• We like to take advantage of 0% APR balance transfers and other credit card offers for free money. We earned a $500 bonus on our last offer on new Capital One Spark credit card.
• Our properties are listed on our balance sheet based on their cost basis, not current market value. We did this while the real estate market was riding high and we continue to do it now during the slide. I believe real estate is too illiquid to list based on recent sale transactions. For those interested, our April Zillow property estimates are: $193,593; $121,465; $296,140 (which recently appraised for $270k); and $233,195.
• Re-renting our 1st rental which has a lease ending in July was my primary focus in April. I outsourced some landscaping $310, exterior painting $1450, and purchased a new lawnmower $147. I was able to sign a 2 year lease and still raise the rent a bit. I am feeling good that the heavy lifting on this project is done for now.
• April was a disappointing month from an investment perspective. My actively managed portfolio lost value, while the VTI benchmark gained a little. I'll post my investing report shortly.

While I was sitting at an outside park bench at the museum I started to bask in how wonderful it was to let things slow down and enjoy things like the outdoors with my family. Why can't I do this all the time? Working hard sucks. It reminded me of everything I miss out on when I'm working most of the time. I can remember in college when lifeguarding at the community pool for the summer seemed to last forever, now a year goes by in the blink of an eye.

Today reminded me of why I'm working so hard in the first place - it is not for some net worth aspiration, but more freedom to chose how I and my wife spend our time in the future. I sorta wish that time was now, but its still too early to check out of the rat race. We are still 8-11 years away from our financial freedom goal and that seems too far away on days like these.

• We like to take advantage of 0% APR balance transfers and other credit card offers for free money. In January we earned a $500 bonus on a new Capital One Spark credit card.
• Our properties are listed on our balance sheet based on their cost basis, not current market value. We did this while the real estate market was riding high and we continue to do it now during the slide. I believe real estate is too illiquid to list based on recent sale transactions. For those interested, our March Zillow property estimates are: $193,369; $120,123; $292,803 (which recently appraised for $270k); and $231,405.
• March was a big month from an income statement perspective. I received my annual bonus this month as well as received an $8k advance from my employer for something we are working on that I'm hoping to share next month. In the meantime the $8k shows up in "Cash & Savings" and is offset under "Other Liabilities" with a corresponding $8k liability since it hasn't been consumed yet.
• March was also a pretty good month from an investment standpoint with my personally managed portfolio returning 4.5%+ in March.
• I have to admit now with a 3 year old and a 6 month old and my other commitments that I'm starting to struggle to regularly post to this blog. Weeks fly by in the blink of an eye. My family is my priority so posting will likely be more sporadic until my time commitments lighten up.

Mr. Pickles has documented a recent free card rental by making a weekend car rental reservation @ avis.com and using coupon code "TUEA002". He was able to rent a 2013 Chrysler 300 for free for a weekend.

I did a quick search on avis.com and was able to make a car reservation using the coupon code for <$2 (taxes) for a weekend rental.

Major Financial Cost Drivers for Our Family with a 3yr old:

• Preschool - Our child's preschool currently costs $210/mo. I've heard that is very inexpensive compared to many other preschools, but haven't done the research myself.
• Food -- Our food bill is higher, but hard to distinguish, part of it is likely lifestyle changes for us and a small part due to our child. After all she has her favorite foods - yogurts, kids snacks, etc that we regularly buy just for her. I'd estimate our food costs are up about 10%, rather small compared with all the other expenses.
• Health Insurance -- We held off on buying dental insurance initially, but my wife did take our 3yr old for an initial visit to the dentist this year for a total cost of $59. My wife felt it was important to get her exposed to a dentist and found a special offer that kept the cost low. We have had health insurance from day 1 from my employer for an extra $110/mo.
• Presents -- Not only do we have gifts for holidays (Christmas, birthday, etc), but we also have social engagements and birthday gifts for all her friends too. There is at least 1-2 birthday parties a month so I anticipate $25-$50/mo for gifts alone.
• Annual Birthday Party -- $250-$300/yr. With our time at such a premium the only way we can throw a decent birthday parts is to buy one. We had her 1st & 2nd birthday at our house which was less expensive, but with more obligations and pressing needs for time, we are now just buying a birthday package at a local place -- bowling alley, kids fun place, etc.
• Clothes - $150-$200/yr. Kids out grow clothes fast. The keys that have helped us keep clothing costs manageable are hand-me-downs; shopping consignment sales/2nd hand store; and clearance sales at clothing stores.
• Child care - ~$300/yr. drop in daycare and babysitters. This would be considerable more, but we have significantly cut down on our evenings out and instead have stayed in most of the time. Still my wife and I need quality time on occasion and without family close by we tend to rely on babysitters. A good suggestion I've heard from friends is to do swap sitting with other families, but we just haven't been organized enough to have much success with this yet.
• Extracurricular Activities - $55/mo. Currently my daughter is taking a weekly dance class and a local dance company. We've also previously signed up for swim lessons and plan to join a soccer team in the future. We generally try to have 1 extra-circular activity going at a time to manage/throttle the expenses.
• College Savings - We are currently socking away about $150/mo in a 529 plan for our 3yr child. I have seen many estimates out there, but the general consensus seems to be to target saving $250-$400/mo for college so we may have a bit of catching up to do.

