October 2008 Financial Status / Net Worth Update

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Net Worth Chart 2008

Credit Card Debt
If you’re a new reader, let me start out as usual by explaining the credit card debt. I’m actually taking money from 0% APR balance transfer offers and instead of spending it, I am placing it in high-yield savings accounts that actually earn 3-4% interest or more, and keeping the difference as profit. Along with other deals that I blog about, this helps me earn extra side income of thousands of dollars a year. Recently I put together a series of step-by-step posts on how I do this. Please check it out first if you have any questions. This is why, although I have the ability to pay the credit card balances off, I choose not to.

Retirement and Brokerage accounts
Whew! Ignoring new investments, the value of my holdings lost nearly $12,000. I won’t go into why, I think most people have heard the overall reasons. I did a portfolio update in mid-September to better understand what happened specifically. Accordingly, I am directing future contributions as I can to help rebalance my portfolio back towards the target asset allocations (mainly international developed and emerging markets stocks).

I did make an $5,000 contribution to my self-employed 401k, although I am still left in negative territory for the month. I do hope to contribute at least the $15,500 maximum salary deferral in 2008, as this has been my only contribution so far this year. My wife has already maxed out her 401(k).

Cash Savings and Emergency Funds
Last month, we achieved our mid-term goal of six months of expenses ($30,000) in net cash put aside for emergencies. Once my retirement accounts are funded, I may try to increase this cushion. An alternate reason for increasing cash is for potential real estate opportunities (way) down the road.

Home Mortgage
Another ~$500 of loan principal paid off. According to Zillow, the estimate of the value of my house is still higher than what I originally paid for it, but has also dropped 3% in the last month alone.

Big Expenses
We are taking a trip to Spain in November, which will cost us about $1,000 each. I wrote earlier about how we tried to save money on travel and how we manage cash and credit cards abroad. The airfare has already been paid for (charged on the credit cards to earn rewards, of course).

Basically, I still consider myself doing well, but I guess it is hard to avoid what everyone else is experiencing. Shrinking 401(k). Dropping house value. Rumors of potential layoffs for part-time employees at work (who’s next?). Lots of red in my net worth chart. 🙁 Fun times, eh?

You can see our previous net worth updates here.

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  1. Well, it’s definitely gut check time. I know someone who just unloaded all their stocks into money market funds. They were invested 70% stocks and are retiring in 2 years. I feel really, really bad for those people. There must be quite a few out there.

    Shame, Shame.

  2. They should have done the rule of thumb
    100 YEARS – (MINUS) YOUR AGE = how much you put in stocks
    so lets say they were 65, they should have only put 35% in stocks.

  3. Shoulda, woulda, coulda.

  4. Jonathan, do you feel it is a good idea to be directing your invetment portfolio towards international and emerging markets? Right now our own financial markets are experiencing a difficult time, and could really use some help.

    Should we be doing the noble thing by buying stocks in our battered financial sector to show our support and solidarity to the industry?

    I was just reading about today’s ongoing congressional hearings with Dick Fuld of Lehman Bros. It was sad to hear that the main reason Lehman went bankrupt was only because of the fear investors had about the company.

  5. Dan Isaacs says

    Zillow is generally full of poo. They have a pair of undeveloped lots across the street from me valued $50k more than my larger lot (inc the 3,000ft^2 house resting upon it.). Their Zestimate of my house was 30K more than the appraisal I got when I did a re-fi in July. They really have only a rough idea, and consider being %10 off actual value to be a “success”.

  6. I just talked to Schwab today, and it appeared their stance was that the US currently has more potential than Emerging and International.

    Fact is, I SHOULD be be buying more emerging and international as those are the stocks that have tanked the worst, but I think what I’ll end up doing instead is just not rebalance and let those lower allocations to foreign investments ride at the percentages they are.

    I am jumping into the U.S. with some money I had saved up though…

  7. Shraz… I think the conventional wisdom is now 120 minus your age. People are living a lot longer than they used to.

  8. I should be underweight in the US as well, but I’ve been buying S&P 500 steadily in my wife’s 401k (her only “index” fund) so I don’t need to buy much more now.

    Dan – In general, I agree. Zillow is just some algorithm that some computer guys tried to put together. There is no discretion as to what sales are legitimate comps, and there is very little adjustment for the actual condition of the property. However, it does show the recent trend in terms of median sales price in ones area.

  9. Jonathan… Have fun in Spain! Where are you going when you’re there?

    I lived in Spain for 3 years and would be happy to offer up advice, suggestions for restaurants, or any other information that might be helpful.

    At least the dollar has bounced back against the Euro… seems they are screwed as badly as we are!

  10. It was very discouraging today to see Jim Cramer, of all people, instruct anyone who has money invested in the stock market, and may need the funds in the next 5 years to “SELL EVERYTHING”. Is it possible he knows something the rest of us “mere mortals” don’t?

  11. hey, remember me?

    and what i said in July?

    “nobody wants to move their money down 20% year to date, but the risk in our economy is too high not to do it.

    many banks will fail, the economy will weaken like never before, and events in the financial sector will cause the markets to panic (whether justifiably or not) and possibly crash.

    yeah its crazy, but when it happens in the next year or two, i’ll hit you up and tell you told you so.”


    there’s still no light at the end of the tunnel and the market’s not done going down because the economy is no where near bottoming, not even close.

    stay in cash, or move into cash until several weeks or months after the panic that is coming.

  12. “It was very discouraging today to see Jim Cramer, of all people, instruct anyone who has money invested in the stock market, and may need the funds in the next 5 years to “SELL EVERYTHING”. Is it possible he knows something the rest of us “mere mortals” don’t?”

