Net Worth – December, 2017

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.

November was another great month for The Money Commando household. Our investments performed well, our income was solid, and our rental properties performed about as well as can be expected (see our Investment Income – December, 2017 report for more details).

The net worth report below includes an adjustment for the Money Commando True Wealth Index (MCTWI). The MCTWI for December, 2017 is .60. This is a decline from November’s MCTWI of .62 (a value of 1 is fair value, values lower than 1 represent overvaluation and values higher than 1 represent undervaluation. The further from 1 the more the overvaluation or undervaluation.). This means the market became a bit more overvalued in December (the true value of the S&P is about 60% of the current value, whereas in November it was 62% of the then-current value).


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.

Without further ado, here is our net worth report for December, 2017:


S&P 500 performance for December, 2017 = .98%

Our net worth was up 4.98%, which is significantly higher than the market’s gain for the month. This is primarily due to a change how I’m tracking our net worth (which I describe below).

Our MCTWI adjusted net worth was up 5.85%.


Assets – stock market

In August of 2017 I started reporting all of my equity assets using both their actual value as well as the Money Commando True Wealth Index (MCTWI). If you’re not familiar with the concept, it’s a method I created to remove the effects of excessively high or low valuation in the stock market. The idea is to produce a net worth that is more indicative of the actual value of investments rather than changes in the stock market valuation. The MCTWI should fluctuate much less than the actual stock market and is especially resistant to the irrational exuberance or despair that occasionally influences the market.

Brokerage accounts – This is our early retirement fund and where most of our net worth is. Our investments were up by $32,220.30, which is a solid 1.3%. There were no additions to this account, so this is all due to the performance of the market and our sizable dividend income for the month (see my  Investment Income – December, 2017 for more details).

Since my last report I’ve moved about $650k of cash into a CA muni bond mutual fund. This will provide tax-free income while we wait until the market is more attractively valued and we can load up on stocks. I don’t particularly like bonds as an investment.

Retirement Accounts – 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). These were up by about $2.5k for the month. Half of that was due to my 401k contributions and the other half was due to stock market performance.

These are our longest “long-term” investments, as we can’t touch them for at least 18 years (when I turn 59.5). During that time I would expect these accounts to double twice, resulting in an account balance 4x larger than it currently is. Knowing that we can’t touch this money for that long is oddly reassuring.

These accounts have a combined worth of around $700k, so I’d expect them to be worth around $2.8M in 18 years when we can access them. The plan would be to let the tax deferred accounts continue to grow for as long as possible, with the goal that we wouldn’t pull money out until RMD (Required Minimum Distributions) when I’m 70.5 years old. The hope is that we’d never need to touch the Roth accounts and we’ll pass that money on to our children. Under current tax law that money would be tax-free, but who knows what the tax law will look like in 40 or 50 years.

529 accounts – We contribute $500/month to 529 savings accounts we’ve set up for our 2 kids. The value of these accounts was up by around $2k, so about half of the increase was due to our contributions.

Total stock market assets: The total unadjusted value of our stock market investments at the end of the month was $3,166,319.90. That was about $37k higher than last month and good for 1.2% increase.

Total stock market assets adjusted for MCTWI: After adjusting for the market’s high valuation, our stock market assets are worth $2,189,098.81. As described in my introduction to the concept of the MCTWI, in times of high valuation (like today) your stock market investments are actually worth less than their current price. In this case, the math shows that a diversified portfolio of stocks or an index fund is actually worth about 60% of the current price. You should expect that, over time, your portfolio will eventually converge on the MCTWI calculation of the value of your investments.


Assets – Other

Checking – It looks like we’ve had a huge increase in our checking account, but this isn’t really true. We’ve been doing some home improvement projects and I’ve been subtracting from our checking account the amount of money necessary to complete the projects.

However, I’ve grown tired of doing the math each month. I have to figure out how much of the project has been done, subtract from the original estimate, then tweak the numbers depending on if I feel we are ahead of schedule or behind schedule in any particular area.

