Why Mid-Year Financial Reviews are So Powerful for Your Wealth
It’s been a surprisingly stellar Mid-year thus far for investors. Especially for those who were either heavily leveraged in tech late in 2022 or better yet those who bought into the market low in January. Although there have been several global financial emergencies as we thread the needle around this Cocaine Recession, there are still opportunities.
With no time to review the numbers from Q2, Q3 is here! At this rate, there is a tentative chance that we close out the second half of 2023 with an extra 5 percent market gain. At least that’s what we are all hoping for.
As for our family, the travel season restarts.
We will be headed for a trip to Mexico for a Wedding followed (later) by our annual anniversary trip to Argentina and Brazil. With $2,500 in remaining home repairs and another $1,657 per month in Q4 for student loan payments; this year is expensive. However, if we play our cards right, we have a great chance to become MILLIONAIRES!
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Mid-Year Wealth Up $150k, due to Investments Rebounding
For context, we knew that this was coming. Specifically, Financial news people knew it was coming. The Federal Reserves Chairman warned us of up to 25 rate increases to combat high inflation. He also anticipates job losses into 2023. And all of that transpired. In the end, it cost north of 15 million layoffs of which nearly 500,000 came from the tech side.
Following the news, many panic-sold and bought, but at least as of June 2023, inflation settle at 3 percent. Although pandemic investment gains reset to zero by October 2022, the S&P 500 surged 14 percent in the first half of 2023. Home prices slowed and social media complains. In some ways, this feels just right.
And yet, most experts feel uneasy about the year. The only consensus is that Q3 will be a draw with hopeful growth in Q4 if the Feds hit their comfort target of maybe 2.5% inflation. Construction on new homes fell by 8%. Home building slowed down starting on new single-family homes and focusing on finishing existing projects.
Our household net worth jumped +$150k (see above) with 20% gains from our investments. We are still dollar-cost-averaging (DCA) into quality companies in the meanwhile. For new investors, there is a renewed confidence going into 2024 with the mantra BUY LOW and #HODL.
Investment Performance for the Year, So Far
As you can see above, our household portfolio is trending upward for the year. Something that most didn’t predict. We were in a rock and a hard financial place. America is managing as APPLE hit a $3 trillion market cap.
TNFG’s overall portfolio continues to beat the S&P. Yet I still think for the average investor, a simple index ETF like $VOO can cut the mustard.
To think, I started with a $500 rollover into my 401k in 2014 when I got to DC. The portfolio is around +$600k now, and the net/max financial plan and our strategy are still the same (see breakdown below):
- Invest to match in the 401k,
- Pay down credit card debt aggressively,
- Increase 401k contributions until max (ie limit $22.5k for 2023),
- Invest in a Traditional IRA (ie limit $6.5k for 2023) and Health Savings Account (ie limit $3,875 for 2023),
- Get more money back during tax season,
- Reinvest some more in an after-tax for dividends and
- Enjoy life!
Emergencies Hit When You Least Expect Them
While 2023 hasn’t been all milk and honey, we are taking this as an opportunity to grow.
While we are paying upfront for travel, we were hit with unexpected medical and dental costs. To the tune of $10,000 for the year, which isn’t easy to come by.
We also bought a new EV car adding nearly $1,000 per month in auto loan payments plus insurance coverage.
This meant that we had to reduce our investment contribution goals from $92,000 to $84,000 for 2023. We also took money from our savings to pay for credit card debt. Why? It helps reduce monthly interest fees. This also meant that we used a lot of points as well. Every bit counts in a financial emergency.
Last year, I posted that my family had an Emergency Plan versus Emergency Savings. Time tested this theory and the strategy held. From credit card points and HSA reimbursements, we were able to cover the cost. All with minimal direct impact on our overall wealth goals.
Additionally, we finally did the electrical upgrades to the house for a total of $7,000 and replaced the kitchen faucet for the extra $500. It cost after cost.
Disasters strike and unfortunately, they will strike again. It’s unfair but like a hurricane, it doesn’t discriminate.
