Monday, 3 February 2014

January 2014 Net Worth: $477,000 (-0.1%)

Value% Change
Net worth$477,000-0.1%

In a rather rocky start to the 2014 year, my net worth this month decreased by 0.1% which was only the second time (the first time being in June 2013) that my net worth has decreased).  The decrease was driven by two separate factors which was a (hopefully) higher than normal expenses month combined with the share market pulling back sharply towards the end of the month.

I had been hoping for my net worth to reach $480,000 this half (which I mentioned in my December 2013 Net Worth post) and for much of the month I thought I was going to do this easily.  As it turned out the result could have been a lot worse but for a few factors.  I have outlined both the positive and negative factors affecting my net worth performance this month

Positive factors

  • An updated statement for my managed funds
    • I rarely talk about managed funds because I prefer to invest in stocks directly or in ETFs
    • I have a few managed funds which were gifted to me by my parents when I was a bit younger and I have basically stuck these under a rock and they will do what they do - it is almost rainy day insurance for me
    • Whilst I update all of my other accounts monthly, my managed funds only ever send me statements every 6 months and in the last six month period they performed very strongly (i.e. an increase of $2,000 over the previous six months)
  • Continued investment in my superannuation account and my employee share plan
    • I have mentioned several times before the benefit that comes from having a plan where the cash gets taken away before you see it
    • Superannuation works in much the same way and is a great source of retirement saving for most people
  • An increase in my home loan offset account and cash balances
    • Although my cash balances went up strongly this month it will reverse later this year and next year.  As I outlined in my 2014 Financial goals, I am saving in order to get engaged and married hopefully within the next 2 years so while my cash balances will look healthy, I am going to take a hit when I have to pay those expenses.
Negative factors
  • A fall in the share market towards the end of January
    • The reduction in my net worth this month was driven almost exclusively by the correction in the share market which affected my share holdings across the board and also my superannuation balance
    • As my portfolio is more and more skewed to share market returns I will continue to face this issue which is largely unavoidable
  • A large amount of personal expenditures which led to much higher credit card debt
    • As I have mentioned several times recently I have moved into my own apartment which has resulted in quite high upfront costs including paying a bond, buying furniture and kitting out my apartment
    • Although I am attempting to do this on a budget, there is no way to avoid significant upfront expenditure
    • My car insurance was also due this month which had quite a big impact on my credit card balance
I am not entirely surprised that the share market pulled back.  I confess that I get quite nervous when it continues to run month after month.  I used the pull back to put my toe back into the market and if the market continues to fall I will be looking for more opportunities to buy.  Although I shall not be contributing new capital to my share investments (because I will be saving towards my 2014 goals) I have several stocks which I have been looking to sell and some lazy capital which I should be redeploying.

February 2014 will probably be a subdued month as well as I pay my rather large credit card balance however my employee share plan should vest which always gives me a leg up.  I continue to put off doing my taxes which should give me a free kick at some point (when I get around to it).  I am once again hoping for a net worth of $480,000 in the coming month however my target of $550,000 by June 2014 is looking more and more unlikely.

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