Lifestyle

RB40 Household Net Worth Breakdown

56 total views
444 Shares
RB40 Household Net Worth Breakdown

Do you keep track of your net worth? Your net worth is simply your assets minus your liabilities. It is a great way to measure your financial progress from year to year. Ideally, your net worth should increase every year, but real life rarely works out that way. There will be setbacks and your net worth will decrease once in a while; however, the general trend should be positive as you get older. If you’re not making positive progress over time, then there is a problem or two.

Tracking your net worth is especially important if your goal is financial independence and/or early retirement. That’s one way to find out if you’ve achieved your goal. Once your net worth exceeds 25x your annual expense, you are financially independent! Well, you should add some margin if you want to retire very early, but 25x is a great accomplishment for anybody.

Net Worth History

I’ve been tracking our net worth since 2006 and it’s great to see how much progress we made financially. This post was actually written back in 2016. Today, I’ll update it and see if there are any big changes since then. I will do this with percentages because I’m not ready to share the dollar value at this time. Let’s just say it’s over a million and under 5.

Okay, let’s breakdown of the RB40 household net worth. First, I’ll break it down by asset type. Then, I’ll do it again by tax categories.

RB40 household asset types

Here is a bit of history.

This chart reflects our net worth at the end of 2021. The trend continues. Our US stocks allocation increased and real estate decreased. The US stock market did so well over the last two years. Also, I didn’t change the price of our primary residence (duplex.) I don’t think the price increased much. Portland is such a big hot mess. I doubt the property price increased much. I’ll just keep it the same until I sell the place. You never know how much you’ll get for a house.

  • US stocks 44% + International stocks 17% – Most of our net worth is invested in equities. International stock didn’t do very well compare to the US stock market. I think 2022 will be different. The US stock market ran up so much. The international markets should compare well this year, but who knows.
  • Bonds 9% – I’m not a big fan of bonds. The interest is so low and will stay that way for a long time. At this point, I think it’s better to invest in stocks because we don’t plan to withdraw for at least 10 years. I’ll move most of this allocation to dividend stocks over the next few years.
  • Real estate 18% – This includes our duplex, a rental condo, and 2 condos in Thailand. My parent lives in the condos. They are not investment, just a place to live. You can see a further breakdown in the next section.
  • Cash/Money Market 1% – Our cash allocation is pretty light. We don’t need to keep a bit cushion because we don’t have a big expense right now. We could always cash out some bonds if we need to. I prefer to invest in real estate crowdfunding and stocks rather than keep a lot of cash around. And 1% is about the same our annual expense so I think this allocatioin is enough.
  • Alternatives 8% – This is really real estate. A big portion is invested in real estate crowdfunding. The rest is invested in REITs. There is a bit in crypto, but a very small amount.
  • Intellectual property 2% – This is a place holder. It’s 3x the annual income from my online business.
  • Pension 1% – I have a very small pension from my engineering job. Once Mrs. RB40 retires, I’ll probably cash it out. The value won’t increase much even if I wait until 65.
  • Others 0% – Other assets such as art work and our vehicle. This is almost a negligible amount now. Our car is all banged up and it’s probably worth around $1,000. This section rounds down to 0%.

The allocation looks okay, but I’ll continue to tinker with it. Over the next few years, I plan to reduce our international stocks exposure. They just can’t compete with the US equities. I’ll redeploy the proceed to real estate crowdfunding and US stocks. I also plan to sell our rental condo soon. I can’t be a landlord anymore because I plan to travel a lot more. I need our investment to be very passive.

Tax categories

net worth tax categories

Taxable account: 17%

This is the investment account that we could access easily. Our dividend portfolio is here.

The taxable account is very important if you plan to retire early. You need to fund your retirement somehow and this account is more accessible than the tax-advantaged accounts. This portion of our net worth will help generate passive income to fund our early retirement.

Tax-deferred: 45%

These are our traditional IRAs and 401k accounts. We’ve been maxing out our 401k contribution for over 20 years and they are doing quite well. Most of the money here is invested in low-cost Vanguard stock and bond funds. After Mrs. RB40 retires, we will slowly roll the money over to our Roth IRAs. Building a Roth IRA ladder is a great way to minimize tax when you retire early.

