Monthly Net Worth Checkpoint: December (yep - lower still)
We recently (at least it seems like it was recent) celebrated Thanksgiving and now we’re into the hustle and bustle of the Christmas season. Christmas shopping, Christmas cards, Christmas programs for the kids (my daughter had one Sunday, another tonight, a play next Friday, and my son has a play next Thursday) and so on and so forth. It is also time to check all our account balances and update our net worth for the month. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . This post mentions some online tools for tracking your net worth .
Our assets dropped 1.6%
Just like last month, I expected our assets to drop more than they did. At least for that month, the rate of descent of our assets has slowed. The biggest mover was my stock options which have dropped another 14.5%. Since August, they have dropped a total of 85%! (wow, that’s a lot). The other accounts, even those with stock market exposure, did not drop a tremendous amount. Our retirement accounts only dropped 2.3% and our taxable investments dropped less than one half of a percent (How crazy is that losing 2.3% of your retirement account value in one month is not that bad anymore!?!). In fact, my daughter’s 529b plan actually increased almost 4%! It was a tepid month for all accounts, I think, as even our liquid accounts, which were increasing over the past few month, only grew by a little over 1%.
Our liabilities decreased by 0.5%
Our liabilities dropped the typical monthly rate of about 0.5%. I’d love to get rid of that mortgage payment…but the principal balance is so high that I can’t foresee doing anything about it in the near future. I’m still thinking about it though. Usually I would say every little bit helps, but when throwing a little extra cash at it each month wouldn’t reduce the length of the loan significantly, is it really worth it?
Our net worth decreased approximately 3.6%.
Well, we’ve experienced another drop in net worth this month (that’s starting to become a habit). At least the downward rate has decreased again this month (last month it was a 4.5% drop) Most of this is out of my control still (stock market losses and house valuation declines), so I try to focus on what I can control, which is mainly the liquid savings and liabilities. So, since our liquid savings were up slightly and our liabilities were down slightly, that’s good news from my perspective. Of course, Christmas brings with it a lot of extra expenses (gifts, travel, food, etc) so it will be interesting to see how we end up 2008 (of course, if you use a credit card for some expenses, then you don’t really get hit until January)
Merry Christmas!!
Monthly Net Worth Check Point: November (still dropping)
Scares! Shrieks! Is it Halloween, you ask? No, it’s time to check all our account balances and update our net worth for the month. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . If you don’t like spreadsheets (who doesn’t like spreadsheets?!), I also have a post on some online tools for tracking your net worth .
Over at One Caveman’s Financial Journey, recently there was a post on why your net worth isn’t the best gauge of financial health . It’s an interesting post with some valid points. I agree that the usefulness of your net worth as an indicator of financial health is clouded by external forces such as the stock market. That is actually the main reason I created my net worth spreadsheet in such a way as to provide a information on different account categories. For instance, it might not be very illuminating to simply see that our net worth decreased 4.5% this month (OUCH!) but being able to see how our liquid savings did separately from our accounts with stock market exposure is still useful, I believe.
Our assets dropped 2%
Just like last month, I expected our assets to drop more than they did. Every account with stock market exposure dropped significantly. For instance, our taxable investments dropped 12%, our retirement accounts dropped 7.5%, our 529 plan dropped 5.7%, and my stock options dropped a whopping 49.5% in value! My options have been hammered lately, dropping 48%, 33%, and 49% over the last three months. That means compared to their value in August, my stock options are down more than 82%! (Luckily, I guess, they weren’t worth that much money to begin with)
All of this was buffeted by the fact that our liquid assets increased 9.9% this month. So, for the past two months while all of our accounts exposed to the market have been tanking, our liquid assets have balanced this out somewhat as they have grown 25%. So, I feel that looking at our increase or decrease in liquid savings is probably the best measure to see how we’re doing financially in this current environment.
Our liabilities decreased by 0.49%
Another very important financial metric to me is our level of liabilities (seeing that level go down to be specific). Our mortgage drops a similar amount each month and our lone remaining debt (my wife’s contractual obligation if she stops working) drops a set amount. As long as this keeps decreasing, I’m happy. I do not have any plans to accelerate our mortgage repayment in the near future, but it is an idea with which I am toying.
Our net worth decreased approximately 4.5%.
All of this adds up (subtracts up?) to a 4.5% loss in net worth this month. At least the downward decline is decelerating compared to our 8% drop last month. Again, the most important measures to me are the direction of our liquid savings and our liabilities. As long as our liquid savings are going up and our debts are going down, then I feel like we’ve been successful for another month.
I am still not overly concerned about the stock market
I am not super excited about the drop in our stock market accounts…well, in a strange way, I am actually somewhat happy about it (in a very selfish way, I admit). I am in a position that I do not need to draw on my retirement savings for decades and hopefully our emergency fund will prevent us from having to cash out any mutual funds or stock options in the near future. In that respect, the lower prices for stocks are actually helpful as we continue to purchase more every month. In fact, I recently increased my 401k contribution 4%.
I know it’s not pretty looking at the current numbers; instead I try to focus on how many more shares I am purchasing each month compared to the number I was buying last year at this time. If I stay focused and calm and continue to dollar cost average each month, it has the potential to pay off in the long term when the market recovers. (that assumes, of course, that the new president-elect and democrat controlled congress will attempt to stabilize the economy instead of causing it crash and burn so they can switch us over to socialism)
Monthly Net Worth Check Point: October (down a lot!)
