August 2009: Net Worth Update and House Buying Plans

Published 8/31/09 (Modified 3/8/11)
By MoneyBlueBook

The month of August 2009 is going to go down as a particularly momentous period in my life. It's going to be the month that I finally pulled the trigger and made the decision to purchase my very first home. While the actual date of my contractual signing will likely be dragged out until the first or second week of September as things currently stand - it was during the last few weeks of August when most of my major home purchasing decisions were rapidly set in motion.

The last few years have been quite the whirlwind for me. I know on this personal finance blog I may frequently portray a sense of stability and perhaps frequently offer up an air of someone who appears to know exactly where he wants to be in life and knows exactly how to get there - but the reality is quite far from it. I've been blessed with an incredible amount of luck, remarkable timing, and good fortune - with much of my financial success starting only a few years ago when I first started blogging online to make some extra cash on the side. My early attempts at trying to make money money blogging started rather surreptitiously without much fanfare and without the knowledge of most of my friends and family. Through the struggles and early process of starting my very first blog, I developed and honed a variety of entrepreneurial skills that I ultimately leveraged into the start of my own fledgling legal practice as a part time attorney. While I had saved a sum of money through my past jobs of working for other people shortly after graduating from law school, it wasn't until after I had started working for myself and began to pursue my dream of starting my own small firm and online business that I began generating the type of income that I enjoy today. I guess it goes to show that even in a down economy, with some practical skills and a very healthy dose of chance, it is still possible to find a silver lining if one is willing to consider alternative possibilities and take a leap of faith on a dream.

My Current Net Worth and Financial Status Update Compared To Last Month

Assets Balance $ Change % Change
Cash $92,883 -$32,186 -25.73 %
Stocks $430,137 $79,541 22.69 %
Bonds $0 $0 -
Retirement (401K, Roth, IRA) $14,701 $51 0.35 %
Car and Vehicle Value $0 $0 -
Real Estate and Home Value $0 $0 -
Other Real Estate $0 $0 -
Total Assets: $537,721 $47,406 9.67 %
Debt and Liabilities Balance $ Change % Change
Credit Cards $1,292 -$457 -26.13 %
Car Loans $0 $0 -
Home Mortgage $0 $0 -
Student Loans $26,585 -$101 -0.38 %
Total Debt $27,877 -$558 -1.96 %
Total Net Worth
$509,844 $47,964
10.38 %

Closing In On The Purchase Of My Very First Home - A Long Time Coming

I started my home search in early May 2009, but didn't start devoting serious time towards scouting out locations and visiting open houses until late June 2009. Because I work from my home office and much of my various self automated businesses are able to run themselves without active supervision for reasonably lengthy periods of time, I was able to pull myself away from work and spend a great deal of time in recent months searching for my future dream home in the Washington D.C./ Baltimore area.

As a single guy, who's dating, with no family as of yet and not anticipating one anytime soon for at least the next 5 years - instead of focusing on school districts, I concentrated on finding an upscale semi-rural community located in very close proximity to stores and restaurants, that not only offered the sleepy feel of a farming town but also offered the transportation conveniences of a major suburban center. Because I work from home, work location was not an important consideration for me. However, proximity to major highways and multiple access points to both D.C. and Baltimore City were important factors to me as both areas are places I frequently visit for social and familial reasons. In terms of price, I made the decision early on that I would not be restricted to a certain price cap - as what I was looking for was fair value, with the potential for future upside. I decided at the start that I would be willing to pay a hefty premium for a high end location in an extremely safe neighborhood and that I would not be willing to pigeon hole my preferences into a less than desirable neighborhood for the sake of price savings alone.

After months of searching, I finally found my dream home in my dream location - a brand new, pre construction, perfectly sized (2500 square feet above grade) single family home with 4 bedrooms, 4 baths, located in an excellent upscale community close to all of the transportation conveniences I desired. While the house is close to powerlines (depending on whether you think 350 yards away is considered close), the home offers everything else I could ever want in a first time starter home situated in a strategically located D.C. / Baltimore area location. While I had considered the prospect of pursuing a lower priced new construction townhouse, ultimately, I felt a single family home offered better recoupment possibilities in terms of future resale upside.

