While 2008 was not the best year for our net worth, December, surprisingly, turned out to be the best month we have ever had. When the stock market stops working against us, we’ll be hoping to have months like this more often.

The fact that we had such a good month is particularly nice considering the extra expenses we had this month. Not only did we have the usual extra holiday expenses, but my wife managed to bang her car up. I wont embarrass her by going into details (not that she reads this), but suffice it to say we had to replace her front fender and both of her right side doors and the tie rod. She was perfectly fine, and in fact, when she called me to tell me what happened, she thought she had just knocked her side mirror off (for the 4th time).

Hope everyone enjoyed the holidays as much as we did. Stay tuned for my year end review.

Hopefully the stock sale will continue into January (I have no doubts that it will) so I can load up our 2009 Roth IRA’s at these discount prices.

Interestingly enough, it was exactly two years ago, in November of 2006, that my Roth IRA surpassed the $20,000 mark for the first time. Back then little did I imagine that I would pass the same mark again 2 years later in November of 2008, but this time heading in the wrong direction.

My net worth for the year is currently only positive by about $1500. The hopes of breaking $100,000 are obviously long gone. For now, I’m just trying to end the year at least $1 higher than I started it. On the positive side, I have increased the number of shares of stock that I own significantly, and when prices rebound, I’ll be set to reap the rewards.

An important part of determining your asset allocation is knowing your risk tolerance. Unfortunately, you never really know your risk tolerance until you start watching your money disappear. When markets are climbing, everyone thinks they have a high risk tolerance and they load up on stocks because it’s not worth getting some safety from investments like bonds which have lower returns.

If, during these rough times, you find yourself wanting to sell your stocks or move all your money to safer investments, you can be assured that your asset allocation did not match your risk tolerance level. Take the time now to be aware of it and stick to a better asset allocation, even when things get better and you’re tempted to go all the way back into volatile investments.

For us, and probably most of you, October was brutal to our net worth. We suffered a loss of nearly 10% of our net worth. But, I still feel pretty confident in our asset allocation. As I’ve stated many times before, we’ve got a long time horizon and today’s market declines will most likely have very little to do with where we end up.

Here’s a fun little chart of my Roth IRA. The yellow dots track my contributions and the blue dots track the actual value. Nasty little plunge at the end there…

Good times…

What can I say, the financial crisis is doing an efficient job of giving our investment portfolio a beat down. It is looking increasingly impossible for us to hit $100,000 by the end of the year. We’ve increased our net worth by about $14,000 so far this year, and we’re still about $14,000 away.

It’s not fun to consider things like the fact that 1 year ago my Roth IRA was worth more than it is today and I’ve investing $5,000 into it since then. So much for compounding interest. Really, it’s all part of the journey and it’s why it’s nice in the investing game to have a long time horizon.

June and July were a bit rough on our net worth, so we were glad that August turned out to be a pretty decent month for us. A $3,471.82 gain is our 3rd highest gain this year, and our 7th highest gain of all time.

I’ve accumulated a bit of money in my Emigrant Direct account which will hopefully find its way into an investment opportunity in the coming months.

We’ll need the last 4 months of the year to be similar to this one if we are going to finish the year anywhere near where we wanted to.