To keep things simple I’m just going to be showing the actual balance in our checking account each month. This is both more accurate and saves me time.

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. This is roughly 6 months of expenses.

Private investments – 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. No change this month.

Rental properties – On the last day of each quarter I adjust the value of the properties based on Zillow’s estimate. I was surprised to see that the total value of our rental properties was down in Q4. It wasn’t a significant amount (1.1%), but it’s still a bit surprising given that real estate values are typically much more stable than other investments.

Primary residence – Just like the rental properties, I adjust the value of our house at the end of each quarter. I’m not sure what’s going on in our neighborhood, but apparently Zillow believes that our house’s value has gone up by $130k in the last 3 months. That seems…unlikely. However, it’s easiest for me to just remain consistent with the data sources I’m using (in this case, Zillow for property values).

Total Assets – Other – This category accounted for the bulk of the change in our net worth, due to the inclusion of our full checking account balance and a large increase in the estimated value of our house.



Credit cards –  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 – All properties are currently rented, which means our tenants paid down $1,009.89 of the balances on the mortgages for our rental properties. Thanks guys!

Primary residence mortgage – We paid $1,105.34 on our mortgage this month. 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.

Total liabilities – Total liabilities were down by $3,362.29 for the month (a 0.31% decrease) to $1,082,634.67. For some reason paying down the mortgages on our rental properties feels like free money. I think it’s because when I do the mental accounting on how much money we are making on the rentals I just compare cash costs (rent – mortgages – taxes – insurance – repairs) and I don’t consider increases in property values, paying down mortgage balances, etc. When I see the property value increase and the mortgage size decrease…well, it feels like free money.

We still have over $1M in debt. At the current rate of paying down our mortgages (about $2,200/month) we’ll be under $1M in debt in about 39 months. That will be a fun milestone to finally hit!

Total net worth

As described above, I’m calculating my net worth both with and without adjusting for the Money Commando True Wealth Index.

Current net worth is $5,047,455.93, which was up $239,506.94 from last month (a 4.98% increase). Given that most of that increase was due to an increase in the estimated value of our primary residence (which doesn’t really matter since we hope to never move) and including our actual checking account balance, this doesn’t seem like a “real” increase in net worth. Nevertheless, it’s exciting to see the number cross $5M for the first time!

The more accurate MCTWI total net worth is $4,070,234.84, which was up $224,886.07 from last month. This is the number I tend to concentrate on, as I feel it better represents our true net worth.

Here’s a graph of our net worth per month so you can see the year over year comparison.



We did, in fact, hit our goal of $5M in net worth by the end of 2017, but we’ll dip back below that number early in the year as we continue to pay for the house projects.

Looking back at 2017 I just have one thought – FUCK YEAH. It was a great year for us on a variety of fronts, but especially financially. We started the year with net worth around $3.4M and we ended at almost exactly $5M. I doubt we’ll ever see that kind of increase in our net worth in one year again.


How did everybody else do this month?  Have you been riding the stock market to hit new net worth numbers each month? Where are you putting your money to work today?

16 thoughts on “Net Worth – December, 2017

  1. Congrats on breaking through 5 mil NW on the unadjusted and 240k increase MoM is super impressive. Though, it looks like your net worth detail picture above still shows Oct-Nov.

  2. Why don’t you think you’ll ever see that kind of increase in your net worth in one year again? I think much of the increase came from active income, and you are just entering your peak earning years.

  3. My jaw is on the floor and my mouth is watering when I see your net worth figure. You have had an incredible year and it is very motivating for someone like me that wants to be in the same club.

    We had a good year with net worth up about 27% for 2017. My official goal for 2018 is $825,000 but if the market continues this bull market, I think we have a chance at making a run for $1,000,000. I wouldn’t assign it a very large probability, maybe 30% chance.

    I don’t ever account for market gains when setting yearly net worth targets, so that is where the difference will come from most likely.

