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.
Before I get into the analysis of how our net worth changed for the month, let me preface it by saying that this month was 5 years in the making. As those of you who follow my blog might remember, I’ve been working on a huge deal at work that, if closed, would result in a significant commission. Here’s what I wrote at the end of last month’s net worth report:
“I hoped to receive my large commission check by the end of May, but I don’t get paid until the company is paid, and it looks like payment from the customer won’t happen until early June.
Stay tuned until next month – this number is going to look very, very different…”
Sure enough, I received the first part commission check on June 15 and I expect to receive the second check sometime in July. The results of this commission check had an impact throughout our net worth report.
|May||June||$ Change||% Change|
S&P 500 performance for June, 2017 = 0.48%
Checking – I deposited a commission check of approximately $540,000 into our checking account on June 15th. We’ve used some of this money to reduce some debts (more on that below), but most of the money will be sitting in this account to pay for some work on the house that we plan to do over the next few months.
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 a solid 2.9%, for a total gain of $18,446.04. Of that, approximately $1,200 are contributions to the 401k, so the bulk of our gains are due to the performance of the market.
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 $180.68 in gains from the market, so it looks like my expectations are about right.
Brokerage accounts – This is our early retirement fund and where most of our net worth is. I moved $200,000 of the commission check to our brokerage account with the idea that it will be used for investments. Unfortunately, due to the ridiculously high level of the market, I don’t see a lot of options in the market today. As a result, I think this money is likely to sit in cash (or a short-term California muni bond fund) until I can find better values in the market.
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. According to Zillow these properties are up a total of just over $16k this quarter. That’s 1.8%, which results in an annualized 7.2% gain. That seems high – it’s hard to believe that property values are actually increasing that quickly.
Primary residence – Just like the rental properties, I adjust the value of our house at the end of each quarter. The value of our house doesn’t really matter because we hope to live in this house forever, but I track it for the sake of completeness.
Total assets – Total assets were up $484,699.70 for the month (a 10% gain). This puts our total assets at just over $5M, which is a nice milestone.
Credit cards – We don’t carry a balance from month to month on our credit cards, so this just reflects our balance as of the end of the month. I try to use credit cards for the bulk of our spending as it makes tracking our expenses a bit easier.
Rental mortgages – We paid off $1,213.32 on the rental mortgages. The best part about seeing this number drop is that the mortgages are being paid by the renters, so this feels like “free” money each month.
Primary mortgage – We have 2 mortgages on our house – a first and a second. The interest rate on the first mortgage is just over 4%. The interest on the second mortgage is 5.25%.
My expectation is the the stock market is going to return around 4-5% annually for the next 5 years. This means it makes sense to pay off the second mortgage but not the first.
The balance on the second mortgage was right around $180k. I paid $99,999.99 (the most I could pay electronically) of the balance last month and I’ll pay the rest off in July. That will leave us with a single mortgage on our house of about $560k.
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 – this is why I’ve decided to pay off the second mortgage.
Total liabilities – Total liabilities were down $115,881.10 for the month (a 9.1% decrease).
Total net worth
Net worth was up $600,580.80 for the month to $4,179,289.32. This was a 16.78% increase from last month.
Frankly, this kind of feels like cheating – the big windfall really overshadowed everything else.
This was a good month for our real estate investments – the property values continue to climb and rent is being paid on time. Every single one of the 8 rental properties was profitable this month.
The market continues to climb, taking our investment accounts with it. Our savings rate is solid (although it looks amazing with these commissions checks). We’re trying to keep our spending in check.
I’ll be writing a lot more over the next few months about what it feels like to get a huge windfall and how I plan to use the money. If you’re interested in following along please subscribe to my blog.
How did everybody else do this month? If you received a big chunk of money would you pay down debts, invest in the market, or do something else with it?