October 2008 - Net Worth Update and Personal Finance Status

Published 10/23/08 (Modified 3/8/11)
By MoneyBlueBook

For new readers of my personal finance blog, this is my first inaugural financial status and net worth update. I hope to make this is a monthly tradition to better help me track the condition of my financial health. At the same time, I am keenly aware of the potential awkwardness that comes with financial disclosure involving actual numbers. I know that there is a taboo sensibility when it comes to talking about money and actually revealing personal numbers. However, Money Blue Book is a personal finance blog and my purpose here is to encourage readers to improve their own financial lives by adopting practices that will put them on the right track to financial independence. Perhaps my own experiences and financial progress will inspire calls to action and help voyeuristic readers gain the necessary confidence to learn more about the importance of financial tracking and statistical self assessment. In the future I may discuss more sensitive topics such as my own expenditures concerning church tithing.

As a side note, the reason I am posting this halfway through the month rather than the customary beginning of the month is because of how my income accounting is set up. My income streams tend to get realized and reported at around this time.

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

Assets Balance $ Change % Change
Cash $149,547 $35,164 30.74 %
Stocks $21,198 -$6,536 -23.57 %
Bonds $0 $0 -
Retirement (401K, Roth, IRA) $10,221 -$1,981 -16.24 %
Car and Vehicle Value $11,945 $0 0.00 %
Real Estate and Home Value $0 $0 -
Other Real Estate $0 $0 -
Total Assets: $192,911 $26,647 16.03 %
Debt and Liabilities Balance $ Change % Change
Credit Cards $1,500 $1,200 400.00 %
Car Loans $0 $0 -
Home Mortgage $0 $0 -
Student Loans $28,017 -$147 -0.52 %
Total Debt $29,517 $1,053 3.70 %
Total Net Worth
$163,394 $25,594 18.57 %

Income From My Small Business Enterprise, and My Current Cash Flow

Ever since I made the significant switch from traditional job to self employment, my financial life has vastly improved. In my former life (which was only actually a year ago), I was an attorney and one who was stuck working the usual 9 to 5 job with frequent overtime and weekend hours. While I received a fairly steady paycheck, I constantly felt the slow drain of my youthful creative spirit being sapped away as I slaved away in a working situation where everyday felt the same as the day before. Eventually I made the decision to start working for myself and become a full time entrepreneur. Today, I run my own part time legal practice and spend much of my active daytime working hours keeping tabs on my alternative "real life" businesses. In between, I also spend a portion of my time managing my network of income producing online businesses which include the personal finance blog you are reading and another blog about health and fitness. Altogether, my combined monthly income stream from all income sources, averages around $53,000 a month, pre-tax. Needless to say, this healthy monthly cash flow, which has remained steady for more than 9 months now, has allowed me to pursue more aggressive investment opportunities and possibilities. Looking back, if I had decided to play it safe and not leave my job as an employed attorney a year ago, I would never have had the opportunity to realize my full financial potential.

Cash Saving Accounts (Banks and CD's)

With the recent stock market crash brought on by the imminent economic recession and continuing credit crisis, I have decided to adopt a more conservative investment strategy regarding taking on new positions in the stock market. For the time being, I've chosen to keep the vast bulk of my monthly income and cash flow stored away in safe investments - namely FDIC insurance protected banks accounts. Currently, the largest chunk of my cash savings are spread among accounts with the top online banks in the market. These bank accounts are made up of a small mixture of high savings accounts and CD ladders.

While I fully understand the wisdom of Billionaire Warren Buffett's investment mantra regarding fear and greed when it comes to seizing long term opportunities, I also soberly understand the need to preserve capital during difficult times. For the short term, I want to shield my cash assets from loss so I have sufficient assets to pursue lucrative opportunities once the recession and credit crisis have finished doing their financial demolition derby. For the next few months at least, I'm putting a higher priority on maintaining more than enough cash to enable me to ride out any financial emergency should the worst case scenario arise.

