2016 Year-End Net Worth Update


People ask me all the time what our net worth is, but rarely do I post the numbers.  Why?

It fluctuates too dang much to worry about.  As soon as I post a number, it’ll change tomorrow.  But I do understand that people are curious.  Most people want to know how big our portfolio is to generate that large amount of passive income.

Well, today’s your lucky day — I’m sharing our net worth numbers!

In my last post, I covered our expenses and dividend income for the year.  In this post, I’ll cover the change in our net worth, including gains or loses over the past year.

 

Year End Net Worth

My first year of financial independence is now complete, and it’s time to tally up the damage.

In 2016, our net worth improved by $383,239.  Overall that’s an 18% improvement from our 2015 year end net worth.

That’s right, I didn’t work a single day in 2016 and our net worth grew by $383k.  Far more than I ever could have earned working.  Despite spending slightly more than our passive income, the numbers look positive for the year.

(Whew…I dodged that bullet!)

Let’s dig into the specifics:

2016 Net Worth

We are now worth $2.5 million dollars (USD), and $2.1 million of that is in liquid assets (stocks, bonds, mutual funds, or cash)

 Our annual spending in 2016 was $55k.  This level of spending puts our liquid net worth at 38 times annual spending.

In other words, we could maintain our same level of spending for 38 years, even if the market had a 0% return.

 

Taxable Accounts 1 & 2

Taxable accounts 1 and 2 are our primary investment portfolios, and where all our income dividends are generated.  These taxable accounts are worth a combined $1,680,924.

We hold mainly individual stocks in these accounts, but also hold REITs, Preferred Shares, and cash in these accounts.

Dividends from the taxable accounts amounted to $47,428, which means we had a combined yield of 2.82% for 2016.  Generally speaking, I’m shooting for a 3% yield, so this was fairly close to my goals.

Our taxable accounts had a combined return of 15% in 2016 (subtracting out additional cash contributions).  This number is inclusive of dividends, taxes, and trading fees.

Meanwhile, the S&P 500 returned 12.25% (with dividends reinvested and NO taxes paid).  That amounts to a market beat of 2.75% for our taxable accounts.

I’ll take it.

We’ve beaten the S&P 500 index on average for the last 10 years, so I feel pretty comfortable with what we’re doing here.  Most personal finance blogs will tell you to only invest in index funds.  That’s good advice, and most people should do exactly that.

Investing in individual stocks is not for everyone, but I happen to like investing.  As I said last year, “We don’t mind being a little different when the results are on our side.”

If you’re interested in investing in individual stocks, I suggest reading every investing book you can get your hands on … including those on my recommended Books page.  Eventually you’ll get a feel for it.  😉 

 

Tax-deferred Accounts 1 & 2 & 3

The Tax-deferred accounts are our 401k’s and various IRA’s.  These tax deferred accounts contain mainly Vanguard Index funds, with a little bit of employer stock left over from when we worked at public companies.  

Annual performance of these accounts was reasonable and matched the indices (minus some very small fund fees) for the given funds.  

Last year I goofed up and forgot to include Taxable Account 3 in my original net worth post.  This was my old employer 401k plan.  This year I’ve amended that error and included the amounts in the table above.

We continue to not touch these accounts to fund our lifestyle.

At some point, when Mrs. Tako quits her job, our plan is to begin rolling over most of these funds into a Roth conversion ladder…when we finally fall into lower tax brackets.  

For now, we just let these accounts grow.

 

Cash Account

Our cash account was down to $10,281 at the end of the year.  It doesn’t include the massive amounts of cash we have sitting in our taxable brokerage accounts…this is just a small cash account at our bank.

The account is used primarily for paying bills, so the drop from last year amounts to regular inflows and outflows while paying bills (like the mortgage, daycare, food, utilities, etc).

We regularly replenish this account with cash from our taxable portfolios.  Nothing to see here.

 

Real Estate (90% of Zillow estimate)

The real estate category is the value of our home, as represented by a “best estimate” of our home equity.

As I keep saying in my posts, we live in a high cost of living area and 2016 didn’t do anything to discredit that reputation.  Zillow estimates our home value at $741,092.  A 12.9% increase over 2015!

Pretty incredible if you ask me.

Like last year, I only used 90% of Zillow’s estimate (because 100% seems kind of high).  90% of Zillow’s estimate is $666,982.8.

Using (recent) comparables from houses sold in my neighborhood, that number seems like a fairly accurate representation of what we could get for our house today.  

We continue to maintain a mortgage balance.  The balance of that mortgage is now down to $295,434.02.

