Saturday, February 28, 2009

End of February Update

It’s official, the sky is falling and I think it hit the back of my head on the way down. We have moved way past the 8000 mark on the Dow and are fast approaching Dow 6000. I will admit that I pay way too much attention to the news and have almost become frozen into inaction. Well not completely.

I recently read an article about a few people that had seen the troubled markets brewing back in 2007/2008 and are now trying to figure out when to reenter the market. I have to admit that I was jealous of those people who sold at the top and are now trying to time the bottom. Now I’m thinking about putting a note under my pillow that says sell everything when the Dow Jones get’s back to 13000? Will that be in 2011 or 2020…tough to say at this point. The financial down turn is very disappointing to say the least. I am working towards a goal of a net worth of $1,000,000 by the time I’m 40 and It seems like a big deal to lose several years worth of gains along the way. I turned 32 in the month of February and was reminded that I only have 8 more years. Part of me also knows and thinks that as I buy shares at 1997 prices in 2009 I stand a chance of drastically increasing my net worth if the Dow Jones does get back to 13,000 within the next 5 years. Jim Cramer keeps saying 4.5 years.

Net worth update: $193,407.57, Which is a loss of $866.47

Recent moves include upping my 401K to 14%. With my company match of 6.5% this puts me close to $20,000 for the year. I have also changed where my future contributions will go into.

PIMCO PIMCO Total Return Instl Fund 40.00%
Fidelity Contra Fund 35.00%
Principal Global Investors MidCap Blend Separate Account15.00%
Principal Global Investors International Growth Separate Account 10.00%

I know it seems a little conservative by putting 40% into a PIMPCO bond fund but I feel like this is balancing the risk of 5% out of the 6.5% match from my company being in the form of company stock. Having said that, my company stock is only down about 13% for the year.

Other financial moves if you want to call it that is the purchase of a new car. My car was dying and needed about $4,500 worth of maintenance. I elected to purchase a used car, 2008 with 13K miles on it. I put $6,000 down and now have a payment of $218 a month for the next four years ($9,000 loan). This purchase won’t be reflected on this month’s balance sheet but next months. The reason for this is that I put the down payment on a credit card that does not need to get paid off until next month.

I must admit that this purchase has made me question my thoughts on counting personal property as part of my net worth. At a maximum I was thinking of giving myself a partial credit for personal property only up to the point of offsetting the loss of cash from my savings account. This to me seems to fall in the category of “funny accounting” but seems like the car and all our property is worth something. However, I really don’t want to play the game of how much is my car worth versus how much I owe on the loan. I am leaning towards not putting my car debt on my balance sheet and only reflecting it in terms of cash flow loss. This is totally cheating in some respects. However, my wife’s car is nearly paid for with only a few car payments left and I will not include the value of her car on our balance sheet. We also have furniture, TVs, and a painting worth thousands of dollars not included on our balance sheet. The painting is worth maybe $2-3K alone. I think this all get’s back to how I want to count personal property as part of my net worth. The bottom line is that I don’t think it fair to deduct $15,000 from my net worth just because I purchased a vehicle. I don’t think it tells the entire story of what is going on. At the same time I don’t want to play the game of “how much is my car worth” either. The car has a blue book value of 18K and I owe 9K on it.

I will continue to ponder my accounting over the next few weeks and months ahead.