Well, it is that time of the month again…time to check our current net worth. Unfortunately, it is not the greatest week to update all those account balances. To track how we are doing financially, I monitor our net worth and update it on a monthly basis. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . If you prefer, I also have a post on some online tools for tracking your net worth .
Our assets dropped only 3.3%
I am not sure how our assets only dropped 3.3% when each individual component seemed to be down - some by very large numbers. Our non-retirement investments were down 13.5%, our retirement accounts were down more than 10%, my daughter’s 529b balance was down more than 10%, and my stock options decreased in value by a whopping 33.4%. I’ve already checked the overall number once, let me do it again quick….yeah, it appears to be correct. Our liquid savings did increase more than 13% due to a gift we were given…but I didn’t realize it would be enough to balance it all out.
Our liabilities decreased by 0.35%
After paying off the last of our student loans last month , our decrease in liabilities will now be much more level (and much smaller) each month. Basically, we have our mortgage and a decreasing contractual obligation that we track as debt.
Our net worth decreased approximately 8% in August.
With our assets dropping more than 3% and our liabilities only decreasing a little bit, it all adds up to an 8% drop during the month of September. It would have been worse without the gift we received (over 10% drop). When I look at these numbers, actually, I have to admit it was not nearly as painful as I expected them to be. I think this is a product of when I checked the numbers and is quite misleading. I took all these balances on the evening of October 6th - which was Monday night. Obviously, a lot happened during the rest of the week. If I had checked the numbers Friday night, I bet they had been much, much worse (I am NOT going to check them again right now!) What this does mean, however, is that even if the market stabilizes the rest of the month, my net worth will show a big drop next month.
So will the events of last week change anything?
So, am I freaking out? No (at least I don’t think so). I have not considered pulling any money out of the market (too lazy for that frankly - I don’t want to have to pay attention to everything all the time in the futile attempt to time the market). In fact, I’m planning on buying more mutual funds (hey, it’s kinda like a 40% off sale). I have quite a few years before retirement and judging from history, the market will recover. It might not be soon, but then again it might be and I don’t want to miss the recovery. In the middle of last week, I finally signed up to have Vanguard pull out a few hundred bucks and invest it in some index funds each month. Tonight after I finish this post, I’m going to decide what to do with some money in a rollover IRA I still have in cash and probably put in a buy order for tomorrow.
Photo Credits: Terence ChangMonthly Net Worth Check Point: September (down 6.1%)
To track how we are doing financially, I monitor our net worth and update it on a monthly basis. I think it is a great way to keep track of how all your planning and hard work is paying off. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . If you prefer, I also have a post on some online tools for tracking your net worth .
Yikes! A 13.4% drop in our assets!
The hard work does not seem to be paying off (at least not this month!) It was actually a crazy month for us finance-wise. For example, our total assets dropped 13.4% driven by a whopping 65.6% drop in our liquid assets. Of course, since you are all faithful readers, I’m sure you remember that we paid off our final student loan this month and that accounts for the vast majority of the drop.
On top of that, however, it seems to have been a poor month for my mutual funds and company stock. Actually, the value of my company stock holdings dropped more than 7% and the value of my stock options fell off a cliff, dropping almost 50%! My other stock market exposure (in 401ks and mutual funds) also accounted for some of the asset drop, but they were down less than 2% each.
Woohoo! Our liabilities decreased by 17.5%.
Again, the weirdness of the month created quite a large drop in total liabilities. Ahhh, it is so nice to not have to obsess about paying off the student loan anymore. I haven’t really started obsessing about anything in its place yet (like paying off the mortgage, for instance). I’m still waiting for our liquid assets to recover a bit over the next months due to not putting so much cash towards that loan each month. After a trip to IKEA , however, I’m not sure how fast those numbers will rebound.
Our net worth decreased approximately 6.1% in August.
Putting those two large numbers together yields a slightly smaller, but still pretty large, drop in our net worth. Obviously the stock market wasn’t too kind to us this month. Taking into account the fact that a large amount of our cash buffer was used to pay off the student loan, you can see that the stock market exposure will continue to have a large impact on our net worth in the months to come.
This month, however, was much more about getting rid of our last student loan that anything else. I am very happy with our decision to use some of our cash to eliminate it. We are now down to only having the mortgage (and the other contractual obligation to pay back if my wife stops working in the next 15 months). From a net worth point of view, it will probably be bumpy for the foreseeable future as it will depend in large part on stock market performance.
As we go forward, we won’t be looking to replenish our cash reserves to where they were previously. We will keep our emergency fund at its current level of 3 or so months of expenses. We have started some short term savings for vacation, gifts, large home purchases, and yearly expenses. Also, I finally decided on an asset allocation for my rollover IRA and our taxable mutual funds. We will start putting more money into those mutual funds soon and probably increase our kids’ college savings accounts as well.
So, I sum up the month thusly: 6.1% drop: bad . No more student loans: great!
How I Track My Net Worth with a Spreadsheet
Last week I started a series on the basics of a personal finance plan. In the coming days and weeks, I’ll be going into more detail on each of the topics covered in the first two posts.
It’s a common precept in business these days that if you are going to manage something, you need to measure it. I feel the best way to measure how well you are doing with your financial plan is to monitor your net worth. The net worth gives you a bottom line measure of your finances wrapping up all of your saving and spending decisions. Therefore, the first post in this series will be an explanation of how I use a simple spreadsheet to measure my net worth. Click here to continue reading…
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