Net Worth: August 2015 Progress

Yikes! The month of August was a major punch to my financial gut, as I[m sure it was for pretty much anyone with any investments in the market whatsoever. People finally started to realize China’s economy is cooling off, and it freaked people out enough here that we had a correction in U.S. markets. And we’re now back to the oddball up-and-down rollercoaster markets from day to day – where good U.S. economic news might just make the market go up 2%… or down 2%because it’s making everyone uncertain what the Fed will do.

The Numbers

For background on the methodology and definitions, see Net Worth: September 2013 Progress. I’m including the past two months for comparisons now, but the “difference” values are computed for the past month’s changes.

Category June 2015 July 2015 August 2015 Difference
Net Worth $735,468.50 $742,442.15 $724,909.45 $17,532.70 -2.36%
  Assets $1,093,121.38 $1,096,833.68 $1,075,192.67 -$21,641.01 -1.97%
    Real Estate $626,735.00 $625,145.00 $625,519.00 +$374.00 +0.06%
    Automobiles $20,398.00 $20,398.00 $20,398.00 0 0
    Investments $429,936.25 $441,193.41 $418,448.64 -$22,744.77 -5.16%
    Cash $15,752.13 $10,097.27 $10,827.03 +$729.76 +7.23%
  Liabilities $357,652.88 $354,391.53 $350,283.22 -$4,108.31 -1.16%
    Mortgages $333,640.47 $332,312.83 $330,980.23 -$1,332.60 -0.40%
    Auto Loan $18,555.56 $18,130.49 $17,705.55 -$424.94 -2.34%
    Credit Card $5,456.85 $3,948.21 $1,597.44 -$2,350.77 -59.54%

Analysis

The Month

Well, first off I need to address the elephant in the room: I haven’t been updating since January. Life happened, and we got busy and I just never caught up for a while and then the blog updates totally slipped from my mind. But hey, a financial correction and some shoddy budgeting the last couple months will bring it right back into focus.

This month was dominated by the major correction in the US stock markets that resulted in that stunning $22k+ drop in investments. Keep in mind that the market has also dropped more in September, and that I actually contributed about $2,500 to my accounts in August, so the real loss is bigger (~$25k in August plus more in September).

Now, plenty of bloggers will tell you not to FREAK OUT, and hey now we’re buying the same stuff just cheaper; or that they had “no loss” because it’s all in paper and doesn’t materialize until they sell. Whatever guys. A paper loss is demoralizing and depressing when it’s this large, even if you have some validity in what you’re saying. But hey, the big thing to remember is to not sell off or stop contributing – and that you can’t control the markets. Stuff like this happens.

So, on to something we can control – our month to month cashflow and expenses. I have to make a confession: since our daughter was born last October, our expenses have been getting out of hand. We expect an increase in costs due to diapers, wipes and formula – but not only could we not breastfeed her, but she required more expensive special formula for reflux. It adds up over time, and our little guy still isn’t potty trained (or even close to wanting to), so we’re still on the diapers and wipes front with him too. So that inflates our grocery/shopping expenses a little every month.

The reality is that we got lazy with groceries, household supplies, general shopping, clothing and restaurants. Those credit car balances I report every month do get paid off month to month, but they expose that we’ve been sloppy in keeping expenses low. So, we decided to implement a mostly cash budget for those variable categories lumped together. So the number isn’t totally getting rolled up into the credit card balance, but is taken out in cash in the beginning of the month. We always eschewed cash because I could automatically track expense through mint using the cards and we got 2% cash back. The problem is we’d become too comfortable just swiping our card without any regard to what it all added up to, and it was getting downright messy.

So I’m proud to show that our card balance is down quite a bit, and we’re going to try and continue to use a cash budget to keep that in line. We’ll still use cards for automatic/recurring bills (i.e. utilities, gym, Hulu, etc), but this had a huge impact this month and I’d love to keep it rolling.

 

3 thoughts on “Net Worth: August 2015 Progress

  1. Pingback: The Net Worth of Personal Finance Bloggers

  2. Progress indeed, especially given the new child. We had similar rough patches as well, adapting to each of our daughters as they arrived. Glad to see you’re getting through!

    I made two tweaks in tracking our finances soon after our first arrived. First was adjusting expense categories to make it clear what was child-specific, to ensure we saw and understood changes in non-child-related costs as they happened. Second was separating current and past-due credit card amounts, to tell whether we were actually making headway on debt pay-down. (That helped us greatly in becoming debt-free.)

    Not sure whether either of those would provide you any useful insight. Hard to tell without income/expenses to complement asset/liability/net-worth you post. I found it much easier to ignore the “paper” gains and losses with years of monthly positive cash-flow staring me in the face. Honestly, I no longer calculate the change in my investments during my monthly reckoning of the household finances — as long as the shares themselves are still around, they can stay in a black box for the next 5-10 years. (At that point, I will dust them off in our run-up to retirement. 🙂

    • Thankfully we have no “bad” debts like credit card debt, so there’s no need to break apart the advancement of debt paydowns like that. Our current debt/loan balances are for three mortgages (a primary home and two rentals); and a very low interest (0.9% APR) car loan.

      You’re right, it’s hard to tell the monthly cashflow from a balance sheet like this. The indirect gauge is the month-to-month credit card balances, since they’re paid off every month. So they act as a proxy for what we’re spending on non-loan expenses every month.

      In general, the reality is just that we’d gotten used to using Target’s Red Card and our cash back AMEX rewards card to fuel all purchases without regard for reigning in the amounts to adhere to a budget. Most of that is my fault for not keeping a closer eye on it and discussing it with my wife as we went (she does the heavy majority of the shopping: groceries, baby supplies, home supplies, gifts, etc). It’s more a matter of the disconnect between me doing the finances and her doing the spending 🙂 She buys what we need/want and doesn’t see the net result; I see the net result and don’t have the details on what’s truly necessary or not. The way we’re bridging that now is to use a “cash” budget. We used an actual cash envelope for two months now; and to make it easier (than carrying wads of cash) we’re going to use a checking account and debit card set up with the budget amount each month. She also now keeps a general running total so she knows where we’re at for the month.

      We’re hoping that this helps. So far the past two months have been much better now.

      Of course there’s another side to that story – we had vacancies in our duplex and lots of work/repairs to get the units ready again. So not only were we being loose with our spending, but we had to carry the duplex mortgage for a couple months and pay for getting it back in shape. We’re in a much, much better spot now!

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