Net Worth Update #6: 2018 Annual Review
Happy New Year!! Welcome to my monthly net worth update :)
You can check out my latest net worth update here.
You can also find my personal net worth template here.
This update is poised to be a little different. I’m going to look back at the whole year and assess each of our accounts. I plan to use these annual reviews as a way to make sure my financial goals are still lined up the way that I want them to be. Let’s jump right into the first section here:
Primary Bank Account: $10,621.80
Change from last month: +318.98 — Change from last year: +3,233.08
We had a great Christmas and New Years break, my mother-in-law visited from Spain and we were able to get out and experience plenty of the tourist spots around California. This also meant that we spent way more than a normal month on food, travel, and entertainment which will certainly reflect in the credit card amount. Overall, this was my expectation for December, as there’s plenty of family members to give gifts to and that adds up quickly. The increase over last year tells me that we have been keeping more cash in our account but is also indicative of salary increases that we’ve received throughout the year.
Bank Account Assessment: This year we realized the pain of having a bank account that isn’t local to where we live. When we moved and needed to get a certified funds check for our security deposit, we had to get creative with how we would procure something like that. In the end, it all worked out, and I don’t see a need to transfer our accounts to a new, local bank.
Savings Account: $1,558.40
Change from last month: +202.46— Change from last year: (-1,589.53)
After pulling money out of savings to finish paying for the bathroom renovation last month, this account is still in recovery mode. The plan is to inject more money into this account once we’ve finished paying off our personal line to get it back up to a more healthy number, likely around $5,000. This is the exact reason that we have savings, and it worked out perfectly. Last month was the first time we had to touch our savings since opening the account back in 2016. A net negative change from last year happens to be from the timing of our bathroom project so I don’t consider this concerning.
Savings Account Assessment: I have been very happy with our Barclays Account. This year has seen some significant growth in terms of savings rates, and Barclays has been quick to respond every time an increase has happened. The account currently offers 2.20% APY! This is a 0.15% increase from their last one which was announced back in October. I don’t foresee a need to change our account from Barclays anytime soon.
Change from last month: (-2,925.77) — Change from last year: +11,508.27
Our investments in our 401(k)’s have taken a back seat to debt pay down for the past few months. The down swing hit all of our accounts this month and since this is our largest combined amount, the drop stings the most. Since my switch to a new job at a startup last month, I’ve lost my ability to contribute to an employer sponsored plan which has resulted in me taking the money that I would normally invest in a 401(k) and sending that towards accelerated debt payoff. I feel that this is the best use of our money, and prefer to spend these funds on debt, instead of opening an IRA, because of my lack of knowledge of the stock market. The increase in these accounts from last year is nice, but it’s not very large due to our alternative investing strategy. (For more info on my thoughts about investing in stocks, check out this post).
401(k) Account Assessment: Since these accounts are employer owned, we don’t have much choice in which accounts we use. Our approach has always been to put in just enough to get an employer match, and nothing more. Mrs Money Smith prefers to put in slightly more than that, which helps to diversify our investments. Each time one of us takes a new job, we have rolled over the funds into our current one, for ease of management.
Lending Club: $922.10
Change from last month: +62.35 — Change from last year: +594.49
The automatic injections of $50 per month are actually starting to add up for this account. Of our 45 notes that are currently funded, 44 of them are paid up to date, and 1 of them is late on payments by a few months (likely to be charged-off soon). I am surprised at how many of these notes stay current, considering I mostly invest in high risk loans. I’ll chalk this up to our economy doing well, and I don’t expect this trend to last forever.
Lending Club Assessment: This is the first year that we’ve started to actively inject funds each month. So far, the results have been much better than I expected, though I am ever-weary of how this could change in the future. I have noticed that the selection of notes to choose from is getting more sparse than before, but I’m still able to find notes to put money into. For now, I plan to continue to invest $50/month into this account and monitor it closely for potential signs of concern.
S Pine Street: $375,000.00
Change from last month: None — Change from last year: None
As I mentioned in last weeks post, the bathroom renovation is done! We’re still struggling to find appropriate tenants for the 2nd floor unit, but I am in no rush as the house currently pays for itself. The beauty of having a 3-unit is that the math works out to allow 2 units to pay for the entire property, while the third unit is our cash flow!
