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.
I’ve been tossing around the idea of writing net worth updates here and there lately. Every month I publish my online blog income reports and ask all of you if you want to see my net worth updates, and the frequency that you want to see them. I have started to get some requests for this these days as the traffic on this site has been steadily growing. I attribute the growth to my added transparency this year. People like see my online income endeavors, and I think they will appreciate the net worth updates as well. Please understand that net worth updates isn’t simply a ploy to gain blog traffic, nor is 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. You will remember that about 4 months ago my post on my net worth was last at $425,000, so please keep that in mind when you see the graphs below.
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 actually in May, and the greatest overall change in 1 single month. That happened to be a $19k increase in one month back in March to April. Consider that for a minute, in one month I was able to increase my net worth by that much money. From January to June, mid-year, I increased my net worth by $55,000. 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 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 6 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? Of course, you can see that my net worth slightly decreased in June from May, which is also a result of the stock market, but that’s ok, it happens.
My overall goals going forward are pretty simple. I am shooting for over $500,000 by the end of 2015, which I think is more than achievable actually. The market is down a bit this month due to all the economic uncertainty in China and Greece, not to mention the supposed “hacking” incident at the NYSE. People often get scared and sell off their holdings for no real legitimate reason, that’s usually the time when I invest more of my money. Why not take advantage of market lows? We all know it’s going back up at some point in time. 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 hit $450k, 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!