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SteveDH, April 2013 Net Worth

This article was written by in Naked With Cash. 8 comments.


Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.

SteveDH is retired, and he and his wife have two grown kids. By the time he retired in 2008, he had reached his retirement asset goal of $500,000. His goal now is to ensure his savings last as long as he does. Read his bio to learn more about SteveDH. SteveDH is on Team Roger, with Certified Financial Planner Roger Wohlner.

Keep reading to see his net worth report, updated for April 2013. Following the analysis from SteveDH, Roger Wohlner will offer his own thoughts and guidance from his planning perspective.

Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.

Analysis from SteveDH

Spring –- maybe, maybe not -– that’s how April went. It seemed to be just another “good news, bad news” month as far as the weather and the finances go. The good news was our spending habits remain modest and we’re doing the things we want to do within our budget. The bad news was the tax man.

With bills of $840 and $280 to the Feds and state respectively, cash flow was lower than it should have been, but still respectable. We spent 80% of our fixed income and 65% of total income. Strong market performance made the balance sheet look pretty good as unrealized gains approached $6,000.

April also began a new quarter, which means I look at the balance sheet from the previous quarter in more detail. I generally use my income statement far more than the balance sheet for managing finances, but a thorough quarterly analysis is worth the effort. The first quarter of 2013 was OK. Although the balance sheet only grew by $4,427, asset depreciation for the car, truck, and pre-paid expenses obscured both cash flow and investment performance. Cash flow for the quarter was $7,495, helped by $2,163 in interest, dividends, and capital gains. At the same time unrealized gains of $6,564 pushed net earnings to $14,059.

Since stock market performance was fair and our dividends were reinvested our average annual return (IRR) for the first quarter was 8.3% as computed by Quicken. Nevertheless, I’m not overly enthusiastic about 2013 in general. First I fear the evil empire (Wall Street) may be blowing another equities bubble, and I’m dreading the inevitable “adjustment.” Secondly, I’m turning a watchful eye towards the Fed who may very well temper their actions, reducing their balance sheet — and mine at the same time.

Looking forward to May.

More activity will be the focus for May 2013 -– both physical and financial. Expenses for yard and garden maintenance as well as preparation for the June cruise will increase our spending. There are also a few other projects around the house that may drive spending as I start to pare down my to-do list. Summer is coming, but when the good-times roll the cash usually follows.

Feedback from Roger Wohlner, CFP

Nothing drastic, but as I looked at your balance sheet I’m not sure I understand why your automobiles are included and why you track depreciation (unless they are in some way used in a business capacity). Cars in my mind are an expense and not an asset, except to the extent that they might have some trade-in value down the road. I’m guessing that at some point they will be replaced and the value of the old car would lie in what you can get as a trade-in.

Other than that it seems that you continue to keep spending in check which from what I can gather from your summaries is the key to maintaining your retirement. A couple of questions that you might consider:

Once Social Security kicks in for the two of you, how much more positive cash flow will this provide? As interest rates move up (as all of us “experts” have been predicting for the past few years) how will this impact your situation? Do you have enough in stocks to keep you ahead of inflation?

I’m not saying that you are doing anything wrong but these are the questions that someone in your situation should be asking in my opinion.

Updated May 23, 2013 and originally published May 22, 2013. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 8 comments… read them below or add one }

avatar Kathleen, Frugal Portland

Good work, Steve! Keep it up!

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avatar SteveDH

Roger, my cars are indeed carried as assets because of their trade-in value. They are the only personal property I list. Although I don’t do any depreciation calculations I do adjust their value based on my personal property tax assessment and I think our assessor uses Edmunds (at least their pretty close).
My present income includes four sources; one corporate, one military and two Social Security pensions, so there is little chance of increasing cash flow from our fixed income sources. (other than COLA applied to all but the corporate pension).
I haven’t paid interest on anything in years so I haven’t given the threat of increased rates much thought.
My equities holdings are 33% of total investments with 50% fixed income and 17% cash.

Kathleen, Thanks, and I’ll try my best :-)

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avatar Roger @ The Chicago Financial Planner

The way you handle the cars makes sense then. As for the rise in interest rates I was referring more to the potential impact on the valuations of your fixed income holdings and this is said not really knowing the composition of those holdings. Overall I couldn’t agree more with Kathleen’s comment.

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avatar SteveDH

I’m certainly remiss in trying to analyze bond yields in terms of interest rate risk relying more on the aggregate performance of my total retirement portfolio allocation targets. Most (64%) of my fixed income holding are in a Bond Fund that makes its own term decisions but I do have the other 36% of my total Fixed Income holdings divided evenly (purely accidental) between a targeted Short-Term fund and an Intermediate-Term fund. Sorry I missed the intent of your comment – I jumped on interest expense because I do so enjoy not paying any ;-)

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avatar Roger @ The Chicago Financial Planner

Steve an easy way to see the potential downside risk of a bond fund is to go to morningstar.com, type in the fund’s ticker, and then go to the portfolio tab. On the right side of the page under bond statistics you will see effective duration. You will see a number there. For example if the number is “4″ this means that a 1% increase in interest rates would equate to a 4% decline in the value of the fund’s underlying holdings. This is just an approximation but it will give you an idea of your fund’s interest rate risk on the downside.

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avatar SteveDH

Wow, very interesting! I’ve captured the process you detailed in order to include a look at that particular risk during quarterly/annual analysis. My funds interest rate risk came out as 4.6, 3.3 and 1.5 respectively. I was even able to drill down through the data on an Income Fund and see the effective duration number for the bonds they hold. Thanks for the information – I’ll try to put it to good use.

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avatar jake21 ♦131 (Cent)

On a fixed income and still increasing net worth. I am impressed.

I imagine a lot of it is planning in the past now showing up as a benefit.

Excellent. I hope I can achieve the same stability.

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avatar Tony

Having 50% in Fixed Income is very aggressive in this environment. As interest rates rise your bonds or bond funds will decrease in value according to their duration. Should cycle some of those bonds to floating rate bonds or ETFs.

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