S Pine Street Assessment: Since moving out of state, I’ve started to take a hard look at the viability of continuing to invest in Massachusetts. There have certainly been some headaches, and a few bumpy lessons to be learned, but I consider all of those experiences as 100% worth it. I really enjoy the freedom that this investment has allowed us, and I plan to keep this house for a very long time. Total rent received this year:$48,200.00
Total Assets: $450,951.27
Change from last month: (-2,341.98) — Change from last year: +13,746.31
Change from last month: (-639.41) — Change from last year: (-7,496.42)
Another standard month for pay down here, and another month of vacancy for our 2nd floor. I’m continuing to think about refinancing this property, but I don’t know that I have enough equity, even with the expected market growth, to completely get rid of our PMI. Admittedly I haven’t really started calling around to learn about the process, but I plan to do that in early 2019. It almost feels criminal to think that we’ve paid $33,600 to this account in 2018, but only 22% of that amount has been applied to the principal of the note. :( (You can learn more about our investment property here.)
Mortgage Assessment: My thoughts on keeping this mortgage the way it is are constantly changing. On one hand, the interest rate is really low, only 3.75%, but on the other hand, I know that the PMI payments are essentially flushing our money down the toilet. I’m committed to learning more about what it takes to refinance our mortgage and whether it’s something that makes sense for us in 2019.
Student Loans: $20,319.65
Change from last month: (-234.83) — Change from last year: (-4,239.36)
Another small change this month, just paying the minimums as they exist. There are six different loan balances left that make up this number, and we plan to start attacking this amount as soon as the Personal Line is paid off. While the total decrease in 2018 wasn’t very exciting, I’m happy to know that we should be able to finish these loans off in 2019!
Student Loan Assessment: Similar to the mortgage, I frequently wonder if it would be worth the time and energy to refinance these loans. My gut leans toward not changing anything about the student loans, because they are definitely going to be paid off next year. While the APR’s for these loans range from 3.15% to 6.55%, I don’t know that I’m confident that we will find a substantially lower rate that would make the effort worth it. Assuming that the entire balance was at 6.55%, the interest for 2019 would amount to about $1,300. If that was lowered to 3%, the interest would amount to about $600. Knowing that we plan to pay these off this year, I just don’t think that the difference would be worth it.
Credit Cards: $9,128.35
Change from last month: +1,623.56 — Change from last year: (-938.51)
Seeing this amount fluctuate as much as it does each month always makes my blood pressure rise! I know that we don’t pay interest on our balances anymore, but knowing that there’s that much debt floating around so freely over our heads is cause for at least a little concern. The exciting difference between 2019 and 2018 with this number is that we don’t carry balances over each month, which is definitely saving us all of the crazy interest rates!
Credit Card Assessment: This number is made up of three total credit cards, two of which are “Discover it” cards and one is a “Chase Sapphire Reserve”. We currently put most purchases on the Chase card and utilize the Discover cards revolving rewards categories for their increased cash back bonuses. I don’t feel the need for more credit cards at this point, and would argue that we don’t even need both Discover cards. But, due to the hit our credit scores would take, and considering that the Discover cards don’t have an annual fee, I don’t see a need to cancel them at this point.
Auto Loan: $17,685.10
Change from last month: (-313.75) — Change from last year: (-6,566.47)
More of the same type of targeted pay down for our only financed vehicle. Paying just the required amount until the time comes to aggressively make this debt disappear in 2019. Moving to a one-car lifestyle was something that drastically changed how we lived, but since we live in a city with a strong ride-sharing presence and a stable climate, we haven’t experienced any major pain points because of it.
Auto Loan Assessment: This loan amount is likely to be the last piece of consumer debt that we will pay off. In fact, if the savings rate on our Barclays account continues to rise, we might not even pay this amount off early. The APR on our Honda is only 2.49%, which could very well be smaller than the savings account’s APY if it continues that upward trend.
