Monday, July 2, 2012

My Quarter End: 2nd Quarter 2012

This past quarter reminded me a lot of grade school. The school bell rung for recess and the one loud kid who bragged about how great he is at dodge ball, whom built up expectations all year long about his mad skills, went into a full sprint towards the dodge ball circle and proceeded to trip and fall due to his laces being untied, resulting in a skidded knee and a bruised ego. The child, sobbing while on the ground with his boo-boo, proceeded to blame everyone else because it was everyone else’s fault that their laces were untied. That child was Facebook and the game of dodge ball was its IPO launch.

The student council elections are on the horizon and we know who the candidates are. Although a name or two has changed, it’s the still the same boring people spewing the same boring rhetoric that we’ve heard before year after year. Yes it would be great to have better food options in the cafeteria, yes you have great ideas for our school, and yes I believe that both candidates think that they can make a difference in our lives. The truth is you can’t impact whether I get A’s, how much I study or the steps I take to aspire to be what I want to be. Candidates, you are figure heads whom have no impact on my daily life or whether I prosper.

Yet through all of the chaos around us this was a phenomenal quarter in our household. My wife joined the super elite and fit debt-free club and I am so proud of her. As of today our collective net worth stands at $266,980.34 and well over 100k of that is held within cash and equities, so our net worth is now at just about a 50/50 split between debt free real estate and equities & cash.

In the market the summer sell off that has historically occurred in every market cycle..Duhn duhn duhn! Happened! So looking forward I expect a nice rise to end the year; If not in the latter part of the 3rd quarter then definitely in the 4th as we will have our Presidential election finalized, followed by black Friday and the Santa Claus rally.

A stat also came out from the Federal Reserve this quarter noting that, adjusted for inflation, the median net worth of American families fell back to around 70k, where it was in 1992. This caught my eye for a few reasons, one of which is why the study focuses on the median and not the average, but mainly that during this same period I have seen unprecedented growth in my own personal net worth. I don’t earn a six figure income nor have inherited wealth. So how did I do it?

Simple and sound personal finance practices have led me to where I am today. In our household we have a 6 month emergency fund to cover immediate disasters which also allows us to raise deductibles across our insurances and pay lower premiums. When we invest we buy and hold for at least a five year period. So though our investments dropped in 2008 and 2011, we weathered the storm and held and are continuing to see positive double digit returns on our mutual funds --  just because we didn’t panic and sell. We’ve also spent the last three and a half years getting rid of debt from our lives. As of Friday, June 29th, we are a debt free married couple! In curb stomping Sallie Mae and unDiscovering bondage, we’ve opened up our largest wealth building tool – our income.

So in the coming quarters we are going to continue dreaming, drawing up goals and going after them with the same gazelle intensity that got us here. We’ve even got a few vacations lined up in the pipeline, so be on the look out for those as the 2nd half of this year plays out. But overall I walked away from this quarter confident that simple and sound financial practices work in times of boom and bust.

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