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 November:
| October | November | $ Change | % Change | ||
| Assets | |||||
| Checking | $14,311.63 | $33,831.13 | $19,519.51 | 136.4% | |
| Retirement accounts | $544,739.60 | $569,939.50 | $25,199.90 | 4.6% | |
| 529 accounts | $11,539.93 | $13,041.27 | $1,501.34 | 13.0% | |
| Brokerage accounts | $1,305,740.28 | $1,342,139.19 | $36,398.91 | 2.79% | |
| Private equity | $200,000.00 | $200,000.00 | $0.00 | 0.0% | |
| Rental properties | $868,325.00 | $868,325.00 | $0.00 | 0.0% | |
| Primary residence | $1,560,000.00 | $1,560,000.00 | $0.00 | 0.0% | |
| Total Assets | $4,504,656.44 | $4,587,276.09 | $82,619.65 | 1.8% | |
| Liabilities | |||||
| Credit cards | $1,226.04 | $4,453.48 | $3,227.44 | 263.2% | |
| Rental mortgages | $526,104.55 | $525,241.53 | -$863.02 | -0.2% | |
| Primary mortgage | $764,391.30 | $762,084.87 | -$2,306.43 | -0.3% | |
| Total Liabilities | $1,291,721.89 | $1,291,779.88 | $57.99 | 0.0% | |
| Net worth | $3,212,934.55 | $3,295,496.22 | $82,561.66 | 2.57% |
S&P 500 performance for October = 4.68%
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 up due to a transfer of cash from the brokerage account to pay December property taxes (see below for more information).
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 $25,199.90, which is a very solid 4.6% increase. This almost exactly matches the performance of the S&P, which makes sense because almost all of our retirement accounts are in S&P 500 index funds.
529 accounts I’ve asked myself if I should really include these accounts in our net worth, as the money is earmarked for the kids and will be spent solely on them. Ultimately I’ve decided to continue including them, as if we didn’t have these 529 accounts then we’d need to pay for college out of our other investments. 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 $501.34 in gains from the market, so these accounts were up 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 2.8%. I had some cash sitting in a money market account earmarked to pay our property taxes. The first installment is due in December, so I pulled a chunk of cash out. Without that cash withdrawal we would have been up around 4.3%, which slightly trails the S&P 500. 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. That means no change to these values until December.
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 an astounding $82,619.65 for the month, due almost entirely to the market’s strong performance. That’s good for a 1.8% increase. I hope to get around a .5% increase every month, so this month’s performance more than makes up for last month’s negative performance.
Liabilities
Credit cards I booked a lot of work travel for December, so this large increase in credit card balance is largely due to purchasing the airfare (which I will be reimbursed for). I purchase my work flights on my personal credit card so I can get extra miles. It usually takes 1-2 months to get reimbursed. We never carry a balance on our credit cards, so I’d expect this balance to be back to the normal ~$1,500 in December.
Rental mortgages We paid off $863 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 $2,306 on the mortgages on our main residence. 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 essentially unchanged for the month. This is due almost entirely to the increase in the credit card balances. 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 considering changing that plan to instead pay off the second mortgage, 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 $82,561.66. That’s certainly one of my best months ever. It’s fun to bask in the glow of a huge month, but since our equity investments pretty much tracked the S&P index it’s not due to any genius on my part. With our real estate exposure we should trail the market a bit it’s up and perform a bit better than the market when the market is down. How did everybody else do this month? Is anybody planning on making any changes to their allocations or investment strategies?
Great job! You are correct in saying that as our stock portfolios grow, market fluctuations/performance play a much more prominent role in determining our net worth than savings and net new cash contributions. I’m curious as to what steps you are taking to protect your net worth as much as possible now. I know best practices teaches us to just keep a balanced portfolio in indexes and keep it set forever. But you have to admit that you must sense there will be a pull back, probably a dramatic one after the annual “Santa Claus” rally. What steps if any will you be taking in your portfolio? Shift some assets to commodities indexes, stable value funds? I thought bond funds would be good, but expected interest rate raises won’t be good for them. S&P 500 seems to high to invest new money (more than the standard automated contributions that is). What are your thoughts? thx.
Thanks for the kind words. I’ve made a few change due to the extreme overvaluation in the market today. First, I’ve trimmed about 5% of my holdings (what I consider my weaker/more speculative holdings). I’m investing very little new money in the market.
I’m not moving any money into bonds (see https://www.themoneycommando.com/run-away-bonds-fast-can/ for more info). Instead, I’m working to build up a cash reserve so I can take advantage of future deals.
Although I’m interested in protecting my money, I’m not at the point where I’m “done”. I strongly believe that over the next 10+ years my stock investments will outperform any sort of bond investment I could make.
Thanks MC for the link. For some strange reason I thought the bond funds I was in were the same as CDs and Money Markets. That’s obviously not the case. I just initiated a transfer out of bonds. Thanks for protecting my losses! Btw, loved your guest article on private vs. public education as well. I got the “2nd most valuable degree” haha, and completely agree with everything you said as I had the same experience at my university. Keep up the great work!
So it’s kinda daunting looking at these numbers for someone a bit younger. I have projections of being a little behind where you are (not hitting my first million until about 43) and that is only the brokerage account.
I would love to read an article about some earlier investments and how you got started investing. How much you were stocking away, early pitfalls and learning opportunities.
It’s still very human to think linear growth whereas investing is exponential. I use spreadsheets to help me map my thinking, but unless I’m staring at my speadsheets while reading these articles, it’s hard to see how to get from where I am to where you are.
The intent of publishing these numbers isn’t for comparison. It’s to show that it’s possible to achieve early retirement for a regular person. I’ll probably write about my early years at some point, but the way I got here was simple – I worked hard in high school, went to a good university and majored in an in-demand area (computer science), worked hard, got my first job (in software), worked hard, took a calculated risk to move into sales, and continued to work hard.
The biggest factor in my success was probably taking the risk to move into sales. That probably doubled my income over the course of 3 years.
Read my post Everybody should try job in sales for more info.
Was also a good read, I burned through the last few months over the last week. My intention was not a direct comparison as it seems you live somewhere west coast with crazy property valuations. I live in small town south east where cost of living is significantly cheaper.
I also read the blog about your college comparisons and I tend to agree with you there as well (but can’t redo). Majored in Engineering, worked 60-80 hours/week for the first decade, and have taken my foot off the gas now that I have a little one at home.
I really like seeing your month on month growth, and it gives me hope for the future.
Looking forward to reading about your earlier investing experiences.