. I work a 9 to 5 doing statistical analysis for a regional bank, and I have a few hours of statistical consulting work a month. My two roommates pay me $1,300 a month in rent, and this has allowed me to increase my income by roughly $8k per 6 months. I also include my utility income (which is technically income but is offset by when I actually pay the utilities), and any other income.

2017 income statement income

Expenses

It doesn’t matter how much you make, it matters how much you keep. It is important to live within your means – spend less than you make!

The main expense categories are discretionary spending (Food and drink, shopping, recreation, travel, home improvement, donation, etc.), utilities and mortgage, auto insurance and gas, other expenses (investment contributions), and paycheck items (taxes and investments).

Discretionary Spending

The main expense each month is food and drink. I’ve definitely became a little more loose with food and drink as my income has increased (lifestyle inflation at it’s finest).

2017 income statement discretionary spending

I’m averaging about $450 a month in food and drink, most of which comes from eating a $5-10 lunch at work. I don’t buy drinks or go out for dinner too much any more, but lunches add up!

Also, at the end of June, I booked a flight to Vegas to hang out for the 4th of July weekend. I haven’t done too much traveling, but realize if I want to widen my perspective on the world, it’s essential to get out there and see new things!

las vegas downtown

Recreation is another one that I think can get out of hand quick: this one is gym membership fees, golf greens fees, and other fun expenses, etc.

Utilities and Mortgage

Each month, my mortgage payment (principal and interest) is $1,104, insurance is $114, PMI is $144, and property taxes is $339. Utilities run about $300 a month, and this is split 3 ways.

2017 income statement utilities mortgage

As mentioned above, paying down the mortgage principal by roughly $20k will get rid of the PMI payment of $144 a month. Without any extra payments towards principal, my wealth grows roughly $530 a month through equity build.

Auto Insurance and Gas and Other Expenses

I usually fill up my gas tank one time a month because I don’t drive too much. In May and November, I have my car insurance payment of about $800. Car insurance is expensive!

For investment contributions, you will see in February, I contributed $5,500 to my Roth IRA, and in May, I put $6,000 to work in my business endeavors. Investment contributions aren’t technically aren’t expenses, they are a balance sheet transfer, but since cash is going out, I treat it as an expense.

These expenses are not a concern for me.

Day Job Paycheck Taxes and Investments

Everyone needs to pay taxes, and I’m no exception. With each bi-weekly paycheck, there is a number of things taken out, both pre-tax or post-tax. The main items I’d like to call attention to is the 401k and HSA line items. I’ve recently increased my 401k contributions and am maxing out my HSA account.

Overall Takeaways From My Income Statement

Overall, I’m saving a good amount of money each month, and I’m able to put that money to work in a variety of ways. A savings rate of 49% post-tax is very good, but can always be improved upon.

One thing I’m hoping to do is travel a little bit more in the second half of 2017. Like I mentioned above, this past weekend, I went to Vegas on a whim and had an amazing time 🙂 I’m looking to continue to travel around the Midwest and continue to widen my perspective on the world.

bellagio fountain show

My Outlook on the 2nd Half of 2017

Going into the last 6 months of 2017, I’m looking to contribute another $5,500 to my Roth IRA, and also pay down the PMI on my mortgage. In addition, I have upped my 401k contribution to 10% of my salary, and will continue to build that account up as the year goes on. As I mentioned above, this will result in me putting another $25k+ to work for me.

I’m very excited for the next few months as I will hit the $100k net worth mark, and will hopefully be able to grow my wealth by another $30-35k by year-end. Also, I’m on pace for my first year of hitting $100k in income, so cheers to that! 🙂

Thanks for reading! It’s fun thinking about all of the different possible ways to build wealth. Hope you liked my transparency – it was a fun post to write! 🙂

Readers: how are your finances looking at the mid-way point of 2017? Are there any goals you are hoping to hit in the 2nd half of 2017? What are your thoughts on the direction of the market – both stock market or real estate market? Do you see any areas of improvement that I haven’t identified?

Erik

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Comments 31

  1. Wow those numbers are looking great! Looks like your 2017 is off to a wonderful start. If you’d like to travel more, I suggest going to FinCon in Dallas this fall! You’ll get to meet tons of awesome people (cough me cough) and see a bit of a city in a different part of the country!

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      Thanks for stopping by and commenting Gwen, I don’t get too many famous people here often 😉 ha. The past few weeks have been great in particular.

      I’ll do some research on FinCon while avoiding work – my mom mentioned a family trip to somewhere tropical in October, but the 25-28 may work out!

  2. First and foremost, congrats on increasing your overall net income by $30,000. That’s INCREDIBLE. I may need to consult you more for investments as I have only increased my salary by $2,000 net this year. Which is good, but I have $63,000 worth of student loan debt thanks to my master’s.

    All in all, I wanted to say thanks for being open, honest, and thorough with your finances. It really put some fire in my spirit to lock down on those numbers, create better habits, and work on my business some more.

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      Thanks Kyle for the compliment and support. Most of my net worth increase has been from contributions and debt pay down; my investment gains are not too much yet!

