Last month was quite the roller coaster ride. But maybe all this market volatility is a good thing. The rich keep getting richer because the assets they own, like stocks and real estate, continue to grow in value. But this is a worrying signal because high levels of inequality have usually lead to recessions in the past.
For someone to make a lot of money it generally requires other people to work for it. For example, the CEO of a large company can’t earn a large salary if not for the hundreds of employees working under him. 🙂 And a real estate investor can’t make a living off his rental income if his tenants decide to move out or otherwise stop paying him. So in order for the wealthy to maintain their high standards of living they have to be supported by the larger base of the lower and middle class workers. But if the poor keeps getting poorer then eventually they’ll just give up supporting the wealthy. This is already starting to happen around the world as people are dropping out of the workforce. 🙁 In the U.S. the labor participation rate is only 62.8%, the lowest since 1978. But it’s also important to remember that employment circumstances are very localized. For example the unemployment rates in Oregon and Idaho are 7.1% and 4.5% respectively, which is quite a big difference, even though the two states are right beside each other. 😉
The recession in 2008 somewhat served as an equalizer of economic status where the people who owned the most financial assets lost more than anyone else, and the world became a little more equal. But the net worth gap between the rich and the poor has been growing again since 2010. So maybe a small stock market correction every now and then like we’ve seen in October is probably more favorable than having another large recession. It’s in society’s best interest to not let wealth inequality get out of control. The rich depend on the production of the working class to thrive, so if the working class becomes less productive then eventually everyone will be in trouble. 😕
At one point in mid October my stock portfolio was down by more than 4%. Luckily however the market decided to recover most of that loss. My existing investments are still down for the month but I saved some money from my income and paid down some extra debt to make up the difference. In other words both my assets and debts were down, but my debts lost more value so I still increased my wealth overall, albeit just barely. 😀
*Side Income:
- Part-Time Work = $800
- Dividends = $500
- Eating Out = $100
- Others = $100
*Net Worth: (MoM)
- Assets: = $832,000 total (–4,000)
- Cash = $2600 (-800)
- Stocks CDN =$85,400 (-3300)
- Stocks US = $52,600 (-300)
- RRSP = $49,400 (+400)
- MICs = $15,000 (same)
- Home = $254,000 (same)
- Farms = $373,000 (same)
- Debts: = $521,500 total (-4,200)
- Mortgage = $196,300 (-600)
- Farm Loans = $204,300 (-500)
- Margin Loan CDN = $27,000 (-500)
- Margin Loan US = $23,900 (-1000)
- TD Line of Credit = $30,700 (-300)
- CIBC Line of Credit = $11,400 (-200)
- HELOC = $18,400 (-100)
- RRSP Loans = $9,500 (-1,000)
*Total Net Worth = $310,500 (+0.10%)
All numbers above are in $CDN. Conversion rate used: 1.00 USD = 1.13 CAD
Somehow I managed to come out just $200 ahead compared to the end of September, phew. October was a reminder that I am literally at the mercy of the financial markets. If global stocks fall again by over 30% like they did in 2008 then my net worth could drop by $100,000 or more in a relatively short amount of time. 😕 That’s no reason for me to get worried though. I have special friends called the Fed and the IMF who I believe will try to make sure another financial crisis doesn’t happen. 😉
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Random Useless Fact:
Thanks for sharing your most recent update with us. There’s no question that October was a crazy roller coaster ride. At least your dividend income is nice and stable. $500 for the month is a nice amount to earn on a passive basis. Look forward to your next update and random useless fact.
Thanks. Glad you like those useless facts 🙂
October was quite the ride for my Jumping Pennies. Watched it tumbling down then roaring back to all time highs! Wealth can come and go… most important is to always adapt to changes. BTW, you can feel better about yourself now… you’re beating me in net worth count!
Yeah at one point my net worth in October was down $10,000 and if that had continued it would have been the biggest net worth lost I’d ever gotten. But then the markets recovered and everything turned out okay. 🙂 November will be interesting because it’s the first month in a long time stocks are going to trade without help from the central bank.
The roller coaster ride has been… eventful! I bought some more stuff, it jumped up 6% and has now crashed down to about -6%. C’mon recovery!