Credit Card Rewards and Debt

Although my income cash flow has significantly spiked within the last year due to the financial successes of my self run small businesses, I still maintain a manageable frugal lifestyle. However, some expenses simply can't be avoided, sadly. Because I'm a single guy, I'm a terrible cook - which means I spend a lot of money per month dining out and buying expensive ready made meals and groceries at the supermarket. To reduce costs and save money, I use credit card rewards to earn up to 5% cashback bonuses on everything I buy. In an effort to maximize savings, I use multiple credit cards to get the highest spending rebates for all the different types of purchases I engage in. Currently, all additions to my credit card balances are due solely to regular spending habits and not attributed to any balance transfer arbitrage activity. My current credit card balance may seem rather high to some, but bear in mind, I use credit cards for everything and avoid using cash when I can. I actually abhor using cash.

Stock Investments and Retirement Accounts

Unless you've been living in a cave on Mars with your fingers stuck in your ears, you are no doubt well aware of the devastation happening in the world financial markets. Due to the housing bubble pop and the giant ongoing debacle involving risky subprime loans, several prominent banks and major financial institutions have recently been wiped out. As we slowly make our way through this economic recession, the stock market will undoubtedly remain extremely volatile and irrationally influenced by emotions and despair. This is the reason why the majority of my assets are now in cash savings and not fully invested in the stock market. Clearly in the long, long run, stock market investing is the way to go for the growth minded investor, but in this irrational economy, where corporate balance sheet fundamentals no longer matter and are overpowered by continuous fear, I prefer to play it safe until at least after the U.S. Presidential election and perhaps until the start of 2009.

Because most of my Roth IRA, and Traditional IRA retirement investments were previously made in more volatile and risky emerging market index and mutual funds, my stock portfolio has taken quite a beating since the highs a year ago - down 40%. However, I have not sold a position since the blood letting began and in fact, actually feel quite pleased (as giddy as a schoolgirl) at the significant drop in stock market prices. Despite the rampant fear in the market, I smell a wonderful opportunity in the making, and am waiting for the right opportunity at the right low price. Remember, it's during economic recessions and stock market crashes that opportunistic future millionaires get made. I hope to be one of them someday.

Housing and Real Estate

Currently, I'm renting a brand new condominium apartment for $1,475 a month. My monthly rent may seem high to some, but it's quite average for my area, a very convenient Maryland suburb of metropolitan Washington D.C.

My short term plan is to purchase a primary home for myself within the next year or so. Despite the recent precipitous plunge in national housing prices, I believe home prices must continue to drop some more - at least another 20-25% before we reach true real estate equilibrium. So long as house sellers refuse to sell their overinflated homes at bargain basement prices, buyers like myself will continue to sit on the sidelines and patiently continue renting.

As my income situation continues to prosper and improve, I have upcoming plans in the works to take advantage of my cash savings and healthy cash flow. As an aspiring vulture real estate investor, I hope to purchase several real estate investment properties in the next year or two at heavily discounted prices. I anticipate saving up enough money in the coming year to afford the 20% down payments to be used towards the properties I pursue. Meanwhile, I plan to continue monitoring my FICO credit score (currently at a healthy 802) and take necessary steps to maintain the score to increase my future chances of being able to secure multiple home mortgage loans when the opportunity arises in 2009 and 2010.

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12 Responses to “October 2008 - Net Worth Update and Personal Finance Status” 

  1. Diane Daviss says:

    You have an income of $59,000 a month for the last 9 months? Shouldn't your assets be higher either in cash, personal property, stocks, something? What am I missing? Thanks

  2. Raymond says:

    Diane,

    I attempted to dollar cost average down on my stock positions in the last 6 months by investing in more shares, but saw broad stock price declines that wiped out most of my investment money. Some of the money went towards that.

    I also had to clear up a previous IRS tax liability, which is now fully resolved. As a self employed small business owner, I also have the responsibility to make quarterly self assessed estimated tax payments. After taxes, only a portion of my income remains. Believes it or not, taxes have the potential to take huge bites out of income streams.

    As an aside regarding the upcoming U.S. election for president, clearly, I'm not looking forward to any wealth redistribution policies either of the candidates, but in particular Senator Barack Obama, may choose to implement. His proposed tax plan to penalize higher net worth small businesses with incomes over $250,000 with higher taxes to "spread the wealth around" and subsidize the lower tax brackets greatly disturbs me. On the other hand, McCain's plan doesn't seem too popular either among the majority of ordinary working class voters.

