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 discuss any changes I’m thinking of making.

I track our net worth in both the “real” numbers and the Money Commando True Wealth Index (or MCTWI for short). 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 – the MCTWI tells you how much your stock investments would be worth assuming “normal” valuation rather than the current valuation in the market.

The net worth report below includes an adjustment for the Money Commando True Wealth Index (MCTWI). The MCTWI for March, 2019 is 74%.

Here’s how the MCTWI has trended over time.

As you can see, the market’s overvaluation (where the graph is lowest) was in January, 2018. The market was closest to fair value in December, 2018, but has since trended back towards greater overvaluation.

If the market was suddenly revalued at the long-term average of 15.68x earnings rather than the current 21.15x earnings, then your stock market investments would be worth roughly 73% of what they are currently worth

The fact that over the last year the MCTWI is generally moving up towards 100% implies that the market is slowly moving towards “true value”. We are still quite a ways away, but at least things are moving in the right direction.

Without further ado, here is our net worth report for March, 2019:

Our performance for the month just barely trailed the S&P 500. We were up 1.8% and the S&P was up 1.9%. That’s about what I’d expect, as our large real estate and cash holdings means our net worth should be more stable than the market as a whole. We will underperform when the market is up and outperform when the market is down.

Assets

Brokerage (+1.8% Month, +10.9% YTD):

The value of our brokerage account was up by $50,210.94 for the month and we are up $278,891.39 for the year.

I’m pretty darn happy with this performance, both on a percentage and an absolute basis. It’s hard to believe we are up almost $279k in 3 months.

Retirement Accounts (+2.8% Month, +14.7% YTD)

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). The value of these accounts was up by a total of $22,085.08 for the month.

We continue to invest in the 401k and the value continues to slowly climb. Assuming that we continue to contribute $18k/year to the 401k and we get a 8% annual return, it looks like the 401k account will hit the $1M mark in about 5 years.

529 accounts (+3.6% Month, +21.8% YTD):

We outperformed the S&P 500, which makes sense given that these accounts are invested 100% in S&P 500 accounts plus we contribute $1,000/month.

Assuming both of our kids go to college, both accounts will be liquidated in about 20 years. Based on my calculations, these accounts should pay for 90%+ of the total 4-year cost at a state university. The remaining amounts will be paid out of our then-current cash flow.

Checking (+35.9% Month, +65.4% YTD):

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.

In addition, we have a separate checking account to handle the income and expenses for our rental properties.

Not much to say here. We started the year a bit below our desired $50k mark and now we are a bit above it. This number will bounce around as money comes in and we move anything above $50k out of the account and into our investment accounts.

Private investments: unchanged

We have 2 separate private equity investments. Since there’s no way to value these investments I will continue to keep them valued at my initial investment amount.

I’ve heard that there might be a liquidity event for one of my private equity investments later this year. It’s nothing other than a rumor at this point, so I’m not going to adjust my valuation until it becomes real.

Stock options: unchanged

There’s been a lot of activity in this category over the last few months. My employer had a liquidity event in December and I was able to cash all of my then-outstanding vested shares. However, I had a few more shares vest in January, and I was able to exercise and sell those at the end of the month.

I still have a few unvested options, and I’ll continue to track the value of those as they vest quarterly. The next block of stock vests on April 1st.

Rental properties (+0.4% Month, 0.4% YTD):

I revalue our real estate at the end of each quarter. Apparently the housing market is cooling off a bit around the country. Some of our investment properties actually dropped in value, which is why the total increase was so small.

Primary residence (+0% Month, +0% YTD):

Just like the rental properties, I adjust the value of our house at the end of each quarter. The value of our house changed by just $110, which is such a small percentage it doesn’t even appear until I calculate it out to multiple decimal places. It’s essentially unchanged.

Total Assets (+1.5% Month, +6.6% YTD):

Our assets were up by a total of $95,522.13, which makes for a pretty good month! If we were able to get this performance every year we’d be up by over $1M this year!

Total assets after adjusting for MCTWI (+1.3% Month, +4.2% YTD):

This is a better indicator of our performance for the month, and it still showed our net worth climbing by $75,571.83.

Liabilities

Just a note on the numbers below – since these are liabilities, a negative number (reduction in liability) is good, while a positive number (and increase in liabilities) is bad.

Credit cards (-62.7% Month, -36.8% YTD)

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 (-0.2% Month, -0.6% YTD)

This was a pretty standard month – we tend to pay somewhere around $1k (about 0.2%) on our rental mortgages every month, and this month we paid off $976.24.

Primary residence mortgage (-0.2% Month, -0.4% YTD)

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.

We are making steady progress on this, but we have a long way to go to pay this loan off completely.

Total liabilities (-0.5% Month, -0.6% YTD)

Most people would be well served by spending less time worrying about the value of their assets (especially equities, which vary wildly) and instead focus on the steady progress of paying down liabilities. The fact that we reduced our liabilities by over $5k this month is exactly what I like to see.

We still have over $1M in debt but the number is dropping fast. At the average rate that we’ve been paying down our mortgages (about $2,250/month) we’ll be under $1M in debt in about 17.5 months. That will be a fun milestone to finally hit!

Total net worth

Our net worth was up by $100,893.98 (a 1.8% increase) for the month. It’s pretty amazing to have our net worth increase by 6 figures in a single month for doing absolutely nothing!

Perhaps more amazing is that our net worth is up $421,975.82 for the year (8.1% increase). It’s really amazing how fast our net worth has grown now that we’ve got the snowball rolling downhill. We are making significantly more money each month on our investments than I bring home in salary.

We’ve seen solid growth in our net worth since I started tracking the number in June, 2016, with the biggest jumps in the middle of 2017 when I received my huge commission checks.

Here’s what our asset allocation looks like:

These numbers are reasonably close to where I’d like them to be at this point in our lives (and unchanged in 2019). Most of our money is in equities (stocks and mutual funds). This category has the highest expected returns as well as the highest volatility.

Our rental real estate allocation (10%) effectively takes the place of bonds in our portfolio. Real estate provides relatively steady returns and is largely uncorrelated with the stock market. We’ve recently decided to increase our allocation here, and that will be reflected in our numbers in the next month or two.

I’d prefer if the equity in our primary residence was a smaller percentage of our overall net worth. We plan to never move, which means the value of the house doesn’t matter. My hope is that over the next decade or so we’ll get this percentage down to 10%, even as we pay off our mortgage, by growing the rest of our investments. 

Conclusion

Any month you see your net worth increase by six figures is a pretty good month. We are still holding a lot of cash, but we putting some of that to work with some recent property purchases (more details on that later in the month).

How did everybody else do this month?  What’s your asset allocation, and how does it compare to your ideal allocation?