Thursday, March 06, 2014

Net Worth

The Net Worth Post

The Net Worth Primer in case you want to understand what I calculate and why.

Last value, $1,106,713

End of June Net Worth

Net Worth number for the end of June... ok July 3rd, 1,106,713.  A drop of $8,622 for the month.  Stocks did well, again, but big drops in house values.  At one point houses were down $40K for the month.  Zillow must have made a change to the algorithm as today the residence went up 26K and the rental went down 15K.  Normally, if Zillow updates, they may move a couple of hundred, a thousand once in a while.

Cash and investments have overtaken home equity, 566,899 to 539,814.

The neighbors house I had mentioned in last months post was taken off of the market.

End of May Net Worth

Net Worth number for the end of May.... $1,115,335.  An increase of $19,239 or 1.755% or 21.6% annualized.  That included a withdrawal of $5,000 from an account I include in the net worth to an account I don't include in the calculation.  So, the number should kind of sort of be 5K higher.  But its not.

Not the 30% annualized gains we have been seeing but I will take 21% every single month.  It would have been 26.54% with that additional 5K.  The goal for this year, which I feel is aggressive, is to get to 1,190,000 and at the current rate, on track to get to 1,204,000.

The hope during the last week of the month was maybe getting to 1,120 but a decrease in the house values by Zillow spoiled that dream.  House equity stands at 575,736, cash and investments, 539,599.  I had thought cash would surpass home equity by now but still a ways to go.

The neighbors house that I mentioned was on the market in the March update is still on the market and still not sold and they have not changed the price.  I will be golfing with the owner tomorrow morning so may get some insight.

End of April Net Worth

Net Worth number for the end of April.... $1,096,096.  An increase of $40,636 or 3.85% or 46.2% annualized.  Both the house values and stocks did very well.  It was a really good month and I have no time to comment more on it now.

End of March Net Worth
The net worth value for the Start of April is... $1,055,460.  An increase of $23,745 or 2.3% which annualized is 27.6%

House values were up slightly, cash and investments had another good month.  At the current rate the value of the cash and investments should overtake the equity in the houses at some point in the next month.  We increased our retirement account contributions right at the end of the month so the monthly numbers were just slightly affected by that change.  Going forward, there should be additional contributions made.  In addition, there was discussion about a change to the investments to move additional money from non retirement accounts to a 401K.  The plan is to make that change in a few months.

I was a little surprised to not see the residential house value go up, per Zillow, right at the end of the month.  I friend who live about a block away and whose house is similar in size and # of bed and baths went on the market last Friday at a price more than 10% above the Zillow estimate, 15% above our estimate.  I thought that might bump up our price but we actually had a very slight decrease.  A year and a half ago, the house around the corner from us sold for 25% above the Zillow estimate and that raised our value per Zillow.  It will be interesting to see what change, if any happens when the house sells.

End of February Net Worth
The net worth number to start the month of March is.... $1,031,715.  The increase for Feb was $24,790, a 2.46% gain, which annualized is about a 33.8% return.  This gets us to just over where we were at the start of the year, $1,030,262,   At one point the number was in the 997K range a week into the month and then the number really started turning around.

I wanted to mention one thing about the net worth number.... as mentioned in the net worth primer, that does include both houses.  I read some discussions in some of last months net worth postings about including houses or not and here is my reason.... I have substantial equity in my houses.  Just consider a couple of examples and see if you do not agree.  Lets say two people have similar net worths when calculated without equity in houses.  Lets put those numbers right around 500K.  Now lets say both of those people have a house and both of those houses have a mortgage of about 375K.  Now what if I told you one of those houses was worth 415K and the other was worth 860K?  Would you say both of those people had the same net worth?  If you said yes, do you realize that the person with the 860K house could sell it and take the proceeds, after expenses and pay cash for a 450K house, own it outright and live with no mortgage expense?  Still think they have the same net worth?

