January 2009 Financial Status / Net Worth Update

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Net Worth Chart 2008

Credit Card Debt
I have no actual consumer debt. In the past, I have been taking money from credit cards at 0% APR and immediately placing it into high-yield savings accounts or similar safe investments that earn 5% interest or more, and keeping the difference as profit. I even put together a series of step-by-step posts on how I make money off of credit cards this way. However, given the current lack of no fee 0% APR credit card offers, I haven’t been as active with this recently.

Retirement and Brokerage accounts
The value of our passively-managed portfolio bounced back by about 10% compared to last month. There were no new contributions. As noted, we did manage to max out both of our 401(k)s this year, and plan on making 2008 IRA contributions by the April deadline.

Cash Savings and Emergency Funds
Our emergency fund balance is nearly at 12 months of our total monthly expenses. So theoretically both my wife and I could be laid off and we would be okay for 12 months without having to sell any longer-term investments. I am very happy with this cash cushion.

Where is it? I suppose you could say I “actively manage” my cash, putting it in various places to maximize yield while maintaining the highest possible safety. For example, I have some in a previous WT Direct promo at over 6% annualized interest, some in Series I Savings Bonds at over 6%, and a chunk at a WaMu 12-month CD paying 5% APY with about 10 months remaining.

Compare this to the piddly 0.14% for 90-day T-Bills and 0.43% on 1-year Treasuries! If you didn’t get in on any or all of these, keep reading or subscribe to updates for new deals as they come up.

Home Equity
I continue to estimate our home value using internet tools, starting with the average estimates provided by Zillow, Cyberhomes, Coldwell Banker, and Bank of America. This left me with $584,516. Then, I shave off 5% to be conservative and subtract 6% for expected real estate agent commissions (11% total) to reach my final estimate. Fortunately, we bought as prices were falling already, and the area where we live has not been hit nearly as bad as other major metropolitan areas.

Looking ahead, I am working on new goals for 2009, and also better metrics for measuring our financial progress. You can see our previous net worth updates here.

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  1. Happy new year.

    Any thoughts of providing an updated monthly budget for 2009?

    Not sure if you have made any changes to your budget recently… we just paid off our car, leaving our mortgage as our only debt. I am hoping to refi. that to under 5% in the coming months as well. For now, we are putting a lot more back into savings now to get our 12-month cushion – and hoping we can save a very large down payment for our next vehicle.

  2. Wow you keep a lot of cash. I don’t feel I keep enough so one of my goals is to boost that amount this year. I wish home prices were doing better here, I am horribly upside down having bought in 2005. Good luck with 2009, hopefully it will be a better year for all of us.

  3. How motivating – very helpful to folks who are working towards savings goals!

  4. rubin pham says

    you need to have 12 months of emergency money because we are facing 1 of the worst economic crisis in history.
    the standard 6 months no longer apply.

  5. Over the Cubicle Wall says

    Nice job all around. I like a large cash position as well. Curious about your plans for the mortgage payoff – early, 15 years, 30 years?

  6. I have a question regarding making 2008 Roth contributions in calendar 2009. I would like to use my ’08 income tax refund to reach my ’08 maximim contribution, but I’m confused – I would have already filed my income taxes (isn’t this where the IRS learns how much I contributed in 2008?). How does the post-year end contribution work?

  7. I also have a large pile of cash. More than 20 months if I consider it emergency fund. I’m just wondering where should I do the split and what should I do with the remaining portion. Invest it? But in what? I would like to be as safe as monies but with beter return than the high yeld accounts that I have.

  8. If you can save 8k/month, you will reach your goal of becoming a millionaire in less than 10 years, conservatively speaking.

  9. FYI, “Bank of America has an all new home value search, powered by Cyberhomes”.

  10. As a veteran stoozer, it is a bleak time in the credit card market. One thing you might note when you’re talking about 0% cards is that they are useless if there is a balance transfer fee that doesn’t have a cap. You’ll be lucky to find a 1-year CD at 3% right now so a balance transfer fee of 3% would erase any potential earnings unless you take on a riskier investment which is extremely unwise when you’re using “borrowed” money to pay for it.

    Anyway… I enjoy your blog. Just wanted to add this comment.

  11. Wow, that’s great to have a positive networth. I’m still in the red, but I’m working hard to get back in the green. Hopefully soon I’ll post back letting you know when I get there.


