December 2008 Net Worth: Finishing Strong (Kind Of)

Well. It's been some time since I blogged about my financial progress on here. I'm not entirely sure why; I think I got burned out a bit from taking in too much financial media, then the historic election, I was busy with various other things...at any rate I'm back to being focused on my personal finance and the economy in general.

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I finished up the year with a great month on the face of it: a 2.22% increase in my net worth. This was due to a big increase in assets by way of a healthy dose of Xmas cash, other savings, and small FFNOX dividends. This is bloated a bit, as I have close to $400 earmarked for specific debt reduction this month. Still, a solid month for asset accumulation.



And then we come to my debts. Loans down as usual, cards down even more (representing reduced rotating monthly payments - I don't carry a balance aside from about $2600 in collections from years ago that I'm paying off at 0% interest), but that persnickety Other category is way, way up! +$771! Ugh. Part of this is that I haven't paid off NSTAR just yet (I'd rather hang onto the cash until the last possible moment. Psychological I suppose.) Part of it represents a few small family and friend debts that I seem to keep adding despite my commitment to not do so. And a big part of it - $430.53 to be exact - is from a Commonwealth of Massachusetts Tax Assessment from 2005! Perfect. Just what I need right now. Unfortuately I can't help but think this is accurate as back then I had no idea what I was doing with my taxes. I have some recourse to appeal; I will have to take a look at my records if I even have them lying around. Need to concentrate more on debt reduction in 2009.



Because I like graphs that tell a great deal of information, I added a net worth line to my asset & debt graph. Here I can visually track my increasing net worth until it hits the point where the assets and debt lines cross (in the far, far future) - positive net worth. Not sure yet if this is cool, helpful, or silly. As you can see even though I increased my debts this month my big asset increase still resulted in a net worth increase.



Because I like to pack as much info as possible into one graph, check out this new one! It's my FIP, or Financial Independence Progress, graph. A laughable concept right now to be sure, but I love tracking this stuff. I added a line that tracks my assets on here. The thing is even in those bad September and October months - and they certainly affected my equity positions - I was nevertheless able to build up my total cash assets. And the other excellent thing, and big reason for my asset jump this month, is that I was able to take that big income spike and turn it all into savings. I even decreased my overall expenses a bit. So the trend shown here is actually quite good.

Financial Independence Progress (FIP) Graph

Here's the second installment of my new favorite way to evaluate my financial situation - the Financial Independence Progress Graph. This is a simple but elegant graph that actually provides quite a bit of information, but directly and indirectly. The blue line tracks my income month-to-month, the red line tracks my monthly living expenses (all spending minus savings and investments), and the green line tracks my investment income. The key is to try to maximize blue, minimize red, and increase green until it crosses or surpasses red - this is the point at which financial independence (FI) is achieved.



As you can see things are at least trending in the right direction after a horrid June, expense-wise. I picked up a little bit of extra income in referral bonuses and brought spending back down, although not nearly as low as I'd like. Although it's barely noticeable here, that green line is beginning to rise as well coming off a tiny gain in my IRA.

The real key to increasing the green is to maximize my monthly savings and investments. The key to doing that is to maximize the area between the blue and red lines. It's a simple formula: income - expenses = cash flow. That cash has to be used as investment capital in order to have any hope of accelerating my journey toward FI. As you can see from the graph I had a couple great months in this regard, which helped me get my assets to where they are now, and a few so-so and bad months that have brought my efforts to a crawl. I need to work much harder than I have been on this.

It's a long road to be sure, and a tough one, but by starting early and focusing now it will make it easier as the power of compounding works for me.