In July and August I made huge increases towards my net worth, but I did have a feeling that it couldn’t last forever. The month of September has proven that, as I’ve been hit with a double dose of market trends and increased spending. I can’t control the market, so I’ll have to ride that out for the time being. Expenses were high from moving out, so I’m hoping to reign the spending in the coming months. I know that this is a marathon and not a sprint. I’ll keep contributing as much to my savings as possible, without worrying about the things beyond my control.
Here is my newest net worth update for September:
The first thing that stood out to me was the large negative amounts in both my Roth IRA and 401k accounts. The market was not as friendly as last month, with my personal performance showing around -3% decrease in both accounts. Since I’ve already maxed out my IRA contributions for 2016, any further fluctuations in that account will be from the market. The contributions to my 401k softened the blow there, but there was still a large decrease.
I also had an expensive month for spending in August which didn’t help matters. I’ve since received another pay check which cancelled that out. That helped me at least break even for the time being! I’m expecting the same amount of spending for this month so we’ll see after I run all the budget numbers. For now my checking account is a little bit higher for this update.
My savings account and pension also had small increases this month, mainly because they are not affected by the market trends. I automatically increase my savings account by $100 each month, and my pension is a straight 3% of my salary contributed by my employer. The balance hadn’t updated last month, so this month had a nice sized increase. It did help to try an offset the negative trends across my other accounts, but I still finished the month in the red.
So let’s see how far my assets would actually take me at this point in time. I’m going to use my total spending from the previous month to calculate this. I’ll then multiply that by 12 months to get the total spending for the year, and then divide my total net worth by that amount. That’s how long I’d be able to live off my savings at that point in time.
$2115 spending in August 2016 * 12 Months = $25,380 spending in a year
$73,820 net worth / $25,380 spending per year = 2.91 years worth of spending
I also thought it would be cool to see the opposite, how much would I be able to withdraw each month? I set the rate of return at 4% as a conservative guess, and the retirement time period would be for 30 years. I’d be able to withdraw $351 a month which is only 17% of my spending of the previous month. I’ve still got some work to do!
Image Source: Jason McCann @ Unsplash