Each month, I share a net worth update for the Brewing FIRE household. This brief summary of our financial standing serves 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 share my “Chart of the Month,” which should add some color to my saving and investing strategy.
July 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
July saw a lot of movement in the underlying categories, but a net change of almost zero (-0.2%).
Investment Breakdown
Cash: once Mrs. BF and I finally simplified and automated our finances, we found ourselves sitting on a large pile of consolidated cash. This money was earning nothing, so we decided to reduce our emergency fund.
I recently read a post where the author argued that dual income households don’t need a large emergency fund if they can survive on one income. This is because the chance of a double loss-of-job is fairly unlikely. This totally resonated with me. Plus, we’ve recently opened up a HELOC, which can also cover any unexpected shortfalls in our cash flow.
We divided the cash infusion into funding our brokerage account and paying down mortgage principal (more on this below). We will probably maintain a cushion of $10-15k in our checking account going forward.
Equities: The increase in our retirement and brokerage accounts balance this month was a combination of market returns and new contributions. We added $7500 to our taxable brokerage accounts. Since most indexes (indices??) are sitting near all-time highs, we also saw a decent appreciation of our existing investments. Can’t complain there.
One minor change: I took Baby BF’s 529 plan out of our calculations (~$4000). Although it is an account we are contributing to, it’s her money, and thus won’t be added to our FI funds. Unless of course we decide to steal it from her! This is what I will threaten her with when she’s being a terrible 6 year old.
Home Equity: in my most recent post, I detailed our decision to prioritize mortgage payoff over taxable contributions. We will now be throwing most additional cash we have at the mortgage principal. For July, we made an extra large principal payment of $5000, as part of our cash reduction plan.
So how did our home equity end up $15k in the red? Wild real estate markets, that’s how! Our home lost approximately $20k in theoretical value this month. Obviously, it doesn’t really matter at all, since we do not plan to sell anytime soon. I suppose I could just list our mortgage loan balance, but it’s unfair to put a huge liability on your net worth statement without estimating the value of the asset.
Chart of the Month: Dividend Growth
Continuing the trend of including at least one chart or graph in each Net Worth Update, this month we look at growing dividends! The following chart shows the dividends we’ve received across all accounts since 2014. 2014 was the year that my 401k was ‘unlocked’ and became self-directed. Finally, I could invest in things other than 5 crappy mutual funds with 1.2% expense ratios.
Over the course of 5 years, I’ve been able to build up a dividend stream of over $7,000 per year (projected) from zero. That’s a CAGR of 52%! This growth was driven mainly by yearly cash contributions, although most of the stocks I own have raised their dividend considerably during the same period. Obviously I can’t keep up dividend growth this rate, but I am hoping for an average annual increase of 10-15%. Our long-term plan is not necessarily to live off of the dividends, but owning high quality, defensive companies that consistently return cash to shareholders can’t be that bad, right?
Thanks for following along with our monthly progress, and please let me know what you think in the comments. Cheers!
you’re right about that dividend concept. the stock price so often comes along for the ride with dividend raises. it’s not as hard to figure out winners as people like to make it sound. 7k is really something. 10-15k in checking? i got an ally savings account that pays 1.8%. they’ve been hassle free for a couple of years now, just an fyi.
Yeah, I agree that it’s more than necessary in our checking. However, part of the terms of opening our HELOC (emergency fund) with the best possible rate was we needed to upgrade to a ‘premier checking’ account, which has a $10,000 monthly balance requirement to avoid fees. Jumping through hoops to maintain the best interest rates!