I’ve been touting the importance of tracking your net worth for quite some time now. I often hear people talk about how much money they make a year as if it is some safety net from debt and poverty. The truth is, it doesn’t matter if you make $10,000,000 a year if you spend every dime of it. I’ve talked about my climb from a negative net worth to a very positive one over a 4 year period. At the time I had a negative net worth, meaning I owed more debt than I had in assets, I was making $90,000 a year. Sure, there are a lot of people that make more money than that, but that is certainly enough to support a single man with little to no “needed” expenses. Everything I bought was out of a want, not a need.
Last month I publish my first net worth update, and have had a lot of feedback since. Traffic on my site has been growing steadily this year, and I attribute the growth to my added transparency when it comes to online income and overall net worth. People like to see my online income endeavors, and I think they will appreciate the net worth updates as well. Please understand that net worth updates aren’t t simply a ploy to gain blog traffic, nor is it to brag about anything!! There are plenty of people who are better off, and worse off, than myself. My goal is to help those of you who are worse off so that you can take the steps necessary like I did. I was able to turn around my finances in a relatively short period of time. Here’s a funny fact, Facebook offers a social booster tool if you want to blast a blog post over a large demographic of people. When I tried to promote my TRUE STORY of how I increased my net worth by $400,000 in just a 4 year period they actually declined to promote it due to a violation of their guidelines. The violation was that they believed the story to be false and unreasonable. Normally that would have pissed me off, but I actually took it as a huge compliment. I did something that they thought was impossible.
Your net worth is the most important financial number for you to understand. It’s really the only financial metric worth tracking and paying attention too. Yet, it’s funny how few people can truly define what it is. In reality it is very simple. How much do you own, and how much do you owe! In my situation (and my wife’s of course) we have a house, a boat, several retirement accounts that include multiple 401k’s and IRA’s, a brokerage account, a couple bank accounts, and a small pension fund. Our debts are pretty simple, we owe on our mortgage and a just a little bit left on our boat. Our interest rates on both are somewhere in the 3%’s, and when rates are that low I don’t mind carrying some debt as much. I don’t advocate you carrying large amounts of debt, regardless of how low the interest rates are, but sometimes it makes sense.
I use the Mint app to track my rolling net worth, along with my credit card charges etc. It’s actually a very good app for simple tracking. Personal Capital has a good app as well, but I don’t find it as simplistic as Mint and it doesn’t offer the credit card detail that I like to have. It helps me prevent any fraudulent or incorrect charges on my cards. Anyways, the Mint app tracks your net worth by year, month, and even day if desired. I have included some snapshots of my net worth over the several months this year.
This first graph is a very simple view of my assets, debts, and overall net worth. The green bars are the assets we own, and the red bars represent our debt. Each set of bars is a month this year. Ideally, we want to see the green bars continue to rise and the red bars continue to get smaller and decline.
This next chart is actually the one I find most helpful. It shows my assets and debts by month, and then my overall net worth as well. On the far right you can see my peak net worth this year, which was the most current month so that is always a good thing! From January to July I have managed to increase my net worth by $65,000. That isn’t because I had some ample amount of money coming in, rather it is the result of heavily investing in healthy stocks and dividend paying stocks. Also, taking full advantage of maxing out every retirement vehicle I have available. My wife and I max out our two 401k’s, an SEP IRA, and a small pension fund each and every year. In doing so we are taking advantage of compound interest. Most of the net worth increase was simply dividends and stock appreciation over the past several months. Most people can’t earn an extra $50k to sock away in savings, which is why it’s SO important to slowly build up your investments over the years so that they get large enough to start earning you a lot of extra money all on their own. Can you understand why it’s so important to put money into the stock market instead of a plain ole’ bank account?
My overall goals going forward are pretty simple. I am shooting for over $500,000 by the end of 2015, which is starting to look more and more realistic this year. Not only is that a huge milestone, it’s also a $100k increase in 1 year… which is just the beginning of what I need to achieve going forward to hit my next goal! My next major goal I am going to track is hitting the $1,000,000 mark. I am shooting for the end of 2017, which would be exactly 2.5 years from now. That might seem aggressive based on the amount of time it took to get where I am now, but remember, the larger your investment base gets it begins to take on a life of its own.
Stay tuned for further updates! I’m not sure if I’m going to do these monthly, quarterly, or just sporadically as I feel the need. Again, leave a comment or shoot me an email if you have thoughts, opinions, or suggestions of what you want to see!