    Cramer’s just an indicator of a short term rally in the stock market that’s coming. and it will probably rally hard, but once he gets bullish again, sell like theres no tomorrow.

    or if you want to make money, just go and stay short until the crash.

  13. Little late for Cramer’s advice. I disagree with him,
    though he might very well be right….that sort of
    advice is a bit too general, I think.

  14. It seems like right now is the perfect time to start investing right? (Assuming you’re not retiring anytime soon).

  15. Two questions:
    1) Is your cash in the bank? Ours is. Yes, it’s insured. But how long would it take to get that back? I’m considering taking it out of savings and keeping it with us until the crisis clears a bit. We have a years worth of savings in there.

    2) Details on how to do Spain for $1000 each. PLEEEEEASE! We clearly spend way too much (4k for 2 week vacations for the two of us) even though I thought we were doing international travel very reasonably. Please go in depth, break down the spending and show us how you’re doing it!

  16. Clog Money says

    Crazy times, it’s really worrying for people like me. I have no savings at all and reasonably high monthly out goings. If I were to lose my job, I’m not quite sure what I would do… Move back in with my parents?? Eeep…

  17. I am a believer in fixed income, since (unfortunately for us who didn’t have much money back then) the market almost quadrupled between 1994 and 1999. I would not recommend drastic changes to a portfolio at this exact moment but you can check my model allocation on the web site. This is after all a credit crunch and fixed income opportunities are plentiful, with a special eye towards munis.

  18. @DiaryofAdink

    He did so in his blog post about Spain. However, to summarize, he is using reward points to buy down his hotel rate. Given that there is cash value to those points, his trip is higher, but he is gaining more benefit from the points buy cashing them in on a hotel room rather than cash.

  19. I was able to do Italy for about they same for 10 days with no reward points. I think it’s all a matter of looking for bargains. We also found great bargains at B&Bs.

  20. klein3351f says

    You seem to be weathering things quite well. Only lost 10% in the 401k? That’s great.

  21. Jonathan — please post something about this horrible market – I want to scream! Even just talking about it would feel better …

  22. Wrong. Zillow is good for people that don’t know about a neighborhood. If I knew nothing about your area, but had an address, I could determine whether or not houses are in the 100K range or million dollar range. It may be off by 20%, but I believe it isn’t for gauging precise values, it’s for research about unfamiliar markets.

  23. auntie_green says

    uh, 89K is almost 30% more than 69K (or 69K is a 23% discount off 89K) So take that to a house that is listed at $1M. I guess Zillow would say its worth 1.3M . Or a house that Zillow says is worth $1M, really should be listed at 770K.

    I’d be willing to give Zillow 10% difference, but that seems huge.

    Some might say Zillow is probably better in tract homes where there are a lot of sales. well, I live in a tract home where there is decent volume. I have a golf course view lot. Across the street (non golf course view) is the exact same floor plan. Zillow has that house at 75K more than mine. Huh?

    I agree with salladin

  24. Ok, Zillow is worthless for assessing an accurate value of your home, but it is still good for putting you in the ballpark of a neighborhood. For instance, it’s not going to tell you that a 700K house is worth 100K. So, if you are moving to a new area, it’s quite helpful whenever all you see are subdivision names in the multilisting. Look at it as a guide to beginning your search, and not as a guide for what price should be on the contract.

    In addition, if you are a homeowner in the neighborhood, it’s yet another resource to see how much homes were sold for. Albeit, it’s often much easier to use the county assessment database if it’s made available online.

  25. Ha, I’d be veeeerrrry happy with a net reduction in net worth of only 1.9%

    I use Quicken and update 100% of my accounts sporadically. Last full update was 8/1. Just updated yesterday/today and my net worth is down 14.5% in that time with obviously some big hits in the past few days. 60% of my net worth is tied up in the market.

    I first got into the market in 1998 with index funds (started with S&P 500). I’ve been buying monthly since then and have never sold anything. All my accounts are underwater. PAIN! But I capped my 401K in September and as a result just upped all my after tax monthly automatic investments with the extra.

  26. Zillow.com can be quite disheartening. It values my house $15k less than what I paid 6 months ago ($260k). It doesn’t even have any of the details on the house. It actually showed $8k increase in value over the past 30 days, per Zillow, and I got a notice in the mail that my assessor’s office increased the value of the land itself by $5k while Zillow doesn’t show the increase yet.

    So what if I wanted to sell it and I have this website slamming my house’s value?

    Who knows…

  27. Hi Jonathan,

    I was curious — how come your 401k and IRA balance went down by only ~10% when market has tanked by >20%.

    What kind of investment you have in your 401K. Mine has dropped >25%.

  28. @Dan,
    That loss is for September 1-September 30.

  29. Perhaps using comps just sold at Trulia.com would give a better estimate.

  30. Zillow tells me that my house has APPRECIATED in value roughly 10% this past year. Hogwash – I’ve had one appraisal done in the spring for a refi and they came in 10% under the original purchase price.

    Zillow is not a tool for anyone to use to make valuations.

  31. Jonathan, been trying to email you, but it doesn’t seem to be going through. I’d be interested in advertising titanium money clips on your site. Budget for this is $5,000.00US/yearly.

    Let me know if you are interested. Our titanium money clips are a high quality product (and strongly related to money).

    You could get feedback from your readers. It should be a win-win-win for everyone if properly done. Your readers will find a good product, we get a sale and you get some cash.

    Anyway, I’m writing because I think my email is not getting to you. If it is I’m very sorry to bother you.

    Best regards,

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