2010 Year in Review

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Net Worth

Though I have stopped posting monthly update of our net worth, I still keep tracking what we have at the end of each month to check the progress.

2010 was a good year in terms of growing our net worth because 1) the stock market did really well; 2) both of us still have our jobs; and 3) extra side income. Despite the big down payment we made for our house in April, which also caused the big drop in our net worth at that time, we ended 2010 having more than we did when the year started and moved closer to the peak we reached last April and to the $1 million mark at the top of the chart.

Overall in 2010, our net worth grew by 4.59%, with the most gain, percentage wise, coming from 529 accounts which increased by more than 50% last year. For this part, the increase was mostly from our own contributions because investments in those accounts are rather conservative, which limit the fluctuation. In terms of dollar amount, then our retirement accounts, which include both IRAs and 401(k)s, had the most significant gain of more than $110K. Even though both of us maxed out our 2010 contributions to IRAs and 401(k)s, the increase was mostly from price appreciation of our investments.

As I mentioned many times in the past, I don’t include any things that’s related to house in the net worth calculation because it’s hard to get an accurate estimate of the value of the house, though I know exactly how much mortgage we owe. Therefore, the focus is on those that I can control, like money in the bank and investments in the stock markets. As for our mortgage, we are making extra payment toward the principal so we can pay it off faster. We have a 15-year fixed loan at 3.85% and we are planing to pay it off in about 10 years.

Spending

Since we basically pay everything through our checking account at Bank of America, it’s quite easy to figure out where the money went in 2010. Even though we won’t be able to see how much we exactly spent on, for example, groceries, gas or clothes, by looking at transactions in our bank account, it can still give us the big picture view of our spending in the entire year.

We bought our house with 30% down payment last April. That took a big bite of our net worth and was the largest piece of our spending last year. As you can see from the above chart, nearly half of our spending in 2010 was house related, including the down payment and subsequent monthly mortgage payement and rents we paid before moving to our own house.

A large part of the down payment was the proceeds from selling our house in NJ the year before and the rest were our savings, which is also the second largest “spending” item in the chart. In 2010, more than 21% of the money going out of our checking account ended up in savings accounts at places like Ally Bank and Sallie Mae Bank. Of course, not all the 21% was saved, but that still represents a healthy rate of saving, especially when the 5.51% going to our investments in regular accounts (non-retirement investments in stocks, ETFs, and mutual funds), which is the forth largest “spending”, and 1.36% contribution to 529 accounts, are included.

In 2010, about 9.56% of our spending went to paying credit card balance, with an average of about $3,500 a month. However, not all the money were spent on food, gas, clothes, so on. About half of that went to upgrade house and furniture before we moved in. Since we buy almost everything with credit cards, it’s not difficult to find out the exact amount we spent on necessities.

Rounding up top 5 spending is taxes, which include both taxes paid on April 15th and estimated tax payments made through out the year.

Investments

We continue to contribute regularly to our investments in both retirement accounts and regular accounts. For retirement accounts, new money are added from every paycheck to employer sponsored 401(k) accounts (at Fidelity) and contributions to IRA accounts (at Vanguard) are usually made on a quarterly basis. But for non-retirement accounts, we run a monthly contribution schedule, including a few dividend-paying stocks. Except 401(k) accounts, all the contributions accounted for the 5.51% in spending that went to investments.

Currently we own 10 mutual funds in non-retirement accounts, the same funds that we have been holding for years: Dodge & Cox Stock Fund (DODGX), Dodge & Cox International Fund (DODFX), T. Row Price Small Cap Value Fund (PRSVX), T. Row Price New Era Fund (PRNEX), CGM Focus Fund (CGMFX), Oakmark Equity & Income Fund (OAKBX), Buffalo Small Cap Fund (BUFSX), Tocqueville Gold Fund (TGLDX), Alpine Dynamic Dividend Fund (ADVDX), and Third Avenue Real Estate Fund (TAREX). Except TGLDX, ADVDX and TAREX, we make monthly contribution to all other seven.

Above is the asset allocation of our mutual fund investments in non-retirement accounts. As it shows, 90% of the assets are in stocks with U.S. stocks making up the majority at 57%. I am a big fan of international stocks and that why we have 33% in foreign stocks in these mutual funds alone. If individual stocks are considered, the percentage will be even higher. For non-retirement accounts, I don’t have any fund investing in bonds because I want to see more growth in that area by taking more risk, which was quite evident for the past two years as some of the funds fluctuated a lot. I do, however, have a few bond funds in tax deferred accounts.

The reason the chart doesn’t include retirement accounts is that a large number of investments in 401(k) accounts don’t have ticker symbols, therefore, it’s not possible to analyze the components of those funds.

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Related posts:

1. 2007 Year End Review (II): Net Worth
2. 2006 Year-End Review III: Net Worth
3. 2007 Year End Review (III): Performance and Asset Allocation
4. 2007 Year End Review (I): Financial Moves
5. 2006 Year-End Review I: Financial Moves

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2010 Year in Review

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