With the assistance of my real estate agent, we are now imminently close to an official signing date. Unfortunately, negotiations don't seem to be proceeding as well in my favor. While I had hoped to be able to negotiate the listing price down or secure better builder incentives towards option upgrades, the listing agent has thus far refused to budge. However, this refusal on the part of the builder to negotiate the price down can probably be attributed to the fact that the demand for upscale housing in my desired location is currently outstripping the available supply (rather opposite as to what's happening in most other parts of the country). Despite this, I will probably still go through with the purchase in the next few days, barring any unforeseen hiccups.

Time For Me To Start Investing In The Stock Market Again Via ETF's and Mutual Funds

For several months now, I've been holding the vast bulk of my discount brokerage account funds in cash form. As I liquidated the bulk of my stock market holdings early on (it really wasn't a whole lot) to avoid the stock market crash of early 2009, I consequently missed out on the frantic rally of March 2009 that has since seemingly continued to soar. However, I don't plan to miss the next major leg up - whenever that may happen.

With economic indicators now indicating faint glimmers of distant hope with better than expected statistical improvements in employment numbers, corporate profitability, and new housing constructions, I think this may finally be the time to get back in. While the stock market can certainly go down further from here (a W shape recovery as many CNBC pundits are calling it), I personally am no longer gripped in utter fear of the same cataclysmic multi-decade economic depression and financial Armageddon scenario that many had been so fearful of back in the early part of 2009.

In the coming months, I will probably start watching out for investment opportunities as they arise - focusing my efforts on broadly traded exchange traded funds (ETF's) like the financial ETF (XLF), the S&P500 ETF Index (SPY), and possibly even the China 25 Index (FXI). Yes, I am quite well aware that the funds I'm looking at are regarded as aggressive investments, but with at least 30+ more years until my planned retirement, at this point I am seeking earnings upside rather than safety or stability (particularly now that the worst case scenario has seemingly passed). Serious issues like inflationary pressures due to the ever ballooning governmental deficit, market correction risks, and future interest rate increases by the Fed will probably result in a great deal of stock market volatility down the road, but I see the possibility of spikes and dips as prospective speed humps rather than serious causes for concern. Thoughts?

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11 Responses to “August 2009: Net Worth Update and House Buying Plans” 

  1. Peter says:

    Beware of the September collapse! For the last decade or so and even historically since the start of this century, 7 out of 10 of those years have resulted in average stock market decrease of something like 1.5% overall.

    For some reason, September has historically been a very bad month and has been the month when most financial collapses happen. The 2008 collapse occurred in September, and so did the Great Depression collapse. I would get out of the stock market or at least stay out of further fund positions until the end of Sept and get back in sometime October. Of course, they say one shouldn't try to time the market...

  2. DoneToZen says:

    I'm curious as to why you're buying a 4-bedroom, 4-bathroom house. Do you really need that big of a house, considering that you're single and are not planning on having a family for the next five years?

  3. Raymond says:

    Done To Zen,

    I wanted a 3 bedroom, 2 full bath house, but the extra bedrooms and bathrooms came as a promotional offer by the builder and price-wise, it would only have been an extra $10,000 or so. The existing and original 3 bedroom floor plan was rather odd and would have left two severely underused den type rooms on the second floor area. So I decided to go with the alternate floor plan and convert those potentially underused second floor dens into a giant 4th bedroom. Thus I also added an extra full bath for that room, and tacked on another full bath for the finished basement. With its own separate staircase and full bath, the 4th bedroom can now be converted into a large media room or kept as a private in-law suite.

    Bedroom and bathrooms are one of those things that offer great returns on investment at resale, unlike granite/hardwood floor upgrades etc. From what I hear, most families seek out 4 bedrooms these days and they are in great demand.

  4. BuffetFan says:

    Yes, with a family of 4 that normally have a home office. Using one of the bedroom for an office and the other 3 for living make sense. But 4 bathroom is a little too much, I find having extra storage space or a play/study area inside the house more useful. For most people 3 full bath is more then enough. As the house gets older the 4 bathroom will add on more cost.

