Wednesday, October 14, 2015

Net Worth Update - September 2015


While cash flow is more important when it comes to financial independence, it's still good to look at the balance sheet too, which is why I provide these net worth updates.  Since more and more of my net worth is tied to the markets, there's a larger correlation between my net worth and the markets but in the long run as I continue to save and invest the net worth trend should be higher even though short term fluctuations can vary wildly.  As a dividend growth investor I'm not overly concerned with the short-term gyrations as long as the dividend stream remains in tact, but the markets' effect is noticeable.

Well, my net worth took another huge hit in September due to a stock market that declined for a second straight month and a very poor cash flow situation for our personal finances.  The main catalyst for the decline in September was due to stock market declines.  Unfortunately short term volatility is what you have to deal with when your net worth is heavily invested in the stock markets.  While my portfolio and net worth have both declined it's important to focus on what dividend growth investing is all about: dividends and the growth of them.  Dividends continue to roll into my portfolio with just under $850 coming in and even better is the FIVE dividend increases that were announced as well.  Ignore the noise and stay focused on the long term goal.  That's how you win with dividend growth investing!  During September my net worth declined $19,811.57 which is a 4.87% decline from the end of August.  I don't exactly feel like the guy in the picture above after the last two months!

Current Assets: $573,082.68
Current Liquid Assets: $183,165.37
Current Debts: -$186,249.88
Net Worth: $386,832.80

On the heels of August's $20k decline my net worth has declined just over $40k over the last two months.  Ouch!  That's a rough two month stretch.  Considering though that the markets have declined, an unexpected $15k in expenses came up, and I haven't worked much this year leading to very low income I'm not too disappointed with where I'm at.  The stock market changes are out of my control but now that I'm back to the grind of work I'll be able to start saving and most importantly investing again.  Fresh savings will only do so much to combat a declining stock market, but that capital and the future dividend cash flows will thank me several years down the line.  Year to date my net worth has decreased $31,080.02 or 7.44%.

Now that work is back in full swing I expect to be able to start making 1-2 purchases per month, starting possibly as early as the end of October, until we get out emergency fund built back up.  Of course there's also a chance that I'll get a nice windfall from my employer as they agreed with the Department of Labor to pay back overtime pay which we should have been getting but were wrongly classified as salary and OT exempt.  Just taking the average of the agreement it works out to about $17k per person.  I'm not counting on this until the check hits my account but that will be a nice boost to my emergency fund and investment capital if/when it happens.

I don't see the point in paying extra on the mortgage given our relatively low interest rate and think we'll come out much further ahead investing the extra cash flow.  So the liabilities side of the net worth equation will be slow moving.  However, once the FI portfolio is able to get to a self-sustaining level of dividends then I'll aggressively pay down the mortgage.  As of the end of September we have 22.53% equity in our house.  Also, according to Zillow our house has increased just over $13k in value from our purchase price although I'm just using our purchase price in my net worth calculations.

I haven't set any goals yet, and probably won't, for my net worth because there's just too much in flux with our financial house to be able to come up with reasonable goals.  The net worth goal has always been a secondary goal since a lot of it is out of my control since I invest primarily in the stock market.  I'll just continue to focus on what I can control which is maintaining a high savings rate and investing in high quality companies at fair prices.

The following chart shows my assets and liabilities, as well as my net worth, since January 2012.  While I have accurate records for my net worth dating back to July 2010, I didn't keep track of my assets and liabilities on a monthly basis until the start of 2012.


I'm not worried about my after-tax savings rate for September because we had to pay off credit card balances with cash flow from September.  It messed with the calculations for true savings rate but moving forward I should be back on track for my normal income/expense tracking and reporting. What's really cool though is that dividends and interest covered 42.7% of my expenses for September.  Adding in the income I received from blogging/writing of $170.72 bumps up my non-work related income up over $1k for the month and covered 51.2% of my expenses for the month.  I've still got a ways to go to reach financial independence since this was in my highest dividend payment month but we're making headway on our journey.


Based on my expenses from September, my liquid savings would last for 7.62 years, a solid 0.07 year increase from August.  All of the improvement came thanks to a reduction in expenses from around $2.2k in August to just over $2.0k for September.

I've updated my Progress page to reflect September's changes.

Make sure you sign up to receive new posts to your email so you don't miss anything.  And be sure to follow me on Twitter@JC_PIP to get up to the minute news of new purchases for my portfolio.

How did your net worth fare in September?  Were you able to counter the market moves with savings?

Image courtesy of holohololand on FreeDigitalPhotos.net.

8 comments:

  1. One thing for sure JC, the stock markets will fluctuate. Glad to hear your networth didn't get hit worse. I expect (and hope) for more volatility in the coming months. Build those cash reserves buddy, we'll have some buying to do next year.

    I hope you have a great week
    -Bryan

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    Replies
    1. Bryan,

      That they will. The markets did most of the damage to my net worth but there was still about $14k in expenses we hadn't planned for either so that didn't help. I'm trying to build up cash and get back to regular investing but there's still some more expenses I need to make sure are accounted for that are coming up.

      Thanks for stopping by!

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  2. I admire you for not freaking out about a 5-8% decline in net worth. What percentage of your net worth is in stocks?

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    Replies
    1. FS,

      Sorry for the late reply. 60% of our assets is from stock/mutual funds across taxable, 401k, Traditional & Roth IRAs. There is some bond exposure in the mutual funds in my tax sheltered accounts but ball park I would guess it's less than 10% of the investment portfolio, probably closer to 5-7%. It works out to about 87% of our net worth as of 10/15. I'm contemplating adding investment real estate to the mix as well but need to figure out the best route as I want a more hands off approach. I do have real estate exposure in my stocks via REITs which aren't the same but it's close.

      I'm not concerned with the decline due to my large exposure to stocks as well as the fact that about $14k of the decline was also due to large cash expenses we weren't expecting which helped to exaggerate the net worth losses.

      Thanks for stopping by!

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  3. I feel your pain JC...our family saw our first decline to our net worth since we began keeping track! And to think I opened my big mouth and bragged about our streak just one quarter ago. But on the positive side, we put a lot of capital to work this past quarter so hopefully those investments pay dividends (literally!) in the coming months. :)

    Keep investing JC, in these times are when the best purchases are made. And the profits is always made in the purchase!

    Best wishes my friend. AFFJ

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    Replies
    1. AFFJ,

      Just focus on the capital that you invested that will fuel your growth and dividends in the future. That's my main priority. I hope to get back to regular investing later this month or sometime during November but I need to make sure all my ducks are in a row with upcoming expenses and cash on hand first.

      Thanks for stopping by!

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  4. I've been FIRE for a little over 3 years. Each decrease in NW from market hiccups becomes less annoying. Eventually, you hardly notice it.

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    1. FV,

      Been FIRE for over 3 years? Impressive. If things continue as they are then I would expect our timeline to be 5-10 years but my wife would need to continue working, which she probably would even if we were officially FIRE for both of us. The net worth dips don't really concern me but I still like to track my progress on it.

      Thanks for stopping by!

      Delete