Subtracting the one value from the other gives us $371,548.78 in home equity.  That’s a very nice improvement!

 

Final Thoughts

We continued to keep our investments simple and stick with the “game plan” in 2016.

Just like last year, we don’t own any complicated assets.  Nor do we have the large debts you typically see with income property investments.  It’s just stocks, reits, preferred shares, index funds, and a lot of cash.  Too much cash probably.

The year was a good one financially, and I’m very happy with the result.  But every year isn’t going to be a good one.  There are bound to be the bad years where we underperform the market or worse — have negative returns.

All of our returns over the last several years could be wiped out by a single recession, so I try to keep things in perspective.  Historically speaking, the market is even overdue for a recession.  Those facts have me taking a very cautious investment approach to 2017.

Whatever happens, I’ll be here to report all the gory details.  Good luck fellow cephalopods!

 

34 thoughts on “2016 Year-End Net Worth Update

  • January 10, 2017 at 11:59 AM
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    Deep, deep bow, seriously impressed! Good for you mate, well done. Stellar improvement in net worth. You probably sleep extremely good at night 😉

    Reply
    • January 10, 2017 at 12:06 PM
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      I would sleep well at night, but unfortunately Tako Jr. #2 doesn’t sleep through the night yet!

      Reply
  • January 10, 2017 at 12:04 PM
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    Cool! Seeing home equity growth like that sways me a bit toward wanting to own a home, but then I remember that plenty of people lose money on their homes too.

    Hope 2017 is another splendid year for your family of octopi!

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    • January 10, 2017 at 12:07 PM
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      Thanks Ellie! I hope 2017 is great for you and yours too!

      Reply
  • January 10, 2017 at 12:04 PM
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    Great update and awesome increase, Mr. Tako!

    Keep it simple definitely makes it easier to keep track of what you have.

    Here’s to hoping for a great market performance in 2017!

    Reply
  • January 10, 2017 at 12:14 PM
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    Dude, nice equity growth on your home. Any appreciation would be nice where we are at. Even that aside though, a stellar year. Nice work and good luck in 2017!

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    • January 10, 2017 at 12:17 PM
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      Technically the house *just* appreciated 12.9%. The rest of it was us paying the mortgage every month!

      Reply
  • January 10, 2017 at 12:49 PM
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    Great post enjoying reading you blog, Great life you have going.
    If you feel strongly about a down turn 2017, buy some S&P puts as insurance for the portfolio
    Thoughts ?

    Pat G

    Reply
    • January 10, 2017 at 1:22 PM
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      Typically I don’t make short term investments like that…even if I was certain about a down-turn in 2017. I prefer the weighing machine over the voting machine.

      Reply
  • January 10, 2017 at 2:36 PM
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    All riiiiiight! Way to go on that net worth, Mr. Tako. You are one smart cephalopod.

    I’m still trying to wrap my head around investing, so I’d love to see more of your “should I invest in this stock” blogs, too. THANK YOU for the recommended reading. I’m looking for “Investing for Dummies” basically so this is a good place to start.

    As far as the recession goes, I think it’s always wise to prepare for the worst during the good times. It’s important to have a “bare minimum” plan to follow if you fall into dire straits–the absolute smallest amount of money you can live on to survive. The number is surprisingly small once you really look into it.

    Reply
  • January 10, 2017 at 4:28 PM
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    Impressive numbers! Way to go on the increase in net worth despite living off your passive income for the first year. How’d you save such a large nest egg to begin with?

    Reply
  • January 10, 2017 at 6:02 PM
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    This is amazing! I’m not sure if looking at the numbers is still a little surreal, but hopefully you guys are proud of where you are!!

    Who knows what Wall Street will give us for the upcoming year, but we’re pretty bloated out there right now. Regardless, you have such a nice cushion on your investments, you should be good to go for ages!

    Congrats on the awesome numbers and here’s to a great 2017!! 🙂

    — Jim

    Reply
    • January 10, 2017 at 7:12 PM
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      Thank’s Jim! A 50% haircut could be right around the corner, you never know! Even with a haircut like that, I think we’d still be OK.

      Reply
  • January 10, 2017 at 7:25 PM
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    Wow, what an awesome year for your investments! We’re very happy with the gains in our portfolio too 🙂 And since our spending is A LOT less than I thought it would be, we’re making money in retirement. Why do people keep thinking early retirees will run out of money? C’mon, it’s not like we never track anything! I get that the market can tank and wipe out our gains for the year, but that’s why we invest for the long term. Beside, people keep forgetting that we can live on dividends and fix income without having to sell in a market downturn. We also have a cash cushion. Always good to have backup plans A, B, C, D, just in case.

