Net Worth Monthly Percentage Change

I was recently asked by CFO Dad in a comment:

Wondering if you have ever graphed/tracked your monthly % change in assets over time. What is a “good” month? What does this average to annually, and how does this change over time? (Obviously harder to maintain a high % increase when you have a very large base). What are your thoughts on this?

Although I do track my monthly net worth change, it isn’t something I have graphed out or really analyzed. I figured it would be a fun practice, and here’s what I came up with: (click image for full size, forgive the typo)

As you would expect, as our net worth increases, the volatility of the monthly change percentage decreases. It’s an interesting view of our progress. And, it makes me feel obligated to explain the major decreases.

Apr 2005: Purchased engagement ring
Aug 2005: Got married and combined finances. The addition of the wife’s car loan did the damage.
Apr 2006: Purchased home
Feb 2007: Small dip caused by large market decline right at the end of the month.

Largest increase in a month: Nov 2005, 18.28%
Largest decrease in  a month: Aug 2005, -23.29%

In 2005, we averaged a monthly increase of 3.93% which resulted in an increase of 43.5% for the year.
In 2006, we averaged a monthly increase of 5.79% which resulted in an increase of 92.06% for the year.
In 2007, we are averaging an increase of 4.38% which, if maintained, will result in an increase of about 67% for the year.

It’s pretty amazing what small monthly increases actually mean over the year. If you can maintain a 6% increase every month, you will double your net worth every year. At 4%, you’ll increase your net worth by 60% every year. At 2% you’ll increase your net worth by 26% every year. Over time each percentage point requires more and more money, but at the same time, your earning potential should be increasing as your investments grow.

We’re obviously hoping for the maximum increase every month, but for now, I feel pretty good about anything 3% or higher.