I'll also note as I've done previously that probably the single largest expense is our time commitment to raising our child. The time required is exponentially the largest expense for us, but absolutely worth ever penny.

February Highlights:

• Our portfolio had a lackluster month. We saw saw a paper increase of 0.49% for our portfolio vs 1.10% for our VTI benchmark.
• In February we did some profit taking and sold off an initial 100 shares of our Bank of America holdings. Its had a tremendous increase in value over the past 6 months and I figured it was a good time to take some of our investment back to cash.
• The market's continued rally has given me a bit of pause over valuations. While I am not complaining with the recent rise, I believe equity returns could be less attractive. I'll be easing into a more conservative investment posture if the market continues to rally.
• Our portfolio again saw significant valuation increases in Hewlett-Packard in February.
• We made our regular monthly investments in our Roth IRAs, and had some dividends, but otherwise a very quiet month.
• Our recent monthly returns were: Jan 09 -4.98%, Feb -9.94%, Mar +8.45%, Apr +10.88%, May +4.65%, Jun +0.89%, Jul +9.94%, Aug +4.36%, Sept 3.15%, Oct -2.34%, Nov +5.83%, Dec +1.85%, Jan '10 -2.34%, Feb +2.25%, Mar +5.88%, Apr +2.54%, May -8.13%, June -5.64%, July 6.17%. Aug -4.87%, Sept +8.48%, Oct 2.47%, Nov -0.96%, Dec +8.01%, Jan 2011 +2.06%, Feb 2.57%, Mar +0.15%, Apr +3.04%, May -1.56%, June -1.63%, July -2.71%, Aug -5.42%, Sept -7.06%, Oct +9.88%, Nov -0.39%, Dec +2.10%, Jan '12 +4.03%, Feb +4.68%, Mar +2.35%, Apr -1.74%, Sept +3.47%, Oct 0.10%, Nov -0.20%, Dec +3.09%, Jan '13 +6.72%, Feb +0.49% .....

February 2013 Investment Report:

• We like to take advantage of 0% APR balance transfers and other credit card offers for free money.
• We earned a $500 credit card bonus this month after meeting a spending threshold on a Capital One Spark Business Credit Card promotion we received in the mail.
• We used Amazon payments to boost our spending this month to take advantage of the credit card promotion. As a result we had additional cash (and corresponding credit card liabilities) on our balance sheet this month.
• Our properties are listed on our balance sheet based on their cost basis, not current market value. We did this while the real estate market was riding high and we continue to do it now during the slide. I believe real estate is too illiquid to list based on recent sale transactions. For those interested, our Feb Zillow property estimates are: $190,553; $118,977; $292,885 (which recently appraised for $270k); and $228,028.
• Major one-time transactions for the month included +$600 for FSA reimbursements from 2012, +$500 credit card bonus, -$600 for storm damage at a rental property, -$300 preschool deposit for daughter for next school year.
• My wife and I went through our freezer this month and made a list of all main dishes (meats, prepared meals, etc) that we had in the freezer and committed to eating 2-3 meals a week out of our freezer to cycle through a lot of stuff that is aging in storage. Its amazing how many meals we have to go through. We should see a significant reduction in our food expenses for the next couple months if we stick to it.
• February was pretty flat from an investment standpoint. With the markets now hitting all time highs I'm certainly not moving major new money into the market. We made our sizable investments back in 2008-2010 and now we are reaping the benefits.