Personal Line of Credit: $3,146.29
Change from last month: (-1,090.81) — Change from last year: (-17,564.87)
While we have continued to pay this amount down faster than the required minimum payments, we’ve definitely lightened up on finishing this account off. The reason is because other needs have taken priority, we had the bathroom renovation in full swing, a move to a new apartment, and taking a new job. There have been a lot of excuses for not focusing on this account more, but once everything stabilizes in January, I know we’ll be able to jump back into it.
Seeing the decrease amount brings me tons of excitement for 2019 for two reasons: 1) The amount that was paid off is pretty significant and represents the largest year-over-year change of our accounts, and 2) Once this loan is paid off, the next highest interest rate on our accounts is only 6.8%.
Personal Line of Credit Assessment: I won’t be sad to see this account go away in 2019. The idea behind opening this account in 2016 was to use the funds for a renovation of the 1st floor unit at South Pine St and maybe utilize it for other renovations down the road. What wasn’t immediately clear to me was that the rate was variable and that we wouldn’t be able to pay it down as quickly as we initially anticipated. Looking forward, we don’t plan to open another personal line of credit any time soon, and we certainly won’t be opening one that isn’t backed by some collateral.
Mass Save Loan: $18,165.50
Change from last month: (-277.40) — Change from last year: (-3,328.80)
This account still brings a smile to my face every time I look at it. The fact that this money is completely interest free warms my heart to no end. This loan will certainly drag out past 2019 and won’t see any accelerated pay down at all.
Mass Save Loan Assessment: I genuinely hope that I get to utilize one of these loans again in the future, and considering we plan to continue investing in MA, I just might get to. I’ve learned the value in understanding all of your options with this loan and it will certainly help me to think twice about how I will pay for improvements to properties moving forward.
Total Liabilities: $417,625.80
Change from Last Month: (-932.64) — Change from last year: (-40,134.43)
OUR NET WORTH: $33,325.47
Total Change: (-1409.34) — Total Annual Change: +53,880.74
Overall thoughts for the month:
This month has been a pretty good close to 2018. We were able to get the bathroom finished, we were able to spend time with family, and we were able to further improve our professional lives. The month felt like it flew by and that most of the time was spent on auto-pilot, but I think that came from how busy our lives got at our W-2 jobs. This month has been one of self-reflection and personal growth which makes up for a fantastic start to 2019.
Goal for next month
Last months goal was to take the time to read at least one financial improvement book. I’m happy to report that I did meet that goal and I read through Retire Early With Real Estate by Chad Carson (look for the review sometime soon)…The goal this month is:
The goal for January is to prioritize comparing new paychecks against old ones and adding the difference to our automatic debt-payoff amount. This is important because taxes and deductions have changed with my new job, losing the 401(k) and paying less for health insurance. I want to make sure that I’m not tempted to pocket that money and we’re deliberate about keeping our lifestyle creep in check.
Thoughts for the year:
2018 was the first year that Mrs Money Smith and I got serious about paying down our debts. I’m happy to report that we did a pretty good job of taking care of those. We successfully paid off our recurring credit card amounts and one of our student loans. We also got much more deliberate about how we were paying those amounts down. It took some time, but we committed to paying off the highest interest loans first, which meant that every other loan didn’t need the extra that we were sending each month. We switched from a broad approach of paying extra on all of our loans, to minimum payments on all but one.
Initially, when looking at the amounts that our accounts changed, I was frustrated. The numbers aren’t nearly as high as I wanted them to be, but the reason is that these numbers only represent principal amounts. in further reflection, a net worth change of almost $54k is something that I can be proud of because that number also represents how much money we’ve been shoveling towards eliminating debt and preparing ourselves for our next investment property.
Goal for 2019: Pay off all consumer debt with an interest rate above our savings APY. I’m wording the goal this way because our debt is currently comprised of 1 car loan, 13 student loans, 1 PLoC, and the Mass Save loan. Looking at the numbers right now, the total amount to pay off above our savings account rate of 2.2% is almost $41k. But- if our savings rate rises above 2.5%, it would actually be more beneficial to send money into savings and not towards our car, making that total amount just $23k. Considering that we eliminated $40k in liabilities in 2018, I’m positive we can we can finish these debts off in 2019.
Let me know what your goals are down below in the comments, or shoot me a message on the contact page.
-Mr Money Smith