It was in July 2016 that I noticed a huge problem in our family investment income.
When the stock market was going up, our investments were not keeping up.
When the stock market was going down, our investments were going down as much if not more.
Yet I had carefully picked a financial advisor (I’ll call him John) who was very successful, with alot of money under management.
What happened?
Well, it turns out, we were in some annuities that were killing us with fees and poor management.
We ended up moving to another financial advisor (Wes Rowlands) who explained to me what was going on, didn’t push, and with him, despite pulling money out for my wife’s retirement in the last year and a half, we’ve had a CAGR of 10.7% since then.
Which has meant hundreds of thousands of dollars we’ve gained but could have easily lost if we hadn’t made the switch.
Given the above, what has been the key to generating a significant portfolio that allowed my wife to retire early?
Four major things:
- Tracking Data
- Regularly interpreting what it means.
- Verifying that interpretation.
- Acting on that interpretation.
The data that we’ve tracked?
It’s keeping track of our net worth with appropriate categories, on a monthly basis, since January 2010 - 15 years!
In my humble opinion, tracking your net worth is likely THE most important KPI (Key Performance Indicator) for your financial life since your spending, your investment income, your cash flow, your business income, etc. flows up into it; if there’s a problem, you can dive into it from there.
Which is what we did.
Broken down, here’s what happened
1.Tracking Data
Each month towards the end of the month, I add a new column to an excel sheet that has areas of assets and liabilities, and enter the data. Part of that are a few calculations showing how we’re doing on a month-to-month and year-over-year basis.
2.Regularly interpreting what it means
I spend a little time looking at the numbers, overall trends, the previously mentioned calculations, and plugging that into some retirement projections to ensure we’re staying on track. And explain it to my wife which helps me to gather my thoughts. This allowed me to see the aforementioned problem.
3.Verifying that interpretation
I called my financial advisor at the time, John, about the problem, he verified it, and he created a presentation that described how they were changing companies to keep this problem from happening as it wasn’t just me, but other clients of his.
4.Acting on that interpretation
I had ZERO confidence in John that this would solve the problem discovered, especially since he should have discovered the problem before me! So we moved our investment portfolio to Wes gradually. In fact, for a long time, I kept a very small portion of money with John so that I knew Wes was performing to expectations.
And I’m continuing to go through this cycle, tracking, interpreting, verifying, and acting as needed.
If you’d like to start doing what I’m doing, I’ll show you how and what to do if you’re not doing it.
While I’m not a financial advisor and have no financial degrees, I do come at this with an engineering and data driven mindset. And we do have a rock-solid financial portfolio such that we really don’t have to think much about doing a 12-day Panama Canal cruise in a year from now.
So my best advice: TRACK YOUR NET WORTH!!!
~Dave