Also don't forget to take advantage of the Lowe's 10% off coupons in the change of address packet as well, although I have heard these are being phased out so may be limited availability.

A cursory search revealed for all the US carriers I checked that we could earn mileage in frequent flyer accounts with any tickets purchased for my kids (as long as they have a seat, if we buy a ticket for our infant without a seat we wouldn't earn miles). However, none of the US carriers appeared to offer ability to pool or household miles without fees.

I don't think we are going to become nomads anytime soon and only expect we'd go on a limited number of flights in the forseeable future (unless we somehow find flying with a 3yr old and 6m old enjoyable). I'd like to know we can put the miles to good use and if we could household the miles then we could earn a free ticket if 1/4 the time, or a pair of tickets (a more likely scenario for my wife and I) in 1/2 the time.

While the US carriers were a let down, I did find that there were a few overseas airline partner on the various airline alliances that did offer householding family accounts.

While this wouldn't be of much help for anyone who is a loyal user of an US carrier loyalty program, this might offer us some potential. My wife and I already have active British Airways accounts with significant miles from a British Airways Credit Card Bonus opportunity so would be easy for us to use their program rather than American's going forward. For the Skyteam and Star Alliances, I have significant accrued mileage on the US carriers, but my wife does not have accrued mileage. It still might make sense for my whole family to fly using Asiana and Korean Air loyalty programs to maximize our reward benefit. Even if we decide I should still use my US loyalty program, it still might make sense for my wife and children to take advantage of Asiana and Korean Air loyalty programs for any flights we take on those alliances to help use reach a reward ticket faster.

Its good to see there are some options out there, but taking advantage of the loyalty programs becomes that much more complicated with the family in tow. It would be great if the US carriers offered the householding benefit to keep it simple and help keep members loyal.

January Highlights:

• Our portfolio had an awesome month all around! We saw what could be equivalent to a full year's return with a 6.72% increase in our portfolio compared to our VTI benchmark gain of 5.61%.
• In January we made an additional small investment in Fairfax Financial. We also lightened some of our IBM investment.
• The market's continued rally has given me a bit of pause over valuations. While I am not complaining with the recent rise, I believe equity returns could be less attractive. I'll be easing into a more conservative investment posture if the market continues to rally.
• Our portfolio saw significant valuation increases in Hewlett-Packard, Genworth, and Medtronic in January.
• We made our regular monthly investments in our Roth IRAs, Conocco Philips DRIP, and had some dividends and dividend reinvestments.
• Our recent monthly returns were: Jan 09 -4.98%, Feb -9.94%, Mar +8.45%, Apr +10.88%, May +4.65%, Jun +0.89%, Jul +9.94%, Aug +4.36%, Sept 3.15%, Oct -2.34%, Nov +5.83%, Dec +1.85%, Jan '10 -2.34%, Feb +2.25%, Mar +5.88%, Apr +2.54%, May -8.13%, June -5.64%, July 6.17%. Aug -4.87%, Sept +8.48%, Oct 2.47%, Nov -0.96%, Dec +8.01%, Jan 2011 +2.06%, Feb 2.57%, Mar +0.15%, Apr +3.04%, May -1.56%, June -1.63%, July -2.71%, Aug -5.42%, Sept -7.06%, Oct +9.88%, Nov -0.39%, Dec +2.10%, Jan '12 +4.03%, Feb +4.68%, Mar +2.35%, Apr -1.74%, Sept +3.47%, Oct 0.10%, Nov -0.20%, Dec +3.09%, Jan '13 +6.72% .....

January 2013 Investment Report:

**Property Taxes, Insurance, Repairs & Maintenance, Advertising, etc
*Potential Free Cash Flow assuming 2012 Rent, 2012 other expenses, and minimum mortgage payments. This is the best indicator to me of the potential income we would receive from these investments when we are financially free.

Summary
These days I prefer to look at these rental investments together. After all, I tend to eliminate the highest interest rate loans first and as a result have eliminated debts on certain properties, etc which skews the results. If you combine them together I think you get a more reasonable view of our return.

