Monthly Net Worth & Goals Update - November 2009
Credit Card Debt
In the past, I have taken money from credit cards at 0% APR and placed it into online savings accounts, bank CDs, or savings bonds that earn 4-5% interest (much less recently), and keeping the difference as profit. I even put together a series of step-by-step posts on how to make money off of credit cards in this way.
However, given the current lack of great no fee 0% APR balance transfer offers, I am no longer playing this “game” and have just paid off my last 0% offer for now. This makes the net worth chart a bit funny, but it should clear up next month.
Retirement and Brokerage accounts
Our total investment portfolio increased by a few thousand dollars since last month. DW’s 401k was already maxed out at $16,500. I made another $1,000 contribution to my Solo 401k, for a total of $16,500 contributed in 2009 as well. (I forgot the limit was $16,500 and not $15,500 last month…) This makes us done with our goal of maxing out both our 401k salary contributions for 2009.
I am starting to build up too much cash, and have started investing for retirement in a taxable brokerage account as well. In the interest of tax efficiency, I’ll have to move around some investments in order to keep bonds in the tax-advantaged IRAs/401k and the “extra” stocks in taxable. I expect to finish investing $20,000 this week.
Taking that additional 20k into account, our total retirement portfolio is now $211,095, or on an estimated after-tax basis, $170,047. At a 4% withdrawal rate, this would provide $567 per month in tax-free retirement income, which brings me to 23% of my long-term goal of $2,500 per month.
Cash Savings and Emergency Funds
We keep a year’s worth of expenses in our emergency fund. Another $10,000 is earmarked for upcoming home improvement projects that I keep putting off (minor roof repair and solar water heating).
Home Value
I am no longer using any internet home valuation tools to track home value. Some people have suggested using my tax assessed value, but I also think that is too high. I simply picked what I felt is a conservative number based on recent comparables, $480,000, and keep it for at least 6 months if not a year. (Currently on month 2 out of 6.) For the most part I am concerned about mortgage payoff, which I still plan to accomplish in 20 years at most.
You can view previous net worth updates here.
Find more in Goals, Investing, Real Estate, Retirement | 11/2/09, 2:07pm | Trackback
November 2nd, 2009 at 4:34 pm
“DH’s 401k was already maxed out at $16,500.” DH = Dear Husband?
November 2nd, 2009 at 5:23 pm
Ha, could have sworn I typed DW, although I did lose this entire post as a draft earlier and had to redo half of it. I was reading somewhere about how they don’t like being referred to as “my wife” because it denotes ownership or something, although of course my wife has plenty of self-confidence and doesn’t care a bit. DW/DH does seem to be the internet custom, so I am trying to adapt.
November 2nd, 2009 at 8:45 pm
Maxing-out the 401(k)s so early in the year? Don’t you want to spread it out to the end of the year so as to maximize the company match? Perhaps you don’t have a company match.
November 2nd, 2009 at 9:08 pm
Why max out 401(k) so quickly? Isn’t it the idea of cost averaging is to spread it out to 12 months so that you don’t buy all high in one amount?
November 2nd, 2009 at 9:56 pm
Jonathon I would suggest that you buy at least a little bit of gold and/or silver coins with some of that cash. I know you don’t really consider those to be a true asset class, but since you do have a lot of cash, you are taking a risk that the $USD doesn’t continue losing its purchasing power in the long run. I’m certainly not a gold bug by any means, but if I had the amount of cash you did, I would be wanting to protect myself by keeping 5-10% of my cash in precious metal coins.
Just MHO.
November 3rd, 2009 at 12:02 am
@Pedro, Hoang - I don’t need to spread it out, it depends on how your 401k works. See this post:
http://www.mymoneyblog.com/arc.....tions.html
DCA is a method to reduce risk which also can reduce returns. For example, if I did all my contributions in March I’d be up a lot more. I don’t think finishing two months early is a big deal.
Aurelien - I’ve been thinking about it, but doing do when gold is so high just doesn’t feel right. Too much speculation going on right now. If anything, I might add some commodities instead.
November 3rd, 2009 at 6:28 am
Because of the low rates on internet savings accounts, I’ve been thinking of putting half of my cash into bond funds in a mix of say gnma (vfiix) treasury (VFITX) and short term bonds (VBISX). How reasonable is it to keep money in bonds for time periods of only a year - few years?
November 3rd, 2009 at 6:29 am
Looks good, you are doing quite well. I agree with Aurelien, better protect against a falling dollar. And I agree with you too, commodities are a good bet(imo better than gold). Oil looks pretty good at $75, of course it could go back to $30 but most likely it will continue to appreciate. BP, TOT, RDS are all good foreign oil stocks that yield above 5%. Easier plays than a futures contract.
November 3rd, 2009 at 8:13 am
I’m wondering if your $100k in cash is better used for a down payment for a new house and rent it out.
I am purchasing a rental house @ $500k and use it for that. I am wondering if I should split and buy two @ $250k each and have mortgages on them. The area is good for renting as it’s around colleges.
November 3rd, 2009 at 8:34 am
Ryan,
It’s hard to find good deals in real estate. A good deal is a rental that is cash flow positive, which is especially hard to find in single-family homes since people think they are “investing” in them even if it is costing them money every month.
In most single family homes, the rent usually comes no where close to covering the mortgage, taxes, maintenance, vacancies, etc….
In your $250k house example, unless you can rent this for over $3,000/month I’d say it is not worth it. In fact, most real estate experts I know would say $3,000 is not even enough, you would need closer to $3,750/month.
November 3rd, 2009 at 10:23 am
Though a lot more work, you can still create your own balance transfer offer by buying $1 coins from the US Mint using a credit card with a 0% on purchases APR. You then deposit the coins in your bank and transfer them to a rewards checking account to get 4.5% to 6% interest. It can be time consuming and a little embarrassing, but worth it to get around $100 a month in interest on money that isn’t yours.
November 3rd, 2009 at 3:31 pm
Jonathan wrote:
“Ha, could have sworn I typed DW, although I did lose this entire post as a draft earlier and had to redo half of it. I was reading somewhere about how they don’t like being referred to as “my wife” because it denotes ownership or something, although of course my wife has plenty of self-confidence and doesn’t care a bit. DW/DH does seem to be the internet custom, so I am trying to adapt.”
I find “SWMBO” works … on many levels.
November 3rd, 2009 at 5:40 pm
@Ron -
November 4th, 2009 at 1:15 am
@Ryan
College kids might be one of the worse groups to rent to. They tend to have no respect for any property they don’t own.
November 6th, 2009 at 8:27 am
@Josh
Buying one $500k house with cash money down means no mortgage and all rent is profit. I could easily have $3700 or more coming out of this a month.
Buying two $500k houses with 50% cash down and rest of $250k mortgage each (15 years) means 2 x ~ $1400 = $2800 total mortgage a month. The rent would be about double at ~ $7000 (less $2800) = $4200.
Is my math skewed?
November 8th, 2009 at 7:36 am
Finally your 0% APR, no balance transfer fee deals are expiring. I have been constantly following that…and cannot believe it lasted this long! Based on the current conditions, it looks like there will be no way to earn a few hundreds anymore.
November 9th, 2009 at 7:04 am
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