Welcome to my monthly net worth update for Brewing FIRE. Each month, I will give a brief summary of our financial standing, which will serve as a progress report on our journey to financial independence.
In addition to giving a snapshot of our net worth, I will compare our progress to the previous month. I will also comment on any notable changes to our finances. Finally, I will give some color on our saving and investing strategy, as appropriate.
April 2018 Net Worth
We use Personal Capital to track our net worth. Personal Capital makes it very easy to track all of our banking accounts, investing accounts, credit cards and loans all in one place. In addition, Personal Capital has a “Cash Flow” feature which compares your income and expenditures over time, helping you make sure you’re balancing your budget. Personal Capital also has numerous other functions for analyzing your investment holdings, asset allocation and performance, as well as some great retirement planning tools.
Month-Over-Month Comparison
Note: the net worth snapshot doesn’t exactly match the breakdown above. We had a glitch with our mortgage account, so I had to wait an extra week to get an appropriate NW snapshot. At first I thought we made $200,000 overnight!
Overall, we had an incremental gain in our net worth this month, and I’ll take it! Slow and steady progress is what we’re about here at Brewing FIRE.
Investment Breakdown
Cash: As mentioned last month, Mrs. BF and I still have individual checking and savings accounts, as well as a joint account. Having $25,000-30,000 sitting in cash is not completely necessary, but it is comforting. We could live at least 6 months on this amount, so it provides some peace of mind. If the optimization bug bites me one of these days, I’ll look into consolidating into a single savings account (along with our checking) so we can try to earn a little interest on this money pile. Especially if interest rates continue to creep up; we may be able to earn more than 0.1%!
Equities: Each month we contribute approximately $5,000 to our investment accounts. We contribute to our respective 401k/403b accounts with the purpose of maxing out by the end of the year, and any remaining funds go to taxable brokerage accounts.
The majority of newly invested cash (~90%) goes into ETFs, and the vast majority of that goes into S&P index funds. I still dabble in dividend growth investing with part of my retirements accounts, though much less so than in the past. Like many others, I thought for a while that I could beat the market by picking individual stocks. I was wrong. However, I still believe dividend growth investing to be a sound strategy, especially for those looking for income. I will continue to commit a small portion of my new funds to individual stocks in the future, but will only allocate to a few, well-established (think ‘blue chip’) corporations with a long history of growing earnings and paying dividends. I admire Elon Musk, but he has no place in my portfolio!
Home Equity: We make a small monthly contribution to the principal on our mortgage. I decided on this value after running a few different scenarios in a mortgage spreadsheet I created some years ago. Here’s the actual graph I created to show Mrs. BF the benefit of making small principal payments every month. See also: Pay Off Debt or Invest? The Answer, in 2 Charts.
As you can see, making a token extra payment toward your mortgage principal can save you quite a bit of interest paid and years on your mortgage. But there’s a diminishing return as your extra payment increases. By paying an extra $400 per month, we will knock off approximately 12 years from our 30 year mortgage, and save over $70,000 in interest payments in the process.
Thanks for following our progress as we plod along toward FI status. I will try to include some interesting bits, like our mortgage pay-down strategy, to keep things from being too dry, and to further illuminate our financial situation. Feel free to add any questions or comments below. Cheers!