Monthly Net Worth & Goals Update – October 2009

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Net Worth Chart 2009

Credit Card Debt
For newer readers, 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 mostly waiting on existing offers to end.

Retirement and Brokerage accounts
Wife’s 401k was already maxed out at $16,500 for 2009. I made another $5,500 contribution to my Solo 401k, for a total of $15,000 contributed in 2009. This makes us about 95% done with our goal of maxing out both our 401k salary contributions for 2009.

Our total retirement portfolio is now $190,085, or on an estimated after-tax basis, $152,349. At a 4% withdrawal rate, this would provide $508 per month in tax-free retirement income, which brings me to 20% of my long-term goal of $2,500 per month.

Cash Savings and Emergency Funds
We still have a little over a year’s worth of expenses in our emergency fund. Part of the cash is earmarked for some smaller home improvement projects.

The next step is to put future funds into buying ETFs in a taxable brokerage account since I no longer have room in tax-sheltered accounts. I’ll probably use TradeKing or Scottrade as my buy-and-hold ETF broker, and keep Zecco as my “play money” account.

Home Value
I am no longer using any internet home valuation tools to track home value. If I still did, it would have been $572,000. Some people have suggested using my tax assessed value, but I also think that is too high. I am 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. This way, I just focus on the 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. Enjoy these status updates.. We do the same thing now!

  2. I like that you changed from using the single month value of your home but am interested in what tools/criteria you are using to determine comparables and the 480k number you settled on. In 6 months, what method do you plan on using for choose the ‘new’ number?

    As the previous commenter stated, i too enjoy these updates and am also doing them now for my family.

  3. We have a pretty good tax assessment database here in our county. So, you can see a house sold, and easily and quickly find out the sale price. That’s an easy way to get comp prices. I’m assuming most counties have this type of access.

  4. Steve Bonds says

    If I remember the commentary history right, the problem with the home valuation was that the normal montly variance completely overwhelmed all the other changes, rendering the net worth exercise less useful.

    Another approach that would continue to include the home value might be to estimate it once a year, then use that value for the remainder of the year. It’s not like you’ll up and sell your house one month on a whim…

    You could also use your estimated “emergency liquidation” value of your home instead of trying to find a more reasonable market value. Give one of those shady cash-for-your-house outfits a call and see what they’d give you for your house TODAY. Then use that number for the rest of the year. (Or perhaps just use 80% of your current method as a likely liquidation value and avoid getting follow-up calls and junk mail…)

    The liquidation value would reflect your home’s likely contribution to your net worth in an emergency situation.

    — Steve

  5. If your tax assessed value is too high then you should appeal the value. Not sure if it works that way or not where you live but you can here. My tax assessed value is actually lower than what my home appraised for just recently. It has been lower ever since I bought the house. Not sure how things work in Cali but you should find out.

  6. I see you have Brokerage and Roth IRA listed above, just curious as to what Financial Services company you’re using now?

  7. Company 401k – Fidelity and Diversified
    IRAs – Vanguard
    Solo 401k – Fidelity
    Brokerage – Zecco, Scottrade, and TradeKing

  8. @ Jonathan

    Would you consider an automobile part of your net-worth?

  9. I wouldn’t have a problem with someone tracking the net worth of their cars, but I choose not to because they are depreciating objects and I don’t even have a loan for them. Besides, my cars are both worth less than $5k, though they run fine. 🙂 It’d be like listing the value of my computers or furniture.

  10. May be a time-weighted home value would work too? Since you already have a history of your home price.
    ex. 0.5*(12month ago) + 0.5*(11months ago) + … + 2 *(2months ago) + 3 *(current price)
    If you keep same value for 6 months, net worth would jump (or drop) too much after 6 months.

  11. Listing the values of personal property is something I used to do when I was younger to make myself feel better. However, all that does is skew the numbers and make you feel better about all the money you spent!

  12. Good idea on the home value. I estimate mine once a year and leave it alone. Even though houses haven’t decreased in my part of the country, I probably haven’t upped my valuation in 5 years. I also have a very “conservative” valuation. Even in the ‘glory years” when California houses were going up, I wouldn’t have made financial decisions based on that fact. Unfortunately, many did and it partly got us all in this mess.

    Concentrate on paying off the house, if you have the means and other things are taken care of. I paid mine off a few years ago, and believe me there is nothing that feels better than to not owe anybody anything.

  13. Hey Jonathan – It looks like the bulk of your retirement contributions are going into pre-tax accounts – and your spendable dollars in retirement assume a 20-25% income tax rate. Have you thought about how increasing tax rates might affect your portfolio? What if you are deferring taxes at 25-30% only to pay taxes in retirement at 35-40%?

  14. Pat, do you really think houses “haven’t decreased in your part of the country”? Seriously now, can we all just be real?

    What part of the country do you live in? I’m guessing you are a home owner then.

  15. @bob – What options does he have? Making 250+ thousand a year as a couple don’t exactly give them many Roth options other than conversion.

  16. With the large amount of cash you’ve got I think it would be better to pay off all your credit card debt. Much better to get a 4 or 6 percent return on your money rather than a 2 percent return from a bank. Which makes me wonder why would a bank borrow money from customers at 2 percent and loan it to you at 0% APR.

  17. Why EFTs over Vanguard index funds? Considering your buy and hold strategy, what is the benefit of EFT’s over index funds, especially if you’ll be making regular investments and paying transaction fees (as opposed to no fee Vanguard index funds)?

  18. That’s a great monthly increase!

  19. First time visitor- out of curiosity so your mortgage is $584 a month on a 463k balance? what type of loan is that?

  20. @hank – That is the loan principal reduction only, the rest goes to interest.

  21. Can you elaborate on your $2,500 monthly investment income long term goal? I don’t remember reading anything about it. So where do you plan to invest for that type of return. What are you including in the 20% you already have met?

  22. Have you considered diversifying your bond portfolio with international currency non-hedged funds?

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