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.
After big jumps in June and July, August was a pretty unexciting month. No big commission checks, mediocre performance from our investments, and continuing high valuations in the stock market. As a result, our large cash pile remains sadly idle.
Note: the Money Commando True Wealth Index for August, 2017 is .67. You can read more about the MCTWI here.
| July | August | $ Change | % Change | |||
|---|---|---|---|---|---|---|
| Assets - Stock Market | ||||||
| Brokerage accounts | $2,388,346.43 | $2,281,366.57 | -$106,979.86 | -4.5% | ||
| Retirement accounts | $653,372.17 | $654,815.17 | $1,443.00 | 0.2% | ||
| 529 accounts | $23,191.89 | $23,910.01 | $718.12 | 3.1% | ||
| Total | $3,064,910.49 | $2,960,091.75 | -$104,818.74 | -3.4% | ||
| Total after adjusting for MCTWI | $2,350,490.03 | $2,280,261.47 | -$70,228.56 | -3.0% | ||
| Assets - Other | ||||||
| Checking | $29,070.11 | $46,544.53 | $17,474.42 | 60.1% | ||
| Private equity | $200,000.00 | $200,000.00 | $0.00 | 0.0% | ||
| Rental properties | $933,500.00 | $933,500.00 | $0.00 | 0.0% | ||
| Primary residence | $1,620,000.00 | $1,620,000.00 | $0.00 | 0.0% | ||
| Total | $2,782,570.11 | $2,800,044.53 | $17,474.42 | 0.6% | ||
| Liabilities | ||||||
| Credit cards | $12,620.56 | -$837.17 | -$13,457.73 | -106.6% | ||
| Rental mortgages | $517,991.26 | $517,254.35 | -$736.90 | -0.14% | ||
| Primary mortgage | $645,043.15 | $564,842.53 | -$80,200.62 | -12.4% | ||
| Total | $1,175,654.97 | $1,081,259.71 | -$94,395.26 | -8.03% | ||
| Total net worth | $4,671,825.64 | $4,678,876.57 | $7,050.94 | 0.15% | ||
| Total net worth after adjusting for MCTWI | $3,957,405.17 | $3,999,046.29 | $41,641.12 | 1.05% |
S&P 500 performance for August, 2017 = .05%
Assets – stock market
Starting this month I will be reporting all of my equity assets using both their current value as well as the Money Commando True Wealth Index (MCTWI). If you’re not familiar with the concept, it’s a method I created to normalize the value of stock investments and remove the effects of excessively high or low valuation.
Brokerage accounts – This is our early retirement fund and where most of our net worth is. As I’d discussed in earlier posts, I decided to pay off our second mortgage early. I pulled $100k of cash out of our brokerage account to make this payment.
Retirement Accounts – This includes a 401(k), a few IRAs, and a few Roth IRAs. The only account we are currently contributing to is the 401(k). These were up a meager 0.2%, for a total gain of $1,443. Of that, $1,200 of the gain was due to contributions to the 401k.
529 accounts – We are contributing $500/month for each of our two kids. Given the low balance of these accounts I expect that our contributions will dwarf any investment returns for quite some time. The performance of these accounts this month are instructive. The investment for each kid is made on the 15th of each month. Even thought we contributed $1,000 total to the 529 accounts, all of which is invested in a S&P 500 index fund, the accounts were only up by $781.12. This is surprising because the market eked out a minor .05% gain for the month. The market was up for the period from Aug 1 – 31, but because of the timing of these investments there were down for the month.
Total stock market assets: The total unadjusted value of our stock market investments is $2,960,091.75.
Total stock market assets adjusted for MCTWI: After adjusting for the market’s high valuation, our stock market assets are worth $2,280,261.47. As described in the post where I introduced the concept of the MCTWI, in times of high valuation your stock market investments are actually worth less than their current price. In this case, the math shows that a diversified portfolio of stocks or index fund is actually worth about 67% of the current price.
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 roughly 6 months of expenses.
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. The value of our house doesn’t really matter because we hope to live in this house forever, but I track it for the sake of completeness. No change this month.
Total other assets – Total other assets were up $17,474.42 for the month (a 0.6% gain) to $2,800,044.53.
Liabilities
Credit cards – I made a mistake and accidentally paid our credit card twice, so we currently have a positive balance (a credit) of $837.17. I expect we’ll use this credit up this month.
Rental mortgages – Due to the timing of some payments we only paid $736 on the loan balances of our rental properties.
Primary residence mortgages – This was the big exciting move of the month. We’d paid about half of the balance on our second mortgage in June and we paid the rest of it in August. We’d been making payments of $2,000/month on it with the goal of paying the balance off in 15 years instead of 30. We’ll take the $2,000/month that’s been freed up and pay down some other debt.
Although I don’t really consider our house to be an asset, I definitely consider our home loans to be liabilities. I think it would be difficult to retire early with substantial mortgage payments hanging over our heads – this is why I’ve decided to pay off the second mortgage.
Total liabilities – Total liabilities were down by $94,395 for the month (a 8.03% decrease). Again, this is due to using the cash sitting in our brokerage account to pay off our second mortgage. It’s a bit daunting to realize that our total liabilities still exceed $1M ($1,081,259.71 of total liabilities, to be exact) – that’s a lot of debt. My goal is to have this debt gone by the time I retire.
Total net worth
As described above, I’m calculating my net worth both with and without adjusting for the Money Commando True Wealth Index.
Current net worth is $4,678,876.57, which was up $7,050.94 from last month (0.15% increase).
The more accurate MCTWI total net worth is $3,999,046.29, which was up $41,641.12 from last month (a 1.05% increase).
The MCTWI is designed to remove (or least reduce) the effects of high market valuations. As a result, there’s currently a large difference (about $700k) between what the stock market says we’re worth and what we’d actually be worth using a more realistic valuation on the market.
How did everybody else do this month? Where are you putting your money to work today? Does anybody have an asset class or investment type that’s reasonably valued today?