January 2010 Score Card — Part I: Net Worth

I know sooner or later, this is going to happen.

Since last March, our net worth has ridden the recovering stock market higher and higher month after month, going up like a straight line from March to December. While I was very happy with the growth of our wealth on paper, I know every well that at some point, the streak will be broken. Now, it’s clear that January was the month when the upward trend finally took a break as the stock market retreat.

After reaching a 15-month high on January 19th, the mood on the street turned sour. For the month, the Dow lost 3.46%, the S&P 500 dropped 3.7%, and the Nasdaq tumbled 5.37%. As a result, we also saw the first decline of our net worth in 10 months. At the end of January, our net worth was at $882,640.40, a decrease of $17,832.62 (1.98%) from the previous month. Comparing to the stock market, the loss was actually quite moderate.

A breakdown of last month’s number looks like this:

• Credit card balance(–): The total balance on our credit cards continued to decline last month, but at a much smaller scale. As I mentioned earlier when I summarized our spending in 2009, we charge about $4,000 on our credit cards every month on average, which also includes more than $1,900 for two kids’ tuition. On January 31, 2010, the total credit card balance was $4,078.85, $178.52 (4.19%) lower from the previous month. The total number was inline with our monthly average.
• Cash(+++): This turned out to be the only bright spot in January. We have been saving for our next house dowmpayment for quite some time already and in the middle of January, we made an offer to buy a house that was on short-sale. It was one we actually liked. Unfortunately, we didn’t get it, so we got to keep our cash, for now. At the end of the month, we had $233,384.19 in our savings and checking accounts. It was $7,248.93 (3.21%) more than a month ago.
• Taxable accounts(—–): The most damage was done on our taxable investments last month, which were badly underperformed the market. For the month, the loss of investments in stocks and mutual funds in taxable account was $18,299.69 (5.69%) on paper. The loss brought the total market value to $303,097.70. If the first week of February is any indication for what the whole month will be like, it certainly doesn’t look good. There was no new stock purchase last month in brokerage accounts.
• Retirement accounts(—): Our retirement accounts did relatively better in January than taxable accounts did, suffering a loss of only $6,569.58 (2.13%) last month. At the end of the month, the total market value of our 401(k) and IRA accounts was $302,194.41. January was one of the months when we make quarterly contributions to our IRA accounts, so the new money added to the accounts was a little higher than the month before. Also last month I rolled over one of my old 401(k) account into an IRA account, which I will write about later.
• 529 plans(–): Now that we didn’t have any extra money, those referral bonuses, put into our 529 plans, our own contribution just wasn’t enough to overcome the drop in market value of our investments. Fortunately, the decline was rather small, comparing to other investments. On January 31, 2010, we had $29,066.91 in 529 plans, an decrease of $452.88 (1.53%) from December 2009. I am also in the process of making some changes to our 529 investments to take advantage of the tax incentive offered by the state of Virginia.
• Bonds(+): Our investment in bonds grew $100 (0.60%) last month to $16,684.24 due to our monthly purchase of $100 I-Bonds.

Year-over-year, our net worth almost doubled, increasing $430,404.32 (95.17%) from what we had at this time in January 2009.