Net Worth Challenge

We had another solid month of gains in May.  I know I had been anxiously holding my breath to find out how well our performance was during May!  Some of the highlights for this month were:

1. Stock Market — the stock market continued it’s upward trend, which certainly helped our net worth gains for the month.  It’s been a good year so far; and I hope to see it continue the upward gains during the second half of the year.  I may not have made the post yet, but my wife and I have already maxed out our Roth IRA contributions for the year.  I accelerated our monthly contributions in order to get to this point.  If the market continues it’s upward trend, we’ll benefit even more because of it.
2. Rental Unit — May is the first “rented” month for our new rental property.  It certainly helps to have that rent check coming in at the first of the month now that I have to start making mortgage payments, insurance payments, and tax payments on the property.  We rented the unit on a shorter-term lease than our standard, but we are compensated by a higher rent because of this option.  For the next three months we’ll have a higher cash-flow on the property than the cash-flow on our standard one-year lease.
3. Spending — I have never went into a deep analysis of our spending on the blog, but this is an item that represented a negative for the month of May.  My wife and I were on the road a lot during May and spent a considerable amount more on dining out (and fast food) than we usually spend.  Hopefully we can bring this spending under control in June, although we will be traveling about the same amount as in May.

Our finances were back in full force in April with a healthy increase of $13,307.39 — a 8.74% gain! There were a number of factors that contributed to this increase, however, all of them were certainly welcome.

1. My wife switched companies in early April. Due to the nature of her line of work, her old company did not want her to continue working during the two week notice period. Therefore, my wife began immediately at the new company — but still received a paycheck from the old company for the remaing two weeks. My wife got paid double-time, which helped!
2. The stock market rebounded tremendously. We are getting to the point that we have a lot of money invested in the stock market. The solid gains in April certainly bouyed our overall performance.
3. We rented out our newest rental unit. Financially this did not affect the April numbers, since the deposit wasn’t made until May. But, I still want to mention the point because I’m excited!

I thought our February 2007 Net Worth Update was bad, but I should have held back my disappointment until this month. We still squeezed out a positive gain of $1,490.03 — but it was a paltry gain of only 0.99%. I knew that March was going to be difficult because the closing for our new rental property took place at the beginning of the month. Additionally, my wife and I had to purchase numerous supplies in order to “rehab” the property and bring it back to a good, clean living condition. Our efforts should pay off as I expect to begin renting the property before May 1st.

Aside from the rental, there was not much else interesting for us during the month. It has been a lot of work to get the property ready — and I honestly will admit that I’m wondering if I’m better off in the rental business or better off putting the money into the stock market. Many of my recent (within the last two years) investments are up 20%+ since purchasing them. If I can keep that record up, the real estate market and rental business (includes all the work involved in maintaining a property), may not be the place for my money — or my time and effort. That may make for an interesting discussion in the future. I just wanted to admit that the thought had crossed my mind.

One word comes to mind when looking at our net worth update from February —- ouch! My wife and I are heavily invested in the stock market (both in individual stocks and through mutual funds). This means that our portfolio and net worth will typically swing the direction that the overall market is going. In the case of last month, the market was hit HARD! I’m still pleased to see an increase in our net worth, but was a little disappointed in the performance during the last few days of February. I will not let it affect me too much because the market goes up and the market goes down.

The other highlights from February is my shifting of money between the taxable brokerage accounts and the cash & savings account. This shift is evident because of the LARGE increase in cash & savings. Most of the moves into the account took place during the last week in February. This is all in preparation for the closing on our additional rental property. Our closing date has been delayed a half-week due to some last minute complications that arose between the sellers sale of the old house and their purchase of their new house. The complications have been resolved and we’re on track to close this week. At that time the money in our cash & savings account will decreased dramatically because of the down-payment and closing costs that we expect to pay.

That’s about it for February. I’m anxious to see how the month of March plays out because of the home purchase. I expect to see our expenses rise considerably as we purchase cleaning supplies and other items that will be used in preparing the rental property for rental. Let’s hope it doesn’t get too out-of-hand.

