Accumulation of Wealth 2005
About a year ago in an earlier Digressions... article I worked out my approximate net worth and expected net worth, and found I scored about 90% of my expected net worth. A year later, how am I doing?
Quite well! The stock market was OK over the past year, and despite having to pay extra during most of 2004 into my mortgage escrow account to compensate for the mortgage company's bad timing in handling the existing amount 2 years ago (actually common for new houses), careful cost management (i.e. not overspending) meant I only used emergency cash reserves and was able to leave assets alone. Indeed, I was able to increase assets through automatic monthly investment into Wasatch Ultra Growth (WAMCX) and through granted stock options in L-3 Communications (LLL). And with each mortgage payment the equity in my house grows, albeit very slowly.
As an engineer at L-3 Communications, Communications Systems East, I get a salary increase each year. Consequently my expected net worth increases each year. Still, as of today I score 100% of my expected net worth.
The financial challenge for 2005 will be to continue being careful with spending while rebuilding emergency cash reserves. I do not expect any more stock option grants in L-3 in the future, but I will finally finish my car payments in August. Car insurance premiums will continue to be higher after the ice accident I had in January 2004.
A very significant amount of my net worth, both in retirement and non-retirement assets, is in L-3 stock - 42% of non-retirement hard assets, about 23% of retirement assets. The matching funds in my L-3 401(k) plan are in L-3 stock (and I have no choice in the matter) so I can't do anything about that. The L-3 stock I have from options - I'll have to keep them through 2005 to avoid short-term capital gains taxes, but I plan to rebalance in 2006. Gives me a year to find a few good stock funds and a good bond fund or two. Also, as of today my assets in Tweedy Browne Global Value (TBGVX) make up 18% of my non-retirement hard assets; my goal is 20%. Some of the rebalancing in 2006 may go to Tweedy Browne Global Value.