Net worth report
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. Here’s how our net worth looked for December:
| November | December | $ Change | % Change | ||
| Assets | |||||
| Checking | $33,831.13 | $13,923.13 | -$19,908.00 | -58.8% | |
| Retirement accounts | $569,939.50 | $572,767.20 | $2,827.70 | 0.5% | |
| 529 accounts | $13,041.27 | $14,787.36 | $1,746.09 | 13.4% | |
| Brokerage accounts | $1,342,139.19 | $1,361,327.89 | $19,188.70 | 1.4% | |
| Private equity | $200,000.00 | $200,000.00 | $0.00 | 0.0% | |
| Rental properties | $868,325.00 | $904,962.50 | $36,637.50 | 4.2% | |
| Primary residence | $1,560,000.00 | $1,580,000.00 | $20,000.00 | 1.3% | |
| Total Assets | $4,587,276.09 | $4,647,768.08 | $60,491.99 | 1.3% | |
| Liabilities | |||||
| Credit cards | $4,453.48 | $5,205.77 | $752.29 | 16.9% | |
| Rental mortgages | $525,241.53 | $524,153.04 | -$1,088.49 | -0.2% | |
| Primary mortgage | $762,084.87 | $758,762.19 | -$3,322.68 | -0.4% | |
| Total Liabilities | $1,291,779.88 | $1,288,121.00 | -$3,658.88 | -0.3% | |
| Net worth | $3,295,496.22 | $3,359,647.09 | $64,150.87 | 1.95% |
S&P 500 performance for December = 1.82%
Assets
Checking – Our checking account balance fluctuates every month based on when the credit card statements are due, when I get reimbursed from my employer for work expenses, when rents are paid by tenants, etc. This month our checking balance was lower because property taxes were due and I prepaid a few mortgage payments to pull them into 2016 for tax reasons.
Retirement Accounts – This includes a 401(k), a few IRAs, and a few Roth IRAs. The only account we are still contributing to is the 401(k), as we are ineligible to invest in the rest. These were up only .5% compared to the S&P 500’s 1.82% gain. This is because we have a number of international funds in our retirement accounts that trailed the S&P 500.
529 accounts – We are contributing $500/month for each kid, and given the low balance of these accounts I expect that our contributions will dwarf any investment returns for quite some time. We added $1,000 and got another $746.09 in gains from the market, so these accounts were up just over 13% for the month.
Brokerage accounts – This is our early retirement fund and where most of our net worth is. The brokerage account was up 1.4%, which slightly trailed the market. Due to the size of our portfolio vs the amount we invest each month, the market will have a much stronger effect on our net worth than any new money we invest (or money we pull out of the account).
Private equity – 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.
Rental properties – On the last day of each quarter I adjust the value of the properties based on Zillow’s estimate. Looking at the adjustments it appears that most of the properties were about flat for the quarter, but just about all of the increase came from 2 of our properties. Who knows how accurate these estimates are, but I’ll continue updating them just to keep the accounting consistent.
Primary residence – Just like the rental properties, I adjust the value of our house at the end of each quarter. And like the 529 accounts, I struggle with whether or not I should include our house’s value here, as it doesn’t provide us any income and our hope (dream?) is to live in this house for the rest of our lives. It doesn’t really matter what the value is because we hope to never sell it. However, since we’d have to rent a place to live if we didn’t own our house, I’ve decided to include the house in our net worth calculation.
Total assets – Total assets were up $60,491.99 for the month, which is obviously a fantastic performance. Most of the increase was due to increased estimates of the value of some rental properties and our primary residence. Obviously I would be delighted to put up these numbers on a monthly basis, but that’s clearly not possible. However, it’s nice to see that we had a balanced performance from our stock and real estate holdings.
Liabilities
Credit cards – the credit card balances are up a bit due to some work related travel (for which I will be reimbursed) and Christmas spending.
Rental mortgages We paid off $1,088.49 on the mortgages. In the past I’ve considered paying these down faster than the standard 30-year loan schedule, but I’ve always felt I could do better investing that money elsewhere. All of these loans are at 4-4.5% interest.
Primary mortgage This was the bulk of the decrease in liabilities, as we paid off $3,322.68 on the mortgages on our main residence. This large decrease is due to having 2 mortgage payments in December (for tax reasons). I have been paying the second mortgage off on an accelerated pace, with the goal of having it paid off in less than 15 years. 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.
Total liabilities Total liabilities were down $3,658.88 for the month. For the last few years I’ve been working on increasing assets rather than paying down liabilities. However, given the market’s current overvaluation I am going to instead pay off the second mortgage (with the goal of having it completely paid off in 2017), then aggressively pay off some or all of the rental properties (they have a higher interest rate than our house).
