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:
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.
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!
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!