2017 Year-End Net Worth Update


Happy New Year!  The year 2017 is now behind us, and it’s time once again for my annual net worth post!

Why don’t I report our net worth more frequently?

I honestly don’t think it ads a lot of value to readers — markets are extremely volatile by their very nature.  There’s always going to be big swings up and down due to market sentiment, not real business value.

A significant portion of our net worth is invested in either stocks or stock index funds, which means the value can fluctuate significantly throughout the year.  Those large swings in value usually have very little to do with my own investing actions during the year.

It hardly seems fair to take credit for those changes, so I rarely report our net worth.

As the old saying goes, “A rising tide will lift all boats”, and 2017 was certainly a year for large tidal movements.

 

Year End Net Worth

In 2017, our net worth increased by $570,180.  This is a fair result for the year — a 22.58% increase from our 2016 year end net worth.

That’s far more than I ever earned in a single year while I was working, and proof that assets can earn you far more than a job ever will.

2017 year end net worth

Yes, our net worth has now surpassed $3 million dollars!  When I first started this financial independence adventure back in 2015, we had a $2 million dollar net worth.  That means we’ve seen (almost) a $1 million dollar net worth increase in just two years.

I’ve got to say it … that feels phenomenal!

FIRE net worth 2017
Since I officially called it quits from full-time work in 2015, our net worth has increased considerably.

Meanwhile, the S&P 500 returned 18.74% for the year.  Before you poo-poo our annual return, please be reminded of the following facts:

  1. Our net worth includes the payment of taxes.  We hold a lot of money in taxable accounts and pay real world taxes on our earnings.  The S&P 500 does not.
  2. We hold 25% of our taxable accounts in cash right now.  The S&P 500 return is a 100% invested figure.
  3. Fees are also included in our net worth number.  Unlike the S&P 500 index, real people have to pay fees.
  4. We routinely take money from our taxable accounts to pay for living expenses.  The S&P 500 number doesn’t include the cost of food, shelter, travel, and entertainment.  Financially independent people need to eat, unlike an index.

Those four factors mask our real asset returns for the year.  If we removed these factors from the equation, our return was significantly better than the S&P in 2017.

Considering the factors listed above, I’m very happy with our returns for the year.  On average, we’ve beaten or matched the performance of the S&P 500 for the last 10 years (inclusive of fees, taxes, and uninvested cash).

I feel pretty comfortable with how we’re managing our money.  Most personal finance blogs will tell you to only invest in index funds, and that’s generally good advice — most people should do exactly that.

I do things a little differently of course, holding a mix of stocks, index funds, preferred shares, and REITs.

Let’s dig into the details!

 

Taxable Accounts

Taxable accounts 1 and 2 are our primary investment portfolios.  This is where all our dividend income is generated.  These taxable accounts are worth a combined $2,042,461.50.

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

Actually A LOT of cash.  25% of our taxable accounts are in cash right now.

300 dollars
We held a lot of cash during the year. This reduced our overall returns, but we have 7 years of living expenses that live outside of the volatile stock market.  I sleep pretty well at night.

While we definitely could have earned more in 2017 by remaining fully invested, I prefer the safety of a large cash buffer right now.

Dividends from our taxable accounts amounted to $53,504.19 for the year.  I’ll go into more detail on this figure in my December Dividend Income & Expenses post, but our annual dividend figure exceeded my goal of 10% dividend growth for 2017.

Hot damn!  For awhile I didn’t think we’d actually make it, but a combination of new investments and dividend raises helped us meet the goal.

 

Tax Deferred Accounts

Tax Deferred Accounts 1, 2, and 3 are our various 401k’s and 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 mostly matched the relevant indices (minus some very small fees) for the given funds or ETF’s.

Tax Deferred Account 4 is a small IRA that I invest in individuals stocks.  Performance in this account has been good.  I started 2016 with $7,068.64, and that account has now ballooned to $14,513.06.  That’s an average annual return of 52.65%

We continued to leave our tax deferred accounts alone in 2017.  We don’t use them 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 is a bank account mainly used for paying regular monthly bills.

The account was down to $8,370 by the end of the year, but this number is hardly significant.  It does not include the massive amounts of cash we have in our taxable brokerage accounts… this is just a small cash account used for bill paying convenience.

The value of this account varies significantly as we pay bills like our mortgage, daycare, food, utilities, etc.

We regularly refill this account with cash from our taxable brokerage accounts (as necessary), mainly using passive dividend income.

brothers watching the storm water
Raising a family isn’t as expensive as many people think, but it’s hardly free either — we routinely refill our cash account with dividends from our taxable portfolios.

 

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’ve mentioned on the blog over the years, we live in a very high cost of living area.  It’s a hot real estate market here and houses are expensive!

Zillow estimates the value of our home value at $839,335.  That’s a 13.25% increase over 2016!

Like most people, I feel that Zillow’s zestimate values are a little inflated.  So, like last year I used 90% of Zillow’s estimate for the value of our home.  90% of Zillow’s estimate is $755,401.50.

low tide
The rising tide also lifted the value of our home.  We live in a hot real estate market, and values have been rising rapidly for several years now.