This portion of our portfolio is growing faster than others. We save here first to reduce our tax liability. However, this portion might be growing too big soon. It’ll create problems later down the line if we need to deal with required minimum distributions.

Tax-free: 9%

Our Roth IRAs aren’t a big part of our net worth right now. We contribute the max every year, but the low contribution limits mean we can’t accumulate much in our Roth IRAs. This portion of our net worth should grow once we start building our Roth IRA ladder.

Rental Properties: 9%

Currently, we have 2 rental units. One is a condo and the other is a unit in our duplex. I’m planning to sell the rental condo this year. Also, we plan to take over both units at our duplex if our tenant leaves. We’ll need more space when our son is a teenager. So this category will go down to 0% at some point. I don’t want to be a landlord anymore because we plan to travel a lot more.

Primary residence: 5%

The biggest piece of most family’s net worth is their home. However, I don’t think that’s the right way to go. All that money is stuck in your home and you’ll have to pay property tax, insurance, repair, and maintenance every year. I think it’s better to live in a modest home and make your money work harder. That’s why our primary residence is just 5% of our net worth. Building equity is nice, but I like investing better. I’m not in a hurry to pay off the mortgage either.

Real estate crowdfunding: 3%

Several projects were completed this year and I need to reinvest soon. I’ve been investing in real estate crowdfunding since 2017 and it’s going well so far. The multi-family projects did quite well over the last few years. Offices and other projects didn’t do as well. I’ll just focus on multi-family projects from now on. I plan to increase our investment at CrowdStreet to 5% of our net worth.

UTMA & 529 plan: 4%

RB40Jr’s college fund. I found out my father-in-law has another 529 account for him (not included here). These should be plenty to fund a 4-year degree at a state college when he’s 18. We don’t plan to contribute much additional money over the next 10 years.

Bank accounts: 1%

Our bank account looks a bit low percentage-wise. There is enough here to fund about a year of living expenses for us.

Pension: 1%

IP: 2%

Other assets: 4%

This one includes 2 condos in Thailand, our car, and artwork. My parent lives in the condo and rents it out occasionally. This condo would be a great home base for us when we relocate to Asia for a few years. I plan to live here and travel all around the region once RB40Jr goes to college. That’s about 7 years off, but we’ll have a preview in 2022. We’ll visit Asia for 3 months in the summer.

That’s about it. The only thing missing from here is Social Security benefits. That’s a long way off, though. I might not even be around to collect. Also, I didn’t count our other personal properties. They aren’t worth much and they are depreciating every day. There is no point including things like a computer, sofa, and TV.

How I track our net worth?

I track our net worth with an Excel spreadsheet. It is a good exercise to go through your finance at least once a month and see how all your investments are doing. I also use Personal Capital to get a quick snapshot, but I think it’s best to make your own spreadsheet. That way, you have all the history.

Diversify

That’s what our net worth looks like at the end of 2021. US stocks have done very well over the past few years and our net worth benefited from the growth. Over the next 2 years, I plan to reduce our allocation in international stocks and rental properties. The money will be redeployed in stocks and real estate crowdfunding.

The next big inflection point will be in 2029 when Mrs. RB40 retires. We’ll travel more and I will evaluate our asset allocation again. Mrs. RB40 doesn’t want to retire right now and her income will give our net worth a boost for 7 more years. At this rate, we’ll be very comfortable when she retires. I’m not worried about money anymore. Our annual expense is just a little over 1% of our net worth. In 7 years, we’ll be able to spend a lot more and it will still be a very conservative withdrawal rate.

Alright, I hope you enjoyed a peek into our asset allocation. Have you gone through this exercise lately? The stock market has done quite well. You may need to rebalance if you haven’t done it in a long time.

How does your net worth look? What do you think about diversification?

*Sign up for a free account at Personal Capital to help manage your net worth and investment accounts. I log in almost every day to check on our accounts. It’s a great site for DIY investors. They have a really good retirement calculator.

The following two tabs change content below.

Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

Latest posts by retirebyforty (see all)

Get update via email:
Sign up to receive new articles via email
We hate spam just as much as you

444 Shares

Share this Post