Net Worth Update – December 2017

The year 2017 is now (well and truly) over, and it is well past time for another net worth checkup. If you are not familiar with net worth, the idea is to calculate how much your possessions are worth if you had to consolidate everything at current value right now. To calculate it, you take everything you own, work out how much it is worth, and add it up. You then subtract from that number anything you owe people (like home loan, car loan etc). That gives you a final number called your net worth.

The second half of 2017 (and the start of 2018) have flown by. Part of the reason if that we finally managed to get someone to do our bathroom renovation (although you can read more about that in my upcoming goals post). Finances has been quite good over the last 6 months with most areas performing well (or at least well enough for me).

Well, here is how we have done over the last 6 months…

Net Worth – December 2017 – $1.42m

For those not keeping track, $1.42m is up about $70,000 from the middle of the year, which was itself up about $70k from the end of 2016. Once again I couldn’t be happier. Well I could have been happier, but having beaten my goals I defiantly feel happy enough.

That $70k was despite doing a bathroom renovation (which ended up costing just shy of $30k). Initially we were hoping to keep the cost down further, but a few different items got added in, as it made sense to do them together.

On to the graphs…

Asset Distribution

Onto the graphs, and first up we have the asset distribution graph.

The first time I looked at the graph, everything seemed flat to me. Slight change in Super, slight reduction in shared and bonds, and slight increase in fixed and cash. However looking at that blue line clearly shows that our house is making up less and less of our total net worth. At some point I may have to start removing some of the graphs history, as I don’t think I want any single asset class make up over 50% again (although any rental property will currently kill that idea).

Once again, my moving target is currently:

• 10-20% cash
• 30-50% shares (including both super and actual shares/bonds)
• 30-40% property (this will probably vary quickly as even a deposit is normally a large amount)
• 10% X-Factor investments (this area is currently not currently tracked individually , but is around 3% mixed with shares)

Everything is headed in the right direction. Now I just need to make some allowance for increasing the X-Factor. If things go well, I will have some blog posts about that in the not too distant future. The current and last half desired breakdown and assessment is below:

June 2017 Targets:

• 40% property (9.9% over, but single digits!)
• 45% equities
  • 25% super (1% over, but starting to grow faster than expected)
  • 20% shares & bonds (8% under, but heading in the right direction)
• 15% fixed interest and cash (1% under, and dropping a bit as shares and bonds grow)

December 2017 Targets:

• 40% property (7% over and getting close to that 40%)
• 45% equities
  • 25% super (3% over, and grow faster than expected)
  • 20% shares & bonds (9% under)
• 15% fixed interest and cash (1% under, up from last time, but rounding does wonders!)

Net Worth Totals

The second graph is the one with the actual numbers and net worth (the black line). Don’t get too hung up over the details, as everything is rounded – we are thinking big picture here.

I am glad to see the blue line remaining mostly flat. Not because I don’t want my house to go up in value (using my conservative estimates), but because at the moment we are not wanting either of the other two options to happen:

1. a drop in value, which looks unlikely now, or
2. a large increase from purchasing an investment property. I still don’t believe it is the right time.

The orange super line (401k for USA people), is still on the way up, and I still am trying to max out my contributions each year. I managed to totally screw up the calculations this time, and went well over the cap. Thankfully the government makes it easy for you to fix the error in one of two ways:

1. Remove the excess amount, pay appropriate tax on it and put it in your pocket.
2. Pay the extra tax to turn it into an post-tax (aka non-concessional) contribution.

I chose the second option, as the amount of money won’t make that much of a difference in or out of super, and it was easier to just pay the top-up tax.

Unfortunately the green and purple did not swap places as I had hoped. That should probably happen during the next 6 months, now that some of the renovations are out of the way. Our cash on hand (and low interest earning assets) are starting to cause problems as they edge towards $200k. After discussing it with my partner, we plan to move some of that money into bonds. The right bonds get 1.5 to 2 times the return, with some a little over 2 times. The down side is additional risk, however that risk can be somewhat mitigated by only selecting bonds in companies that are unlikely to default (or where the bonds have favourable terms should they default). One example is CBA; while they may have problems that cause their share price to drop if they cut dividends, that should not impact them paying the interest on their bonds.

 

Well, I hope you enjoyed that update. Let me know how you are going in the comments below, and where you want your net worth asset distribution percentages to be?