Happy New Year! May 2020 bring you happiness and financial success.
Since I started this blog on March 29, 2019, I’ve been slowly finding the sweet spot of providing financial updates. I’ve decided to provide annual net worth and retirement asset updates plus quarterly dividend income updates. The quarterly dividend updates usually mention any new adds I made to our portfolio.
2019 was significant in so many ways financially. Here are some notable achievements:
- $150,132 YOY increase in net worth, which is a 23.8% YOY increase
- $2,252 dividends received and $3,192 in 12-month forecasted income (assuming no additional capital added)
- Contributed $41,850 of new money to my taxable account, which focuses on dividend stocks
- Contributed $26,887 to my 401(k) at work (which is my maximum plus 3% from company match plus the maximum catch-up contribution)
- I secured the Retiree Healthcare benefit after reaching 20 years in my company (and being over 55). This is a huge benefit, especially for people that retire before 65 years old. When I retire at 62, I’ll maintain my same health insurance coverage just like I was an employee (at the same cost) until age 65. At 65, Medicare kicks in and they pay my wife and I $5,000 to purchase supplemental insurance to support Medicare.
- Our mortgage dropped to under $100,000 ($92,405) and should be paid off within 3 years. We paid an extra $12,150 to our mortgage principal to help accelerate the payoff. These were funds that could have gone toward our savings but we really want that mortgage to disappear.
Now that we highlighted a handful of 2019 successes, let’s get to the charts.
2019 Charts
Here’s what I found amazing after our $150,132 YOY increase in net worth. Just 8 years ago, we had a total net worth of $155,719 but our YOY increase nearly matched that entire amount.
This is a pause moment. In 48 years of living (25 years working), I accumulated only $155,719. And just 8 years later I nearly matched that entire 48 year amount in just 1 year. That’s what focus, planning, and execution does to your finances. Yes, I earned more money at work but this was also done while two kids where in college.
What’s most encouraging is that my house is becoming less and less important to my overall net worth (currently 39.7% of net worth). I suspect that by the time I retire, my house with be about 20-25% of my total net worth …. the lower the better. So many people are house rich but retirement asset poor. They are banking on selling their bigger house (downsizing) and living off the proceeds. I consider that risky but I see it all the time. As I say often, your home should not be your retirement plan.
You have to want to change your financial circumstances … nothing magical will change your situation unless you are willing to change spending, priorities, debt, and savings rate. So, if you’re looking for a magic formula to suddenly increase your net worth you won’t find it here. The magic comes with the willingness to change plus creating a decent plan to execute. It also takes a partner (if you have one) that is on the same page.
Summary
Just to clarify, my main focus is building my retirement investment portfolio. Those assets and the income they produce will be the enabler that earns my retirement. But keeping an eye on net worth shows that my debt reductions, increased savings rate, and reduced spending are naturally increasing our overall wealth. It’s just another way to make sure I’m on track, that I’ll be debt free at retirement, and it provides a big picture view of my overall wealth over time.
A $34,000 reduction in debt plus $68,000 in new contributions added to my investment portfolio really juiced the $150,000 YOY increase. Just those two significant actions accounted for about 70% of my $150,000 YOY increase. Add in some dividend income and capital gains and you get all the magic you need. Without the focus on reducing debt and increasing my investment portfolio contributions, net worth just doesn’t build. It’s actually simple to understand but it needs focus, courage, and consistency to execute.
Good luck to all in 2020 and thanks for reading!
Mr. TLR