So, I was asked how it is that I measure how my Investments are doing. So, I thought that I would let you know how I do it today. (As well as remember to blog on a Friday, my day off.)
So, my Payday Budgetary Cycles run from the morning of Payday to the morning of the next payday. (Once again, I am not a financial planner nor a financial expert, just an average guy.)
This dates back to when I had regular payments coming out of my bank account and I had to ensure there was cash in the bank to cover them even if they came out the night before payday.
Well, I have fought to get debt free and further to reduce monthly bills. I am now to the point where my cell phone bill is the only monthly bill I have, that one I manually pay.
So, what does this all mean? Well, at the closing of each Payday Budgetary Cycle I make sure that the Closing Balance of each of my Bank Accounts on my Budget Spreadsheet match exactly the Current Balance of each Bank Account (in real life).
So, the closing of each Payday Budgetary Cycle is a snapshot, an image in time. This is how I make sure that my budgets are accurate. Accuracy is important and sticking to a budget is vital if you want to do any long-term financial planning.
With my actual bank accounts, as in my Main Account and Mid-Term Account, that is easy as there is just money in there, so whatever the balance is that is what it is.
With my Long-Term Account, that is a little harder to calculate. This is because the term Long-Term Account is a catch all for the collection of various Long-Term Investments that I have.
So, since some of them are stocks and others are other types of investments, all of which are traded on a stock market of some sort, their value will vary greatly.
So, what I do is I just look at the closing balance on the business day right before my payday.
Whatever the value of my investments were worth at that point in time, that is the closing balance of my “Long-Term Account.”
Yet, since my investments are stocks and other investments, there are volatile by their very nature.
That is why sometimes I see the balance of my “Long-Term Account shoot up yet other times it will deflate and be worth less than the previous payday.
That is because that is the very nature of Stocks and Investments, but it is okay. Like your house (if you own one) at various times your house will be worth more or less.
If you don’t sell your house, however, that gain or loss is not real, it is not a “Realized Gain” or a “Realized Loss.”
You still have the asset (your house) and you don’t get extra cash simply because its value goes up. Nor do you have to pay anyone simply because the value of your house goes down.
Since I am planning on buying stocks and other investments and holding onto them until I plan to start my Homesteading Process (4 or 5 years from now) I am not all that worried with the fluctuations in the markets now.
The only time you lose money (actual money) in the markets is if you are buying and selling on a regular basis, and make those gains and losses Realized Gains or Losses. (Like a “Day Trader.”)
So, the value of my Savings (Mid-Term and Long-Term) will vary greatly but that is life and what happens when some of your savings are stocks and other assets that vary in value.
We shall see if my plan is one that will work, but as long as I can, I do plan on continuing to make my investments in the markets and other investment vehicles.
While they are worth less, hoping that over time their value will increase considerably.
As always: Keep your head up, your attitude positive, and keep moving forward!