  12. I think you overstate your net worth by showing equity on your house. If you consider how much it depreciated in the last 8 months plus the fact that real sate cycles last about 8 years you should take your house out or show a 0 equity. the $45,460 sounds more like wishful thinking than reality. sorry for being so direct 🙁

  13. Although the home does indeed serve as one of the better vestment options and tax savings in some cases, i couldnt agree more that trying to include that value within your net worth equation is a little biased towards positive thinking with current mkt fluctuations and the true fact this asset is indeed owned by the bank.

  14. I agree with including the home in your financial status–especially if you keep the value in check by adjusting it as the market adjust. It all comes out in the wash if you look at the net worth calculation. As long as you’re honest with yourself on the current value at any given time. I don’t think you can have a sound financial plan without including it–imagine if the value went below the liability…you would definitely want to consider that in any planning decisions.

    Good work! I enjoy your blog and your courage for posting it!!

  15. Jonathan, just wondering if you ever read moneybluebook.com blog. When I first saw it, the website resembles to yours. I think he copied your website’s design/layout 🙂

    That guy claims he earns $50K+ monthly in the last 9 months and he is still in his late twenties. It’s kinda hard to believe.

  16. mike, federico,
    so what would you suggest he do with the estimated net worth of his home?
    I put 500k down to buy a 1.5M house. are you suggesting that my 500M disappeared? even if I look my house up on zillow and zillow says it is now worth 1.2M, and my loan is 1M, where’s the 200k?

    Or even better, let’s say i then sell the house tomorrow for 1.4M, what happens to my net worth then? i pay the 1M loan off and my net goes *back up* by 400k???
    such are the problems with mark-to-market accounting…. i can mark the house at whatever you think the market values it, zero or the same 500k i put in. but it doesn’t really matter as I’m not planning on moving and i can still make the payments.
    good thing i’m not personally regulated w/ mark to market and capital requirements…. otheriwse, the auditors could mark my house to zero and require that i have at least 20% capital in the house and force me to sell it and move out or sell my other assets to meet the ‘capital requirement’.
    as it is, i have no idea what my house is worth b/c no houses have sold in my neighborhood for many months… sounds familiar?

  17. Mike wrote: “.. the true fact this asset [your house] is indeed owned by the bank.”

    That’s not true. The bank owns the mortgage, not the house.

  18. A question about your 401k balance in your calculation. If this is the pre-tax balance, you need to tax affect it to give an accurate picture of your net worth. When you eventually withdraw the money, you will need to pay taxes on it.

  19. I’ve always been at odds on whether to include home equity in net worth statements or not. The net worth that I focus on does not include my home equity. My home equity is about $300k but I never consider that as money so I don’t think about it. My net worth for my own purposes is just the value of my liquid assets minus my liabilities except mortgage. Because the fact is the home equity is never really gotten to, when it is as people have done over the past several years its just a disaster. And when you move you typically pour the proceeds from the sale of your former house into buying a new house. However, while this blogger’s home equity is a big part of his net worth it is not as bad as some. I see a lot of “pf bloggers” put up net worth statements where their home equity is 50% or more of their net worth. That is just fooling yourself, what matters is the money you have access to.

  20. I’m impressed with your savings and hopefully will soon be where you are(although the house is a bit more than I’d want to owe,unless you’re in an expensive housing market, but I suppose we all need to enjoy at least one investment,regardless). My main concern is analyzing the current market conditions, do you feel your brokerage(assuming it’s your risk investments) are a little low? You’re sitting on 20 times(cash) what you have in risk investments. And from your charts, you show the market always bounces back the year after a recession. Perhaps you are converting your cash to investments since this 1/09 snapshot. If not, you maybe missing out on some bargain stocks that happened in 2009. I’m always wearing of risk investments, but if ever there is a time I shouldn’t be I suppose it is now!

  21. It would help to have an idea of your age (at least a range) for readers to compare where they are vs. your published net worth and goals. Based on your numbers, you’re probability of comfortable retirement if you’re between:
    20-30 years old – Very good
    30-40 years old – Good
    40-50 years old – Borderline in trouble
    50-60 years old – You’re in trouble
    60-70 years old – Beyond trouble – start lighting candles, play the lottery, pray for miracles.

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