My Net Worth Dropped. My Financial Goals Were Met.

financial goals

In the preceding post, I unpacked my net worth for you to see and share my insights from that. One message was that it did not grow linearly or exponentially. In fact, in 2022 my net worth dropped. However, I am still quite happy with my financial performance. I have met my financial goals, improved my processes, and they survived 2022.

I hope that that you can apply this glimpse into my financial journey for your own financial goal setting, building wealth, and improving your investment performance. Set smart financial goals to get you there. Make them actionable, incremental, important, and aligned with a bigger plan.

I excelled at financial goals that I could control.

The “markets” dropped about 10-15% this past year, depending on the benchmark you look at. My investments dropped that much too, but my net worth dropped less. About 9%.

I cannot influence wars, inflation, monetary policy, or the various forces that move markets. However, I can control my spending, income, and saving. We radically cut our spending a few years ago and our savings rate rose from around 25% to over 50% of gross income. That was continually pumped into the market this year. That attenuated the decrease in my net worth because I added money. It also softened the psychological blow of falling values in my portfolio as I bought more at a discount.

Don’t use net worth or returns for setting financial goals.

Net worth is a gross measurement. The parts under the surface that you can control are income, spending, and investing wisely. Focus on goals that you can act on, in areas that you have influence. Not market returns. That said, one of the good uses of net worth is for motivation. It helps to see that you are making progress. So, it is ok to look in the mirror and flex now and then. Just remember how much was training and how much lucky genetics. Focus on your financial training. Start with the most important exercises.

grow net worth

I built my holistic wealth.

Another pit-fall of net worth as a measurement is that it does not account for other aspects of your holistic wealth. With working less, I spent more time with my family and friends. I have been eating better and exercising more.

Those human investments help me to maintain my human capital, as depicted on the left side of the schematic below. Net worth and financial goals only capture the right side of the wealth equation. This year, my net worth dropped by 9%. But, so did my weight and resting heart rate. I am also 99% nicer when I am not burned out.

build wealth

My money is growing on its own now, but my time is shrinking.

Sure, I could have built more “net worth” now by earning and investing even more. However, that does me little good if I have no one to enjoy the fruits of those labors with or I am unhealthy/dead. The challenge in balancing the equation illustrated in the above diagram is that we don’t truly know when our career will end. Balance is required along the way, but it shifts as you age.

Neglecting my human capital to build more net worth could ultimately mean less financial assets if my physical or mental health truncates my career. Around 20% of workers exit the workforce before planned, due to health issues. That is part of the human condition. No one is immune and the risks rise with age. However, you can lower or delay that risk by investing to preserve your human capital.

balance debt spending

My investment portfolio did not underperform.

Below I show my year-over-year portfolio growth over the past fifteen years. My investment portfolio grew due to a combination of contributions and investment performance. So, I have split them out. The change due to contributions is the green sliver. Investment returns are in gold. I am showing this because it illustrates that I did not come to the table with some kind of perfect investor strategy or behavior. It has been a journey to improve and I am still on it.

My early investing was labor intensive, volatile, and emotionally draining.

When I moved away from mutual funds, it was into stock picking. I read books about evaluating companies, analyzing financial reports, technical analysis, subscribed to some news letters, and read pay-walled analyst reports. I also hired an advisor to make recommendations and give their opinion on my proposed investments. I now realize that anything I learned from those sources was known by the collective market and priced in. Still, it was intellectually stimulating. However, emotions can easily overtake intellect. Behaviorally, I bought and sold without good discipline. That made it even more like gambling than investing. I now know many reasons why that was dumb.

Looking at the data for this post, I was surprised that I actually outperformed during my early stock-picking years. I ended that period with the feeling that I was lucky to have broken even. Failures carry much more psychological weight. The main stock that I remember trading was Blackberry. If you want to know when I bought it, look at historical chart and find the date of the peak price. What I do remember well is that it was very time consuming, distracting, and an emotional roller coaster.

wealth building goals

The more that I learn, the less I do.

That early good trading performance is actually one of the most dangerous outcomes. It can make you think that you are a genius as you start to invest larger sums. Then, you realize it was luck. Fortunately, I learned about ETFs which helped me to become more diversified before my luck ran out. You can see the volatility (spikes up and down) drop as I made that change. Even then, I still actively tried to market time by shifting my asset allocation around frequently.