    Since you have the cash, why not build a custom house. We're in a recession so the price of material and labor is very reasonable and maybe the best price. One of my co-worker customer build their home in Syracuse, NY and has never regretted it.

    Another thought, five years is not that far away. You might as well buy a house with an educational system to back it you and buy it with a family in mind if you're going to get a family house. What's the value in buying a family size home in an area not sought after by a family?

  5. Raymond says:

    Well the school district is not too bad. The elementary and middle schools are quite excellent, but because the local high schools pools students from one of the other less-than-upscale neighborhoods, the high school is not as great as that in certain stellar parts of suburban Maryland. 7 out of 10 is what I'd heard from some local parents.

    The neighborhood has a lot of families...but the greatest draw of the neighborhood is the upscale feel and close proximity to transportation and major highways to DC and Baltimore where all of the job centers are. So yes, it is sought after by families...just not as highly sought after after by children-rearing parents as certain neighborhoods where the homes are extremely old but the schools are highly ranked.

    Building a custom home in the DC Maryland area is extremely expensive, particularly if the home is close to major transportation arteries. $1- 1.5 million would be the typical cost of building a very basic home around here. I wish we could enjoy Syracuse type prices around these parts....

  6. Modder says:

    Funny to read you getting in the market - I just got out...

    I bailed out of the market in late spring '08 - I smelled a rat.

    Then we saw some declines and the market seemed to stabilize. I was proud of myself how I foresaw the decline and jumped right back into the market. A week later Lehman was history and my portfolio took a beating. But I stayed in and was able to benefit from the rally in 2009 so far. But this weekend I got nervous again and bailed about 60% of my portfolio into money market funds, the remainder is still in. This way a sharp decline won't hurt as much, but I wouldn't miss out on a bull run either. No idea what signal to wait for to get all into the market again...

  7. Raymond says:

    Modder,

    It's impossible to time the market perfectly. I generally invest for the long haul but at least I get to decide the exact timing of when I get in. I don't fear volatile market ups and downs. It's the disastrous collapses that I fear - the 20-25% drops etc....the drops that will keep one up at night. I would much rather miss out on a furious bull rally than be emotionally and financially invested into long positions and wish I could get out.

    Right now I'm waiting to hear more about commercial mortgage foreclosures. They say it's the next shoe to drop but I'm not sure it'll be that serious. But if the rumors come to fruition, the commercial housing foreclosures may have serious impacts on the stability of banks and the financial markets. Still want to hear more news before I'm willing to commit again. At this point, I pretty much ignore everything I hear on CNBC - especially the trash spewed out by the know nothings on the Fast Money show. They're just sports casters - reporting on what's happening at that moment rather than truly projecting the future. I prefer to do my own research..

  8. stephen miracle says:

    congrats on the house. That is very good that you were able to buy your first house. I'm working on paying off very old creditor debt so that I can work on that particular goal myself.

    I also noticed that you seem to be doing very well on your stock portfolio. I know many very experienced stock people who are routinely bringing in a negative change in a month. I am definitely going to subscribe to your blog and keep an eye out for any insider tips :)

  9. Raymond says:

    Thanks Stephen,

    However regarding the stock portfolio...it's currently sitting idle in my various brokerage accounts as cash. I cashed out before the market crash earlier this year so I'm now waiting for a good time to get back in. Hopefully sometime soon...

  10. Kantoorpand kantoorruimte huren says:

    But I'm curious as to why you're buying a 4-bedroom, 4-bathroom house. Do you really need that big of a house, considering that you're single and are not planning on having a family for the next five years?

  11. Raymond says:

    The single family house is rather small - at around 2300 square feet above grade, and the family/living room area is compact. There is very little lawn space in the front yard and no backyard to speak of - relatively maintenance free. The home is by no means one of those infamous McMansions.

    In comparison, the new town houses in the new community are all 2500+ square feet separated onto 3 different levels. I don't need the extra bedrooms, but the rooms are small and in terms of future appreciation, 4 bedrooms do better than homes with fewer bedrooms.

    I may not be planning on having a family anytime soon...but you never know. Besides, I plan to live in this house for at least the next 5 years, if not longer and a bigger home will offer me more room to grow into.

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