My Personal Finance Journey

Personal finance observation, musing and decisions in a journey toward financial independence by 2020 with at least $3 million.


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Monthly Review - February 2006 ($432,826, +$6,073)

Contributed by mm | March 2, 2006 8:43 PM PST

My February result of $6,000 net worth increase reflects very positive performance on the operating side but subpar showing on the investment side.

On the operating end, we landed a few big deals at our small family business -- the net income from the business in February almost matches my day-time job a couple years back. (However, this revenue spike is very unlikely to persist since many contracts we landed are of annual nature, meaning we will only see the money again when people decide to renew 12 months down the road). At the same time, we also cut back our monthly spending to barely over $6,000 -- the lowest since we moved to this continent. All in all, we achieved a positive cash flow of $12,000, the second highest monthly savings record (only after November 2005 during which we benefited from a massive relocation allowance.)

Our investment results are not as impressive. While S&P 500 stayed almost flat for the month, our portfolio of over $400,000 reported a before-tax loss of $2,100. On top of that, MSFT dropped $1 from its late January/early February peak of $28, knocking our employee stock option account balance off by $8,000 -- this is only mitigated by the vesting of another batch of options worth about $4,000.

Anyway, I found I've gotten used to the month-to-month fluctuations of our investment accounts now -- the 0.5% loss on our own portfolio is not that much a red flag, and for the stock option holdings, as long as Microsoft stays as a technical powerhouse (which I believe it is), significant monthly changes should offset in the long run. The stock market (which opens at 10:30PM my time) does not keep me awake at night :-)


BALANCE SHEET

2006-02-net-worth.GIF


IMPORTANT BALANCE SHEET MOVEMENT DISCUSSION

• Cash and Savings: The increase includes the aforementioned regular savings, and the shift of money from money market mutual funds at brokerage accounts to ING Direct to exploit the 4.75% winter sale.

• Brokerage: The $26,000 drop comes from re-parking cash-like investments to banking accounts

• Stock Option: This reflects $4,000 newly-vested options and $8,000 in option value decline.

• Receivable: I received reimbursement for $3,000 for personal-paid business expense and medical expenses.

• Tax Liability: This reflects lower tax exposure due to the decline in investment and employee stock option value.


IMPORTANT PERSONAL FINANCE ISSUES IN MONTHS AHEAD

(Legacy from last month ...)

Tax Document Collection: It is tax season again. As an expatriate benefit, KPMG will prepare and file my tax, but I still want to prepare my own tax just for practice -- the international relocation offers tons of opportunities to implement different tax strategies, and I can surely benefit from more tax knowledge.

Investment Tracking: Since investment performance is becoming a larger portion of my monthly net worth movement, I will soon introduce a monthly scorecard to keep track of investment results.

This Post Has Received 27 Comments. Share Your Opinions Too.


Latin Guy Commented on March 3, 2006

MM, congrats for another good month indeed. As I understand, the only reason you do not use HSBCDirect is because you are unable to open a new account (since you no longer have a valid U.S address), right?

Just to clarify, when you say "small family business", you mean the pfblog.com, or yet another venture?

Keep up the great work.


MM Commented on March 3, 2006

On HSBCDirect, it is not worthwhile to open a new account for 0.05% APR difference (vs promotiomal 4.75% @ ING Direct, both of temporary nature). If you factor in some missing interest when you move money, you might not be better off. By the end of the day, the money market/savings account is highly competitive, and you will never know who will be the market leader one month down the road.

On your second question, all I can say is we are diversifying (but PFBlog also helped).


Anonymous Commented on March 3, 2006

Man, it must be nice to make that much money. Congrats!


Adam Commented on March 3, 2006

Why do you put so little money in your Roth IRA


MM Commented on March 3, 2006

Adam - I maxed out my Roth IRA in 2003 and 2004, but was priced out in 2005 due to high AGI.


Mark Commented on March 5, 2006

Isn't it MAGI that determines Roth?


MM Commented on March 6, 2006

Mark, you are correct. It is my MAGI that priced me out.


Moneysmartz Commented on March 8, 2006

Congrats on another solid month of savings. You've been included in the February Bloggers' Net Worth Index at http://www.moneysmartz.com/weblog.


goodman Commented on March 10, 2006

Congrats on another solid month of savings. You've been included in the February Bloggers' Net Worth Index at http://www.moneysmartz.com/weblog.


just a note Commented on March 18, 2006

Given your situation..the very high annual income, the expatriate deal and its benefits, your goals are extremely conservative. I make about half of what you do, still live in the U.S. with mortgage and kids, and my goals are as large as yours and I have been making them for the last several years. In less than 10 years I have gone from a negative net worth, to over $500k with an expenctation to be over $1M within the next 2.5 years. Either your investment strategies are not generating solid returns (I have been averaging more than 11% annually) or your savings target is light (which is probably true given your living expenses indicate you have plenty of room to save more). At your age keeping the amount of cash you have in bank and savings accounts seems quite conservative. You may consider discussing things with a finance professional to open the door to new ideas. I have not spoken to one myself, but have an education that would allow me to be one if I chose to.

Extend your goals...save more, take some risk, and the rewards in the long run will be much larger than your current expecations.

Good work...just some input on improvements.


JS Commented on March 21, 2006

Practically anyone can become reasonably wealthy. I have earned from only $3.35 an hour back in the early '80s to only $7.50 now and my wife and done around the same. We have zero debt or mortgages, live in a nice $250,000 home, raised a child for 17 years, have two new cars, take big vacations almost every year, have nearly $300K in our retirement accounts and hope to retire shortly after age 50. One way we have saved is to shun the medical system, never buy health insurance, practice good health habits and hardly ever use the medical system. Hint: I am the author of "Wealth on Minimal Wage" published in 1997.


Bond investor Commented on May 1, 2006

JS's advice of shunning health insurance may work for him or her, but for those of us, like me, with poor family health histories and children with birth defects (totally unpredictable and not the result of unhealthy behavior during pregnancy, etc.), health insurance is an absolute must! I am thankful that my employer and I pay to minimize that risk, despite the high monthly cost.


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