Cut back on unnecessary expenses when times are great. And double down on getting an emergency savings plan. You deserve more than to struggle.
So What’s New for the Mid-Year? And the Remainder?
If you are new to my content, this blog post showcases the TNFG’s Semiannual Breakdown for 2023.
Like half time, it’s a great time for my wife and I to reflect. There are always usable financial nuggets and aha moments that might help you along the way. High prices outside should translate to spending more time indoors, for us. We are hoping that’s the case for your pockets as well.
It’s not all bad. This is still a great opportunity to build better habits. Check out TNFG’s Top 3 Best SMART+ER Goal books for inspiration.
Moving beyond Emergency and Survival Mode
Personally, I don’t like to play too close to the edge. So here’s TNFG’s game plan:
- Move $3,750 to reach the $5,000 Bank Savings Goal for 2023,
- Work with extended family for Wills and Estate Planning,
- Get a Term Life Insurance policy outside of work,
- Start re-stacking credit card rewards and miles through 2025,
- Boost +$10,000 into the Savings Plan for 2024,
- And settle with an extra $15,000 in 2025
Our family goal is to float savings for emergencies, rental real estate coverage, and/or dry powder for investments. Either way, having $40,000 on the side seems like a lot but emergencies are costing more and more.
Rule of thumbs for savings:
- No more than 3x months of expenses. For example, if your average monthly expense is $3,000, you would need $9,000.
- For families, especially if you rely on one income, that’s 6x months.
- If you are considering starting a business and quitting. I would highly recommend 1 year of savings. The caveat is that you go leaner on expenses in a demo year to feel what it’s like first.
Even though the game is unfair, there are always rules. If there are rules, there is always a trick to the game. Hard and challenging times are par for the course. They will happen. To mitigate them, you have to stay vigilant and work towards better outcomes today.
Cutting Down Debt through Mid-Year 2023 and Being Debt Free
Here’s the Semiannual Wealth Summary:
The 1st Half of 2023 was an unexpected surprise.
We closed at $911,451 with a pending $7,000 expense hold (transaction timing issue). It puts us closer to $904,000. With inflation or Deflation, higher credit balances, and higher costs, 2023 is a rollercoaster. In total, we saw an increase of 17% of $156,272.
The biggest risk still remains with Putin’s Russia and China. Beyond that, we are holding our breath to see if the low inflation rate will be sustained through September 2023. Turns out the summer time and back to school are high spending months for families which will impact Q4.
Either way, you really need to invest. Every millionaire’s portfolio starts with a dollar; might as well lean into it. Time to let your dollars do the heavy lifting.
What’s working toward Mid-Year wealth creation and what’s working against it?
Yeah about those expenses
With prices going up just about everywhere, expenses are settling into the highs. We are definitely improving with micro expenses.
What are our next wealth-building steps to close out the year?
Become millionaires before taking the next great trip. It’s been an adventure. After that, I’m shifting priorities from financial literacy to the gym.
Turns out my mind only focuses on one thing at a time.
Beyond that here are our overarching goals til Year End:
- Keeping our expenses where they should be. All about, “Not equating happiness and social acceptance based on the money you spend.“
- Add $12,500 in M1 Finance focusing on Growth and Passive Income that generates at least $4,000 in dividends in 2023. Check out the portfolio in real-time. If you like the platform and want to start investing, I have the $10 for $10 referral if you need it. *Terms apply – https://m1.finance/SYdqDJ2SyADC.
- Shooting for a sustained investment rate with the push for a $1.5 Million net worth in 2 Years (by YE 2025). To help monitor your savings, cash flow, net worth, investments, retirement, and more FREE with Empower (formally Personal Capital)! Sign up with my link & get a $20 Amazon gift card. *Terms apply. https://pcap.rocks/lawrencegonz
- Plan 2024 travel season. Heading back to Europe to make up for the 2020 trip.
- $30k repairs on the primary in order to rent and then buy a new home, or maybe even move to another state.
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