Almost made it! From $ -530k net worth to $-9k this yr

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Coiled_Snake
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Almost made it! From $ -530k net worth to $-9k this yr

Post by Coiled_Snake »

I guess I will have to wait one more week.
If only I had started earlier than April...
Huge thanks to all the Bogleheads here who got me on the path this year. Especially mucho (daily) help from WCI.

So happy that I asked and you all responded.

*By the way, you don't count 529s in net wealth, right? That would sneak me right over to the positive side.

*Also, does anyone have a recommendation for online estate attorney? Is that legal?
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by grabiner »

Your net worth includes all your assets and debts, both financial and non-financial. Your 529 is part of your net worth because it is your money; if you write a check from your checking account to invest in your 529, this doesn't decrease your net worth.

Your net worth does decrease when you convert money to something else. When you use the 529 to pay your children's college bills, you would decrease your net worth by that amount. Similarly, when you write a check to take a vacation, you have consumed some of your net worth.
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Laura
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Laura »

Good news, 529s can be counted as part of your net worth. Although targeted toward your children, you could withdraw the money today with a penalty if you really needed to. Give yourself credit for the huge shift.

I had to go back and look at it seems you moved, sold a house, and must have paid off the student loans in addition to investing. Congratulations on making such huge progress. Imagine what your net worth will look like in another year or two if you did all of that in one year. Happy New Year.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
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JamesSFO
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by JamesSFO »

Amazing progress. Can you share some tips about what particularly worked for you?
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Coiled_Snake
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Ahh, thanks.

Post by Coiled_Snake »

I had not seen it described that way.
Makes sense.

Do you include it as part of your asset allocation portfolio also?
mhalley
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by mhalley »

Grats on your net worth improvement! Since technically the money is for your child, I would say not to count it in your net worth. OTOH, it is there in case of an emergency, so you COULD count it as part of it. It really doesn't matter.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Rodc »

Do you include it as part of your asset allocation portfolio also?
Personally I do asset allocation separately for retirement accounts and 529 since they are on different time schedules and have different risk concerns (for example college starts in a few years and lasts for four years (well my funding anyway), while retirement starts later and lasts a whole lot longer, the kids can take out a loan for college if push comes to shove, but I can't take out a loan for retirement).

That said, I do check the over-all asset allocation that results as a sanity check.

One can certainly take a different approach.

Congratulations on the progress!
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Mel Lindauer »

Do you include it as part of your asset allocation portfolio also?
While it's technically your money, I don't think the 529 Plan investments should affect your asset allocation. For example, a retiree with a conservative portfolio might be funding an aggressive 529 for their recently-born grandchild who has perhaps a 18- to 20-year time horizon for that money.
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Coiled_Snake
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That makes total sense.

Post by Coiled_Snake »

I have treated them separate to this point based on the time horizon.
What an honor to have you comment, Mel.

James, I don't feel "worth"-y to really give advice yet. Maybe next year. Haha.
But I did move several thousand miles, quadrupled my income, sold a house, read a lot of books and spent lots on time on a couple websites.
Oh, and paid down $300k in student loans. Almost forgot about that part.
The investment accounts were just a small part. But next year...
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by bhsince87 »

IMO, the 529 plan is absolutely part of your net worth. You can even pull the money out if you want to, subject to income taxes and a penalty, like a 401k/IRA,

But Mel is also right. It should NOT be considered part of your asset allocation.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by White Coat Investor »

Nice work, well done.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
toblerone
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by toblerone »

Coiled_Snake wrote:*By the way, you don't count 529s in net wealth, right? That would sneak me right over to the positive side.
I use them in net worth calculations, but I factor in the penalty for non-educational expenses. A good middle ground for the NW calc - your true asset, if you withdrew it for any purpose.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by inbox788 »

Good job, but can you elaborate a bit on your situation?
Was this all in 2014? or when did you have negative $0.5M net worth? How did you reach that level of debt? Student loans? What was your income the last 5 years? What is your occupation?
Besides a physician in training, what other occupations can get to this much negative net worth and dig out in 1 or less than 5 years? Lottery winner? Real estate?
Eric76
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Eric76 »

With all due respect to the original poster, I think most of us would have been able to pay off a lot of debt if our income suddenly quadrupled.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by lululu »

Eric76 wrote:With all due respect to the original poster, I think most of us would have been able to pay off a lot of debt if our income suddenly quadrupled.
:D My thought, although I was restraining myself from saying that.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by JamesSFO »

lululu wrote:
Eric76 wrote:With all due respect to the original poster, I think most of us would have been able to pay off a lot of debt if our income suddenly quadrupled.
:D My thought, although I was restraining myself from saying that.
Though for many people that doesn't happen. So while it certainly helps to have a significantly higher income, if you don't take meaningful steps to focus on paying off the debt, it will just go into bigger spending and more debt.
inbox788
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by inbox788 »

