Tuesday, May 27, 2008

Net Worth Update

I haven't done one of these recently, so let's get caught up...

First, I've been re-working my asset allocation to be in line with Teresa Lo's satellite portfolio from her series on building your own investment portfolio. I'll have more to say on that shortly, along with my response to her comment, I promise!

Since I should officially achieve my goal of $20,000 in emergency savings by the middle of June, I will be adjusting my Direct Deposit into that account to a slower rate of accumulation. I have explained why I spent so much effort building up that account in a previous post, so I won't rehash it here. However, with this change, I will refocus my efforts on paying down the credit card debt which has been dogging me since last year. It feels great to finally attack this issue, but I absolutely wanted to make sure I was positioned in case of an emergency. I've dipped into my emergency funds for non-emergency situations a bit too often in the last year.

Since I decreased my withholding a few weeks ago as well, this latest change means that I can ratchet up my 401(k) contributions again. That holds benefits on 2 fronts. First, I'll reduce my adjusted gross income (AGI) which will reduce my overall taxable income while allowing me to take home more money with every paycheck. Second, I'll still be able to maintain some accruals to my emergency account, just at a slower pace, so that I can focus on the debt re-payment. I also get the benefit of freeing up some capital to direct into my self-directed Roth IRA. I'm going to have to give some thought as to what I'll do with that account. I had considered doing tax lien and tax sale investments, but we'll see. I'm not sure at this point.

(As an aside, I just received an e-mail reminder to increase my 401(k) contribution amount to 15% in 2 days. For this, I love technology!)

The one blemish on this record was alluded to in my most recent post, that being the need to buy my way out of the horribly flawed real estate partnership to which I belong. If I do have to put up money to get out of this albatross of an investment, I am prepared to put up as much as $10,000. On further thought, I may be able to put up even more IF it guarantees certain outcomes, such as refinancing the loan which is in my name. That house actually has a tenant in it now (its the only occupied house in the portfolio) so there should be coverage on the note. If I can force a refinance of the mortgage into the LLC's name, thus clearing me, I could put more funds into the LLC. As long as I can get out of this situation once and for all, I'll be happy. You will continue to hear more about this in the coming weeks. I set a deadline to be out of this position by the end of June.

I expect to take a potentially significant hit to my net worth due to the real estate partnership unwind, but my psyche will thank me for it. Doing so will also help me accomplish one more of my 2008 goals. Honestly, the best part is that I probably CAN pull that off and not be too terribly hurt by doing so. I have to be grateful for having the resources to do that, should the situation actually come to that. Thank God for a good job with good income from a solid, large company!

(Wow, did I really say that? I guess I did.)

Anyway, that's the story. Not exactly pretty, but it could be a lot worse. So now for the numbers...

My current net worth works out to $75,271.80. That includes a writedown to $0 of the real estate investment and the $35,000 in student loans I co-signed for. Actually, my investments, both in my taxable account and my 401(k), have done fairly well this year. I have unrealized gains of 29.48% on PRMSX, 10.96% on TREMX, 2.87% on PMF, and 2.7% on RPIBX. All of those are held in my taxable brokerage account. As for the 401(k), it is a bit difficult to calculate the change in individual positions. Its down 4.9% on the year, but I doubt much of that is due to the foreign equities even though they make up 47.1% of my 401(k).

Long ago, I wrote down the value of my car to $5000, and added $50 for the value of my old laptop. I may need to drop that back to $0 again though, in the pursuit of intellectual honesty. I'll check eBay first. My CC debt has been on the rise, although as I said, there will be immediate moves to reverse that. The CC debt is in the neighborhood of $15,000 currently. My brokerage account, as noted, has performed rather well. Once I start re-balancing into the positions in my re-designed portfolio, I plan to sell off large chunks of the existing holdings. I'll end up paying short term capital gains taxes, but I'll gain simplicity. As well, those gains will be heavily offset by previous investment losses and the continuing losses on the real estate partnership.

Anyway, that's everything I can think to mention, at least regarding the net worth situation. If anyone has questions or concerns, or anything was unclear, feel free to post in the comments.

Until next time, all...cheers!

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