Each month I’ll be keeping track of our net worth on this blog. The reason for making our net worth public is to not only hold myself accountable, but to provide a record so I can review my progress over time. I’ll be giving a brief analysis on our results for the month and what changes I’m thinking of making.

April was a decent month. Although our investments are performing fine, we are spending a lot of money to complete the construction on our house. However, we’re getting close to being done and we’re really excited to enjoy the new covered patio, especially given the long outdoor season here in Santa Barbara.

The net worth report below includes an adjustment for the Money Commando True Wealth Index (MCTWI). The MCTWI for April, 2018 is .64. This is up from March’s value of .64.

The MCTWI is a way to provide a more stable and “true” valuation of the stock market by adjusting for overly high or low P/E ratios. As a reminder on how the MCTWI works, a value of 1 is fair value, values lower than 1 represent overvaluation and values higher than 1 represent undervaluation. The further from 1 the more the overvaluation or undervaluation. By my estimates, the market continues to be significantly overvalued.

To calculate the “true” value of your investments (that is, what their price would be at the stock market’s long-term average valuation) you just multiply the value of your investments by the MCTWI. So if your total portfolio of domestic stocks is worth $100k at today’s valuation, the MCTWI adjusted valued is $100,000 * .63 = $63,000. This is the number you should use for planning purposes.

Without further ado, here is our net worth report for April, 2018:

 

S&P 500 performance for February, 2018 = .38%

Our net worth was down 0.9%, which significantly underperformed the market.

Our MCTWI adjusted net worth was down 1.1%

 

Assets – stock market

In August of 2017 I started reporting all of my equity assets using both their actual value as well as the Money Commando True Wealth Index (MCTWI). The MCTWI should fluctuate much less than the actual stock market and is especially resistant to the irrational exuberance or despair that occasionally influences the market.

Brokerage – investments – This is our early retirement fund and where most of our net worth is. This was down while the S&P was up. I’m not too worried about these short-term divergence from the S&P.

Retirement Accounts – This includes a 401(k), two IRAs, and two Roth IRAs (one of each for my wife and me). The only account we are currently contributing to is the 401(k).

These are our longest “long-term” investments, as we can’t touch them for at least 18 years (when I turn 59.5). During that time I would expect these accounts to double twice, resulting in an account balance 4x larger than it currently is. Knowing that we can’t touch this money for that long is oddly reassuring.

These accounts have a combined worth of around $710k, so I’d expect them to be worth around $2.84M in 18 years when we can access them. The plan would be to let the tax deferred accounts continue to grow for as long as possible, with the goal that we wouldn’t pull money out until RMDs (Required Minimum Distributions) when I’m 70.5 years old. The hope is that we’d never need to touch the Roth accounts and we’ll pass that money on to our children. Under current tax law that money would be tax-free, but who knows what the tax law will look like in 40 or 50 years.

529 accounts – We contribute $500/month to 529 savings accounts we’ve set up for our 2 kids. Assuming both of our kids go to college, these will be liquidated in about 20 years.

Total stock market assets: The total unadjusted value of our stock market investments at the end of the month was $2,527,094.64. That was down a mere $5,716.16 from last month.

Total stock market assets adjusted for MCTWI: After adjusting for the market’s high valuation, our stock market assets are worth $1,594,561.12. I expect that, over time, our portfolio will eventually converge on the MCTWI calculation of the value of our investments.

This would imply either a significant “correction” (AKA – a stock market crash of 40%) or a prolonged period of time where stock prices go nowhere but earnings keep growing. This would allow valuations to catch up to prices.

 

Assets – Other

Checking – Our goal is to keep about $50k in cash in our checking account. This is due to an abundance of caution. I work in an inherently unstable field (sales) and my income varies widely from month to month. Keeping a good chunk of cash in our checking account helps me sleep well at night.

This is down a lot from last month due to the construction payment.

Private investments – 2 separate equity investments in startups. Since there’s no way to value these investments I will continue to keep them valued at my initial investment amount. Hopefully I’ll one day be pleasantly surprised to see that the companies are worth something. No change this month.

Rental properties – On the last day of each quarter I adjust the value of the properties based on Zillow’s estimate. No change this month.

Primary residence – Just like the rental properties, I adjust the value of our house at the end of each quarter. No change this month.

Brokerage – cash – This is the cash we are holding in our brokerage account. I’ve stopped reinvesting our dividends, so mostly there’s just accumulation in this account due to dividends, etc. In addition, I finally decided to liquidate some of the smaller ($1k-$3k) that I’d built in Loyal3 before they went out of business. The $13,521 increase in value was probably $1,500 dividends and $12,000 in sales of the small positions.

Total Assets – Other – Nothing too exciting here. Most of these assets only get repriced every quarter.

 

Liabilities

Credit cards –  We pay our credit cards in full each month. The amount owed varies from month to month due to when we pay the credit card bill, what we charged that month, etc. I don’t worry too much about changes here.

Rental mortgages – All properties are currently rented, which means our tenants helped us pay down $5,316.88 of the balances on the mortgages for our rental properties. Thanks guys!

Primary residence mortgage – We paid $1,120.62 on our mortgage this month. Although I don’t really consider our house to be an asset, I definitely consider our home loan a liability. I think it would be difficult to retire early with substantial mortgage payments hanging over our heads. We need to have this paid off before I can really consider retirement.

Total liabilities – Total liabilities were down by $8,345.75 for the month (a 0.8% decrease) to $1,071,993.82 (a nice .8% reduction from last month).

We still have over $1M in debt. At the average rate that we’ve been paying down mortgages over tell last few months (about $2,200/month) we’ll be under $1M in debt in about 35 months. That will be a fun milestone to finally hit!

At the rate of $2,200/month, it will take 490 months (39.9 years) to pay off all of our debt. Of course, each mortgage payment pays down a larger portion of the loan, so the reality is that we should be debt-free in about 20 years, assuming no additional payments towards principal. Our general thinking is to pay off the mortgage on our residence ASAP but make no additional payments on our rental property mortgages.

 

Total net worth

As described above, I’m calculating my net worth both with and without adjusting for the Money Commando True Wealth Index.

Not a lot to say here. Our net worth was down about $47k, but our investments performed ok. I’ll be very happy when the construction on the house is finally done

Here’s a graph of our net worth per month so you can see the year over year comparison.

 

 

And here’s a graph of our net worth for each month

 

 

Once we hit June we’ll start having 3 years worth of data to compare.

 

How did everybody else do this month?  Have you been riding the stock market to new highs each month?