    That said, we could go into recession sometime next year, and that could have us fall short of our goal. Only time will tell. We will just focus on the things in our control.

    Happy New Year!


    1. We have a celebrity appearance – THE Gen Y Finance Guy!

      Thanks for the kind words. We definitely had a great year, but honestly, the increase in our net worth kind of feels like cheating. After all, pretty much all of the increase was due to a single large deal (which I’ve been working on for 5 years). I think I’d be more proud (rather than happy, which is how I feel now) if the increase was due to investing prowess or business success.

      I like your method of not accounting for market gains when setting goals. My plan is to use the Money Commando True Wealth Index and hope for a 5-7% increase in our adjusted portfolio every year. That result is much less dependent on the ups and downs of the market and therefor more reliable.

      I’m looking forward to seeing your reaction when you blow past the $1M mark. Will you and the wife crack open a bottle of Champagne to celebrate, or will you see your net worth hit seven figures, shrug your shoulders, and continue what you were doing?

      1. Who is the celebrity? Did I become Internet famous and no one told me?

        My wife and I try to find any reason to saber a Champagne bottle, so you can count on us toasting with a little bubbly when we hit the $1M mark. But then it will be back to work, as we have much work to do in order to hit our $10M goal.

        Onward & Upward!


        1. You’re famous to me!

          It’s amazing how fast things start to snowball once you hit that first $1M, especially if most of your net worth is in appreciating assets (investment real estate, equities, etc.) And with your high income and 50% savings rate you’ll hit $10M in no time.

  4. Congrats TMC on breaking the $5 mill mark! The market has allowed all of us beat many milestones, $3 million being the relevant watermark for my case. I find your Money Commando True Wealth Index (MCTWI) fascinating! However, by only assigning this conservatism in equity investments, and not other factors (especially real estate), it the weighted index over-states the NW if the guiding principle is to set a ‘floor’ on the NW. If the markets decline by 40%, it isn’t inconceivable for real estate values to decline by 15-20% or so. What would be the index weight for this asset class? Anyway, these are theoretical figures anyway. I simply take 20% off the top in NW as a “blended” weight to mentally track a lower NW figure as “real” in my mind.

    1. Nice job blasting through the $3M mark!

      Good questions on the MCTWI. One correction – the point of the MCTWI isn’t to set a “floor” on equity values. It’s to provide a valuation that removes excessively high or low PE ratios. Over time, the PE ratio of the market will always revert to the average. As such, it makes sense to value our equity investments using the average valuation rather than the current valuation. Sometimes that will result in a lower true valuation (as is the case today with the market at lofty PE ratios) and sometimes it will result in a higher valuation (as it would anytime the market PE is below the long-term average).

      I’ve struggled with the question of how to value real estate. The problem is that real estate valuation is much more local than equity valuation. You might be able to get monthly rent equal to 1% of the value of the house in the Midwest ($1,000/month on a $100,000 house) but only .38% in coastal cities ($3,000 on a $800,000 house). Since there doesn’t appear to be any sort of national average valuation, I can’t really come up with a simple adjustment for real estate. However, the good news is that real estate is much less volatile than equities, so adjusting for real estate valuation seems like a problem that’s not nearly as important to solve.

      If I remember correctly from reading your blog, you have about 20% of your net worth in real estate. As such, I’d probably use a higher discount than 20% when calculating your adjusted or “true” net worth. The MCTWI is .6 as of December, 2017, which implies a 40% discount. If we assume 40% discount on your investments and 20% discount on your real estate you’d get a discount of (.4*80% + .2*20%) = 36%. I’d use a 36% discount for your blended net worth.

