Our Net Worth Performance Was Great Until Bloody September!

The year was great until we got to Bloody September. What the hell happened? Inflation, savings depletion, political turmoil, home prices, and the overall struggle; at least Q4 is here. Prices are up on just about everything, it’s ridiculous.

PS – The best way to save on Tipflation is to stay home. Don’t tell the restaurants that.

Despite NVIDIA struggling due to haters, we have great news. I was finally able to transition to another challenging team in the office. Mrs.TNFG also transitioned to a new team back in Florida. This means that we are moving to Central Florida. Although it was faster than we anticipated, this comes with moving (transition) expenses through Q4.

Our annual travel season is canceled for now (to save money). However, we will be reloading planned trips for 2025. As things change, you have to be nimble. Learn to mix and match your options. With nearly $40k in home repairs ahead of us and dwindling emergency funds; I guess it’s time to start saving again.

It’s also time to be GRATEFUL. We prayed for these new opportunities.

Snapping Back from a $50k Investment Slump

Although I knew it was coming, I still managed to freeze like a deer staring at headlights. Financial experts also knew it was coming. While August was choppy, the hunt for the bottom of September was real. The September Effect refers to the historically weak stock market returns observed during September. September has been the worst-performing month, going back nearly a century.

Fortunately, the Federal Reserve stopped the bleeding and completed the war against inflation. While it might not have been a definitive win, rates were cut by 50 basis points.

Americans didn’t help one bit.

The US personal savings rate in July 2024 was 2.9%, 1.5% lower than the previous year. The average household’s 2023 monthly expenses were $6,440 (up $400 over 2022’s average monthly. Expect the monthly 2024 average to creep to $6,750 or $81,000. To make matters worse, the average credit card balance rose to $8,674.

The average American home continues to save less (near record lows) while spending more on credit (record highs). That’s a recipe for long-term financial challenges. 86% of US households have depleted their extra savings and now have less cash on hand than in March 2020. Demand remains too high and productivity too low.

It’s a soft landing but we have middle-class casualties. While the poor are limited on the cash they have to get them in trouble, the middle class covers that up with debt. Borrowing from your future self equals 3x more in the long run for the same item today.

Following the News, People Panicked. But We Survived?

Our household net worth clawed back from $1.47M to close +$27k for September (see below). No matter the outlook, we are playing the long game. A downturn is another opportunity for dollar-cost-averaging (DCA) in quality companies.

If you are new to investing, the goal is to BUY LOW and hold for dear life (#HODL). Long-term stock investments typically outperform shorter-term trading (day trading), which attempts to time the market. Over an investing period of about 40 years, missing the ten best days would cost you about 50% of your capital gains (profits). That’s a lot of money.

Avoid the issue by investing in Vanguard S&P 500 ETF $VOO. It’s diversified and lets you participate in the overall market. The S&P 500 added 0.42% and closed at 5,762.48 for September (closing at a record). This means that VOO is up 20% for the year.

Our Investment Performance for the Year, So Far

As you can see above, our household portfolio dropped in Q2 (April 19) but went on a tear. It stumbled on August 7 and September 6. Even with those losses, our holdings are beating the general S&P. It’s been a drag but this is where winners buckle down.

To think, we started with a $500 rollover into my 401k in 2014 when I got to DC. The portfolio is around $959k now, the net/max financial plan and our strategy is still the same (see breakdown below):

1. Investing to match in the 401k,
2. Paid down credit card debt aggressively,
3. Increased my 401k contribution until max (ie limit $22.5k for 2023),
4. Started to invest in a Traditional IRA (i.e. limit $6.5k for 2023) and Health Savings Account (i.e. limit $3.85k for 2023),
5. Got more money back during tax season, and
6. Reinvested some more.

Financial Changes Hit When You Least Expect Them

While 2024 has been choppy, we still need to pour at least $40k in home renovations from the bathrooms, carpeting, pest control in the rental property, etc.

Coming off the great trip to Banff in June, and a road trip to Florida, there is so much to do now.

At this rate, we need to stick to our day jobs and build up our reserves again.

In 2022, 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.

Disasters and financial emergencies strike and unfortunately, they will strike again. It’s unfair but like a hurricane, it doesn’t discriminate. Cut back on unnecessary expenses and double down on getting an emergency savings plan.

Financial literacy is not your enemy on this journey, it’s an ally.

So What’s New to TNFG? And Q4?

If you are new to my content, this blog post showcases the TNFG monthly Net Worth Breakdown for September 2024.

