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April ’08 Net Worth Monthly Review

Posted By Jim On 05/05/2008 @ 1:45 pm In Monthly Review | 8 Comments

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 [3]!

Other notable actions of the month:

  • Series I Savings Bonds: We purchased some Series I Savings Bonds [4] 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 [5] and I have talked about quite a bit lately. He told me about Vanguard’s Portfolio Watch [6], which looks like a great way to help facilitate this.

Please share your thoughts below!

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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/april-08-net-worth-monthly-review.html

[3] high yield online savings account: http://www.bargaineering.com/articles/top-5-online-banks-savings-or-checking-accounts.html

[4] purchased some Series I Savings Bonds: http://www.bargaineering.com/articles/series-i-bonds-look-attractive-right-now.html

[5] Nickel: http://www.fivecentnickel.com

[6] Vanguard’s Portfolio Watch: http://www.fivecentnickel.com/2008/04/11/a-peek-inside-vanguards-portfolio-watch/

Thank you for reading!