You win some you lose some. I plan to buy some more stuff within the next week or so. Mining companies have been hit hard over the last year so I think there’s value there 🙂
Liquid,
I was hoping the roller coaster would stay down a bit longer, but like the last couple of years corrections continue to be short-lived. Congrats on a great looking month! Also looking at some of the employment statistics you listed reminds me how fortunate I am to live in Houston where the economy has been super strong.
MDP
Thanks man. 🙂 The great energy boom in the U.S. ever since the advent of shale oil and gas is a big reason for the robust economy around Texas right now. 2014 marks the year when the U.S. surpasses Saudi Arabia as the world’s largest oil producer. You guys are doing awesome work down there 😀
Congrats on coming out ahead, even by a really small out. You debt has decreased so that is a win right there as your net worth increases when your liability column gets smaller. The payment of debt also reduces your expenses going forward so your net cashflow increases as well.
Yup, my future cashflow situation will be much better thanks to the debt I’m paying off today when interest rates are still low 🙂 If the price of oil falls even lower I need to be prepared for the worst.
[…] checks in for the month with an update on his financials – would you believe he has over $800K in assets before the age of […]
Congrats on coming out ahead and especially for your debt payoff — a $4300 drop is nothing to sneeze at. Or maybe it is, I don’t know.
As for the point on inequality, I think that the one biggest driver on a macro level that’s making it worse is that politicians — and their well-off benefactors — have finally found a way to get people to consistently vote against their financial self-interest. For example, in a state as poor as Mississippi, it should be political suicide for the governor to opt out of an expansion of health insurance for the poor (Medicaid) and yet the opposite seems true. http://www.nytimes.com/interactive/2014/11/03/upshot/map-if-medicaid-expansion-were-not-optional.html
Thanks Mario. Sadly $4300 isn’t even 1% of my total debt balance lol. I would need like 10 years at this rate to be debt free. Politicians are the worst. Most of them only care about serving themselves at the end of the day. There are definitely some exceptions but they are rare. Thanks for the link. The maps are very telling.
I’m hoping the roller coaster ride would stay a little bit longer so I can deploy more capitals in the stock markets. Oh well I can continue to dream….
You’re making great progress. Over $300k for less than 30 year old is very impressive.
Thanks. I was actually thinking about doing a future post about how to make $300K before one turns 30 years old. 🙂
Please do!
I too am under 30 yrs old and would love to hear more about how you achieved such wild success!
Your asserts are really high and well diversified, and awesome $500 dividend income. Man you are rocking!!!
My stock portfolio didn’t escape from the October roller coaster ride – swing back and forth with more than $1000 in single day. So, I added $10 000 worth of stocks and stopped monitoring my portfolio to control my emotional decisions 😀 . Thankfully, I ended up with some gains in October.
Cheers,
I know what you mean about the swings. In one week I could be $5000 richer or poorer lol. Our fates are at the whims of the market. Good for you for buying more when stocks went on a discount 🙂
TSX taking a beating compared to the US markets. Charts are depressing and the cheap oil is so closely tied to it. Hopefully we get a big rise soon enough. At least your month wasnt in the red which all that matters.
I got really lucky as the last trading day of October we saw a slight come back which was enough to put me in the black again. You bring up a great point about one of the problems with our stock market. Energy, resources, and financials make up the bulk of the companies on the TSX. We don’t have a very diversified set of industries like the U.S. which has pharmaceuticals, technology, and other sorts of businesses making up a larger part of their index.
By the way, your swing trade stock Avigilon Corp (AVO) on fire now :D. Averaging down worked once again… Congrats!!!!
Best Regards,
Yeah, looks like I’m in the black again 🙂 It it reaches $21 I’ll probably sell and take a $500 profit. We’ll see.
You manged to come ahead on a bad month so it’s all good.
It’s alway nice to look at those dept number going down from month to month, especially when the payment comes from other people’s money 🙂
Exactly. Just use other people’s money to reduce personal debt. Once the debt is gone other people’s money will continue to come in increasing cash flow 🙂
Liquid,
What I take away from all of the above is your excellent dividend income! Over $500 in a slow month like October is incredible at your age. That’ll definitely help you get rid of those loans in the future and crank up your net worth.
Keep it up, man!
NMW
I like the tax advantage of dividend income. 🙂 It will only be a matter of time before I start making $1,000 per month from it.