(+0.42% Month / +26.28% YTD) May 2009 Networth
May has come and gone and another month has past of minimal growth to the networth…
May Highlights
- We had about a $2,000 decrease in our savings account this month because we needed a little more cash to finish the backyard. This should be the last time that we’ll need to dip into savings for a while. We have finally finished all of the major fix-ups at the house and it’s finally starting to feel like home. I think the next major withdrawal from savings will be for the purchase of our new car….well, not new, but our new-used car.
- It was a decent month for the stock market so we saw some decent growth in our IRA accounts. I don’t really think this is going to last, but I’ll take it while it’s there. The bulk of my IRA is still cash and I am still trying to debate how to re-allocate and invest the funds so if you’ve got any ideas please feel free to suggest.
– The giant increase in our credit card debt this month was due to the fact that we were finishing up the backyard. Like always we will be paying it off in full at the end of the payment cycle, so it is a little deceiving.
To see the path to our current networth position check out the “Networth Page“
April 2009 Financial Ratios
Another great month. The ratios are exactly where we like to see them
YTD% Growth: We are now more than half way of hitting our goal of 50% networth growth for the year and we are only 4 months into the year. Granted a big portion of that is because of the enormous tax return we got, but it is still nice to see such high growth so early in the year. Also, we saw a second straight month of gains in our IRA and brokerage acconts which has been a good change from months past.
Emergency Fund Ratio: A.K.A. Month’s Living Expense Covered Ratio, is still growing steadily. Although we are well above our goal of 6 months we are now shooting for a emergency fund of 12 months. This means we will probably need to increase our emergency fund to about $30,000, but it will be a good security blanket if we are ever faced with a layoff or family emergency. I’ve always felt like the more you’ve got set aside, the less likely something is to happen. Or maybe it just seems that way because what would have been considered an “emergency” is now just a minor setback.
*For an explanation of my ratios and how they are calculated check out my 3 Financial Ratios posts (Liquidity Ratios, Debt Ratios, Saving Ratios).
(+3.65% Month / +25.76% YTD) April 2009 Networth
April Highlights
- Finally the financial markets have decided to give back a little of the massive losses we have been suffering over the past year. It was nice to have a second month in a row of increases in our equity accounts. I may be a pessimist, but I don’t think we are quite out of the woods yet. We may have bottomed out when the Dow hit around 6,500, but I think it’ll be a quite a few years before we are back above 10,000 levels.
- I have been keeping our house value constant since our purchase last December, but I think I may start to change the value every quarter or so. This is one of those assets that is extremely hard to value until you actually sale it. Right now I have simply valued it at what it appraised for which was about $20,000 more than the purchase price. This may be a little aggressive so I’ve been looking at some different value models and may start using one of those in future months. However, in the end it will still be just a guess, but I would assume it will be much more conservative than my current valuation.
– We did see a significant decrease in our cash account this month, but that was because we had a pretty decent size credit card balance that we had to pay off. We are still trying to finish up the last few fix-ups around the house, so hopefully in the next couple of months we’ll have a lower outstanding balance at the end of each month. Our last major project is the backyard and if all goes according to plan I’ll have that done, by the end of May. We’ve decided on a budget of around $2,500 to finish the backyard. This seems reasonable considering I’ve got to pretty much do everything from sprinklers and drain pipes to laying edging and sod.
- We hit the halfway mark of our goal to increase our Networth 50% for the year and we are only 1/3 through the year. With a little help from the markets and continuing to follow our plan, we should be able to hit our goal.
To see the path to our current networth position as well as our other monthly statements check out the “Networth Page“
March 2009 Financial Ratios
Another month past and our ratios are right in line with where we’d like them.
