Happy New Year! We hope you enjoyed a wonderful holiday season and were able to save more money than you spent. We took a road-trip to Austin, TX to visit friends. I swam in Barton Springs Pool on New Year’s Day. I typically jump in the lake where I live for the annual Polar Bear Plunge, but a nice swim in a 68°F open water pool was more enjoyable than my typical brief 30°F plunge.
Rules of Investing
Our net worth from the previous month slightly increased, but this was because we follow the advice of Warren Buffett. Here are his two rules of investing, which we diligently follow.
Now that you know our investing philosophy, let us take a quick look at our numbers from last month.
Monthly Net Worth Update
Our cash savings took a huge dive last month. Why are we down over $6,000? I have a confession to make. This is a good learning lesson, so pay attention. I was building up our emergency fund, but pushing out payments on our credit cards to do this. We always had the cash to pay off the credit cards, but it appeared to me that the balances were growing. This means that the extra cash was not truly an emergency fund, but was a delayed credit card payoff fund. To be honest, the balances although not large, were beginning to cause stress. We decided to pay the credit cards balances in full except for the one we are using as a 0% short-term loan.
In the past, when cashing out cash back funds from our credit cards, we immediately added the amounts to our emergency savings. Instead, we used the cash back on our Amazon card to purchase gifts.
It appears that Ethereum (ETH) is making a steady climb. We are up nearly 20% in the past month from our low last month. This is a far cry from what we put into the gamble, but at least it stopped heading toward zero.
I pay close attention to the stock market and consider myself more an active than a passive investor. After Google stopped providing their large interactive charts, I began using the full-screen interactive charts on Yahoo Finance as an indicator of where the stock market is headed. I pay the most attention to the Dow Jones Industrial Average (^DJI). This is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the Nasdaq. When the news says that the market is up or down, they are generally speaking about the Dow.
At the end of 2018, the market closed at 23,327. The unfortunate thing for most people is that the market was at the same amount of 23,328 on October 20, 2017. Generally speaking, whatever amount of money you owned in stocks or index funds in October of 2017 may very well be worth the same amount at the end of December 2018. It was a rough year for most investors and proof that the market may not continually rise. At the end of 2017 it was at 24,719. This means that whatever you owned this past December 31st may have been worth half a percent less than the previous year. Many people will tell you that this is the way of the market and that you should just keep investing to average out the gains and losses.
Warren Buffett believes that the typical individual should invest in broad market index funds and continually invest. We believe, like him, that over time the market will generally increase. However, compare our net worth from November 2017. We had $445,725.82 in our retirement. Fast-forward to now and we have $598,679.02. That is an increase of 34% instead of an increase of 0%. We would rather spend time figuring out how to invest our money so that we follow the rules of Warren Buffett and grow our retirement rather than rely on the vicissitudes of the stock market to make that decision for us.
December was the last month we are contributing to our 529 for a while. After reading You Need a Budget by Jesse Mecham, I am not sure that this is the best use of our money. The $250 per month will now go toward paying off our HELOC.
I do not know what is going on, but the median list price for houses increased 19% to $357,250 this month. Xome has our house valued at $336,196 and Zillow has hour house valued at $312,286. I believe these amounts are grossly overstated, so we will keep our home value at $305,000 which is what I believe we could sell the house for with minimal updating
Cars and Boat
The local home values went up, but our car and boat values dropped by 2.6%
With the decision to pay off the credit cards, our balance dropped nearly 75% from the previous month to just $1,683.96. This includes our Chase Freedom Unlimited card that has a balance of $1,200 at 0%. This was the card we obtained to cover the cost to seal and insulate our house before winter. Our monthly payment is $300, so it will be paid off in April.
Now that the credit cards are paid, we plan to pay all outstanding balances in full each Friday. The biggest issue with using credit cards is spending more money than you earn. When we pay our credit cards off each Friday, we ensure we do not spend more money than we earn. If we do not have the money to pay off the credit card, we stop spending until we have the money. We also use the Mint Budget Tracker & Planner to keep within our monthly budget.
We obtained our car loan with 0% interest. Our hefty car payment each month is $578.38, but we paid extra to make the payments an even $600 per month. This has two positive benefits. The first is that it is extremely easy to see how many more car payments we have. We owe $14,400 which calculates to 14400/600 = 24 more monthly payments to pay off the car. This creates a second benefit. Our next payment is due in April for $497.26. We will continue to have the automatic payment each month, but it is fun to see that we are so far ahead in our payments by paying just $21.62 extra each month.
HELOC (Home Equity Line of Credit)
We managed to pay our first $2,000 payment on our loan last month. Money was tight near the end of the month, but we did it. We owe $22,000 more and plan to have it paid off in 2019.
We are now under 10 years to pay off our loan or only 119 more payments. Sometimes I think about how long this is, but then I think about how if we had not refinanced 5 years ago, we could be in for 276 more payments or 23 more years. We really would not like to have a mortgage during retirement and paying off the house faster helps us to that end.
I have something positive to share about Dr. SoS’s outstanding $209,087.27 in student loans. I created a simple debt snowball spreadsheet the other day. Once used to paying $2,000 per month on the HELOC, we could then snowball that amount into our monthly student loan payment.
We pay $754.75 per month on Dr. SoS’s student loan. Unfortunately, this pays only $217.17 on the principal. Adding the $2,000 to that payment would begin paying off over $2,200 per month toward principal. Once we pay off my car at the end of December 2020, we could then snowball that amount into the student loan bringing the amount paid toward principal to $2,800 per month. I calculated that by doing this we could have her student loan paid off by October 2025, which is only 6 years 9 months from now.
There is something even more amazing about this snowball plan. If we then snowball that payment into our house payment, we could pay off the house by November 2026, which is two years earlier than the current payment schedule. Another consideration is that all these payments are just paying what we are currently paying toward these debts. This does not include any additional payments we may be able to make from tax refunds, bonuses, and increases in salary.
As of the first day of January 2019, we have a net worth of $543,337.21 up 0.5% from our net worth of
$540,576.29 last month and up 40.41% from our net worth from the first of January 2018 of $401,144.03. Our current net worth puts us in the top 30% at 217/717 bloggers on the Rockstar Finance Directory Net Worth Tracker.
We compile this information each month to keep us accountable and to hopefully inspire others to spend less than they make, save more, and make wise investment choices. If you have any comments or questions, please leave a comment or contact us directly.