JamesSFO wrote:
lululu wrote:
Eric76 wrote:With all due respect to the original poster, I think most of us would have been able to pay off a lot of debt if our income suddenly quadrupled.
:D My thought, although I was restraining myself from saying that.
Though for many people that doesn't happen. So while it certainly helps to have a significantly higher income, if you don't take meaningful steps to focus on paying off the debt, it will just go into bigger spending and more debt.
No doubt the accomplishment is like running a marathon. I'm still trying to figure out if this was achieved in less than 3 hours or more than 12 hours. Doing so in 2 years or less is amazing, even if annual income went from $50k to $200k. Doing so in 20 years is success if going from $25k to $100k. Now if income is going from $150k to $600k or more then whatever debt was invested in, especially if education has paid off financially.

Still, I'm wondering if net worth isn't being correctly or consistently being calculated. Was a house sold and 500k mortgage paid off? Some would inaccurately say net worth went from negative $500k to zero, ignoring the asset value.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Mudpuppy »

Congrats on working your way out of the "red" zone. I just made it into the positive net worth territory in 2013, so I distinctly recall how good it feels to finally get there. Now just keep up the good habits and keep the momentum going. I'm quite astounded how quickly my net worth has grown since crossing into the positive net worth territory since I kept up the same financial habits, and I'm sure you can do the same. Good luck in 2015!
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by schmitz »

inbox788 wrote:
JamesSFO wrote:
lululu wrote:
Eric76 wrote:With all due respect to the original poster, I think most of us would have been able to pay off a lot of debt if our income suddenly quadrupled.
:D My thought, although I was restraining myself from saying that.
Though for many people that doesn't happen. So while it certainly helps to have a significantly higher income, if you don't take meaningful steps to focus on paying off the debt, it will just go into bigger spending and more debt.
No doubt the accomplishment is like running a marathon. I'm still trying to figure out if this was achieved in less than 3 hours or more than 12 hours. Doing so in 2 years or less is amazing, even if annual income went from $50k to $200k. Doing so in 20 years is success if going from $25k to $100k. Now if income is going from $150k to $600k or more then whatever debt was invested in, especially if education has paid off financially.

Still, I'm wondering if net worth isn't being correctly or consistently being calculated. Was a house sold and 500k mortgage paid off? Some would inaccurately say net worth went from negative $500k to zero, ignoring the asset value.
reminds me of people who make "im debt free!" calls to dave ramsey.

they say they paid off $200,000 in 8 months and when dave asks for more details, we find out they just sold their house for $180,000 which paid off their mortgage.
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Coiled_Snake
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Coiled_Snake »

inbox788 wrote:can you elaborate a bit on your situation?
Was this all in 2014? or when did you have negative $0.5M net worth? How did you reach that level of debt? Student loans? What was your income the last 5 years? What is your occupation?
This all occurred from Jan 1 to Dec 31, 2014.
Debt occurred from student loans, negative value on mortgage that I sold at a significant loss, and automobile.
Income the last 5 years? 125, 125, 125, 125, 500.
Physician.

Never knew a thing about investing at all before last Christmas. Got a Dummies book at Barnes & Noble and was directed here. Our goal was simply to cut ties with our house, live a spartan lifestyle, pay off the student loans, and understand what we were doing with our money. We are extreme novices. We considered it a very successful year.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Compound »

Incredible progress, congratulations!
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by jeep364 »

Coiled_Snake wrote:
inbox788 wrote:can you elaborate a bit on your situation?
Was this all in 2014? or when did you have negative $0.5M net worth? How did you reach that level of debt? Student loans? What was your income the last 5 years? What is your occupation?
This all occurred from Jan 1 to Dec 31, 2014.
Debt occurred from student loans, negative value on mortgage that I sold at a significant loss, and automobile.
Income the last 5 years? 125, 125, 125, 125, 500.
Physician.

Never knew a thing about investing at all before last Christmas. Got a Dummies book at Barnes & Noble and was directed here. Our goal was simply to cut ties with our house, live a spartan lifestyle, pay off the student loans, and understand what we were doing with our money. We are extreme novices. We considered it a very successful year.
Congrats, if I may ask were you earning 125 during a residency? Moonlighting or do some programs deliver that compensation these days?
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LowER
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by LowER »

Coiled_Snake wrote:
inbox788 wrote:can you elaborate a bit on your situation?
Was this all in 2014? or when did you have negative $0.5M net worth? How did you reach that level of debt? Student loans? What was your income the last 5 years? What is your occupation?
This all occurred from Jan 1 to Dec 31, 2014.
Debt occurred from student loans, negative value on mortgage that I sold at a significant loss, and automobile.
Income the last 5 years? 125, 125, 125, 125, 500.
Physician.

