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Net Worth Report - End of 10/06
Apologies for the late report this month. I've had unusually little time available for blogging over the past couple weeks.
October was an extraordinarily good month for me. No particular item stands out as responsible for the increase; it was broadly based. I had expected to pay my property taxes in October, but due to a printing error at the tax office I didn't receive my statement until November 1st. I collected data for this report on Oct. 31st, so the taxes are not included.
Recall that I'm defining "Adjusted Net Worth" as net worth excluding the value of autos and unvested stock. The "Estimated Contribution" is how much money I believe I'll need to invest in order to meet the following month's ANW target. A declining EC indicates that I'm ahead of plan, and an increasing EC indicates that I need to save more in order to reach my long-term goal.
This month is a major milestone: my EC has gone negative. What does this mean? According to my ridiculously simple model of earning a 7% annual return on investments, paying 30% taxes on gains in taxable accounts, and a 2% annual appreciation on my home, I'm "on autopilot". I don't have to do any additional saving besides contributing to my Roth IRA and 401(k). (Those contributions are baked into my model.) I'm thinking about adjusting my methodology to consider the after-tax value of my 401(k) instead of its pre-tax value. I'll have more to say about that next month.
Of course, I have no plan to stop making new investments. I've actually been too cash-heavy for the past several months. My implicit idea has been to keep short term investments in the $15,000-$20,000 range and move the excess to longer-range investments, but I haven't done so for the past couple months.
Alternately, it might be time to splurge on something. I'm not too excited about something like buying an HDTV, but maybe I could decorate my house or something. (I've been living here for five years and frankly you wouldn't know it by looking around. The place is empty.)
As I mentioned last month, I had another credit card conclude its 0% period and I paid it off. My credit rating has improved substantially as my balances have fallen, and perhaps in December I'll start looking for new 0% balance transfer opportunities. Most companies have raised their balance transfer fees, however, making it less profitable. I've been amused by the strong correlation between their fees and the amount of profit I could expect to make by arbitrage if they didn't have any fees. Perhaps the industry has figured this little trick out.
My credit card balances are 100% backed by time deposits and/or savings accounts earning interest at a higher rate than I'm being charged by the credit card companies. The monthly payment is estimated as 2% of the balance. (Most credit cards are now using a 2% minimum payment, and due to this it is important to have a strong cash flow and/or pay with funds from your credit card arbitrage savings account.)
You can keep track of other personal finance bloggers at NetWorthIQ. I've updated my entry there.