Since I started my blog in 2017 and really focused on learning more, I have fiddled much less. That is what the evidence suggests is the best strategy, what I advocate for, and what I aspire to. It has been a challenge because it is so counter-intuitive to how the rest of my career has worked. Working harder, analyzing more, and being smarter were great for my medical career, but not for my investing.

So, I am pleased with my progress. I hope that sharing this with you will help you get started investing on more sound footing and not take a decade to get there, like I did. Make the development of good investing processes and habits your financial goal rather than some annual return rate.

Don’t confuse good outcomes with good actions.

It is very important to recognize that you can make bad choices and have good outcomes. And vice-versa. If you play a game of chance in a casino and win, it feels great. But, it was still a poor financial choice. Keep playing and you will eventually lose it all. I was lucky during those first few years. Now, I am glad that I progressively moved towards a more evidence-informed approach before my luck ran out. Particularly, before there was more money at stake.

You will notice that my investment performance over the last few years has basically shadowed “the market”. That should beat 90% of professionally managed funds with little fuss. It is a better long-term strategy, even though my portfolio shrank this year. I’ll take it.

Remember this point about action and outcome so that you don’t abandon a sound long-term strategy because of short-term random fluctuations.

I did not freak out or lay awake at night.

This year was a better than a risk tolerance questionnaire.

That is another reason why I was pleased this past year. It is human to get excited and invest more at tops, then sulk and sell at bottoms. Bigger price swings are more likely to trigger those bad behaviors. You choose an asset allocation to try and maximize risk/return while dampening the volatility enough that you can stick to the plan. However, you only really know that you have got it right after you experience a few good bear markets without sweating or misbehaving.

risk tolerance experience

I was invested during the 2000-2003 and 2007/8 bear markets. However, I had very little money invested both times. It was useful to experience bear markets early on, but this current one has also been a good test. A 20-25% drop is a lot more dollars when you have a large portfolio and that may grab your attention. Particularly, when it goes on for more than a few months. It also feels different when you know that you have less runway before needing the money.

Financial independence is a more important goal than net worth.

By cutting our costs and putting our money to work, we catapulted into financial independence (no matter how you slice it) in 2020/21. If I had chosen to retire early at that point, I would have been vulnerable to sequence of return risk. That is basically an increased risk of running out of money because you start taking it out during a market downturn. Having an aggressive portfolio increases that risk. Common ways to mitigate sequence risk would be to transiently de-risk my asset allocation or have variable spending. I chose a third way, adjusting my work load instead of retiring cold-turkey.

Part of why I was able to sleep through this year’s bear market was because I am still working enough to cover our costs of living without touching our portfolio. Even at the market low, we maintained our financial independence. That was comforting. Could markets go lower before rising again? Sure, but I am planning to work at least another five years. So, I am not worried. I have plenty of risk capacity to ride out typical downturns.

Focusing our financial goals on what we could control (working, spending, saving, and investment process) gave us more resilience to stick to our plan. Those are the pillars of financial independence, and that is our primary financial goal.

I lured you with flexing, but it is training that matters.

I hope that each of you got something out of my debrief. My net worth dropped, but my processes improved and withstood a “bad year in the markets”. Consider how you can improve yours.

set financial goals you can control
net worth goal

Set actionable, incremental, & important short-term financial goals.

Set goals based on how you can work towards them and not on things that you cannot control.

Take a broad view of your wealth to include what is measured by net worth, but also what is not. Building your human and social capital may be hard to measure. However, they can certainly impact your long-term success and your happiness along the way. Build towards financial independence to help you have even more control.

Focus on one or two financial goals, then move on to others. Preferably, set goals based on changes that you can make that are easy wins or with obvious major impacts. That helps to keep you motivated. Make the increments small so that you get frequent wins. Those will add up over time and give you more dopamine hits along the way.

Use a long-term view & pace to adapt your financial goals and strategies.

The changes and improvements that I have made occurred over 15 years. Also note that I did not get it perfect or have a linear journey. On this site, I advocate for what I think are good processes to use and explain why. However, there are many ways to approach finances and investing.

Much of what I have learned has been through trial and error. Hopefully, I will save you some of that. However, you must find your own path that suits your psyche, values, and circumstances. I am pleased with my long-term progress, but I still don’t have it perfect. I never will, and that is ok. There is no perfect plan, and we are all imperfect humans. Don’t beat yourself up for financial mistakes. You can’t undo them. Learn from them and try to move forward on a better path. The worst things that you can do are to ignore or perseverate on them.

investing mistakes

You will have years where your net worth drops or something else doesn’t go as planned. Remember to not confuse a good or bad outcome with a good or bad decision/process. Build better long-term processes using short-term incremental goals and habit changes. However, don’t get too distracted by short-term outcomes. Reflect and adjust course to make improvements or as your situation changes. But, don’t abandon good long-term strategies due to short-term noise.