      1. Thanks for the detailed reply TMC. I bring in conservatism in entering the value itself, for ex, all my investment RE are at Sept. 2016 levels – not updated since, though I know they have gone up by 15% in many cases (emerging markets RE appreciate faster due to higher inflation). In equities, rather than staying with high weightage to risk assets after having “won the game”, I feel periodic asset balancing based on P/E and other valuation indicators and your own “passive income benchmark” will bring the discount levels from a high 40% to a manageable 20% in my view. By passive income benchmark, I mean, say a conservative 3.5% withdrawal rate for a mid-40’s household at current investment portfolio level leaves more than adequate income to cover all our expenses – so no need to be in 100% equities once you reach this level. You could dial down the equity position and keep dry powder for re-entering equities later – in this case, the opportunity cost of missing future gains is one you can afford compared to the risk of say a 20% or more draw down. This is not a timing decision as much as a risk-adjustment decision based on where your own finances are relative to your future income needs. My financial portfolio is no longer in 100% equities (thanks to the last 5 years of near-100% equities!).

        While many talk about avoiding fear while investing in equities, few mention about ‘avoiding greed’ as well when you have “won the game”. So, taking 20% off the top of my NW is closer to a “real” NW in a “normalized” market condition. This is simple enough for me, and keeps me grounded. Besides, even my $10! target has sizable conservatism in income built in, so I feel there need to be overly conservative in NW estimation, just to pedal harder on the rat race!

        More than the actual methodology, it’s the concept behind your index that I find useful. That I entirely agree with.

        1. Sounds like you have a good algorithm for correcting your net worth.

          I agree with your assessment that, once you reach your goal, it makes sense to “take money off the table”. It sounds like in your case you’ve largely (or entirely) hit your goals and have now reduced your equity exposure. Our passive income isn’t quite there yet, in part because we do have such a large cash position (around $800K, at this point).

          The problem of deciding when to take money off the table is only a problem for moderately wealthy people. People who never come close to hitting their net worth or passive income goals never consider taking money out of equities. And the very rich don’t have to worry about it either, as they have enough money that a 50% (or higher) temporary drop in equities won’t affect their lives at all.

          Thanks for the feedback on the MCTWI. I’m always thinking about ways to improve it, and I’d welcome any additional thoughts you have.

  5. Wow, your net worth growth is amazing! I recently hit the $1M mark last year and have yet a long way to go before hitting the $5M mark.

    I really like your MCTWI concept. Adjusting my net worth accordingly, I would have only around $720k. I might need to start following the MCTWI more closely to assess my readiness to retire. I’m hoping to retire early in 5 years, so should a big bear market come, please let it come soon this year or the next.

    The MCTWI is most useful for those who have the vast majority of their assets in the S&P 500. But what if someone is more globally diversified? Is there a similar adjustment for foreign developed and emerging market stocks?

    1. Great questions.

      First, you are correct that the MCTWI in its current form is only useful for correcting for valuation fluctuations for US stocks. However, it’s pretty trivial to extend the methodology to other countries or indexes.

      For example, to keep things simple, I’ll use the Vanguard Total International Stock Index Fund Investor Shares (VGTSX) as the index for all non-US equities. To create an international MCTWI you’d just need to compare the current PE of the VGTSX to its long-term average. According to ycharts ( the average PE ratio is 16.36 and the current PE ratio is 15.17. So the MCTWI is 1.08 – this means that your international investments are actually worth about 8% MORE than their current price.

      This quick and dirty system has the disadvantage of lumping all international markets together – a more accurate measure would group similar markets (or just produce a MCTWI for each individual market). I’ll start publishing a MCTWI for both domestic and international markets in future net worth reports.

  6. Nice growth in one month. Can you explain more about your investing strategy? Is it dividend or growth company related or do you only invest in ETF’s and index funds? If you are interested about my personal finance blog you can find link attached.

    1. My general investing philosophy is to only buy truly excellent companies when they are fairly valued. I tend to prefer dividend paying companies because paying a dividend requires that the company have enough profit to pay all expenses, invest in future growth, and still have money left over. I am really trying to focus on companies with strong business sheets and low debt. Far too many companies have loaded up on debt in the last few years and as a result they’ll face bankruptcy in the next recession.

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