Sunday, March 27, 2016

Net Worth Update - February 2016


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.

January was brutal for the markets with the S&P 500 declining 5.1%.  The blood-letting continued during the first half of February declining another 6.7% through the first 11 days.  However, things started to reverse to close out February and the S&P 500 ended with just 0.4% decline for the month.  The bulk of my net worth is tied to the performance of the markets so as they go so goes my net worth.

Although with a long term investment horizon the changes are just noise over the short term and are typically best to be ignored.  Of course receiving over $300 in dividends and a whopping 6 dividend increases sure helps to ease the sting of market volatility.  Dividends are great because they are always a positive portion of return.

For the month our net worth increased $809.77.
Current Assets: $581,416.23
Current Liquid Assets: $186,777.73
Current Debts: -$185,031.30
Net Worth: $396,384.93

February was solid for our net worth considering that our income is lower than normal and expenses are higher than normal.  So we don't get the same kind of boost that we used to get from an extremely high savings rate.  For February our net worth ticked higher ever so slightly, but a win is a win.  It worked out to a $809.77 increase for the month.

I'm pretty pleased with February's results although January put us in a big hole for our net worth.  Year to date our net worth has declined $16,812.11.  For the month it worked out to a 0.20% gain compared to January; however, we're still down 4.07% year to date.

We're still in cash conservation mode for the time being with eventually a swap to aggressive debt reduction and then finally move back to regular investing.  I can't wait to be on that last step!  Since I work in the oil field and my wife is planning on being a stay at home mom starting in July, cash is our friend.  If there's more clarity/stability for my job then we'll be able to take a big chunk of our cash to reduce some of our outstanding debts and really push us forward on the debt reduction plan.

At this time I don't see the point in paying extra on the mortgage at this time given our relatively low interest rate as well as the tax break on mortgage payments 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 plan to aggressively pay down the mortgage.

As of the end of Febuary we have 23.1% equity in our house.  According to Zillow our house has increased almost $10k in value from our purchase price although I just use our purchase price in my net worth calculations.  Based on Zillow's estimate the equity in our house is 26.4% thanks to the appreciation.

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.


Truly passive income, dividends and interest, totaled to $315.68 during February which covered 12.0% of my monthly expenses.  Including the income earned from blogging/writing adds another $110.70 to the total bringing my total non-day job income to $426.38.  Non-day job income covered 16.2% of February's expenses.  Compared to February 2015 non-day job income had excellent growth coming in at a 18.5% improvement.  Although dividends did actually show a decline but writing income more than made up for it.



For each month I calculate the ending liquid assets balance, i.e. cash and liquid investments only but excluding retirement accounts, and divide that by the current month's expenses.  Based on my expenses from February, my liquid savings would last for 5.92 years.  That was a 0.31 year improvement from January's level although that was mainly due to a decrease in expenses.

I've updated my Progress page to reflect February'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 February?  Were the markets still a drag on your net worth for the year?

Image courtesy of holohololand on FreeDigitalPhotos.net.

10 comments:

  1. Thanks for sharing your net worth. I like your mortgage strategy to pay more when your investment will be higher.

    ReplyDelete
    Replies
    1. FT,

      There's plenty of value in getting rid of the mortgage but currently it's not a big concern of mine. With our low-ish interest rate we should easily be able to be the "gain" from paying the mortgage early. Once the portfolio gets to a semi-self sustaining level then we'll switch to being more aggressive with getting rid of our mortgage.

      Thanks for stopping by!

      Delete
  2. Is this a typo:
    Current Liquid Assets: $186,777.73
    Current Debts: -$186,777.73

    Seems quite a coincidence debt and liquid assets are exactly offsetting.

    ReplyDelete
    Replies
    1. FV,

      Ooops, they're definitely not. I'll get it updated when I can get to a computer.

      Delete
  3. You're definitely right about ignoring short term changes. You have the right focus with your long-term investing method. I'm sure it will work out well for you. Thanks for another insightful post.

    ReplyDelete
    Replies
    1. DI,

      Short term gyrations should get investors excited not panicked. The wonderful thing about DGI is that it forces you to look at the business fundamentals as well as the dividend which is a nice counterbalance to market fluctuations.

      Thanks for stopping by!

      Delete
  4. Hi JC,
    Congrats on a solid month - another step in the right direction.

    I'm with you on not attacking the mortgage in the short term - it's one case where inflation works for you, and as your income increases, the mortgage payments become less of a burden. I am saving separately to pay-off the mortgage in one lump sum in the mid-term though.

    My results in February were good as I was paid a bonus which I was able to save and invest. Performance-wise I was down -0.44% for a total loss of -2.49% YTD. Those numbers exclude new capital added. So far this month I'm up to around +1% YTD but the month's not over yet!

    Best wishes,
    -DL

    ReplyDelete
    Replies
    1. DL,

      I'm just glad to see the bloodletting from January stop. I was down $17k to start the year, although most of that was paper losses of my investments rather than cash leaving my hands.

      Inflation is definitely your friend when it comes to the mortgage and owning a house. I've been toying with the idea of trying to pay off the house sooner but I think keeping it on hold is probably best for now. I need to work on a spreadsheet to try and figure out when we need to swap to aggressive mortgage pay down though. It shouldn't be too difficult to do just kind of merging a few spreadsheets I already have and make sure they all reference the same cells and then it's just a matter of using the goal seek function in Excel.

      March is looking awesome for our net worth with our biggest increase ever.

      Thanks for stopping by!

      Delete
    2. Looking good. I don't want to pay down extra on our mortgage either. I don't see the point when the rate is low. Our net worth was pretty much flat in February. I think it should be up in March, though. The market did relatively well this month. I'm not worrying about it too much. Some fluctuation is good for DCA investor.

      Delete
    3. Retire By 40,

      Time is definitely your friend when it comes to mortgage pay down thanks to inflation. Especially if the interest rate is sufficiently low and easy enough to beat over the long term via investing.

      I track my net worth for the purpose of knowing where we stand but I put more focus on the cash flow. In order to be FI you have to be able to convert your net worth into cash flow anyways because you can't just pay people in your net worth. Some people might use portfolio sales/drawdown to generate the cash flow but I prefer income generating investments like dividend growth stocks and hopefully some real estate too in the future.

      Thanks for stopping by!

      Delete