MTD% Networth Growth – FINALLY!!! It’s been quite a while since we’ve seen an increase in our retirement/equity accounts. Although the growth isn’t near what we’ve lost, we did see some increases this month. Who knows if we have hit bottom or if this is just a lull in the recession, but whatever it is I’ll take it. I know this is long-term investing money and I shouldn’t worry about it, but it’s hard to see investments drop by nearly 50% in a very short time period. I guess only time will tell if this is going to be a sustained recovery or just a pause in the downfall.
Month’s Living Expenses Covered Ratio – We saw a pretty significant drop in our emergency fund coverage ratio from last month to this month. The reason is because we had to take out about $3,000 for home repair projects. We have been planning on doing these projects since we purchased our new home and now that the weather is getting nicer the time finally came to make the withdrawal. We are hoping that by the end of the year we’ll have it back over 12 months.
*For an explanation of my ratios and how they are calculated check out my Financial Ratios posts (Liquidity Ratios, Debt Ratios, Saving Ratios, & Networth Ratios).
February 2009 Financial Ratios
Another month has passed and I finally feel like our ratios are closer to what we will normally see. Here are a few of the highlights.
Debt Ratio: This is the first month that we actually have a debt ratio that means anything. We’ve finally put the house and mortgage on the balance sheet and now we can see that effect on the debt ratio. A .70 debt ratio basically tells us that 70% of our assets are financed with debt…aka, 70% of our total assets are made up of our home.
Overtime we hope to see this ratio get to zero. When it reaches zero it will signify we are debt free. One of the dilemmas that I am now facing is how to value our home on the balance sheet. I am not sure if I should use the purchase price, the appraisal value, Zillow, our property tax estimations, or perhaps a combination of them all. I think I will be using the appraised value this month, but I’m sure I’ll be making adjustments in the coming months.
MTD% Networth Growth: I wish I could attribute the double digit networth gain this month to something more than our tax return, but unfortunately, that was it. We received a massive tax return, including last year’s stimulus money that we now qualify for as well as the the first-time homebuyers credit. I am a little disappointed that we got such a big tax return because that meant I was basically giving the feds an interest free loan all year long. I am going to be more cognizant of this during 2009 and try to plan it so my return is no where near 2008 levels.
*For an explanation of my ratios and how they are calculated check out my 3 Financial Ratios posts (Liquidity Ratios, Debt Ratios, Saving Ratios, & Networth Ratios).
January 2009 Financial Ratios
It’s a new year and we’re off to a decent start. We have set some lofty goals for Networth Growth and our Emergency Fund ratio and we’re off to a nice start.
As you can see I’ve added the “Networth Growth” category to our ratios this year so it will be easier to track our month-to-date and year-to-date progress on our goal. I am thinking about adding a 3rd ratio under this category that would be lifetime-to-date growth (LTD), but we’ll see….I don’t know if that would really tell us much. With that said, we saw a decent increase in our networth of just over 3% which is a little below our goal of 4.16% growth each month.
Now that we have a house, we’ve finally have a long-term debt coverage ratio. This ratio basically says that at our currently monthly expense amount we could pay our debt obligations 1.24 times over. Because our mortgage makes up so much of our monthly expenses, this is pretty low. Over time we’d like to see an upward trend.
*For an explanation of the different ratios and how they are calculated check out my Financial Ratios posts (Liquidity Ratios, Debt Ratios, Saving Ratios).
December 2008 Financial Ratios
The year has ended and we have finished off the year right where we wanted. We own a home and we saw some significant growth to our Networth….a big part of that due to owning a home.
The ratios don’t show it (and I plan on adding it next year), but our total networth growth for the year was 30.14%. About 7% of it was due to the purchase of our new home so in reality we were probably closer to 25% networth growth. Even with such a horrible 4th quarter in the financial markets we were still able to eek out double digit increases for the year. Because we saw such a significant decrease in our retirement/equity accounts this year we are hoping for a substantial rebound next year. We have set some pretty high goals as they relate to networth growth so lets keep our fingers crossed that we get back some of these massive losses.