      I’m glad I inspired you to do more! It seems like you are doing pretty well on your debt payments since a few months ago you were at 70k.

  3. Thanks for sharing Erik! Such an in-depth and well articulated update.

    For my net worth calculations, I generally assume my car is worth what I owe. I don’t see a car as an investment or asset since it’s always depreciating. If I were to calculate the difference between the value and what I owe, I’d probably use KBB’s private sell.

    For my home, I calculate the value by having my RE agent send me comps every quarter or so.

    Anyway. Overall, awesome work man! Great job.

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      You are welcome Lance! Thanks for stopping by.

      I like your strategy for valuing cars and houses, that makes sense to me! I might have to change it up a little bit.

      Have a good one

  4. I love the transparent format, I think it’s helpful to allow readers a high level of detail in order to help improve their own situation. And congrats on approaching $100k Net Worth and Income! With this kind of start, it’s gotta be exciting to dream about the future. Enjoy the ride!

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      Thanks Ryan for stopping by. I appreciate the support. Also congrats to you on 11k in debt paid off in June!!! That’s awesome!

  5. Great job with the amazing saving rate of almost 50%. I think that balancing your current happiness and saving for the future is a great idea. It’s no fun if life is all about savings and nothing for fun.

    I had a mediocre second quarter as the Canadian stock market did not do that well. However, I am happy to know that I am still on pace to achieve my net worth goal of $1.3M. Let’s hope for a great second half of 2017. Cheers.

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      Thanks Leo for the comment. I’m going to try to keep the savings rate up around 50% as this is a great number to shoot for.

      Let’s hope the markets keep steady for the rest of the year! 🙂

  6. You have done some serious work in the past 6 months. From May to June alone has impressive growth. I like how you lay everything out and the formatting. Especially easy to read if you know any accounting. Some of the forms/ lines/ numbers text are a bit small and difficult to read, just saying for future reference. But the first half of the year is great, keep up the good work! Thanks for sharing your updates.

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      Thanks IH, I appreciate it, I’m very pleased with my progress and will be excited to see what the second half of the year brings!

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      I really appreciate your comment on providing the most detail. That’s very important to me! 🙂 You are welcome.

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  7. 27k increase in net worth is great, congrats on that! It is sometimes tricky to determine how much cash to have on hand – it’s tempting to deploy it when the market is doing so well. And I’m sure you’ll be able to max out the Roth this year as well. Best of luck!

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      Thanks SMM for the comment. It’s a tough choice right now for cash, but in the long run, it will all be good 🙂

  8. Hi Erik,
    Love the transparent update and huge increase in your net worth so far this year – congrats!
    Tracking your finances closely is important – it’s hard to reach a destination if you don’t know where you stand at the moment.
    Getting rid of PMI is always good. I don’t have to pay it fortunately although I’ve swung back from paying down the mortgage to investing the money instead.
    Fantastic progress however and looking forward to watching the numbers improve for the rest of the year!
    Best wishes,
    -DL

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      Thanks for commenting DL, glad to see you back in the blogging mix of things!!!

      I’m pretty happy with my decision to pay off PMI, now I just need to throw another 14k at it and I’ll be fresh 🙂

    2. Our primary is almost paid off but honestly…there’s a lot of regret in that. The market returned 20%+ for us so far but instead we took a 3.75% on $100K. Ouch! 🙁

      Our NW is north of 300K if you include the new mortgage but there’s no hurry to pay it off since it’s a business rental, yay for tax advantages, lesson learned.

  9. Fantastic numbers man! To be making over six figures for anyone is awesome much less at your age. Gotta keep an eye on those income limits for the Roth soon.

    Also, I know Personal Capital Defaults to Zillow but in my area, I have found Redfin to be more accurate and fluctuates less.

    It sounds like you are finding a pretty good balance between saving and enjoying life. You are smart to spend money on memories. You will never have more freedom than you do right now to enjoy stuff like that.

    Every time I see someone post their net worth, income and expenses it motivates me to do the same. I’m just so conditioned by society to never talk about the exact numbers.

    Thanks for sharing, it really is helpful to see.

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      Thanks Grant, I will have to watch out for the Roth IRA income limits 🙂 At that point, I’m going to switch over to traditional 401k to keep the ball rolling.

      I’ll have to check out Redfin… *heads over to Google*, Redfin has me at $352k. So that’s awesome.

      I get excited reading about other people’s successes as well. Super excited for the future, onwards and upwards Grant! 🙂

  10. Nice work, Erik! You will eclipse the $100k mark in no time!

    2017 is off to a good start for me. Through contributions and investment gains in my savings account, 401(k), IRA, taxable account and HSA I’m up $53k since Jan. 1! I have a little more to go to top off my 401(k) and IRA and the rest of my excess money will go into our taxable account.

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      Thanks for stopping by Taylor. That’s awesome you are crushing it as well – on pace for $100k this year!!! that’s fantastic man

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      Thanks Lily – I’m glad I can provide you with a great update. The 30k bump is not income, but net worth 🙂 thanks for stopping by.

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