With all the negative news out there about the economy - which you know has fully filtered its way through society when there are regular popular talks about it given by academics at universities - it seems to be a good time to concentrate on what’s been working for me in my portfolio.
I finished up my year-end portfolio and balance sheets the other day to learn that I increased my networth last year, but because of the huge equity meltdown, it amounted only to an increase by $3,000! Still, that’s better than nothing. But more importantly almost for me is that I increased my yearly passive cashflow by about 300%. Now that’s something I can look forward to this year. I hope to increase it by another 200%.
My portfolio record-keeping is thus pretty simple. I really just add up assets and liabilities to determine networth, and then I look at the passive dividend and interest income on all my investments to get cashflow. Technically, I should also be measuring expenses in order to get a real sense of actual cashflow (income). I might graduate into this in the future. I haven’t yet got the hang of expenses-record-keeping with my hectic student schedule.
That’s the good news. The bad news is that I’m currently cash-poor because I reinvest 100% of this cashflow and am aggressively buying new positions when I get the chance. The way I see it, I don’t have much of a choice. It’s the only way I can help myself get a head start. After all, I’m not doing an MBA and I don’t have a 100K salary waiting for me on the other end of the line.
So what does your porfolio and balance sheet look like for 2008? If I were you I would at least keep track of these two main numbers: networth and cashflow. Keep increasing both each year. I’ve said it before and I’ll say it again: savings can boost your networth, which is good, but most important is increasing your cashflow (first) and using your cashflow to build savings.
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