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.
The start to the year was brutal for the markets with big declines during January and the first half of February. However, what goes down must come up as is typical with the stock markets and March was no different. The S&P 500 climbed 6.6% during the month which was a huge move forward. Since the bulk of my net worth is tied up in the markets it was a welcomed reprieve to see things start churning higher.
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 $800 in dividends and 5 dividend increases helps out too. Dividends are great because they are always a positive portion of return.
For the month our net worth increased $55,980.13.
And BOOM goes the dynamite!
Current Assets: $637,149.74
Current Liquid Assets: $230,164.95
Current Debts: -$184,784.68
Net Worth: $452,365.06
March was an excellent month for our net worth with the markets moving higher although that only explained about 40% of the increase. The rest came from a $29k settlement check I received for back overtime pay which was great but unfortunately it's unsustainable. Although I won't complain about receiving that kind of cash no matter how I get it.
So I'm pretty pleased with March's results. Year to date our net worth has increased over $39k. For the month it worked out to a 14.1% gain compared to February and 9.5% year to date. I honestly didn't expect to see monthly changes quite that large ever again.
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. Luckily we can cross off one of our goals for the year and that's building up a 6 month emergency fund.
At this time I don't see the point in paying extra on the mortgage 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 getst to a self-sustaining level of dividends then I'll plan to aggressively pay down the mortgage.
As of the end of March we have 23.2% 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.
One thing that I've been thinking of doing is refinancing our house. We're only 2.5 years into our 30 year mortgage, but interest rates have continued to decline. I've only done preliminary research on a refinance but it looks like we could reduce our interest rate by almost 1%. That might sound small but that's about a 25% reduction and when you're talking about balances near $170k every bit helps. The upside to a refi is that it would also free up about $90 in monthly cash flow. A refi would make progress on all 3 of our financial goals for the year of expense optimization, reduces our required emergency fund by $540 and frees up more cash flow for debt reduction. The biggest thing holding me back is that I need to see the changes for a no-cost refi on the interest rate because I don't want to shell out cash right now for a refi.
If anyone has any tips or information about a refi please pass them along.
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 $824.98 during March which covered 26.7% of my monthly expenses. Including the income earned from blogging/writing adds another $724.87 to the total bringing my total non-day job income to a personal best $1,549.85. Non-day job income covered 50.1% of March's expenses. So far this year I've received $1,425 in passive income and an additional $1,231 from my blogging/writing. Through the 1st quarter of the year I'm just slightly behind my goal pace to receive $5k from my blogging so there's a little bit of work to do there but what's really exciting is that I'm on pace to have over $10k of additional income that isn't related to my job. That's awesome!
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 March, my liquid savings would last for 6.19 years. That was a 0.37 year improvement from February's level.
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How did your net worth fare in March? Did you ride the markets to a higher net worth?
Image courtesy of holohololand on FreeDigitalPhotos.net.