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.
June was a decent month. Although our investments are performing fine, we are spending a lot of money to complete the construction on our house. However, we’re getting close to being done and we’re really excited to enjoy the new covered patio, especially given the long outdoor season here in Santa Barbara.
The net worth report below includes an adjustment for the Money Commando True Wealth Index (MCTWI). The MCTWI for June, 2018 is .62. This is down slightly from May’s value of .63.
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. As a reminder on how the MCTWI works, 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. By my estimates, the market continues to be significantly overvalued.
To calculate the “true” value of your investments (that is, what their price would be at the stock market’s long-term average valuation) you just multiply the value of your investments by the MCTWI. So if your total portfolio of domestic stocks is worth $100k at today’s valuation, the MCTWI adjusted valued is $100,000 * .62 = $62,000. This is the number you should use for planning purposes.
Without further ado, here is our net worth report for June, 2018:
Our net worth outperformed the S&P 500 in June – we were up 0.9% while the S&P 500 was up 0.62%. This is largely due to the quarterly adjustment of the value of our real estate. However, it’s even more impressive given that we spend ~$40,000 on our house remodel during the month.
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). 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 – investments – This is our early retirement fund and where most of our net worth is. This account was up .4% – it underperformed the S&P 500 due to our large cash allocation (approximately $600k).
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 accounts were up by 1.1%. We outperformed the S&P 500 for 2 reasons. I am contributing to the account from each of my paychecks. Second, the mutual funds in my account paid a sizable dividend this month.
529 accounts – We contribute $500/month to each of the 529 savings accounts we’ve set up for our 2 kids. Assuming both of our kids go to college, we will liquidate both accounts in about 20 years.
Checking – 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.
We made a large (~$38k) payment on our backyard construction last month. The work is almost done (current estimate is completion in mid-July) and we should only have ~$20k of total additional costs before we are done.
I expect to make the final payment later this month, which means that starting in August we should have more normal cash flow.
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. 7 of the 8 properties we own were up for the quarter, and the total increase was $46,176, for a solid 4.6% return.
Primary residence – Just like the rental properties, I adjust the value of our house at the end of each quarter. For 2018 Q2 Zillow estimates our house increased in value by $6,617. We are hoping to live in this house forever, so the value of the house doesn’t matter too much, but it’s fun to track anyway.
Total Assets – Nothing too exciting here. The solid performance of our investments offset by large construction and educational expenses. Total assets were up 0.7%. This means we just slightly outperformed the market.
Liabilities
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 helped us pay down the mortgages this month. The rent from our tenants paid almost $2k on the outstanding loans.
Primary residence mortgage – We paid $2,258.86 on our mortgage this month. For whatever reason the July payment posted in June, meaning we got credited with 2 payments last 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. We need to have this paid off before I can really consider retirement.
Total liabilities – Total liabilities were down by $5,616.31 for the month to $1,055,924.95 (a nice 0.5% reduction from last month).
We still have over $1M in debt. At the average rate that we’ve been paying down mortgages over tell last few months (about $2,200/month) we’ll be under $1M in debt in about 26 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.
Not a lot to say here. Our net worth was up by $48,735.18.
Here’s a graph of our net worth per month so you can see the year over year comparison.
Now that we have 3 years worth of data you can see how much our net worth jumped since 2016. This was due to the combination of a surging stock market and the large commission I earned in 2017.
How did everybody else do this month? Have you been riding the stock market to new highs each month?
Your net worth is amazing…we are so envious of your 8 properties. We are looking to add a small piece of real estate to our financial portfolio in the coming year. Can’t wait to have multiple like your though. Way to go!
Best wishes and continue success. AFFJ
I appreciate the kind words.
To be fair though, we only own 4 of properties ourselves. The other 4 are 50% owned by us and 50% owned by my mother. So I guess that works out to owning the equivalent of 6 properties.