Net worth update: one year later

Financial Planning
10

It’s Labor Day in the U.S., isn’t it ironic that I don’t get to work? I don’t see a lot of pregnant women hanging around the emergency room when I drove my R.N. wife to the hospital this morning either.

Kidding aside, the holiday meant I have extra time to write my first net worth update since I started this blog. I should have been doing this more frequently, but it’s easy to get carried away by other topics that I wanted to cover on the blog. I’ll try to keep this as brief as possible.

Total assets up by 17%

  • Our banking assets are up by roughly 18% from last year.  These are assets that barely make any money due to the Fed still keeping interest rates next to zero. The increase was due to our savings rate plus my sister partially paying me $5,000 for the loan that she took last year. I also automatically deposit $400 every month to our emergency fund to make sure the account keeps growing.
  • Retirement and other savings are up by almost 22%. I actually lowered our 401K contribution rates from 20% and 16% to 15% and 15%, respectively. With the stock market at an all-time high, I figured I’d use the money to pay off our mortgage earlier (new target date is early 2021). There’s a big debate in the personal finance community about the merits/demerits of paying off your house early but I’d tackle that as a separate post in the future.
  • My Bank of America (BAC) stock is up by almost $10,000 since last year. That’s the only individual stock that I own outside my retirement accounts. The other individual stock, Microsoft, is also doing extremely well. You don’t see it in the table below because it’s in my ROTH IRA account. If you’ve been following my blog, I’ve sold my loser SNAP INC. just in time at around $20. It’s currently trading around $14.
  • Our primary residence’ value is up by around 7% as per Zillow estimate.

 

Liabilities down by 15%

  • We continue to pay off our credit card bills in full once they’re due. Our spending is always under control.
  • I’ve been paying an extra $1,000 a month on the mortgage principal. As I’ve already mentioned, the personal finance community is divided when it comes to this. Some argue that you’re better off investing the money than pay off a house with an ultra-low 3% interest rate like mine… blah blah blah. However, what’s important to me at this point in time is to be debt free before I retire. I’m trying to pay it off not because I’m maximizing the returns, but because I’m trying to simplify my life. Who cares if this is good debt? I still want it gone because owing the bank money sucks.

 

Net Worth $1,183,495.19
Networth Statement (excluding personal property, like cars and jewelry etc.)

All in all, total net worth is up by 22%

We’ve been blessed that our net worth continues to go up by 20% on the average for the past 13 years. That can be attributed partly from strong stock market returns and more significantly, high savings rate.

We’re also less than $100K shy of becoming a SEC accredited investor who by definition could be an individual or a couple with a million dollar net worth not counting the house. That in itself opens a lot of opportunities to explore other investing options.

But for the time being, there’s nothing sophisticated about my investment portfolio. My strategy is very simple– invest in quality stocks or stock mutual funds inside tax-advantaged retirement accounts.

I hope you’re also doing well in your journey. We hope to be an inspiration to other people on a similar path to financial freedom.

 

I’m curious to know about your approach in stock investing. Do you prefer individual stocks or index fund like mutual fund or ETF? And what are your thoughts of the idea of Filipinos investing abroad and in the Philippines?

Hi, I’m glad you asked. Most people should avoid buying individual stocks. Not everyone has the time, skill, or temperament to invest in individual stocks. To be really successful, you need to be constantly reading the news and studying the balance sheet (i.e. fundamental analysis). Something that is best left to professionals. I don’t believe in technical analysis or following trends, I think that’s bull crap (pardon the word). The only reason why I bought MSFT and BAC is because I know both industries very well being a software developer and having worked in the financial industry for a very long time. I prefer buying the indices because of the significantly lower fees and most indices beat the actively managed ones. I prefer ETFs over mutual funds because they are more versatile (No minimum and traded like a stock) and tax efficient. However, mutual funds are cheaper when you’re buying shares on a regular basis, like when you’re doing dollar-cost-averaging. I think investing a small portion of your portfolio abroad is a good idea because it lets you diversify your holdings. I myself have some money invested in the Philippine stock market (EPHE). You need to be wary of fees, especially foreign exchange charges (when trading individual stocks).

FMETF is the only ETF in the Philippines that any Filipino can invest in through discount online brokerage. Aside from EPHE, do you also consider other ETFs? I’ve been thinking of buying ETF geared towards socially responsible investing (renewable energy, electric cars etc) or maybe into medical marijuana (HMMJ) using a very small investment. Index investing is boring but effective so it would be nice to try something new while not being too careless.

I’ve read about that ETF in PMT. Socially responsible is OK, but not sure about the growth prospects of medical marijuana. If you’re looking for excitement why not just wait for the Bitcoin ETF as it’s becoming close to reality. There’s nothing wrong with speculating as long as it’s a small % of your portfolio.

It’s great how most of your assets are fairly liquid! I wish we had more choices for retirement savings here in the Philippines (other than the usual SSS, GSIS, and now the PERA). I’ve often wondered about health savings accounts. Are those similar to an hmo / health insurance?

PERA is a breakthrough. I’m not surprised it took them so long to implement knowing so well how it is back home. 401K and IRAs are retirement accounts so they are only semi-liquid. I’d pay 10% penalty if I access my 401K before 59 1/2, for example. There’s a provision where I can access it by 55 (sometime around 2026)– that’s what I’m counting on for early retirement.
Unlike a low-deductible HMO, health savings account is like a bucket available for someone with a high-deductible health insurance plan. You can contribute pre-tax money to the bucket up to a certain max. Any money used for qualified health expenses will be tax free. Thanks for asking 🙂

Originally from the Philippines here and been living in the Chicago for many years now. Have never heard of PERA before. Can you tell me more about it? I;m not sure if there are ETF’s in the Philippines but I remember when I was out there last year i was offered some sort of managed investment by a local bank Manager.

Hello Bernz, great to hear from a fellow pinoy. PERA is the Philippine equivalent of the 401K or Canadian RRSP. The law was passed in 2008, but is only being implemented recently. You were probably offered investing in a UITF (Unit Investment Trust Fund), which is typically offered by banks.

I’ve looked at UITF and it’s quite possible it was the one offered to me. You’re doing really good with your net worth. May I ask what particular type of account you keep your $25k emergency fund?

Thanks. It’s a money market account earning 1.2% interest. I might move it to somewhere else and earn bonus cash (up to $325) in the process.

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