Baby birth bills, Christmas is coming, and other adventures in spending. Meanwhile the market continues to make my money work for me, and it’s starting to regularly outpace my own income…
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||September 2014||October 2014||November 2014||Difference|
In November, my investment increase finally outpaced the S&P 500 Index, which brought in 2.45% for the month. That should ideally always be the case since I’m making contributions on top of the appreciation from market gains – though it rarely happened for me towards the beginning of the year.
The mid-November to end of December timeframe is typically our highest spending times of year – obviously for Christmas, but also due to a number of family birthdays including our son’s in early January. There’s a month lag in the spending to actual bill paying since we use credit cards and just pay the statement balance on the due dates. So I fully anticipate some nasty credit card payments in December and January. Plus, our medical bills for the birth of our daughter have started to come due.
At the beginning of the year I thought the market was going to be going sideways all year. As a result, I hedged my bets and continued to pay extra principal payments on one of the mortgages with a 6.75% interest rate – thinking the market would likely be returning somewhere in the neighborhood, possibly slightly under. I couldn’t have been more wrong. Certainly this hasn’t been a huge year like in 2013 (31.8%!), but YTD the S&P 500 Index returned 11.86% through the end of November. That’s clearly better than the 6.75% rate on the mortgage – though only one of those is guaranteed 😉
As the balances in my investment accounts continue to rise, though, I’m faced by a good problem to have: I can continue to bet on the market and project to come away with a healthy return and eventual nest egg – or I can prioritize getting rid of my debts entirely to free up cash flow for eventual “early retirement”. according to my projections, the monthly mortgage payments are really the biggest hurdle to getting expenses down for that early retirement to be more feasible. The sooner I get rid of them the sooner the math works out – but, according to the same projections, if I get a 7% long term gain in investing then I’ll have a higher net worth to ride the mortgages and invest instead, only it’ll mean the date when the expenses and balances match up using the 4% withdrawal rate is later than if I pre-pay mortgages. It’s certainly pulling me in two different directions when it comes to my surplus cash flow. In the end, I’m playing a little bit of market predicting/market timing as we go trying to decided what to do with my after-tax cash.