December 6, 2023 4:57 am
December 6, 2023 4:57 am

Q1 ’22 Financial Report

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Partly thanks to inspiration from MeTheMillennial and partly a desire to share a bit more about myself, I’ve decided to a quarterly report on my financial journey. I think it’ll be a fun way to share a bit more about myself, reflect on what I’ve learned the last few months, and set a direction for the future.

Why the quarterly cadence? Why now?

I find a quarterly reflection to be a useful period of time. It’s long enough that I can lose track of my direction yet short enough that I can easily correct my course. Most businesses around the world also conduct performance reviews and release financial statements on a quarterly basis so it is a familiar cadence. I’m also an MBA so I’ve got to maintain the image 🙂

Now is a good time for a post because it really is the first full quarter of the calendar year after getting my website off the ground. Back in early January I had just launched the site and was in the middle of moving, I had just written a flurry of articles, and was smack dab in the middle of summer internship recruiting. My time was in high demand! January contrasts with February and March which coincided with a return to a more normal schedule. This more normal schedule gave me a chance to exhale and take a wider look at where I am.

Lessons Learned the last few months

  • A good real estate deal makes me a little skeptical – Especially in this market a listing is like an auction. In an auction you want to win, but you don’t want to pay any more than you have to. Some auctions have a feature where the winning bidder only pays the amount of the second highest bid, but that’s not typically how real estate works. Instead, a buyer pays whatever they bid, and this remains true when you bid tens of thousands more than the next highest bid. Therefore, my first thought when I see a good real estate deal is “What am I not seeing?” The problem is that the only way to “win” is to reject this feeling and come in with a competitive bid when no one else has bid yet. In both real estate purchases that my partner and I have made, I felt some uncertainty. Now I recognize that it is a natural feeling to be aware of but not feared.
  • The moves that turn out well can be lessons for what NOT to do – Just because an event turns out well, doesn’t mean that I made a good decision. At an extreme level, I could buy a lottery ticket and strike it rich. That I happened to win still wouldn’t change the fact that I made a losing bet. Similarly, I made a decision to move my family’s house proceeds into a mix of Vanguard stock based mutual funds. The allocation was too aggressive for money that I anticipated needing in two years. While I made capital gains during the three months I held the additional funds, it wasn’t a prudent move. Furthermore, the aggressive allocation could have prevented my wife and I from making a real estate move in the event a deal (like the one we found) opened up. Luckily, the market did not tank between August and October, but I would have certainly felt foolish if it did!
  • What the numbers say to do and what you should do might be two very different things – In corporate finance we spent time first looking at cash flow management for businesses then we took a look at how people’s behavior changed based on the structure of the business’s capital structure. For me, this mirrors the difference between two main camps of personal finance I find. The first view looks at the interest expense, opportunity cost, compound growth, and other numbers to determine an optimal decision. If followed to a T, then the suggestions work. However, we’re human and our behavior matters. So, in the second view, there is advice about eliminating all debt as quickly as possible or eliminating your credit usage entirely. In most cases I think people are better off starting with the behavioral rather than analytic approach.

Q1 2022 Financial Overview

Since the beginning of the year my stock based mutual funds have taken a hit, but this decrease has been more than made up for by real estate increases. I managed to get a steal of a deal on the real estate deal we closed in January and the growing price of comps in the neighborhood pushed up our equity by $200,000! I had forecast price averaging a little less than half that amount over the course of the year, so this was a major windfall on paper.

Even though our equity gain is only on paper, and we have no intention of doing yet another move any time soon, it’s still made us feel more at ease. We know that the increase in value will make our future down payment more attractive and depending on our future situation, we could even pull some equity out of our primary residence to invest in real estate crowdfunding platforms like Fundrise.

As lucky as I’ve been with my house purchase, it was still a relatively risky position to take. For example, the housing price exceeds Financial Samurai’s 30/30/3 homebuying rule because we stretched to a house 4.6x our income. Given the low rates and expensive local real estate market, it was a risk worth taking, but a risk nonetheless. While it can be tempting to ignore the risks you took when a decision ends well, it’s not realistic or useful to ignore the true risk.

Cash (Checking/Savings)$38,000
Brokerages (Taxable & Tax Advantaged)$156,000
Primary Residence$1,050,000
Other Real Estate$3,000
Mortgage$ (719,000)
Credit Cards$ (1,500)

Signing Off, Until Next Week

Between being a parent, preparing for a summer internship in corporate finance, working on a project with a large financial services company, taking finance courses in my MBA program, exploring new finance apps, and writing about finance on my blog, I’m just swimming in finance. I’m probably a bit of a finance junkie at this point, but I love it and look forward to sharing another post next week.

What interesting lessons have you learned recently? Share in the comments below

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