  3. unimax says:

    how often do you plan to check kbb for your car value?

  4. Raymond says:

    Unimax,

    Well, I suppose theoretically I could check Kelly Blue Book for the fair market value of my continuously depreciating vehicle everytime I update my networth report, but frankly I don't place too much stock into car value as a major factor of net worth to begin with. The only reason I even include the value of my 2004 Honda Accord EX-L into networth calculation is due to its high comparatively high resale value in relation to other personal property I own.

    However, I think checking Kelly Blue Book every 3 months to update the vehicle's market value should be more than adequate...

    The last time I actually checked was a few months ago but I doubt it has depreciated all that much during that time period.

  5. Lokes says:

    I did not get the idea of using multiple credit cards. Thanks a lot. After reading this article it stricked me to possess multiple credit cards to maximize savings and to get the highest spending rebates for all the different types of purchases.

  6. E.C. says:

    Being a single guy doesn't mean you are doomed to being a lousy cook. You can choose to spend your money on prepared food and eating out as you see fit, but if you spent a few hours learning to prepare some quick, tasty, and nutritious dishes you could probably enjoy eating in a couple more times a week and rake in the savings. You may decide that this isn't the best investment of your time and energy, but please don't convince yourself that you are helpless to change your food spending if you wanted to.

  7. Raymond says:

    Hi EC,

    Unfortunately, I've already tried the cooking route. While cooking for oneself is not out of the realm of possibility, the time and effort involved simply is outweighed by the convenience of eating out in my case, unfortunately. Shopping for groceries and making sure the fresh veggies and fruits don't expire on me is a tough task!

    I guess I see it as a tradeoff...I'm merely outsourcing what I'm bad at (cooking and creating edible dishes) for something I'm much better at (making money and running my job and managing my businesses). I know it's not the most frugal solution as dining out is terribly expensive, but perhaps things will change if I ever settle down with a family one of these days.

  8. Andy says:

    $53,000 a month! Wow, that puts you in the top 0.01% of Earners globally. If you can maintain that level of income, you should be a Millionare sooner rather than later, well done. The stock market will bounce back as well, something i am sure you are looking forward to. Will check your site to see if you have any posts on how to set up a succesful online business, if not hope you write one in the near future.

  9. caleb says:

    Raymond,

    Could you please give a breakdown of how much of that monthly income is legal, blog 1, and blog 2?

    Could you also do a post about how you transitioned from 9-5 employee to your own legal practice? Both the "why" and "how"? You would be the first blogger I've read to have done such a thing successfully (and the blogged about it for some strange reason).

  10. Raymond says:

    Caleb,

    While my blog income continues to grow bit by bit, a sizable chunk of my income still remains my real life legal practice. I believe in the importance of diversifying my income sources and not relying solely on one method of income generation. I may get into the individual financial breakdowns in a future blog post.

    I know the idea of transitioning from the working life of an attorney to an online entrepreneur may seem rather odd to some, but the future prospects of the latter are much more substantial, albeit fraught with greater risk. Of course, the current professional transition is easier for someone like myself since I have a finance and computer programming background. I only went to law school because I couldn't figure out what to do with my self after college.

  11. caleb says:

    Ray,

    I've read some of your other posts. It seems like your current "temp work" on a contract basis brings in a higher income than when you were full-time. Is this right?

    I am in a similar situation as you, except I don't share your credit card fetish. Late 20's, and after 7 years of my current "career" the high pay and benefits still don't justify the cost in freedom and life enjoyment. However, there is no "temp work" contract basis for my line of work (military), nor is there overtime pay. Like you, I'm here more out of "I wasn't sure what I wanted." I suspect the natural entrepreneur types don't know they are natural entrepreneurs until they've been disenchanted in one profession or another.

    I've had doubts about leaving a well paying job, so I find it encouraging to see someone who makes even MORE than I do choose to leave their career for something any high school kid can do (blogging).

  12. Patrick Bateman says:

    I have to say, I don't really understand how you average $50k a month? Can you please show a greater detailed breakout?

    By the way, I work in real state and live in DC. I own an investment property and looking to purchase more with my partner. Let me know if you ever have any quesitons.

    -PB

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