There are always usable financial nuggets and aha moments that might help you along the way.

High prices outside translate to spending more time indoors. I’m taking this opportunity to add kinetic weekend activities for the family. It’s high time we walk, play more badminton, go on fun runs, and hit the parks.

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 September’s Emergency Mode

To avoid playing too close to the edge, here’s TNFG’s game plan:

• Moving to a new State. Renovation and moving fees ($50k);
• Sell the primary home ($300k) and pay off all liabilities ($200k) ie. 2x mortgages and 1 auto loans;
• Boost +$20,000 into the Savings Plan for 2025;
• 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 2026;
• Buy a new $600k home in FY 2026;
• And, settle with +$25,000 in savings in 2027

As things change, it’s best to learn to change with them. The primary intention is to draft the plan to help cement the ideas on paper. Secondly, my household goal is to float savings for emergencies, rental real estate coverage, and/or dry powder for investments.

Either way, having $50,000 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 $4,000, you would need $12,000.
• 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 and Being Debt-Free

The health emergency costs and repair costs added to our consumer debt in 2023. We are making some changes this year and cutting down the balance. So far our credit cards still pay us more than we pay them.

We are making room for the $40,000 in 3x home remodeling projects. It’s about time to sure up to the place for a new home purchase in 2026. Initially, we wanted to rent out the primary, however, I’m not sure how feasible this will be. Time to sell and use the proceeds to pay off all our debts.

Wealth is all about cash flow management, however peace of mind is worth its weight in gold.

Here’s the Monthly Wealth Summary:

It started pretty bad. We went sub $1.5M by September 8. However, like a presidential election cycle, the net worth slowly recovered. We closed at $1,555,533.

Layoffs are still in the air. Unemployment is uncomfortably looming. The inflation rate decreased to 2.2 percent in August. The average American is carrying nearly $9k in credit balances. September was an absolute vodka mess. In closing, it comes down to how your household finances improve or don’t. No matter the campaign promises, bills are still due on the 1st.

We saw an increase in our net worth for September 2024 of 1.75%. A cash equivalent value of $27,299. That’s the nature of the game. Sometimes you don’t have to win big. You have to win. Steady wins the race.

I’m anticipating a +8% rate of return for Q4 2024. October should yield around 0.60%. November is estimated to be the big winner at 4.92%. December will ease out with less than 2%.

What’s working toward wealth creation and what’s working against it?

Yeah about those $7.6k expenses

With prices going up just about everywhere, expenses are reaching record highs.

Specifically, we spend $2,506 on the 2023 auto loan, gas, and insurance. Our housing costs (for two homes) settle at around $2,074. With food costs peaking north of $735 (with restaurants). To note, our fixed monthly expenses (real estate and auto loans) are a massive $3,000 with a variable of $1,500. That’s a clean $54,000 per year.

That’s a lot of money. So we have to be careful. Selling the primary home at $300k to pay off $200k debt, would be great. This sets up the home purchase of $600k nicely. I am happy that the net/max plan is holding up.

What are our next wealth-building steps to close out the year?

Time to brush up on Portuguese and Spanish in twelve months and “unbig” my back.

Beyond that here are our overarching goals for 2024:

1. Keeping our expenses where they should be.
   • All about, “Not equating happiness and social acceptance based on the money you spend.“
2. Add $12,500 in M1 Finance focusing on Growth and Passive Income that generates at least $5,000 in dividends in 2024.
   • Check out the portfolio in real-time. If you like the platform and want to start investing, I have the $75 for $75 referral if you need it. *Terms apply – https://m1.finance/SYdqDJ2SyADC.
3. Shooting for a sustained investment contribution rate to reach $1 Million in investment assets (by November 2024).
   • To help monitor your savings, cash flow, net worth, investments, retirement, and more FREE with Personal Capital! Sign up with my link & get a $20 Amazon gift card. *Terms apply. https://pcap.rocks/lawrencegonz
4. Plan 2025 travel season
   • Switch toward a Switzerland via Portugal trip vs. the Italian via Greece trip,
   • Followed by Perú (Machu Picchu) for fall 2025,
   • It would be nice to go to Lake Tahoe (Nevada) with the Mrs. too. But it will come down to investment performance returns.
5. Head back to school in 2025-2026 (maybe) to eventually study for the Certified Financial Planner designation and/or Spanish. I’m sure I know this stuff but this will add more credibility to my online news features.

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