Using (recent) comparables from homes sold in my neighborhood, the 90% number seems like a fairly accurate representation of what we could sell our house for today.

We also continue to maintain a mortgage balance.  The balance of that mortgage is now down to $287,110.42.

Subtracting one value from the other gives us $468,291.08 in home equity.  A nice improvement over last year!

 

Final Thoughts

The year 2017 was definitely a year of rising tides, and like everyone else our net worth rose with the tide.  Thanks Mr. Market!

We also had some incredible luck in 2017, as taxation changes strongly affected the value of a few investments.  Southwest is a good example —  We purchased shares of Southwest Airlines in September, and saw gains of 20% by the end of the year!

While net worth increases like these feel great, they are anything but usual.  Eventually we’re going to have a down year, and our net worth will sink as a result.  That’s just part of the investing game.

While stock prices marched higher in 2017, the underlying value of our businesses also grew… albeit at a pace far slower than market prices.  The difference between these two values is concerning, as the S&P PE is now at historically very high levels.

Over time, I expect these two numbers will roughly converge — either because of market declines, or long periods of flat markets (allowing underlying business value to eventually catch up with market values).

As part of our FIRE plan I’m prepared to weather either eventuality.

Whatever the future brings, I wish everyone good luck in 2018!

 

[Image Credit: Flickr]

42 thoughts on “2017 Year-End Net Worth Update

  • January 2, 2018 at 11:26 PM
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    Booya! I’m inspired, and seriously impressed. Nice run Mr. Tako.

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  • January 2, 2018 at 11:35 PM
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    Awesome year Mr Tako. Sitting on a buffer of cash at the moment is probably a very prudent thing to do. Who knows where the markets will go this year. Increasing NW 50% in two years of a large base is a real feat. Congratulations 🙂

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    • January 3, 2018 at 11:56 AM
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      I really have to give credit to my buddy Mr. Market. He did all the hard work. I just sat around on my ass and counted the money.

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  • January 3, 2018 at 1:19 AM
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    Impressive gains, Mr. Tako. Yes, the market provided a huge tailwind for our household also.

    It’s prudent of you to be sitting on so much cash as new opportunities develop.

    Have a great 2018!

    -Mike

    Reply
  • January 3, 2018 at 2:16 AM
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    Wow, congrats for blasting past the $3M mark Mr. Tako! Although you may not feel like taking credit for a rising tide, you’ve made some awesome choices in the past which allow you to be in your current position. 🙂

    Wishing you another phenomenal year of good fortune, delicious eats, and quality family time in 2018. Keep up all the great content!
    Michael @ Financially Alert recently posted…Financial Update Report – December 2017

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    • January 3, 2018 at 11:55 AM
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      Thanks Michael! You did pretty good yourself this year!

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  • January 3, 2018 at 4:07 AM
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    Incredible gains, Mr. Tako! Your net worth and dividend reports are always so inspiring to me. We plan to increase our cash buffer substantially this year as well. We will see what 2018 brings in terms of market performance…

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    • January 3, 2018 at 11:55 AM
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      Thanks Laurie! Happy New Year, and the best of luck in 2018 to you!

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    • January 3, 2018 at 11:54 AM
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      You keep at it and you’ll be here soon Lily!

      Reply
  • January 3, 2018 at 5:29 AM
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    Tako you’re killing it man! Seems like your winning across the board. Congrats on passing the three mil mark and hope you have continued success this year!

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    • January 3, 2018 at 11:54 AM
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      Thanks AccidentalFire! It’s really all just Mr. Market. I’m just along for the ride! 😉

      Reply
  • January 3, 2018 at 5:45 AM
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    Wow congratulations on hitting the $3M mark! A half a million increase in net worth in a year is just amazing!

    I think it’s a great idea to set aside some cash for unexpected expenses. But over all, I think you had a great year in 2017. I look forward to future updates! 🙂

    Reply
  • January 3, 2018 at 5:46 AM
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    That is very impressive. Congratulations in breaking through the $3M mark!

    The cash in your taxable accounts is a very nice cushion. It will help a lot to go through the market volatility. Better protection, better sleep, that’s how I feel. Have a great 2018!

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  • January 3, 2018 at 5:53 AM
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    Wow. Great numbers for a great year. 1 million increase in 2 years ain’t bad!!

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  • January 3, 2018 at 5:56 AM
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    Nice job on the net worth growth, Mr. Tako!

    Years ago, I might have read this post and thought, “Good for him, but I’ll never get anywhere close to that.” As we’ve stayed the course though and seen some big milestones ourselves, I can look and think “Yeah, this definitely possible!”

    You’re a good inspiration – have a great 2018!!

    — Jim
    Jim @ Route To Retire recently posted…Personal and Financial Goals for 2018

    Reply
    • January 3, 2018 at 11:52 AM
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      Thanks Jim! You’ll be here soon enough!

      It’s definitely possible!

