2006 Year-End Review III: Net Worth

This is the third part of my year-end review. In the first two segments of this review series, I looked our own contributions in 2006 and how a good market helped us in growing our net worth. Now it's time to see how we did exactly.

We started 2006 with a net worth of $294,299 in the following categories:

• Credit card debt: $5,069.44
• Cash: $29,061.08
• Taxable: $133,389.08
• Retirement: $126,404.71
• 529 plans: $1,506.86
• Bonds: $9,006.74

and we closed the year with $458,992 (details can be found here). The year-to-year net change is $164,693, or a gain of nearly 56%. Contributers to the net change include:

• New money: $87,608
• Market value change: $58,825
• Dividends, capital gains, and interests: $16,759
• Free money: $1,500

Percentage wise, each contributer accounts for

Since we are still in the accumulation stage, it didn't surprise me that more than half of our net worth change in 2006 came from our own contributions. This trend should continue as long as both of us work and keep our regular investments. Our assets appreciated nearly 20% over the past year, thanks to the double-digit gain of the broad market. In this category, we were slight ahead of the market. However, since this is unrealized gain (the value change is only on paper), what 2007 will bring us is up to the market conditions. About 10% of 2006 net worth change were due to realized gains (which I call passive income, such as dividend payouts, capital gains, and interests. Among them, about $7,406, or about 44%, are from assets held in taxable accounts, meaning that we are responsible for the taxes of these gains. As we continue to add shares, this part should grow over time and we hope one day the passive income will become a major contributer.

Though I started to track what our nest egg in 2004, monthly change data were only available since I launched this Diary with a regular update of our net worth. The following chart shows the steady growth of our net worth in 2006.

The four-year history of our net worth from January 1, 2004 to January 1, 2007 is shown in the next plot.

The small increase from 2004 to 2005 was mainly due to the $50,000 downpayment when we purchased our current house in 2004. Other than that, we only made a few big purchases in the past two years: $3,000 car downpayment in 2005, $2,400 for a big screen TV in 2005, about $1,200 for a home theater system in early 2006, and a trip to China in the summer of 2006 for about $3,500. For 2007, there is no big spending planed so far. We may want to buy a bigger house as we are expecting our second child. And the new addition of the family will increase our day-to-day spendings as well. Hopefully, we can still keep our saving rate around 40%.

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