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: 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!
Monthly Net Worth Check Point: August (up 3.7%)
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.
I usually calculate our net worth around the 5th of each month, after our mortgage payment is deducted from our checking account. I feel that doing it the same time each month gives me an accurate picture of what happened the previous month. So, after I see that the mortgage payment is debited, I sit down in front of the computer and go through all of our accounts and update my little spreadsheet.
The overall number is important but I also like to create a number of groupings of various accounts and liabilities to provide a finer-grained view of exactly what is happening with all the components of our net worth. If anyone is interested, I can create a post detailing exactly how I set up the spreadsheet to collect this useful information and how I update it each month. You can even have it create a simple little graph for all you visual people out there. Click here to continue reading…
Earning Money is Good but Keeping Some of it is Even Better
We all know people around us who are really rich. You know, the guy driving his expensive car from his gated neighborhood to the country club on Saturday morning or the family down the street with the big SUV to pull the boat and the camper (hopefully not at the same time) when they’re not at home watching their 60” Plasma HDTV. Without really knowing their finances though, are we sure that they really are wealthy?
How do you define wealth?
Click here to continue reading…
Book Review: The Millionaire Next Door
Authors: Thomas Stanley, PhD & William Danko, PhD
My very first book review
Since early 2007, I have read a number of personal finance books during my search to ensure that I was on the right financial path. As I search for other books to read, I also found it tremendously helpful to see what other people with similar interests were reading. My goal is to pass on this information to you as well. I hope to give you a brief overview of the book and the authors, touch on the good and bad in the book, and finally give you my personal recommendation for whether you should borrow the book, buy the book, or act like the book doesn’t exist.
The Millionaire Next Door is the second book I read during this process and it still is what I consider one of the most important to righting my financial ship (shoot, I just gave away the ending!). Click here to continue reading…
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