      Reply
  • January 3, 2018 at 6:55 AM
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    Big congrats on putting the foundation in place for a huge year!

    I agree and love your approach regarding net worth updates. While it’s cool to see the digits tick up, most of the time the progress is based on moves made many months and years prior. Better to focus on the present (enjoying today) and future (ensuring happiness and financial stability for tomorrow).
    Mr. Fired & Free recently posted…Being Vulnerable

    Reply
  • January 3, 2018 at 7:38 AM
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    That’s crazy awesome! Here’s to a great 2018! Inspiration like this is why a lot of us keep going. I think you’re one of the first bloggers who posts updates and has blown through the $3M mark.

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    • January 3, 2018 at 11:51 AM
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      Thanks Olivia! If a simple person like me can do it, *anyone* can do it!

      Reply
  • January 3, 2018 at 8:03 AM
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    Fantastic numbers, Mr. Tako! I hope we can continue to ride this wave for awhile. It almost seems odd to have a day when the markets are actually down.

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  • January 3, 2018 at 8:45 AM
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    Congratulations! You did extremely well last year. 18.5% is huge at this level.
    That’s a lot of $$$.
    Your stock investment did great last year. That’s your edge.
    Good luck in 2018!

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    • January 3, 2018 at 11:48 AM
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      Thanks Joe! I’m going to be modest and say that it was all Mr. Market! 🙂

      Reply
  • January 3, 2018 at 11:05 AM
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    Your growth was actually higher than you calculated. 18.4% is $570k / $3.1mm. $570k / $2.5mm is 22.6%, your actual growth for 2017. You crushed the S&P, all while holding a huge cash portion. Your investments knocked it out of the park! Congratulations.

    Reply
    • January 3, 2018 at 11:41 AM
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      Your right Paul! Thanks for catching that! It was a bug in my spreadsheet, which I’ve now corrected!

      Reply
  • January 3, 2018 at 11:08 AM
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    Congrats man, looks like we have a bit of ways to go before we can catch you. An increase of more than 15% when you are already in the double comma club is pretty damn impressive!

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    • January 3, 2018 at 11:47 AM
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      Thanks Tawcan! I can’t take credit for it, the market was just in a good mood this year!

      Reply
  • January 3, 2018 at 12:06 PM
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    Thanks for the inspiration, Mr. Tako. I’m on the same path, but using real estate to build primary net worth. It would be interesting to cross pollinate our investing strategies to balance out the portfolios. I’ll keep reading and following and hopefully our families will cross paths on an Island somewhere. 🙂

    Cheers,
    Sanj @buyrentsell

    Reply
  • January 3, 2018 at 7:49 PM
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    Congrats Mr.Tako. 3 million in net worth is awesome. Your yearly dividends are awesome too. WTG!

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  • January 4, 2018 at 5:02 PM
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    “Before you poo-poo our annual return…”

    Say what? Why would anyone poo poo a 19% return?

    I’m with on the “not consistently reporting net-worth” point of view. The market fluctuates and our net-worth could be changing constantly. That’s why we live within the yield shield and don’t check our portfolio often. Everyone who invested did crazy well this year, but that doesn’t mean every year is going to be like that. I’m grateful but cautious. And that’s the way it should be.

    Congrats on a great year, Mr. Tako and thanks for sharing your numbers!

    Reply
    • January 5, 2018 at 10:03 AM
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      Actually it was a 22% return, but hey who’s counting?

      I think its very smart of you to be cautious and live on your yield, instead of speculating on market gains. The last 6 or so years have been too good to be true.

      Thanks FIRECracker!

      Reply
  • January 4, 2018 at 10:27 PM
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    Wow, since 2015 your net worth have increased!
    19% return on assets only is amazing.
    I know that net worth updates don’t add value but people (like me) sure like to see them!

    I’m about 18% compared to last year, but that’s including saving my salary and I’m not in the double comma club.

    Keep up the great work, and I’d like to strive to keep up with the Tako’s! (Maybe that should be a T-shirt, instead of Keeping up with the Joneses’ it can be Keeping up with the Tako’s)
    GYM recently posted…Canada’s Favourite Points Program is Ending: Shoppers Optimum Points turns into PC Optimum

    Reply
    • January 5, 2018 at 10:04 AM
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      Hmm… that’s actually a fun idea. Anyone else interested in a Mr. Tako t-shirt?

      Reply
  • January 5, 2018 at 6:10 PM
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    They are some amazing gains to be truly proud of! It is exciting to see what the Tako family can achieve in 2018.

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  • January 6, 2018 at 6:11 AM
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    Congratulations and thanks for sharing. Always get pumped up when seeing this stuff. Good luck in 2018!

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  • January 9, 2018 at 5:29 PM
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    Mr. Tako, thanks for the great post and analysis. What posts do you recommend that talk about how you got to the 2M and any insights on what you own today and what you may be looking at owning?

    Reply
  • January 17, 2018 at 2:39 PM
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    Congrats on a great financial year and crossing the $3M milestone. Here’s to continued success and prosperity for the Takos in 2018.

    Reply

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