Never knew a thing about investing at all before last Christmas. Got a Dummies book at Barnes & Noble and was directed here. Our goal was simply to cut ties with our house, live a spartan lifestyle, pay off the student loans, and understand what we were doing with our money. We are extreme novices. We considered it a very successful year.
And why wouldn't you? Strong work on many levels. Ignore the noise and congratulate yourselves on a future sans doctor investing wizardry, consumerism, and keeping up with the Joneses, unless you find your Joneses here at bogleheads, but that's another thread. In any event, it sounds like you are well on your way to a financial life that will let you sleep soundly, and to allow you to get out of medicine before the really foul poop hits the really big fan.
iflyjetzzz
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by iflyjetzzz »

Very impressive, congratulations.
I recommend that you consider putting as much money as possible into Roths. Not so much for your retirement but more as a tax sheltered inheritance vehicle. Based on the information so far, you will accumulate enough wealth in your lifetime to be hit with an inheritance tax. By using Roths, you never have to withdraw any money in your lifetime and the money passes on free of inheritance taxes to your heirs.

The easy one of course is traditional IRAs for you and your spouse that you roll over to Roths.
I assume that you've got a 401k type plan at work. I'd max it out with Roth contributions and then max out after tax contributions which I'd roll over to Roths.

I realize that this strategy has you paying more taxes today but the long run benefits far outweigh the short term tax savings.

Again, congratulations.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by MathWizard »

Coiled_Snake wrote:
inbox788 wrote:can you elaborate a bit on your situation?
Was this all in 2014? or when did you have negative $0.5M net worth? How did you reach that level of debt? Student loans? What was your income the last 5 years? What is your occupation?
This all occurred from Jan 1 to Dec 31, 2014.
Debt occurred from student loans, negative value on mortgage that I sold at a significant loss, and automobile.
Income the last 5 years? 125, 125, 125, 125, 500.
Physician.

Never knew a thing about investing at all before last Christmas. Got a Dummies book at Barnes & Noble and was directed here. Our goal was simply to cut ties with our house, live a spartan lifestyle, pay off the student loans, and understand what we were doing with our money. We are extreme novices. We considered it a very successful year.
I applaud what you have done, and I believe you did have a successful year, but this still doesn't make mathematical sense.

If you increased net worth by $521K, you had to use $521K to do it. But you only made $500K and surely paid
much of that in taxes. Explanations might be that your spouse also made $500K, or you inherited $300K, or your
net worth was really greater than - $530K because you had $300K in house equity which you did not include in your net worth,
and you sold the house.

I'm not trying to rain on your parade, but overestimating financial accomplishments is a way to fool yourself into thing that
you are doing better than you really are, which could cause you to make bad financial decisions.
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Coiled_Snake
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Coiled_Snake »

MathWizard wrote:If you increased net worth by $521K, you had to use $521K to do it.
Surely, MathMan, you understand that I didn't have to spend $1 to earn $1. Investments did some of the lifting too. As well as free employer money.
Our family of six has lived in a 500 square foot dry cabin with total expenses of ~$500 per month. But then, we were paid more than that by the state.

My numbers are what they are.
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avenger
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by avenger »

Impressive! Congratulations! Makes my net worth increase of only $260k look like chump change!
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [VTI, VXUS, VWITX, SV fund]
inbox788
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by inbox788 »

Coiled_Snake wrote:
inbox788 wrote:can you elaborate a bit on your situation?
Was this all in 2014? or when did you have negative $0.5M net worth? How did you reach that level of debt? Student loans? What was your income the last 5 years? What is your occupation?
This all occurred from Jan 1 to Dec 31, 2014.
Debt occurred from student loans, negative value on mortgage that I sold at a significant loss, and automobile.
Income the last 5 years? 125, 125, 125, 125, 500.
Physician.

Never knew a thing about investing at all before last Christmas. Got a Dummies book at Barnes & Noble and was directed here. Our goal was simply to cut ties with our house, live a spartan lifestyle, pay off the student loans, and understand what we were doing with our money. We are extreme novices. We considered it a very successful year.
Thanks for the detail. Good going on 500k last year. Hope you're able to maintain this level of income for the next few years, and you'll be golden. Assuming you're treading water at 125k annual expenses, you may have made 375k more last year and paid 1/3 in taxes, leaving about 250k in additional net worth. Like you said, some investments helps, and the reduced interest expenses on the student loan and car note are also additive. The part about "negative value on mortgage that I sold at a significant loss" was a bit confusing. Did you get a break from the bank (i.e short sale)?