Total net worth
Net worth was up $64,150.87. It’s fun to bask in the glow of a huge month, but I can’t help but think that we’ll be seeing a sizable correction in equities in 2017. Valuations seem high and I don’t see a lot of interesting opportunities today. The only things that really look compelling are some of the high quality growth stocks like Visa and Nike. The plan is to increase cash so we are in a position to capitalize when the market corrects.
How did everybody else do this month? Is anybody planning on making any changes to their allocations or investment strategies?
Curious about your 529 savings. How old are your children and what did you use to estimate college costs? How much of the cost of college do you intend to cover for them?
To your questions, fantastic month, saw about a 4% increase in net worth, most of which was growth in 401k assets. Helps when about half of my net worth is in my 401k.
I shifted 10% of my 401k from stocks to bonds just before last month, and considering anouther 10% if we get over the dow 20k mark. For now I’m holding pat. (currently 70 stock/30 bond).
My kids are 3 and 1, so we have a long ways to go before we have to worry about actually using any of the 529 money. We haven’t calculated any specific college costs. Our plan has been to save as much money as possible early (i.e. today) and then be able to slow down or cut our savings entirely if it looks like we’ll have enough money to pay for college.
The issue with the 529 account is that it can only be used for education. So if the kids end up not going to college or if they get full scholarships somewhere then we’ll have saved more than necessary. Our general plan for college is to pay most but not all of our kids’ costs, regardless of where they go. We both strongly believe that kids should have some skin in the game, and I want my kids to work during college so that they not only have work experience, but so that they develop time management skills, see the direct link between work and money, and learn just how hard you need to work to earn a dollar.
How did you manage a 4% increase in your 401(k)? Did you have your money in something that performed particularly well or was the increase due to your contributions?
I’m also curious about your age. Did you pick a 30% allocation to bonds because you’re 30 years old or for some other reason?
4% was a combination of contribution, company stock, a few stock picks of my own, and the general increase in the market. I’ve only got about 200k in my 401k so 4% isn’t as dramatic as it sounds. I saw a strange dip in company stock at the end of November due to the threat of interest rates increasing and saw a buying opportunity. I made a gamble and it seems to have paid off in the short term. My data still tells me it’s a value, but I’m worried about the next fed meetings and what may or may not happen. Will probably reallocate that purchase soon, just now sure where to.
I try to keep to an 80/20 stock/bond allocation and when the market goes higher than expected, I pull some profit in anticipation of a downturn. If it goes higher still I’ll pull some more. Conversely when stocks are a great buy, I’ll head the other direction. I look at a time/log$ chart (not sure the technical name) to keep an idea of what “fair” market value is; and eyeball the % from there.
Why 80/20? I read a book somewhere that recommended it. Think I saw it again with Warren Buffet’s instructions for his wife’s money on his death. It seemed as good a starting place as anywhere. (bit more to it, but that’s the general)
It sounds like you’re doing everything right from an asset allocation perspective. We don’t have any bonds because we have a decent rental real estate portfolio. I find that rental properties perform much like bonds – they provide a stable cash flow that can be used to pay living expenses or make purchases of additional equities when they are at attractive valuations.
80/20 is a perfectly reasonable stock/bond allocation. Some advisors would say that it’s on the aggressive side of the risk spectrum, but seeing as how I have almost all of our money in stocks it’s pretty clear I don’t feel the same way.
I’ve got a much smaller brokerage balances (75k) and have wondered if it was worth selling, then using to pay down primary residence or rental property mortgages. We’ve been riding a bull for awhile! Currently owe about $535k on 4 different places. My rents are covering costs of all my houses including primary. Lowest individual mortgage is $109k at 4.5% and highest at 147k at 3.675. Your thoughts?
Here’s the way I look at it – the thing that makes real estate a great investment is the use of leverage. By itself real estate isn’t all that interesting – if everything goes right you get cash flows of 0-10% and appreciation of ~2%/year. However when you leverage your investment through a mortgage that 2% appreciation turns into 8% if you have a typical 20% down loan.
If you’re going to pay something off I’d recommend paying off your primary mortgage. The mortgage interest deduction is probably a lot less than you think it will be due to the standard deduction. If the standard deduction increases (as both Trump and the Republicans in Congress have said they’d like it to) then you might essentially lose all of your mortgage deduction. See my recent post (https://www.themoneycommando.com/trump-telling-pay-off-mortgage-today/) for more details.
Sounds like a very nice increase this month. How exciting for you. All the best for 2017. I have just released my first net worth but its a lot smaller than yours that’s for sure.
Buy, Hold Long – I just checked out your website. You might have a smaller net worth, but it certainly grew much faster than mine did. 363% growth in 2016 is pretty fantastic!
I find that net worth is one of those things that seems to go nowhere for a while, then all of a sudden it just explodes. Keep a high savings rate and keep investing and you’ll be amazed at what happens. Also – don’t forget that I’m 40, so I’m about 15 years old than you. That’s a lot of time for wealth accumulation.
What is your year over year growth in net worth as a %?
Check my latest post (2016 year in review) for my year over year growth.