How My Net Worth Progressed To Financial Independence
What does a net worth trajectory look like over time when it “accidentally” gets to financial independence? As discussed in my journey post, I never had the goal of getting to financial independence until, well, I got there. But I saved like a champ and did all the right things, most of the time at least.
I did a post a while back about my glorious spreadsheet, with all of her simplicity and history. So for those out there who are striving for FI I thought there’d be value in pulling charts from my spreadsheet and seeing the progression of a portfolio over a 20 year period that had no deliberate goal of getting to financial independence, but did.
The period in question is from May 1997 to now, which started in the craziness of dot-com irrational exuberance, and goes to the present with a raging bull still on the loose. But in between we had the dot-com crash, the somewhat stagnant mid-2000’s, and of course the 2008-09 recession.
First I want to get this out of the way – I don’t divulge actual numbers. My reasons are pretty much the same as Tanja from Our Next Life and she did a post on that here which I fully agree with. I also respect those who do share them and don’t think it’s the wrong thing to do. It’s just not the thing for me.
LET’S GET CHARTY
So now that we’ve got that out of the way… Here’s the broad look at my net worth from May 1997 to present. Of note, this does not include the equity in my house which is a decent chunk of change.
Underwhelming huh? You’re right. My ups and downs occur at the same time as the markets ups and downs. So I took my numbers and put them on a logarithmic scale against the S&P 500. Of course I was investing more money all the time, so my net worth line naturally starts pulling away from the S&P, but I want to focus on the relative bumps in the two lines.
I definitely had a great run in 2003 – 2004 as compared to the S&P, and looking back I know much of that was a super-charged savings rate. I also earned more in those years at my second job as an adjunct instructor at a local university.
As you can see my diversification paid off in the 2008-09 recession and I didn’t take nearly as big of a hit. By then I had a substantial amount of money in the Vanguard Total Bond Index fund. I didn’t do it in preparation of a market crash as if I had some super-power knowledge, I did it to diversify more.
The last chart I’d like to show is my taxable investments versus my non-taxables.
I have a mixture of IRA’s and a TSP account (a 401k for government workers) for my non-taxables. My taxable accounts consist mostly of Vanguard Index Funds with a few other mutual funds mixed in that I’ve been looking to sell and put in Vanguard.
I was hoping the new tax bill might reduce the capitol gains tax which is why I waited, but alas it did not. I’m probably just going to bite the bullet and sell the shares in those funds gradually and pay the cap gains tax. Life could be worse.
Mainly I want those funds gone because they don’t do any better than the S&P but they have higher fees. Plus consolidation means simplification and makes life better.
On the last chart it’s clear that I’ve always had similar amounts in my taxable and tax-free accounts. This was not done deliberately per se, it just worked out that way. I always maxed out my tax free options, although I think I was a year or two late to the back-door Roth game after my salary put me out of traditional Roth eligibility.
But after maxing those out I still had money to invest since I saved at a high rate, so I was always stashing a good amount of money in my taxable accounts.
Take note of the dip I highlighted in late 2014. This put the value of my taxable assets below my tax-free assets for a while, but they recovered pretty quickly and have been pulling away again.
Stay tuned for the big reveal on what caused that dip. Trust me folks, your gonna want to read that post!
If you’re wondering about my asset allocation, it’s a 20 year span so it has varied of course. But I’ve mostly stayed between 70 – 85% stocks, and mostly between 7 – 15% bonds, with the rest being cash.
YOU BORING, LAZY SOD
If you want my investing style in a nutshell, it’s three things – boring, lazy, and kinda conservative.
Boring because I took the index fund route for the most part. I may have bought 8 or 9 individual stocks in my whole life. Some winners and some losers, but I quickly saw that it wasn’t for me and I could expend way fewer brain cells in index funds for the same or better results. Duh.
According to the White Coat Investor boring is the way to go, and he’s smart. So there.
Lazy because I spent very little time working on this stuff. I learned the basics in my 20’s, set my strategy, and rode it out. Clicking a few buttons here and there to transfer money from my checking account to Vanguard burned maybe 23.5 calories in total all those years. Lazy indeed.
And conservative because there were times in my 30’s when I drifted down to 67 – 68% stocks, with over 20% cash (ghast!). That’s mostly rooted in the fact that I have no safety net. I come from a family with no money and no real assets.
Currently, I’m at 85% stocks, 11% bonds, and 4% cash. Ironically that’s the highest I’ve ever been in stocks, at my oldest age.
Like everyone else, I can’t predict when the inevitable market correction will come, but it will come, make no mistake. The conservative side of me, which is the dominant side, thinks I should start getting that 85% down at least in the 70’s if not more, but who knows. If I had that game mastered I’d be famous.
So there you have it. How a boring, lazy, and conservative investor accidentally achieved financial independence by his mid-40’s.