I can't complain about a near 7% return that ignores asset valuation changes. The main downside of these investments is they also consume some of my time and energy and that isn't factored into these returns. Back in 2006 when I started this I tried to do everything myself to keep the explicit expenses as low as possible. Today, being so time poor, I only attempted to do 1 repair and handled re-renting 1 house myself this year. The rest of the work I outsourced to contractors and other folks to minimize the amount of my time required. When we are financially free I suspect I will move back to doing much of the work myself to boost our net income.

• We like to take advantage of 0% APR balance transfers and other credit card offers for free money. We are currently taking advantage of a promotion for a Capital One Spark Business Credit Card that offered a $500 bonus after spending $4,500 within the 1st 3 months and offers 1.5% cash back off all purchases with no annual fee.
• We used Amazon payments to boost our spending this month to take advantage of the credit card promotion. As a result we had additional cash (and corresponding credit card liabilities) on our balance sheet this month.
• Our properties are listed on our balance sheet based on their cost basis, not current market value. We did this while the real estate market was riding high and we continue to do it now during the slide. I believe real estate is too illiquid to list based on recent sale transactions. For those interested, our Feb Zillow property estimates are: $190,216; $119,582; $292,580 (which recently appraised for $270k); and $227,587.
• We crossed that major milestone this month to become millionaires on our balance sheet. Its been a non event for us so far, but it is recognition we are making regular progress towards our financial freedom goal. It has been a 12 year ride for me to reach this point, the majority of it captured in this blog.
• We had some unanticipated issues with our home's furnace this month and ultimately purchased a new unit for ~$4k. Wasn't a very timely purchase given we allocated the majority of our cash/emergency fund in our no cost refinance in November, but just a small blip in an otherwise very positive month.
• We paid our annual auto insurance premium of ~$1k this month.
• In January our investment portfolio rocked! It compared nicely to our benchmark (6.72% vs 5.61%). I'll post our investment report shortly.

This passive income is an important part of our financial freedom plan. Our current financial plan includes $6k in annual dividend income to support our living expenses so I prefer to be growing our dividend income on a trajectory that will will support this by the time we are targeting to be financially free.

Our taxable dividend income rose by 17% in 2012. Its not the 40%+ growth rates in dividend income we saw before the last recession, but our portfolio is significantly larger now and we are no longer increasing the portfolio size as rapidly as we were when our net worth was smaller.

If you look at our taxable stock portfolio yield - our portfolio was valued at $191,009 at the end of 2012, so we had an a 1.95% dividend yield on our overall taxable portfolio (including non-dividend paying investments).

If we assume an average 10% growth rate over the next 8 years we can see in the table below we have a reasonable margin of safety that suggests we are on target with our financial freedom plan.

If we want to increase the amount of dividend income we utilize when we become financially free ~2021 to about $10k/yr we are currently about $479/yr short. All in all we are in good shape regarding our dividend income.

Here is a summary of our recent portfolio performance:


*Average return is calculated via geometric mean. Annual returns were calculated via Modified Dietz Method.
**I don't know how this 401k rate of return was calculated, but indicates its a time weighted formula so likely more accurate than my own calculations.

This continues to reinforce my previous portfolio analysis that I should be concentrating our investments in passive index funds as I am not yet demonstrating that my actively managed investments can beat our passive index benchmark.

On the positive side we are competitive. I take comfort in knowing that we aren't performing terribly compared to our benchmark and as long as our actively managed portfolio can keep pace with our index benchmark then we get the benefit of investing experience without costing us our financial freedom goals. As I've stated before I see improving my ability to invest at above average rates of return an important part of our reaching and maintaining our financial freedom goal.

Its hard to complain with double digit portfolio returns. I think its interesting that our annual growth has been very consistent over the past few years where in 2009, 2010, and 2012 we basically grew our net worth by $150k each yr. What I find exciting here is that the portfolio rate of return we had was less each year (that sounds weird doesn't it?). I see it and I think about the affect our growing net worth on our annual earnings capability -- we are earning the same amount, but need less return from our investment portfolio and therefore less investment risk to get those annual earnings. That is a pretty cool thing.

Now if I could only get the markets to return double digit gains consistently - we'd already be financially free if that were the case.