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?