Net Worth
>> Saturday, November 7, 2009
One of the things a lot of personal finance bloggers track is their net worth. Essentially all that number does is compare how much you have versus how much you owe. So, to determine your net worth, take everything you own and subtract everything you owe. Simple.
Since we started on our total money makeover, we've focused so much on individual transactions that we weren't looking at the big picture. Our approach thus far has been very narrow--- track our income and expenses monthly so we could pay down our debt. There's nothing wrong with this at all and it most certainly served a strong purpose.
Now that we're debt free and we have a working budget each month, it's time to start looking at the big picture. We've grown a lot this past year and it's time for our perspective to grow and change as well.
I have to warn you, though... it's not pretty. Our net worth is ugly but so was our debt load one year ago and we overcame that hurdle so I know we can fix this too.
Here's our net worth statement for October:
Like I said, it's not pretty.
The biggest culprit is that our home in Michigan is valued at $64,000 less than we owe on it. If this were valued at what it was when we bought it ($167K), we would actually have a positive net worth of $44K. There's no sense in crying over spilled milk...
There are some positives though and that's where I'd like to focus on:
1. Our savings will continue to grow as we build our emergency fund.
2. From what I can estimate, one year ago our net worth would have been -$80,708 because of the debt load we had. (Add $60K worth of debt yet 1 year ago, our home appraised at $110K)
3. We're trending in the right direction.
I'll be adding this chart to my blog somewhere that will track our total net worth each month. As you can see, our net worth was $5,000 worse last month which is a direct result of the money we added to our emergency fund in October.
Our current goal as you all know is to fund our Emergency Fund. Once that's complete, we'll begin saving for a 2nd car. Both of these will indirectly increase our net worth as well. Simultaneously, we're contributing 3% to my 401k (w/ a 3% match from my employer) and next year we'll start funding our retirement accounts at a full 15%.
Next year, I'd like to set a net worth goal to aim for, only I'm not sure what a good number would be quite yet. I have to crunch some numbers and see what I come up with.
What is your net worth?
Are you trying to improve this number?
Do you have a goal and a plan?
Kelsalynn
5 thought(s) from friends:
I can't say I've focused on my net worth directly. Indirectly, I've been consistently adding to my 401K and focusing on paying off debt. In this way, I've increased my net worth. Once my student loans are paid off, really the only thing I've planned on doing with my extra income will be adding to my savings. I have some purchases I may have to make over the next year, some which will add to my net worth, some which will not. I honestly need to start thinking about bulding my net worth.
I'm with you Amy - once those student loans are gone it will be lots of extra money for the savings account. ;)
Kelsalynn - least you two can afford to hold the house while it is recoverying from the economic trauma caused by this US irresponsibility in handling funds. And you've already passed a big hurdle - PIFing that debt. That is one I can't wait to reach.
Great job tracking. Now lets watch it get better. :)
Three comments! You crazy girl. In a good way. Thanks for the link. It worked. And I do like that idea. I may just use it.
I honestly though net worth was something only millionaires calculated, but I guess it does have value for the rest of us too!
Our net worth is in roughly the same negative ballpark as yours- mostly due to student loans and some credit card debt with not a lot of assets to offset the negative values yet :)
It is discouraging at times, but I realize how young we are still and realize that pretty soon things will be wehre they need to be!
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