Monthly Review 
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April ’08 Net Worth Monthly Review

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This marks the actual return of the monthly net worth reviews and the first time, in a long time, that my net worth actually fell and it fell by 12.1% in the month of April. Now, before well all jump on the “jim has no idea what he’s doing, let’s go read some other blog,” I have to warn you that the fall was expected and planned for.

The fall was due to the payment of income taxes for 2007. I paid a pittance in estimated taxes last year because income from this site (and other online ventures) was relatively small and so I wasn’t required to pay much in estimated taxes. However, on April 15th, the piper had arrived and was demanding his money so I wrote some of the largest checks of my life. I had to pay 2007 federal and state income taxes as well as first quarter 2008 estimated taxes to both the feds and Maryland. The end result was chopping off 12.1% of my net worth. However, since it was expected and planned for, it’s not a big deal. Here’s a case of where the numbers don’t tell the whole story and why commentary is always important.

What did I learn from this? Numbers don’t tell the whole story. It’s much like how the weight scale might not show a fall in your body weight but the mirror shows you putting on more muscle and adding definition. Numbers are good but only to a certain extent, so don’t let it get you too high or too low because they can be deceptive. -12.1% of unexplained net worth loss is crippling, but if you know the reason and it’s not indicative of a bigger underlying problem then you’re okay. In this particular case, -12.1% was good because I earned interest on those monies as they sat in a high yield online savings account!

Other notable actions of the month:

  • Series I Savings Bonds: We purchased some Series I Savings Bonds near the end of April, $5k each for my wife and myself, in order to lock in the 1.2% fixed rate. Savings bonds don’t give crazy stock market type returns but it establishes a good base and one that is guaranteed. It locks our funds in for at least a year but the earnings are local and state tax free.
  • Consolidation of Accounts: I finally rolled over my former employer’s 401(k) plan into my Vanguard account, a process that was both painless and fast. This didn’t net any financial benefits but it means there’s one less account I need to log into and review, so there’s a net time benefit in that one (I did miss out on a couple days of solid stock market increases while the funds were in transition though, boo!, but you can’t plan for those).

Looking to the future:

  • Roof replacement: Our roof is leaking and has been leaking for some time now, so a full replacement will need to occur in the next month. This week I’ll contacting a few contractors to get quotes but I estimate the cost will be in the neighborhood of $4,000. It’s a problem we’ve been aware since before the wedding (in February) but there hasn’t been many heavy rains since then so we’ve been lucky.
  • Water Heater: Replacing it is on the radar but it’s currently in great working condition, it’s just old, and we may opt to replace it with a tankless version simply for the energy savings. Since it hasn’t been a priority and since the tank is in the basement, it’s been an “out of sight, out of mind” type of situation.
  • Diversification: I need to take a hard look at all of our investments and make sure we’ve properly diversified. It’s something that Nickel and I have talked about quite a bit lately. He told me about Vanguard’s Portfolio Watch, which looks like a great way to help facilitate this.

Please share your thoughts below!

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8 Responses to “April ’08 Net Worth Monthly Review”

  1. fred@opc says:

    I just had my first experience showering with hot water from with a tankless water heater system. Overall, the experience was negative. Our family stayed at my Aunt’s and Uncle’s new lake house. The house had awesome shower systems – water pressure and flow were so high I expect each shower was fed by a full 1/2″ pipe. If only one shower was running at any time, there was plenty of hot water. But, at one point on the vacation, two of us were taking showers -1 in the master bath, and 1 in the guest bath, and the tankless system simply couldn’t keep up – but instead of both of us getting warm water, the water cycled from very hot to very cold every 9-10 seconds or so. If you go with a tankless model (which make a LOT of sense from an efficiency perspective) make sure you get one that can really handle your water requirements. Also, check how the system will perform under stress: will the water simply be a little less hot (better) or will it cycle from hot to cold (worse).

  2. CK says:

    Make sure you know where the shutoffs are for the water heater just in case they’re needed. And test them out to make sure they actually work.

  3. Jay says:

    Sounds like you’re on track and planning ahead!
    To address a small part of your article:
    We have a tankless water heater, our second, about 2 years old now, and are very happy with it. You have to expect some differences, such as time for the water to heat up, but overall we like it. Having an up-to-date faucet with built in temp regulation (?) really helps in the shower. You also can always install a recirculating pump, on a timer, if you want instant hot water.
    If I were doing it over, I might have opted for a solar water heater and kept the big water heater/tank. Toss up which is more efficient. Check them out before you buy. And, of course, do it before it’s an emergency ;-)

  4. Llama Money says:

    With the tankless heaters, just make sure to do your homework. They’re rated in flow rate, gallons per minute I believe. Most places that sell them will help you estimate your usage, so that you buy a powerful enough model. If you use up to 8 GPM, you don’t want a 5GPM unit, or you’ll have that fun scalding / freezing switch that fred experienced.

  5. saladdin says:

    Jim,
    I feel silly asking (because I know you will) but will you keep us up on your tankless experience? I’m considering it also. One bathroom is on the opposite side of the house as the waterheater and takes a good 45 seconds to get hot water.

    saladdin

  6. jim says:

    Saladdin: Of course :)

  7. robert says:

    jim: I need your advise I have a few insurance policy’s that grow in cash value. I asked my insurance co. for the actual cash value of each policy and they wont tell me.
    They will however let me borrow money on my policy and I have done so at only 7-8% interest/year. and have long ago paid that off. I think it was great . Is there a standard formula to calculate the cash value of a life insurance policy or would it be so difficult to comprehend that I would get lost in all the devil in the details. I know my money gets invested every year with that in mind what would they invest in to make me money to acumulate cash value… that would be part of my net worth it just something nice to know.


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