  1. Thanks LD for another great blog post!

    Another traditionally recommended way to mitigate sequence risk is to have 5-year worth expenses in buffer cash in safe/cashable investments eg. GIC ladder or HISA. However, your approach of delaying full retirement by a few years is the best in my opinion.

    1. Thanks PD. I would consider that one of the asset allocation change approaches (increase bonds, cash, or GICs) for the high risk period around retirement. It is intuitive and reassuring for people which are valuable qualities for sure. I am fortunate to have the option of a work glideslope. The biggest benefit for me is to psychologically transition into different interests, relationships, and identity. I guess, the best approach probably depends on the person’s relationship with work and psychology. A thought-provoking comment – thanks!

      1. Yes, I moved more into bonds/cash/GIC *and* am still working some, which helps in a down market, especially if you’re the sole income earner.

        The only disadvantage I see is the “One More Year Syndrome” where you can’t cut the cord. I accept that risk. Definitely an easier transition psychologically for me, and I didn’t feel the need to travel globally with my family or anything else that required zero work.

        1. Hey Melissa,

          Great to hear from you and thanks for commenting. Nothing wrong with that approach. Honestly, having more buffer is great and it gives piece of mind. Especially with the potentially super-long timeframe of early retirement.

          The lack of need to go to zero was a factor for us. We travelled a lot in the RV when our kids were 6-12. Now, they have jobs and activities that they don’t want to miss. So, for us it is “until they finish high school syndrome” 🙂 Then, who knows. It really depends on what we want to do. Medicine really looks different to me practicing 7 days per month than it did when I was working a really heavy load. It is fun again and I feel more engaged when I am there.

  2. Some great advice in this post, I like how your net worth dropped by 9% (unfortunately) but so did resting heart rate and your weight. This may be a rather important trade off, because if everything went up 9%, you may run the risk of more dire health problems, and would you trade 9% more in wealth for the chance of potential long-term health problems? I sure wouldn’t. Great post, enjoyed reading it!

    1. Thanks Jim. Redirecting more focus to my human capital really hit home when I started seeing more people my own age getting sick. Sometimes, you don’t even get a second chance. So, investment for the future applies just like with financial investments.

      1. Amen to that! I’m dealing with a sick mother-in-law with Rheumatoid Arthritis and just had steel rods put in her back due to compression in her spine. At Thanksgiving she was using a walker, by Christmas she was in a wheelchair. Puts things in perspective!

  3. I mostly agree with everything you said. However, I do think net worth is a good tool to track your growth. No, it’s by no means perfect. It definitely hurts it’s value in assessing where you are when the market is so volatile. With the stock market down so much, I was fully expecting for my net worth to also be down. I was surprised to know that conservatively mine went up over 15% thanks to private real estate investments. And I say conservatively because I have no clue how to assess the value of some investments I have so in many cases I assessed their value at zero. For example, how do I valuate a restaurant investment that is doing well? How do I valuate an investment in a company that is expected to ipo this year? So I just don’t count them since they are risky investments. So this is a problem with using net worth.

    But here’s why I still like calculating net worth. For me, it’s motivation. If my net worth was down I know it’s likely due to the stock market being down, but now I’m super motivated to pick up the investing. If my net worth is up like it was with my best year in 2022 despite the market downturn, I’m super motivated that I’m doing something right. Another great thing about figuring out net worth, if you aren’t happy with where you’re at with respect to retirement given the downturn then you know that you aren’t ready to quit yet. If your finances can’t handle a downturn, you (not you specifically ?) aren’t financially independent. People should figure out if their investments are down 5, 10, 20 percent, then will you be okay?

    Ultimately though it’s just a tool.

    1. Hey Del,

      I agree with your take on net worth. In the preceding article to this one, I wrote about net worth as a tool. I actually think the ways to use it changes at different life points and the main pitfall is when people use it for external comparison.

      As a side note, I loved hearing about your various businesses. It is really hard to know the worth of those kinds of assets until you actually sell them net of fees, but they are definitely worth something. Maybe a lot. Personally, I would look at them for their cashflow generation and how close that gets me to financial independence if I weren’t eager to sell. Often, the value of a business for a business owner is the sense of meaning and accomplishment it gives them. Hard to put a dollar value on that too.

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