Net worth is calculated by taking the sum of all of your assets subtracting your liabilities (debts). In my case, I have zero debts. I do not owe any person or business money. No student loans, no car loans, no mortgage, no credit card debt. It feels AMAZING!!! And I highly recommend it.
A common discussion in the finance groups I belong to, is how your wealth is positioned and distributed. And then many people also want to discuss the "why" behind it too. So, here's my situation:
The Simple Breakdown
Net Worth
Cash 10%
Investments 90%
Breakdown by Category
Cash:
Checking 5%
Savings 5%
Investments:
Professionally Managed Brokerage Account 55%
Roth IRA 14.5%
CDs 12%
Old Employer 401K 8%
Personally Managed Brokerage Account 0.5%
Cash -- 3 checking accounts and 3 savings accounts
Yep, that's right, I have 3 of each because they serve different organizational purposes. Among these accounts, I tend to keep about 12-months worth of living expenses, and sometimes more than that. I do consider this category as a whole my emergency fund, where many people use one specific account to store those monies. Bank of America, Charles Schwab, and Citibank are the institution’s where the accounts are held.
Investment Accounts
CDs -- I am holding two CDs at the moment because when I sold my home in May 2019, I decided that I wanted to put a chunk of the profits into a safe investment where I could not encounter any losses, as these monies may (or may not) be used for a down payment on a future home (rental or personal use). On paper, these accounts have shown a loss with the current market declines, however the first CD will mature in October 2020. If the account does not return to the original value, I will recoup my loss and receive my initial deposit. Obviously, I'm rooting for a gain, so let's cross our fingers the markets rise before the maturity date! If not, at least I know I did not lose those monies. The second CD will mature a year or more after the first one. It too has a similar stipulation, that I will receive my original amount, or more, but not a loss. Both CDs had a rate around 5.5% return at the time of purchase (August 2019).
Roth IRA & Old Employer 401K -- Just standard investment buckets. I do try and max out my Roth IRA every January so it's done for the year. I leave my old employer 401K alone at Fidelity because I cannot contribute to it since I don't work for that company any more. The fees are nominal and that account had really great returns pre-COVID. I have faith it will recover in time, so I let it be. The account is set up as Fidelity Freedom 2045 (FSNZX).
Personally Managed Brokerage Account -- I recently opened an account at Charles Schwab that I choose to manage. As you can see, I have very little in that account right now. However, it's my goal to grow this account. I presently hold some shares of VTI and in the near future I would like to buy IYH and QQQ. I'm not here to teach anyone about investments, as I just want to share my personal story. If you are not familiar with those abbreviations, use Google. Google is your friend.
Professionally Managed Brokerage Account -- Yes, this is where the majority of my wealth is stashed, and I love it there. That bucket brings me comfort, a safe feeling, and much joy. This is the account I will use first, when I want to start living off of my investments during early retirement. I have a number of positions in this account that include various ETFs and mutual funds. This account is set up for growth with income, and I'm very comfortable with the risk tolerance here.
In the FI and FIRE communities, many people turn a nose at managed accounts because it costs money, and the journey to FI often is a frugal one. I on the other hand, LOOOVVVEE my Wealth Advisor, Kerina Graham!! Kerina is an experienced, qualified expert in her field, and she is an educator of finance at heart. I can ask her a million questions, and she is always willing to explain the answers in ways that I understand. She does not make me feel stupid for some of the most basic questions, and she is candid if I bring an idea to her and she does not feel it would be in my best interest. She was respectful when I explained my plan for early retirement and devised a plan that would work well for me to reach my goals. Kerina regularly checks in with my financial goals, re-evaluates my portfolio, offers suggestions, and then discusses the details and plan before making any changes. Having a trusted person to chit-chat about personal finance has been a godsend for me, and I truly enjoy talking "spreadsheets" with her. We can geek-out in good company.
2020 Financial Goals
As I continue to learn more about personal finance and investing, one of my goals is to increase the amount of investments in my personally managed brokerage account. In January, I had set a target number for my net worth, that I was hoping to reach by the end of this calendar year. To hit that target, I would need to increase my net worth by 25% and I had planned to do so through aggressively saving my earned income in conjunction with interest and dividends from my investments. Well ... I've scrapped that target number and will set a new one later. Right now, I would just love to see my net worth go back up to where it was in early February before the nasty declines.
If you's like more specific information about how I utilize Kerina's services, my CFP, feel free to send me a message, or you're welcome to contact her directly to learn more about what services she offers and if she would be a good fit for your needs.
Random pictures of my friends in Belize. Stay healthy, stay safe and stay home.
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