Not a lot of occupations have this big jump in income, but it gives those young physicians out there racking up half-million or more in debt some hope. Keep up the good work. Come back in 2-3 years and let us know how you're investing the $1M.
GenXer
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by GenXer »

Our family of six has lived in a 500 square foot dry cabin with total expenses of ~$500 per month. But then, we were paid more than that by the state.
This is every bit as impressive as the growth in net worth.
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Tabaxus »

GenXer wrote:
Our family of six has lived in a 500 square foot dry cabin with total expenses of ~$500 per month. But then, we were paid more than that by the state.
This is every bit as impressive as the growth in net worth.
That it is. I read the MMM blog and have determined that I'm just not cut out for it. At all. This is that on steroids.
bkh8
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by bkh8 »

Congratulations. I am in a similar situation, with finishing residency and having a big family. We have gone from -100k to +75k this last year. I remember you posting about paying down loans or investing in a taxable account, after maxing out tax advantage space. So did you decide to just pay down your low interest loans first before investing in a taxable account or did you put money in a taxable account?
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by an_asker »

Tabaxus wrote:
Our family of six has lived in a 500 square foot dry cabin with total expenses of ~$500 per month. But then, we were paid more than that by the state.
[...] I'm just not cut out for it. At all. This is that on steroids.
+1
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Coiled_Snake
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by Coiled_Snake »

bkh8 wrote: So did you decide to just pay down your low interest loans first before investing in a taxable account or did you put money in a taxable account?
Yes, I did. After maxing all the tax-advantaged I knew about, I learned about a bit more space available but finally went full-throttle on the student loans and avoided putting money in a taxable account.

Whether that was the "right" decision, I still am not sure. Seeking advice to that question was the reason I came here in the first place and also consulted with Eric Tyson (Dummies author).
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by HomerJ »

Coiled_Snake wrote:
MathWizard wrote:If you increased net worth by $521K, you had to use $521K to do it.
Surely, MathMan, you understand that I didn't have to spend $1 to earn $1. Investments did some of the lifting too. As well as free employer money.
Our family of six has lived in a 500 square foot dry cabin with total expenses of ~$500 per month. But then, we were paid more than that by the state.

My numbers are what they are.
Your numbers are what they are?

So, your family of six lived on $6,000 this year?
And you had 6 people living in a 500 square foot cabin.
And you burned off $521k in debt with a $500k salary... but you had investments... Were you $2.5 million in debt, with $2 million in investments, and that's how the numbers manage to work?

I need to see the breakdown before I believe anything in this thread... If they are true, you should write a book... MMM has made a ton of money detailing how he doesn't spend money... You'd get all kinds of free publicity with a story like "Doctor who makes $500k a year lives on $6000 in a tiny cabin as a family of six!"

Even if it's all true, it's a little overboard don't you think? I think you could have done quite well living on $30k and "only" knocking off $497k of debt instead of $521k (and your family could have been a bit more comfortable - how much time do you spend in that cabin compared to your family?)
an_asker
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by an_asker »

HomerJ wrote:
Coiled_Snake wrote:
MathWizard wrote:If you increased net worth by $521K, you had to use $521K to do it.
Surely, MathMan, you understand that I didn't have to spend $1 to earn $1. Investments did some of the lifting too. As well as free employer money.
Our family of six has lived in a 500 square foot dry cabin with total expenses of ~$500 per month. But then, we were paid more than that by the state.

My numbers are what they are.
Your numbers are what they are?

So, your family of six lived on $6,000 this year?
And you had 6 people living in a 500 square foot cabin.
And you burned off $521k in debt with a $500k salary... but you had investments... Were you $2.5 million in debt, with $2 million in investments, and that's how the numbers manage to work?

I need to see the breakdown before I believe anything in this thread... If they are true, you should write a book... MMM has made a ton of money detailing how he doesn't spend money... You'd get all kinds of free publicity with a story like "Doctor who makes $500k a year lives on $6000 in a tiny cabin as a family of six!"

Even if it's all true, it's a little overboard don't you think? I think you could have done quite well living on $30k and "only" knocking off $497k of debt instead of $521k (and your family could have been a bit more comfortable - how much time do you spend in that cabin compared to your family?)
The market went up by about 10+ percent this last year. Let's say his gains were about $25k on his $500k salary. That in itself is $525k. You assume he had $100k sitting in the market, and he used that money for the $6k and some more.

Like I said in my previous response, there is nothing in this thread for us relative spendthrifts. We can move right on ... :oops:
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HomerJ
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by HomerJ »

an_asker wrote:$500k salary.
Taxes.
DVMResident
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Re: Almost made it! From $ -530k net worth to $-9k this yr

Post by DVMResident »

I think the OP means he went from -$530k to -$9k debt, not net worth.

The mortgage was collateralized against the house. OP sold the house and paid off the mortgage.
Not really an increase in net worth, but certainly a way to pay down debt.

Congrats in any event. :beer
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