Welcome to my net worth update for January 2019!
After finishing 2018 on a down note, we started 2019 off on the right foot. But that’s mainly due to the recent market moves. The market correction caused our December 2018 Net Worth to report a loss while the subsequent rally in January made up the core of our gains.
As our retirement assets continue to grow, they will only have a larger and larger impact on our net worth. Of course, that’s a good thing!
Monthly Budget Summary
Before we get to the net worth, I’m tweaking the format a bit here to provide some better insights. One of the things that I’ve realized after writing these is that the net worth report is results-oriented and doesn’t paint the whole picture for the month.
For instance, whether or not the Payables or Receivables accounts go up or down during the month is not really significant to me. Those numbers are completely skewed based on timing and transactions that have no real net worth impact. For example, a $400 flight for work booked on a credit card affects Accounts Receivable and Credit Cards Payable, but has absolutely no impact on net worth.
The key numbers I focus on during the month are our revenues and expenses.
My budget spreadsheet systemizes the tracking of revenue and expenses by category so I know exactly where we were on, over, or under budget. Then it automatically updates this monthly summary:
This little summary is the most important thing I focus on each month. This is the sum of all our financial decisions. It shows our monthly net income, savings rate, debt repayment, retirement contributions, and cash flow.
January was a bad month for us. Our revenue was down due to my rental property still being vacant. On top of that, I had about $1,400 dollars in repairs, maintenance, and inspections. This double whammy led our net income and savings rate being much lower than the typical $4-5k and 30% or higher I respectively like to see.
This is the process-oriented part. Due to our reduced net income, I’ve scaled back on how aggressively we’re paying down the student loans as we’re dipping into our savings already to do so (shown by the negative net liquid cash flow).
Net Worth Update January 2019
The monthly budget summary now gives us much better context to see the mechanics of the net worth changes. With the lower net income, we had to dip into savings about $1k to continue the principal payments and retirement contributions we’ve been making.
The principal payments correspond to the mortgage, student loans, and car loan. Therefore, the other $2k decrease in savings came from paying down Credit Cards Payable and Accounts Payable.
After a terrible December, markets essentially recovered those losses in January. These gains made up 97% of the January increase in net worth, which means we didn’t do much to actively increase it. However, we did do some as $885.80 of the retirement gains came from contributions — where we picked up shares on sale.
Rental Property (No Change)
Not making any adjustment here. The big thing is that the rental property is currently vacant, which means we’re currently paying for a mortgage and rent with no compensating rental income. Add the repairs, maintenance, and utility costs and this feels much more like a liability than an asset at the moment.
Depreciation continues to do its work. Like a slow-acting gravity. I feel most people understand conceptually that cars steadily lose value, but don’t have a good grasp of the magnitude of that rate. For example, we bought $115.11 of gas in January so depreciation was a bigger expense than the gas.
Account Receivable (-$427.16)
This account mostly pertains to Mrs. Budget Boy’s work expenses that get reimbursed.
Although the rental property is vacant, it at least continues to build equity. Not that much of a silver lining though since it equates to paying a dollar to save a quarter.
Student Loans (-$860.04)
I’m starting to see the finish line here. These were at $50k in 2016 when I married into them. If I wanted to, I could completely wipe them out with the money in our savings. That’s empowering to know but risky to do. The goal is to have them completely paid off in a few months, so I plan to drop the hammer shortly. First, I want to see the returns from my recent switch to sales with some nice commissions and bonuses.
Car Loan (-$326.43)
We continue to make progress on the car. By progress, I mean that the principal repayment is greater than the depreciation on the vehicle. The net result was $194.43 of progress for January. I can’t really say we built equity since we’re actually underwater on the vehicle — as we have been since we bought it. But getting closer and closer to be in the black. Tracking this vehicle’s numbers reaffirms my decision to get rid of my car and just have the one vehicle for the two of us.
Credit Cards Payable (-$480.35)
As mentioned above, the fluctuations here aren’t really significant to me. Just has to do with the timing of when expenses are accrued versus when they’re paid. It is interesting to see the total revolving credit card debt we have at a specific point in time. I don’t want to say “carry” since we pay it in full each month.
Accounts Payable (-$1,598.26)
This account is super high right now due to collecting money from a bunch of people for a group trip (read: bachelorette party). This ensures that the money collected is held in trust and doesn’t inflate our net worth. After being collected upfront, the money is now being drawn from the account to pay for the group expenses.
In the month of January, our assets increased by $1,873.55 and our liabilities decreased by $3,822.30. Unlike December, both moved in the right direction this month for a total net worth increase of $5,695.85. In terms of percent, that’s a 4.15% increase.
Our January net worth of $143,055.09 is an all-time high, besting our previous high of $141,419.51 from September 2018. The combination of the market correction and rental vacancy in Q4 put an end to our 16 straight up months, many of which were all-time highs. We’re looking to regain that momentum with sights set on crossing the $200k mark by year end.