My Personal Finance Journey

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Monthly Review - March 2006 ($449,093, +$16,267)

Contributed by mm | April 3, 2006 10:41 PM PST

Our family net worth is growing again! With the $16,000 uptake in the month, our Q1 net worth improvement reached north of $48,000, or 32% of our annual target of $150,000 growth. Apart from regular savings, our portfolio benefitted tremendously from the favorable market conditions -- the $8,700 monthly investment gain pushed year-to-date portfolio gain to over $14,000, or 36% of annual target.

Our income in March actually retracted from the high level we've seen in the preceding two months, primarily due to less income from the sideline family business. Still, with $61,000 quarterly earned income, $14,000 from investment income and close to $8,000 from stock option gains, the quarterly income of $83,000 is in line with the best scenario of our 2006 financial plan.

BALANCE SHEET

2006-03-networth.GIF

IMPORTANT BALANCE SHEET MOVEMENT DISCUSSION

• Cash & Savings: Our regular savings beefed up our cash positions -- they are earning 4.75% at ING Direct now until 4/15, and by then they will be swept to other high yield savings accounts or investments.

• Investment Accounts (Brokerage, 401(k), Roth IRA): My portfolio beat benchmark S&P 500 by about 1 percentage point. My heavy-weight international equity positions delivered nicely thanks to upbeat economy in Japan and favorable foreign exchange rates.

• Tax Liability: $2,581 increase reflects increased tax liability due to floating investment gains.


IMPORTANT PERSONAL FINANCE ISSUES IN MONTHS AHEAD

Tax Issues: I finally retrieved all tax documents sitting in my U.S. mailbox. While I have KPMG at my disposal to file my tax, and due to my unique situation my 2005 tax form will not be filed until maybe 2007, I still have to figure out quickly: 1) whether to take a defensive stance to pay a bit more estimated tax due to uncertainty (and my lack of experience) in the complex tax accounting for abroad income, and 2) how much to contribute to my self-employment 401(k) account to maximize tax deferral.

Tax Reading: I bought TheTaxBook lately -- a great resource that I expect to use to kill many long hours on international flights.

Portfolio Check: By the end of March, I still have about 30% of portfolio in cash. I want to spend some time to examine whether I can put the cash to better use (although near 5% risk-free return right now is pretty yummy), and whether I should rebalance my portfolio after a good Q1.

This Post Has Received 5 Comments. Share Your Opinions Too.


drchunger Commented on April 5, 2006

as for your 30% cash, what i would suggest that has worked well for me is to take that number, divide by 24, and biweekly push into a standard semi-agressive allocation (international, growth, cash, bond, etc) - in other words, dollar cost average into a position. you can also do the same with etfs depending on your religeous beliefs...

if you still want to play the ponys, that's fine, just get into this methodical push into your account.



CPA1298 Commented on April 5, 2006

MM - I really appreciate the added Income Statement disclosure you've begun to provide, in addition to the Balance Sheet analysis. Doing a rough calculation, it seems that you're saving approximately 36% of your gross income (quarterly earned income of $61,000 = $20,333 per month; total net worth increase in March of $16,000 less $8,700 investment gains = $7,300 of savings; $7,300/$20,333 = 35.9%)

Very impressive.

As far as drchunger's comment; I think your cash pile is just fine. Don't you already have about 75% of your net worth in equities? I see significant changes in global asset prices over the next couple years; someday people will have to realize that it's not ok to earn 200 basis points over Treasurys on junk bonds when the historical average is 1000 basis points, and that large apartment complexes can't carry a cap rate of 4%. When the shakeout occurs, you'll be ready to make some money. Meanwhile, earning a risk-free 4.5% + is not all bad.


guest Commented on April 11, 2006

MM- Congratulations on another exceptional month. To have your level of discipline and vision in your early thirties is extraordinary! I look forward to seeing your monthly updates, because I love to see someone with a plan who is winning.


Kassy Commented on April 17, 2006

Congrats on your progress! Do you have a month/year when you forecast to hit the magic million mark?


Tim MMF Commented on April 25, 2006

That is a massive amount of money you're able to save every month! Congrats on the huge income! :) In a year you've more than doubled your net worth...that's impressive. I assume you've paid off your house. Keep up the good work!

BTW, I had trouble submitting my comment because of "questionable content" What's up w/ that?


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