Net Worth & Goals Update – July 2010

Net Worth Chart 2010

Time for another net worth update… last one was back in April.

Credit Card Debt
I used to take money from credit cards at 0% APR and place it into online savings accounts, bank CDs, or savings bonds that earned 4-5% interest (much less recently), keeping the difference as profit while taking minimal risk. (Minimal in regards that the risk was under my control.) However, given the current lack of great no fee 0% APR balance transfer offers, I am currently not playing this “game”.

Most credit cards don’t require you to pay the charges built up during a monthly cycle until after a grace period of about 14 days. This theoretically provides enough time for you to receive your statement in the mail and send back a check. As this is simply a real-time snapshot of my finances, my credit card debt consists of just these charges.

Retirement and Brokerage accounts
We recently converted our Traditional IRA balances to Roth IRAs, as the income restrictions were lifted this year. The choice to convert was rather simple for us, as we had non-deductible contributions that will now be able to be withdrawn tax-free. (We still owe taxes on very modest gains.)

Our total retirement portfolio is now $289,277 or on an estimated after-tax basis, $249,976. At a theoretical 4% withdrawal rate, this would provide $833 per month in after-tax retirement income, which brings me to 33% of my long-term goal of generating $2,500 per month.

Cash Savings and Emergency Funds
We are now a bit below a year’s worth of expenses (conservatively estimated at $60,000) in our emergency fund. This is after withholding some money for paying taxes on the Roth IRA conversion above, and also for undisclosed, one-time recent expenses. It’d be fun to say that we picked up a convertible or something, but the reality is much less exciting. :P

Our cash savings is mostly kept in a combination of a rewards checking account (with debit card usage requirements), a SmartyPig account at 2.15% APY currently, or in a 5-year CD from Ally Bank, which despite the long term still provides a very competitive yield even if you withdraw early before the 5 years is up. (See here for more details.)

Home Value
I am still not using any internet home valuation tools to track home value. After using them for a year and finding them unreliable, I am back to maintaining a conservative estimate and focusing on mortgage payoff. If we get some positive cashflow after retirement savings, I do want to pay it down faster.

Comments

  1. I’ve heard the same thing about internet home valuation tools. Such a struggle. Maybe one of your readers could suggest a good tool to use (or at least a more reliable one).

  2. big expense: my guess is adoption

  3. C. Maoxian says:

    I’m guessing the one-off major expense was healthcare-related?

  4. I keep hearing that converting from traditional to roth ira is a no brainer but don’t you still have to pay taxes on the income? Say if you’re converting 40k from tradition to roth and you’re tax rate is 25%; don’t you have to pay 10k in taxes to convert to roth?

  5. @jack – Yes, but you won’t owe any taxes on whatever that 40k grows to down the road. However, I don’t think it’s a no-brainer for everyone. You must decide whether you’d rather pay taxes now or later.

    For us, it was a no-brainer because we contributed to a Traditional IRA but were already unable to deduct the contribution from our taxes due to income limits like most people did (we were also unable to go Roth due to income).

  6. ChrisMR says:

    buy a new car?

  7. rubin pham says:

    jonathan,
    good job for building a spreadsheet like this. i hope i will get around to doing something like what you do here so i can have a better picture of my financial situation.

  8. Adoption? It somehow seems that calling that “much less exciting than a convertible” wouldn’t be proper.

    We know there was some issue, but that’s about it. For all we know, they had a sick family member and were the only ones available to help out. Maybe they volunteered in Haiti for a month. Maybe Jon finally got that extra leg removed. It really doesn’t matter.

    I haven’t looked at my retirement account since early April. This tells me that I should keep it that way. I see the deposits going in from checking, but that’s it.

  9. Just found your blog, and already it is inspiring me! Thanks for being so open with your posts. I look forward to continuting my reading here.

  10. It is amazing how close our finances are. See ours here: http://www.makeitby40.com/node/10 (updated in April, our July is at $365K!)

    I’m not sure what part of the country you live in, but ouch – that’s a massive mortgage! We differ a bit because we have 3 mortgages (2 are rental properties and we live in a modest $275K home we bought last year to take advantage of the fire sale prices), but the total of the mortgages amount to about the same. Of course, we have the advantage of renters subsidizing our payments!

    Thank you for sharing all this information. It is inspiring to see.

    Good luck to you – may you achieve your goals in life!

  11. Great data and fantastic savings – couldn’t help but notice though that you don’t appear to have a Health Savings Account (HSA). Maybe you do and just haven’t listed it but if you don’t, it’s a great place to put up to $6150 in PRE-TAX dollars away for your family.

  12. There’s been a lot of debate about how to correctly assess home value. One very easy way to do it is to contact a real estate agent once a year and ask for a home value evaluation. They will go over all of the houses that have sold in your area. Also, unlike Zillow and a lot of the other online estimators, a real person will take account for some intangibles that aren’t calculated on Zillow. For us, it’s a lot of appealing upgrades that are no doubt worth some amount of money (recently valued at approximately $25-35k). My real estate agent will give me best case, most likely, and a “I can sell it within a month for ‘this’” price. I use the last one as part of my calculation to be conservative.

  13. PS – some may think it’s cheesy to contact a real estate agent when you know you’re not going to sell. That is probably true. But I always operate under the guise of… well I might sell it if the price is right. As a matter of fact, we just ordered our 2nd value evaluation in 2 years and we will likely put it on the market at a high price as real estate is soaring in our area and I think the house if probably worth more now than it ever will be.

  14. Hi Jon,
    I assume you have some math that amounts to 4% income in your retirement? Can you explain? You’d need to put money into somewhat risky accounts to acheive that unless we are in a strong economy with high return rate from CDs.
    Thanks
    Inq

  15. anonomyous says:

    Jonathan,

    I’ve enjoyed your net worth updates – will you publishing another one soon? I know you are not tracking this as you have in the past, but I feel as if that’s one of the core reasons for the site, so I enjoy tracking my progress vs. yours – gives me some insulation against the unknowns of the market/world!!

    Thanks,

  16. How are you getting 2.15% APY on your SmartyPig? I currently see it as 1.75% or am I missing something?

  17. No Net worth update in a while….how about it?

    Thanks

  18. I was just reading Kiplinger’s success with your money (Winter 2010) and it mentioned a case where this woman bought an immediate annuity from New York Life for about $375,000 and because of that receives $2,500 a month. This is your goal, and I noticed you said you have about $250,000 which would provide you $833 in after tax income. I’m wondering if you looked into an annuity. I’m sure her figure is before taxes, but still it seems to be what you’re seeking. I haven’t gone back and looked through all your articles, but have you discussed or researched annuities?

    I’m rather curious about them myself.

  19. AdirondackJack says:

    I would be cautious using a real estate agent’s estimate for the value of your home. My experience is that most will give you an estimate significantly higher than the true market value of your home. Why? They want to be the one to get your listing. Most folks aren’t going to list their home with the agent that tells them their home is worth the least. Inflating the estimate helps them secure the contract, and then they can work on you to lower your price when you don’t get any bids. Please understand, I’m not labelling all agents as shady or corrupt, agents do need to compete for business and no agent wants to be the one to give you the lowest estimate.

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