Monthly Net Worth & Goals Update – November 2009

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Net Worth Chart 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.

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  1. “DH’s 401k was already maxed out at $16,500.” DH = Dear Husband?

  2. 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.

  3. 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.

  4. 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?

  5. 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.

  6. @Pedro, Hoang – I don’t need to spread it out, it depends on how your 401k works. See this post:

    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.

  7. 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?

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. @Ron – 😉

  14. @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.

  15. @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?

  16. SavingEverything says

    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.

  17. I still don`t get it. You got savings , why don`t you pay off a big part of your debt (mortgage) with it?

    what is the interest rate yoiu get on your savings and what is the one on your mortgage?

  18. Jonathan,

    Where do you recommend transferring my old 401k to so I can buy ETF’s? I already have a Vanguard account for mutual funds, but I want ETF’s with the $22K from my last 401K.

    I am considering Zecco, but they have a $30 annual IRA fee. Any suggestions?

  19. @Eman – Zecco has 10 free trades/month with $25k and $30 annual fee as you state, TradeKing has $5 trades, and if you have a Wells Fargo checking account you can get 100 free trades/year with $25k in stocks. Just some ideas, depends on how often you trade and what additional features your looking for beyond basic trading.

  20. You are doing very good. I am 27 years old and I feel so behind whenever I look at your financials. One day I will keep up with you….Keep up the good work!

  21. moneynomani says

    What I don’t follow is (and pardon my ignorance):
    – If liabilities decreased by $12k MoM, why didn’t your cash balance also decrease since you had to pay it off with an asset? Hmm..Unless your salary inflow offset it and you only had a net -4K change… ahh.. might have answered my own question.

  22. Thank you for postings. We are similar savers and constantly trying to see if we’re “on path”, so it’s nice to have someone else’s thoughts to bump up ours against and make sure we’re not missing something.

    So I do have a question, and apologize if you answered this in a previous post that I missed. I understand your mid-term goal, hands down (max out 401k contributions). What I haven’t been able to figure out is your long-term goal ($2500/month in investment income). So a few questions:
    – what’s driving that goal? (Is that to replace income because you / your wife anticipate taking a less paying job? is it just gravy?)
    – do you have a timeline in mind as to when you want to achieve it?

    I’ve run plenty of what-if scenarios, but have yet to derive a specific goal to hang my hat on. Any backgrond would be really helpful.

    Thank you!

  23. Ryan,
    I thought you said 100k down are you actually going to be putting 500k down according to your example? I think there is an error in your example. If you have that much cash, real estate is a really good option for you however you are not really grasping how real estate investments work. I would like to reveal more but i am still at a stage of experimentation. I work at the bank, i get to see many people’s portfolios and i spoke to many real estate investors and i feel most real estate agents don’t even have a good idea of how you can be really rich in real estate but it seems that not much people have yet grasp how they can make it work.
    Wish me luck, I hope to retire in 15 years making 1 million a month.

  24. Robert Keeler says

    You’ve been doing an awesome job keeping afloat on the equity/mortgage balance equation, at a time when so many others that bought around the same time as you are VERY underwater. Good Job! Keep up the good work! Looking forward to a more recent monthly update!

  25. When do we see a new update on net worth? Been a few months….I am tracking mine in comparison to you (I’m at about 400k, 30 yo), but Nov is your last post…

  26. Hi, I dont get why you would invest in a 401k when you can lose so much money when the market is down. Time magazine had an article a few years back about how dumb a 401k is. I dont mean to be rude, I just think there’s better places for your money. On a 401K you are taxed just the same when you take your money out (at whatever age your permitted to) as earned income, not only that but your money is now worth less because of the average 3% inflation each year, so you are actually losing money. Also, what kind of income-producing assets do you own? Are those the stocks? I don’t yet understand how stocks work much, so bare with me please.

  27. Great move getting rid of all credit card debt

  28. One of the charts I’ve enjoyed is your “A Decade Of Net Worth History Revealed,” which is net worth with life events. It would be interesting to see it updated with your new events: home ownership, job changes, market crash, kids.etc. Speaking of kids do you have any yet? To make your net worth relevant to others, I would monthly post: married, both spouse work, kids and ages. Reason I say that, everything changes when you have kids. Wife and I are about to turn 30, second son will soon be here and they’ll be two years apart. Kids immediately cost ( double-income = daycare vs. single income. Don’t forget saving for their college is a mystery goal.

    Noticed that you never had school loans, mom & dad paid right? We, on the other hand, paid and still paying all of our college debt. We think there is something to be said for kids paying their own way, but the direction tuition rates are going and how govt assumes wealthy parents will pick up the bill… don’t see how that’s possible. Actually, at the rate it’s going the majority will be on “income-based” repayment… can you say socialism? Here’s the gov site that tracks tuition ( public / private )

    Good Luck and hope to see to the blog continue

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