Personal Balance Sheet, July 2008: Net Worth +1.78%

August 4th, 2008

Each month, I post an analysis of my finances and my end-of-month net worth. For more on why I do this, please take a look at my explanation post.

While the markets had a bit of a rally at the middle of the month, the S&P 500 ended up losing just under 1% over the month. Considering how the rest of the year has been going, this is a welcome change. I’d rather the markets gain (wouldn’t everyone), but I’ll gladly accept a little loss every now and then.

Here’s how July ended up for us (click to expand):

Overview

Assets

The first thing you’ll probably notice is how much red there is in my month-to-month asset listing. While it’s painful to see my cash-equivalent assets dropping, at least I know where the money is going now.

Late in July, I wrote about making an $800 car payment thanks to 6 month’s worth of snowflakes. This is money that I had sitting around in my checking and savings accounts, so that was a significant hit to the balances when I withdrew that money for the payment. On top of that, the first half of my property tax came due last month, pulling out a good deal of the money I had set aside after cashing out my property tax and insurance escrow.

Fortunately, on the investments front, my company did me some decent favors by finally depositing their 401(k) match, boosting my overall balance significantly. Now if only I had good numbers to determine my actual loss/gain… Hopefully by next month, I’ll find the information I need to learn what my actual cost basis is on my investments. I suspect I’m still quite in the red, but at least my cost basis will continue to decline as long as I keep buying low!

Over July, after the gains in estimated property value and my 401(k) and the losses due to my wife’s IRA and payments against liabilities, our assets dropped by 0.57%, which isn’t bad considering the amount of money that left my hands.

Liabilities

After paying extra to our loans last month, I got addicted to debt elimination and decided to pull out all the stops this month.

On top of the bonus $800 car payment we made from the snowflake money, we also made our regular $300 payment. This pulled our balance below $3,000, but I didn’t feel like stopping there. A few months ago, my mom told me about some old mature savings bonds that she found in her safe deposit box. After calculating their growth rate, I figured out that they were earning less than 3% now that they were mature. Considering the 4.5% interest rate on our car loan, it didn’t make sense to leave that money set when it could be put to good use. After cashing in the bonds and taking care of the extra income tax they would require, we were able to make a third payment for the month for $550. Through our extra payments, we slashed our car loan balance by over 40% and all but guaranteed that we will be able to pay off the car in just a few more months.

Our debt elimination addition also bled over to the student loans again for a second month as we work to pay off the extra accrued interest that we built up over a few months we deferred payment. While we didn’t completely eliminate that extra debt, we came very close and will certainly pay that off this month. Through extra payments on the loans, we finally dropped the balance below $16,000. A few things have changed with our payment plan for these loans in the future, though. Last month, when the statement arrived, we noticed that they silently dropped our interest rate again to 6.22%, which is well below our home equity interest rate at 8.375%. Now, instead of paying extra against the student loans, we’ll be diverting the extra funds to the home equity to pay that down. I don’t bother much with a half-percent difference, but when you’re talking about an extra 2% that I’m paying, it doesn’t make much sense to ignore it.

By tapping into our savings and diverting more “found money” to our liabilities, we were able to drop them by a full 1.4% - nearly a $3,000 drop!

Net Worth

After last month’s correction, we fell back below $72,000, but our aggressive debt elimination policy allowed us to quickly make up that ground and more - ending the month at $72,809.21. This is an effective growth of 1.78% month-to-month!

We’ve gotten addicted to paying off our debt and I can’t wait to see what kind of gains we can make next month as my overtime check (over 28 hours of overtime) and the per diem from my business trip comes in. We’re getting so close, I can practically taste it!