Even though we closed on our house this month we don’t actually have a mortgage payment due until February so we were able to save over half of our income and keep some pretty high saving ratios. Once we start paying our regular monthly bills and mortgage we are going to try and keep this right around 15%.
*For an explanation of the different ratios and how they are calculated check out my Financial Ratios posts (Liquidity Ratios, Debt Ratios, Saving Ratios).
0% APR, 12 Months w/ NO Balance Transfer Fee
I’m not an advocate of using credit cards to accumulate debt. However, with that said, I am an advocate of keeping as much money in your own pocket and out of the pockets of corporate America. I ran across this offer this afternoon and thought it could be of interest to someone looking to transfer an outstanding balance they are working to pay off. Most of the 1 year, 0% interest deals I’ve seen include a fixed or percentage based balance transfer fee.
The card is an Associated Banks Visa rewards card and is issued by Citi. From what I’ve read so far it seems to be pretty easy to get a decent line of credit with a normal credit score i.e. I’ve seen a $15,000 line of credit with a 700 credit score. Also, for those ambitious out there, this is a perfect card to get if your looking to transfer an outstanding balance simply to earn interest on the outstanding balance. For an explanation of how this works please check out a post from MY Money Blog.
Here’s a link to all the fine print. You’ll notice it states there is a 3% balance transfer fee. However, there is no fee with the 0.00% APR balance transfer offer described above.
Financial Ratios Part I: Liquidity Ratios
Liquidity Ratios can help determine whether or not you have enough current assets to pay for a large, unexpected expense, or enough money too tie you over in case of a period of reduced or eliminated income.
Current Ratio = Current (liquid) Assets / Current Liabilities
The current ratio tells you how many times over you could pay off your current liabilities with the cash you have on hand. The more times you can pay off your current liabilities, the better off you are financially. A ratio greater than 2 is recommended. It is also important to track the trend of this ratio; an upward trend is recommend. If this ratio is going down, you need to make changes to improve your financial situation.
Living Expense Covered Ratio = Current Assets / Monthly Living Expenses
I also like to refer to this ratio as the emergency fund ratio. The living expense covered ratio tells you how long you could survive if you were to loose all of your current sources of income. This is a good measure to see how long you could sustain financially on your current emergency fund assuming the same level of lifestyle. However, this is a conservative estimate considering most people would scale back their standard of living with the loss of income sources.
When calculating your monthly living expenses keep in mind that with the loss of a job you may get rid of certain expense i.e. taxes, charitable giving, savings, etc.
Once again, you should track the trend of this ratio. It should be increasing on a steady basis. Ideally you should have a ratio of between 3 and 6 depending on the volatility of your job.
*For an explanation of the other ratios I use, check out my other financial ratio posts (Liquidity Ratios, Debt Ratios, Saving Ratios, & Networth Ratios).
November 2008 Financial Ratios
No complaints here. It was another great month financially. The ratios speak for themselves, but here are some items I noticed.
SAVINGS RATIO: I have been debating wheter or not to include the money we put in our Health Savings Account into our savings category, but then I looked at the name again and decided it techincally is savings 
. The only reason I say that is I feel like it is technically a medical expense that we are just paying in advance, but I guess it’s not an expense until we actually pay it out so we will continue to include it with savings. As you can see with that included we were over 50%.
MONTH’S LIVING EXPENSE COVERED CURRENT RATIO: The trend for our emergency fund ratio has been going up just as we planned. It has been good to have a couple months of consistent paychecks and bills to get a better feel for how healthy our emergency fund really is. However, I feel it is still not a true reflection of the health of our emergency fund because our monthly bills will significantly increase once we purchase a home. With the purchase of a home we are hoping to be within our goal of 3 – 6 months.
DEBT RATIO: Another month of next to nothing in debt. That will change overnight with the purchase of our home, but it’s good to see it so low right now.
*For an explanation of my ratios and what they represent please take a look my 3 part Financial Ratios post (Part I, Part II, Part III).
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