Wednesday, May 6, 2009

Two years of progress: How am I doing?

Although I only started the blog 23 months ago, I've been tracking my finances to the penny since April 30, 2007. That means that, as of today's recap of April 2009, I have two years of progress to report. Just as I posted charts of my various metrics when I had built up one year's history, I thought I would post a graphical review of my progress to date.

Net Worth

As before, the fluctuating curve in my Net Worth represents my actual monthly numbers, while the smooth line represents the best straight line approximation of my progress over time. As you can see, the straight line doesn't do too badly at fitting the curve; it's still a generally increasing trend, although for the first half of 2008 I appeared to be over-performing, and for the last several months I've been under-performing. This can be tied to the market performance during this period, but it's interesting that my most recent month falls right on the line.

Retirement Savings

A look at my Retirement Savings confirms that most of the "off-trend" variation in my net worth over the past year can be explained by swings in market performance. Although I've been contributing steadily to my RRSP accounts over the entire period, this chart shows just how volatile the market has been over the past twelve months. The late-2008 crash is particularly evident, as is the current rally that has been buoying my bottom line for the last two months. A straight line turns out to be a terrible approximation of my retirement savings.

Cash Savings

Cash savings fare better in adhering to a straight line, although some periodic events still throw the curve off the linear approximation. You can see the build-up in October and November, followed by an abrupt drop in December, due to that constant annual surprise, the Christmas shopping season. Although I've successfully navigated through two cash-only Christmases, the impact of the holiday season can still be seen in my cash balances. It's interesting to see how, after my Emergency Fund hit $1,000 in October 2007, my cash savings have never dropped below this value, and since I set my sights on $2,000 last year, this has become my new effective cash "floor".

Revolving Debt

In spite of (or perhaps because of) its status as my most important goal, Revolving Debt has the most boring chart of the bunch. It's almost a perfect straight line, improving by a consistent $20 or so each day over the past two years. It's thanks to this trend (and two very similar trends in my Student Loan and Mortgage repayments) that my net worth has increased so consistently despite substantial fluctuations in my retirement and cash savings. This serves as a terrific illustration of the importance of focusing on the factors you can control: if I can throw $20 a day at my debt, that will always improve my net worth, no matter what the markets are doing. It's a risk-free return on investment, and more than you'll get in any savings account or GIC.

The Last Twelve Months

Over the past year, the overall trends have been comparable to what I see in these two-year views: net worth increasing, and all debts steadily decreasing over time. However, when I look at my retirement and cash savings over the last twelve months, I see something different:

Both these charts show a negative trend over the last year, although the trend is very slight for cash savings. Now, this is not really cause for alarm, since both charts show me currently outperforming the trend, and the trend for my retirement savings is clearly driven by market performance. However, it does indicate that I should continue to keep an eye on my liquid savings. Spending too much on holiday shopping, or dipping into the Emergency Fund to cover some car repairs, could leave me in a bit of a tight spot if I'm not careful.

1 comment:

NCN said...

It looks like you are doing a WONDERFUL job! Keep it up!
Rock on,