    Well done and cheers to an awesome year!

    Reply
    • January 12, 2017 at 5:46 PM
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      Too right Mrs. FIRECracker! I always wondered why people thought early retirees were somehow different that regular retirees….

      The math is the same!

      Reply
  • January 11, 2017 at 2:28 AM
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    Impressive gains, especially as you do not use any leverage!
    Finally had a look at your recommended book list. They are indeed very good investment books: I have read all of them (some several times)! No wonder a lot what you write about investing sounded so familiar to me.

    Reply
  • January 11, 2017 at 8:05 AM
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    38 years of spending @ 0 returns. Talk about security! Well done Mr. Tako.

    Reply
  • January 12, 2017 at 4:31 PM
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    Great Job.

    I am wondering how people can save over 50% of their salaries….

    Here is a quick breakdown. Any suggestions or comments welcome. Where am I overspending?

    My income = 80,000
    My wife’s = 60,000

    Total Gross = 140000
    – max out 457/TSP – 36000
    =104,000

    take 30% which are withheld for taxes

    728000

    – 2400 a month for mortgage payments (28800)

    leaves 44,000

    -20,400 for childcare for 2 kids (1700 per month)

    =23600
    – 10000 for property tax

    =13600

    -5500 Roth IRA

    =8100

    Reply
    • January 12, 2017 at 5:10 PM
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      Honestly it looks like you have way too much house for your income. 30% taxes and 10 grand for property taxes? That seems way too high. Where do you live – California or something? Putting away $41,000 a year isn’t too shabby I guess, but you can do better.

      Sell the house and move into a two bedroom apartment and I bet you’ll go a long way towards improving your savings.

      Reply
      • January 12, 2017 at 5:58 PM
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        you guessed it. the bay area, california…a small city named Milpitas.

        most of my early savings went to pay for the downpayment of the home purchase in 2013. i guess using your rule of thumb 90 percent of Zillow, we have 600k in home equity….

        it would be a tough adjustment to downsize from a single family home to an apartment. but i guess you have to sacrifice something to get to FIRE earlier.

        the way things are going i am on track to retire around 55.

        Reply
        • April 9, 2017 at 3:48 PM
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          Don’t forget the geo arbitrage ability! Many of my fellow Cop brethren cash out of California when they retire.

          Although you have to deal with “weather” (whatever that is), up to 1/2 of your equity is now freed to be invested!

          Reply
  • January 12, 2017 at 4:33 PM
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    Congrats on an awesome year. Your year-over-year net worth increase is higher than most people’s entire nest egg. Best of luck in 2017.

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    • January 12, 2017 at 5:00 PM
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      Thanks Investment Hunting! We don’t like to do things by half measures around here!

      Reply
  • January 13, 2017 at 3:41 AM
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    Great return. Other than tracking a few things with Mint, I really don’t know exact numbers for 2016. I know our liquid net worth increased by at least 300k. We grossed about 200k from working and probably made near that in market gain. Spent the rest. Total liquid is almost 1.7M plus no debt. Paid off real estate worth 300k or 400k, clueless to how much it’s worth. How the hell do you guys keep track?

    Reply
    • January 13, 2017 at 3:08 PM
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      With a spreadsheet. Put all your numbers in and add it up!

      Reply
      • January 13, 2017 at 6:13 PM
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        To not have to make spreadsheets is why I’m saving money. We make a heak of a lot more than we spend. No real budget. Maybe when we hit $2M liquid we’ll look at tracking things better.

        Reply
  • January 13, 2017 at 9:53 AM
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    Whoa, 18% is really good at this stage. Congrats!
    Do you hold any bonds or is everything in the stock market?
    Good luck in 2017!

    Reply
    • January 13, 2017 at 3:09 PM
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      In our taxable accounts, fixed income securities are limited to preferred shares.

      Reply
  • January 13, 2017 at 12:12 PM
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    Seriously awesome year you had. Very impressive growth.

    Now can you spare $20? Kidding ha!

    Reply
  • January 15, 2017 at 10:44 AM
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    Do you hold any REITs or MLPs in tax-deferred accounts?
    I hear it may cause headaches, but for a small investor it doesn’t appear very likely.
    For someone on your scale though, I could see it causing some tax consequences. Question is if those would be worth it. Food for thought when it comes time to Roth conversions.

    Reply
    • January 15, 2017 at 11:07 AM
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      No, we don’t hold any REITs or MLPs in our tax-deferred accounts at this time.

      Reply
  • January 17, 2017 at 8:09 PM
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    Thanks for the peak into your net worth. Really impressive YOY gain.

    Reply

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