2008 Net Worth Review

So far I have looked at how I traded stocks in 2008 and my passive income last year. Now it’s time to examine the progress on building up our net worth. Before I get to the details, one thing is for sure: It’s not pretty, as I have already shown through my monthly net worth update. It’s just a matter of how bad it really is.

December Net Worth Update

First, an update on how we did in the last month of 2008. After three consecutive monthly declines, our net worth at the end of December 2008 actually went up a little bit, which is definitely a good news considering how much paper wealth we have lost throughout the year.

On December 31, 2008, we had a total of $472,760.31 excluding house and car related items. That’s a net increase of $23,835.31 (5.31%) over what we had a month ago, thanks to the rebound in the stock markets.

A quick look at each category:

• Credit card balance(+): We continued to trim our credit card balance last month, downing $373.25 (2.24%) from November to a $16,254.54.  This month, however, the balance is likely to go up as we bought some stuff before the holidays.
• Cash(++): Our savings at banks kept growing in December with another $4,096.43 (4.86%). The total balance at the end of December is $88,357.00. Most of our money is now in account with Dollar Savings Direct, which, surprisingly, still pays 4.0% APY.
• Taxable accounts(+++): When stock markets rebounded like they did in December, we can always expect a nice gain in our investments and that’s indeed the case last month.  For the month, our investments in taxable account gained $12,499.42 (7.17%) to a total of $186,806.57.
• Retirement accounts(+): Comparing to the our taxable accounts, our retirement accounts weren’t as impressive (probably because I only use index funds in retirement account?). In December, our 401(k)s and IRAs gained $4,990.28 (2.80%) to $183,277.76.
• 529 plans(++++): OK, here comes the largest gain last month: $1,125.25 (8.81%) in 529 plans to a total of $13,903.44. Obviously, the stock markets alone don’t do it. A large part of the gain actually came from the CollegeAdvantage referral program that I ran last month (thanks everyone for using my referral). Too bad it ended already.
• Bonds(+): Our I-bond investment increased $104 (0.91%) to $14,820.78.

2008 Net Worth Review

Now the hard part.

Don’t know about you, but 2008 is bad, bad year in terms of growing our net worth. Not that we grew it very slowly. We actually lost a big chunk of our paper fortune, thanks again the miserable stock markets.

Following is a monthly net worth chart from July 2006, when I started tracking, to December 2008. As you can see, we are basically back to where we were two years ago, even though we made much more now than then.

Our net worth peaked in October 2007, coinciding with the stock markets, including the Chinese stock markets. Since then, it has been declining most of the time, with the biggest drop in September/October 2008. The reason, of course, is that we have most of our money invested in stocks and mutual funds, even though we have nearly 30% in conservative investments such as banks accounts and bonds.

Year-over-year, we

• Reduced our credit card balance by $2,039.64 (11.15%) from $18,294.18 in December 2007 to $16,254.54 in December 2008;
• Increased our cash by $24,655.82 (38.71%) from $63,701.18 to $88,357.00;
• Lost $115,269 (38.16%) in our taxable investments, from $302,075.57 a year ago to $186,806.57;
• Lost $51,617.32 (21.97%) in our retirement accounts, from $234,895.08 to $183.277.76;
• Gained $1,105.11 (8.63%) in 529 plans, from $12,798.33 to $13,903.44;
• Gained $1,874.40 (14.48%) in bond investments, from $12,946.38 to $14,820.78.

Of course, all those gains and losses in investments include our own contributions, which are very significant considering we have maxed out our 401(k)s (nearly $30,000) and IRAs ($10,000), and made about $1,000 investments in stocks and mutual funds in taxable accounts every month ($12,000) and $600 in 529 plans ($7,200).

What will happen in 2009?

Since I am determined to invest in the stock markets and have been buying throughout the year, I can expect to see a better result at the end of the year if the stock markets indeed recover, and that’s a big if

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