Net worth – October, 2016

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 October:

September October $ Change % Change
Assets
Checking $14,216.98 $14,311.63 $94.65 0.7%
Retirement accounts $545,251.86 $544,739.60 -$512.26 -0.1%
529 accounts $10,758.00 $11,539.93 $781.93 7.3%
Brokerage accounts $1,336,174.50 $1,305,740.28 -$30,434.22 -2.28%
Private equity $200,000.00 $200,000.00 $0.00 0.0%
Rental properties $865,325.00 $868,325.00 $3,000.00 0.3%
Primary residence $1,560,000.00 $1,560,000.00 $0.00 0.0%
Assets total   $4,531,726.34 $4,504,656.44 -$27,069.90 -0.6%
Liabilities
Credit cards $2,562.93 $1,226.04 -$1,336.89 -52.16%
Rental mortgages $526,742.11 $526,104.55 -$637.56 -0.12%
Primary mortgage $767,710.08 $764,391.30 -$3,318.78 -0.43%
Liabilities total   $1,297,015.12 $1,291,721.89 -$5,293.23 -0.41%
Net worth   $3,234,711.22 $3,212,934.55 -$21,776.67 -0.7%

 

 

S&P 500 performance for October = -1.94%

 




Assets

Cash

Cash fluctuates every month just 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.

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 down $512.26 for the month, which is a mere .1%. The actual investments were down by more, but the automatic payroll contributions to the 401(k) helped counterbalance the weak market.

529 accounts

I’ve asked myself if I should really include these accounts in our net worth, as the money is earmarked for the kids and will be spent solely on them. Ultimately I’ve decided to continue including them, as if we didn’t have these 529 accounts then we’d need to pay for college out of our other investments. 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 but the account balance was only up $781.93, which means the actual performance of the account was -$218.07.

Brokerage accounts

This is our early retirement fund and where most of our net worth is.

The brokerage account was -2.28% for the month compared to the S&P being -1.94% for the month, so we slightly underperformed the market in October. Obviously a difference of .34% either way is nothing to worry about.

Due to the size of our portfolio vs the amount we can invest each month, the market will have a much stronger effect on our net worth than any new money we invest.

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.

Rental properties

On the last day of each quarter I adjust the value of the properties based on Zillow’s estimate. It looks like I misallocated one of the property value adjustments to the beginning of October rather than the end of September, so there’s a small gain here for this month.

My goal is to see the value of the rental properties increase by 3-5%/year. Given that we are currently leveraged 3-1, that would translate to 9-15% gains on our investments in the properties.

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. As a result, 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 if we didn’t own the house, I’ve decided to include the house in our net worth calculation.

Total assets

Total assets were down -$27,069.90 for the month, due almost entirely to our portfolio being down ~$30k. Not too surprising, given the performance of the overall market in October.

 

Liabilities

Credit cards

Slight decrease in credit card balance at the end of the month. This is just due to when payments are made and how much I used my credit card for work purchases for the month. I do get reimbursed for work expenses, but it takes 1-2 months.

Rental mortgages

We paid off just over $600 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 over $3,300 on the mortgages on our main residence.  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, and I’d like to pay them off as soon as possible. I think it would be hard to really hit early retirement with substantial mortgages hanging over our heads.

Total liabilities

Total liabilities dropped -$5,293.23 for the month. That’s solid but unspectacular. If we can keep retiring .4% of our liabilities every month it will take almost 21 years to pay everything off. Clearly we don’t want to wait that long. My expectation is to pay off the second mortgage on our residence first, then look at aggressively paying off some/all of the rental properties (they have a higher interest rate than our house). For the last few years I’ve been working on increasing our assets rather than paying down my liabilities. Given my reluctance to invest further in the market today I’m thinking it might be about time to reverse that thinking.

 

Total net worth

Net worth was down -$21,776.67. Yikes. We did better overall than the market (thank goodness for the balancing effects of real estate). Given our large exposure to the stock market I expect that our net worth performance will closely track the performance of the stock market. We should trail a bit when the market is up and perform a bit better than the market when the market is down.

 

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

6 thoughts on “Net worth – October, 2016

  1. Wow, that’s one very healthy portfolio! It’s quite the minor monthly fluctuation if you think about it.
    All we can say is well done! Seems we have much to learn 😉

    1. Thanks! I’m feeling pretty good about our portfolio right now, but I think there’s a lot of risk in the market at today’s valuation. On one hand I want to continually be adding new investments, but on the other hand I’m unconvinced that money invested today is going to provide acceptable risk-adjusted returns.

  2. Nice to read your blog..

    My age and financial profile is comparable to yours.. I am currently working full time and that pays my bills and improves my networth month on month.

    I am struggling with two questions:
    1. What to do with my time if I stop working full time?
    2. What is the right amount to leave for your kids?

    Would like to know your ideas.. maybe a post or a reply..

    Cheers and well done

    1. Thanks for the kind words. I think you’re asking a pretty big question. That is, once our daily needs are provided for and we’ve accumulated enough money to ensure we have food and shelter for the rest of our lives, what provides motivation?

      I think you need to find something you really enjoy doing and that you think provides value to you, your family, and/or your community. Just because you have enough money to do nothing doesn’t mean you should do nothing. Everything I’ve read says that’s a sure ticket to boredom and depression.

    1. Yeah, that’s exactly what ended up happening. November and December were much better months.

      As we all know, balances fluctuate up and down, so I try not to get too bothered by month to month fluctuations.

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