Its again time of the month when I report net worth status for AVI family. For folks who are new to this blog, I want to quickly summarize how I report net worth and what are the key metrics that I track month-to-month.

The basic Net Worth equation is: [math] \text{Net Worth} = \text{Total Asset} – \text{Liability} [/math]

Under “Total Assets”, I include cash holdings, current value of active and passive investment portfolio, funds in HSA and all fixed assets including primary residence and vehicles. Primary residence value is reported based on the home-value on Redfin.com. Vehicles are depreciating assets and I report them at 25 % discount to KBB fair-condition private seller value.

“Total Liability” includes all the money I owe to “someone”– which includes, mortgage on primary residence and the credit-card liability.

There is a raging debate in the Personal Finance community on whether one should include home equity for primary residence in NW calculations. The debate is quite relevant, especially now, given the macro conditions surrounding home price appreciation we have seen in the past year.  A lot of home owners have seen their NW grow significantly over the past year, AVI family being no-exception. My remedy for the this dilemma, is to track yet another metric, which I called “Accessible Net Worth” (ANW), which discounts the present value of fixed assets from the Net Worth equation.  ANW can also be thought of as “liquid Net Worth”, i.e., net worth that can be converted into hard-cash on short-order.  The NW and ANW numbers are reported as fraction of AVI-family FI number.

In addition to NW, and ANW, I track two additional metrics: (a) Liquid Asset to Debt Ratio and (b) Cash to Two-Years Living Expense Ratio. The former provides me a analytical framework to determine AVI family readiness to pay of mortgage without the worry of “too-much of a house” problem.The idea being, if liquid assets are atleast twice the debt, I could pay of home-mortgage and still have sufficient liquid cash on hands to sustain present standard of living. The later ratio, if >=1,  allows me to sleep well at night!

With the preliminaries aside, now is the time to dig into the numbers for end of May 2021.

• Net Worth (as percentage of FI number): 118.4
• Accessible Net Worth (as percentage of FI number): 74.73
• Liquid Assets/ Debt Ratio: 3.896
• Cash Balance/Two Year Living Expense Ratio: 1.07

Synopsis

• The big drop in checking account cash balance was expected. Last month, I transferred funds into checking account to pay for a rather large- home renovation project. In addition, I invested some cash into Series I Saving Bond, which is at present offering a very attractive 3.54 % annualized rate-of-returns. For folks like myself, who are looking to preserve their cash and at the same time get some yield, Saving Bonds offer a very attractive proposition. The only downside being the $10,000 annual contribution limit per individual account.
• The ~9 % increasing in savings is primarily driven by the transfer of funds into the Saving Bonds.
• Markets were rather flat through the month of May, atleast for the section of the markets I am heavily invested in. A modest increase in non-retirement portfolio, primarily driven by the 4 % stock-price appreciation in FB, following the news that Government anti-trust lawsuit against FB was thrown out. The modest decline in retirement account was primarily due to the continued down-trend in gold price.
• I am continuing to aggressively pay down AVI-Family mortgage, which is again reflected in the ~5 % decline in the mortgage.
• Massive drop in credit card liabilities was again a reflection of paying off the bills on big credit charges for the upcoming family vacation travels
• Primary residence property value keeps going up, up by ~9 % for the month. Median home price in our neighborhood is now well upwards of 1 Million Dollars.
• Net worth numbers are continuing to head in the right direction. Rising home prices are certainly a contributing factor.

Its been almost 2 years since we started on our FIRE journey and I modified this blog to focus on mix of writing about Personal Finance and Investing. At the rate we are going and with the blessing of markets we should be able to claim FIRE life-style in about a year, at which point, I expect AVI family ANW >= 100 %. As soon as we reach the FIRE status, my focus will change from personal finance to personal health and I will most probably start blogging on topics related to health and fitness more so than finance and investing! For now though, the focus remains long-term wealth creation.

Video/Book/Article/Audios for this blog post

As I noted in my last blog post, I have a backlog of topics to list here. I covered a part of those in last post and will cover a few more here

• Video: Ray Dalio on whether we are in a stock market bubble!
• Interview: Don Erza on planning for life after retirement. I very much liked his concept of life’s abundance-portfolio, a topic that I will most likely dig into further in one of the upcoming blogs.
• Interview: Vikram Mansharamani, author of Boombustology speaking with Meb Faber.
• Chart: Fascinating chart on dividend-aristrocrats in 2021.