My wife and I are off to a great start in 2007. We experienced the best of both worlds because our assets increased and our liabilities decreased, resulting in a nice increase of $7,923.50 to our net worth. Our savings rate is holding steady and our expenses were well under control for the month. We are making contributions to our Roth IRA accounts, 401k accounts, and House Fund according to our 2007 Financial Goals.

I am very pleased with our start in the New Year. Let’s hope to see similar gains in the upcoming months!

This update marks the official end of 2006. The year ended quite positively with a nice surge in the stock market, which ultimately helped to send our net worth to a record level of $137,960.77 —- an increase of $14,953.26 from the previous month. Yes, that increase is correct! I know because I checked my numbers three times just to be sure!

Part of the reason for the increase was that my wife had a $4,500 CD (certificate of deposit) from her old bank that she had not told me about. Truthfully, she had forgotten about it herself. Upon learning about the CD, I insisted that we take the money and put it into our Vanguard Money Market account — which is paying a higher interest rate than the rate at her old bank. The other part of the reason for the increase was a small bonus of around $1,000 total from our employers at the end of the year. It was not a large bonus, but we were still happy to accept it.

Overall, I am more than excited to see 2006 end on such a high note. Since I started this blog last September, I did not get the chance to post my 2006 financial goals early enough for everyone to view. One of those goals, however, was to “reach a net worth of $110,000 to $120,000 by year end.” The discovery of my wife’s CD means that our numbers should be increased by $4,500 than the original goal — placing the range at $114,500 to $124,500. We clearly surpassed our original goal set last January, which I suppose is better than not meeting the goal in the first place. However, there were a few reasons that played a role in surpassing our original goal by such a significant amount. I believe we exceeded our goal because of three reasons:

• Stronger than expected return from the stock market. Our investments performed better than my conservative, moderate, and agressive predictions.

• Ability to save more than previously expected. I received a nice raise in my paycheck in July — more than I had hoped for or even expected. Instead of using this “newfound money” for spending, I decided to take the opportunity to increase my contributions to my 401k account. This extra savings helped push our net worth higher during the later part of 2006.
• Matching 401k contributions from employer. I knew that both of our employers offered a matching portion to part of our 401k contributions, however, I did not factor those contributions into our goals for 2006. I will make sure to include this point for 2007, though.

Now that 2006 is over, I am ready to focus on 2007 and am excited to work towards a new set of goals. I’ll save that list for the next post.

It took me a little while to make this post (ok, a month late), but here it is. November was a positive month for our net worth just as October had been. Since last month’s update, we saw a gain of $5,952.46 in our net worth. Since starting this blog in September, our net worth has increased by $15,333.32 — a gain of 14.24%.

October was a great month for the stock market and our net worth. As time continues forward, my wife and I are going to have more and more money invested in the stock market. Big upswings in the market are going to affect our net worth to a larger degree. Of course, I love reporting on the positive months that have big gains, such as this last one!

Since last month’s update, we saw a gain of $9,380.86 in our net worth. Our new total net worth is just a little over $117,000. One of our goals for 2006 (which I need to share in the blog sometime) was to achieve a net worth of $115,000 to $118,000. It looks as though we are going to surpass even our high-end estimate for the year, which is great news. I attribute the majority of the gain to the stock market’s great returns throughout the year. I continued to invest our money when the stock market inched downward during the middle part of the year — and it’s starting to pay off now that the market has been hitting new highs.

Although I am just starting out with this blog, I am not just starting out with my plans to grow my net worth. In my last post I talked about the long-term goals I have set — in reality, I set these goals about two years ago. Since that time I have been trying to alter my saving/spending habits in such a way that I am able to move forward towards those goals.

Starting today, I will begin each month by listing my updated assets, liabilities, and net worth. This accomplishes two things in my mind: (1) it will give you a chance to see where I am at financially in relationship to my goals and (2) it will force me to make this calculation each and every month. And thankfully, it just so happens that I was able to finish totaling up my assets and liabilities today! Here is my current financial situation:

At the end of September 2006, my net worth was $107,674.19. In the next couple of posts I hope to dive deeper into each category and explain the numbers further.