Net Worth – January, 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. Here’s how our net worth looked for January, 2017:

  DecemberJanuary$ Change% Change
Assets
Checking$13,923.13$35,743.84$21,820.71156.7%
Retirement accounts$572,767.20$576,252.44$3,485.240.6%
529 accounts$14,787.36$15,688.82$901.466.1%
Brokerage accounts$1,361,327.89$1,345,894.41-$15,433.48-1.1%
Private equity$200,000.00$200,000.00$0.000.0%
Rental properties$904,962.50$904,962.50$0.000.0%
Primary residence$1,580,000.00$1,580,000.00$0.000.0%
Total Assets$4,647,768.08$4,658,542.01$10,773.920.2%
Liabilities
Credit cards$5,205.77$10,068.99$4,863.2293.4%
Rental mortgages$524,153.04$523,507.48-$645.57
-0.1%
Primary mortgage$758,762.19$757,530.00-$1,232.19-0.2%
Total Liabilities$1,288,121.00$1,291,471.39$3,350.390.3%
Net worth$3,359,647.09$3,367,070.62$7,788.460.23%

S&P 500 performance for January, 2017 = 1.79%

Assets

Checking – Our checking account balance was up due to a transfer of cash from our brokerage account to our checking account. This money was to pay some work expenses I put on my credit card. I will be reimbursed for these expenses in February.

Retirement Accounts – This includes a 401(k), a few IRAs, and a few Roth IRAs. The only account we are currently contributing to is the 401(k), as we are ineligible to invest in the rest. These were up only .6% 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 $901.46 in gains from the market, so these accounts were up just over 6% for the month.

Brokerage accounts – This is our early retirement fund and where most of our net worth is. The brokerage account was down 1.1% due to the aforementioned transfer to our checking account. 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. No change this month.

Primary residence – Just like the rental properties, I adjust the value of our house at the end of each quarter. No change this month.

Total assets – Total assets were up $10,773.92 for the month. At a .2% gain this significantly trails the S&P 500 . 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 due to some work related travel.

Rental mortgages – We paid off $645.57 on the mortgages. This number is smaller than usual because about half of the January payments were made on Dec 31 so they would count for the 2016 tax year.

Primary mortgage – We paid $1,232.19 on the mortgages for our primary residence. The goal is to have the second load (~$187k) paid off by the end of 2017. 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 $2,985.46 for the month.  For the last few years I’ve concentrated on increasing assets rather than paying down liabilities. Given the market’s current overvaluation I have changed my focus and will 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 $7,788.46, which is only a .23% gain. That significantly trails the market’s gain of 1.79% for the month. I expect things will even out later this year. I also expect us to significantly outperform in a down market, as our real estate holdings should provide steady but small gains.

 

How did everybody else do this month? Is anybody planning on making any changes to their allocations or investment strategies?

9 thoughts on “Net Worth – January, 2017

  1. Congrats on the progress this month. I’m taking a similar approach with a higher real estate weighting for the same reasons you mention (potentially smaller gains, but will perform better in a downturn).

    Quick question on the retirement accounts. When you say ineligible to invest in the rest, does this mean that you’re not eligible to invest in IRAs? I’m guessing you’re well past the limit for contributing to a ROTH or having the ability to deduct a traditional IRA. Does the traditional IRA have AGI contribution limits?

    1. Thanks! Although I believe the stock market is the best path to success and wealth for most people, I do believe that some diversification is a good idea. Given that I think bonds are a terrible choice right now I think real estate is a superior alternative.

      Regarding the IRAs – yes, there are AGI limits for both Roth and regular IRAs. There is a range of income (Modified AGI) during which your ability to contribute to an IRA starts phasing out. For 2016 the limits were:

      Single: $117,000 – $132,000
      Married Filing Jointly: $184,000 – $194,000

      Our MAGI for 2016 was higher than $194k, so we were ineligible to contribute to an IRA.

  2. That’s exactly what I think on diversification and outlook on bonds.

    Good to know on MAGI. I believe I may have made an error here. I thought it was no deduction available for traditional IRA with MAGI > $194k, but otherwise, a contribution would still be allowed.

    1. That’s correct – you CAN still contribute to an IRA, but it’s not deductible. You can’t directly contribute to a Roth IRA if you’re over the income limits, but you can use the backdoor contribution strategy (make a non-deductible contribution to a regular IRA then convert to a Roth).

  3. Cool, that’s what I’ve been doing, then investing the ROTH in a note fund that has a 12% preferred return (that would otherwise be very tax inefficient).

  4. It’s through PPR (pprnoteco.com). Their DEII fund had the 12% preferred return. It looks like their currently open fund is a 10% preferred, which is still a great return. I’m also in another short-term real estate lending fund that has had a 12.33% trailing 12-month return (PBRELF I). I’ve been happy with both.

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