The truth is, I own both of those houses.  My residence is worth about 860 and the rental about 415 and both mortgages are currently in the 375 range.  So I have slightly more than 500K equity in the two houses.  What if I sold both, rented someplace cheap and put the 450K money in the bank or in stocks.  That would be included in my net worth, correct?  So to not include those in my net worth calculations would say that my net worth would be the same even if I did not own those houses or regardless of the amount of equity.  I just do not see the logic in that reasoning.

Now another argument centered around houses as an investment.  While I would argue that a house can be an investment, I would not compare a house to stocks but regardless, my residence has been a great investment..  In less than 4 years for the residence, I took a less than 250K down payment and mortgage payments that have totaled less than 100K and the result has been 500K equity.  That's a return of close to 45% or about 10% annually and most of those mortgage payments should not be included since I would have incurred the same or similar costs paying rent had I not bought the house.  Now do I expect my equity to increase that 10% each year?... maybe.  On the one hand the market is the market and it goes up and down so who knows.  On the other hand I now control an asset worth 860K and the predictions say house prices in this area should increase 7% in 2014.  So if that holds true, I would have another 60K worth of appreciation and even using the down payment and the full mortgage amount extended out another year for my cost, that would still be a 15% return for the year.

So here is my tip for the month about doing well with an investment or any purchase for that matter.  You make your money at the time of the buy so don't put yourself in a position where you have to buy right now.  When I bought the house I did not need to buy but I had done my homework and spent the time looking at enough houses to know that this house was worth way more than what they were asking.  Why was it under priced?.... long story that involves Paris, Microsoft, Iran, cheating spouse and Canada.  The same goes for other purchases.  I buy on eBay occasionally, most of the time shoes and almost all of the time a specific brand.  I know what I want and I know what they are worth.  I check a few times a week and if I find something of interest at an exceptional price, I consider buying.  I have that luxury because I do not need to buy right now.  If I needed to have a pair of shoes right now, I am limited to what is being offered right now and its probably not going to include that one really great deal a month I manage to find.  I am currently watching 2 pairs of shoes.  1 of the pairs I have that exact shoe and I love them but they are starting to show some age.  I just don't love the price they are asking and I highly doubt they will get it.  If they come down, I will be ready.

Be patient, know the market, know when something, a stock, a house, a pair of shoes is being offered at a great price and when you recognize it, pull the trigger.  Chances are you made or saved yourself some money.

End of Jan 2014 Net Worth
Down about 23K this month. Final number was 1,006,925. As I said before, this includes bank accounts, stocks, houses both residence and rental but not other assets that are hard to value such as vehicles, jewelry, furniture and ownership in my small business. I want my number to be very conservative and easy to calculate.

We did have a change in cars. My old car, an Acura MDX had some issues so we traded it in on a used Subaru. I am now driving the Honda hybrid which was something we were considering doing anyway because of my long commute. Bottom line, I am going to save close to $200 a month just in gas. I loved the MDX but the one knock on it, which I knew about when I purchased was the mileage would be poor, maybe 18 mpg and that was 90% highway driving. I am averaging 47 mpg with the hybrid.

The drop in net worth was a fairly even combination of the houses and stocks. The stock market has been a challenge or late and I just need to remind myself that this opens up buying opportunities. I have talked both online and in person on this subject a number of times over the month that those who do well in the market see downturns as the chance to buy and those who do not see downturns as the time to sell and get out. Then of course when things turn around and the market is going crazy, those who do well tend to sell and those who do not are eager to put in all they have. Now one of these approaches is buy low, sell high and one is not.

End of 2013 Net Worth Number
Just ran the "official" end of the year number and the answer is.... 1,029,876. Other big news... I holed out for eagle on the #1 handicap hole at my home course on New Years Day. Great drive right down the slot, 130 yards to a front pin. Played extra club to make sure I got it there, rather be long than short in this case. Its in the hole. Nice way to start the year.


Streetikonz said...

Nice work on the eagle...
And the net worth as well!! :)

Sov said...

I love your site! Just a few places ahead of you on RockstarFinance. Hope you catch up soon :-)


EL said...

Great job on amassing such a big net worth. It goes to show that if you focus on investing with time you will be a millionaire. Good luck and keep us updated on your investing knowledge.

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