Saturday, April 14, 2007

$100k net worth increase in 6 months! unbelievable

Being on the road so much, I've found it very difficult to update our finances, especially those that require significant manual data entry. My wife's 401k is a great example. The thieve's that manage it deduct quite a few basis points every month as an administrative fee - I'd love to see them hit by a class action suite!

After catching up with data entry I was quite amazed.

Our Networth has increase nearly $100k since November.

Now a good amount came from aggressive savings - but was essentially driven by my increased earnings. Another nice percentage have been solid investment returns.

We've already maxed out our 401ks, my wife receives a nice match and my extra income allows us to save more. However, most of our investments have done fairly well - even the foreign and emerging market equities bounced back. My target allocation is almost 50% foreign equities, we'll see how market cycles and investor fads effect us.

One very curious issue will be how much money we have left after we close on the new house. It will dig into our cash reserve (the one everyone asks me why do you keep so much on hand). My wife taking a few months off will help shave it down, but I agree with her that she needs the time - especially to spend with our children while I travel so much.

By Sept. I think we'll have lopped out 30-45% of our networth gain, depending upon:

1. when the old house sells
2. unexpected costs for the new house
3. how extravangently my wife spends while not working
4. how accurately we manage our budgets
5. how effectively we resist decorating the new house
6. our actual income tax obligation for 2006

At the moment, I was concerned that $50,000 of unexpected income would create a massive tax obligation. First peak from my accountant seems like it won't be as bad as expected - we'll have to see. If the unofficial number is anywhere near right, we'll feel the hit, but move forward. Otherwise it will significantly influence our plans.

I'll try to post our networth data in a few days so you can see for yourself. If possible I'll put some six month side by side information.

We're at a very interesting point in time. We should still be able to exceed average market returns with our ability to save, however, as we save and compound our principal, or when we see extraordinary rates of return, investment earnings can exceed (or losses wipe out) our annual savings.

Eventually, it will be wonderful to have such large principal that the gains exceed potential savings, however, our income potential has not been capped so is most likely between 5-10 years away.

Regards, makingourway


mOOm said...

Good to hear from you.

This is why it's so important to have financial assets or borrowing capacity outside of retirement accounts -not just for emergencies but to have choices to make changes in life too.

On your job - I don't like telling students there's no money to fund them, or we won't admit them, or they can't continue in their grad program etc. My experience in management I found the main problem is motivating people. So both combined I wouldn't want to be in your position...

Anonymous said...

This is fantastic - congratulations!


Anonymous said...

Congrats! I just checked and we're right behind you, $99K in six months... :)

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