I figured I would follow the lead of Mr. 1500 and Net Worth Snowball and provide some regular updates on my own finances. My eventual goal is early retirement, but I have no exact date set and instead I’d like to track the numbers over time and do some calculations based on the numbers to see when I can expect to retire and how changes in my investments (rate of return), expenses and contributions will affect that.
Update: If you’re interested in how I’m doing now and what happened along the way, you can follow along on my progress reports on net worth here.
I’ll also mention here that these numbers are specific to me and aren’t meant to brag or boast. Hopefully it will be useful to see how compound interest, investing and other changes can impact your finances and you’ll get to see that because of financial choices I made long ago how the money is working for me and beginning to outshine my current contributions!
I’ll be sharing Net Worth broken down into Investments, Cash, and Liabilities.
Net Worth is defined as all of my assets minus all liabilities. This will include real estate (I own a primary home and two investment properties).
Investments will consist of 401ks, IRAs, taxable brokerage accounts, bonds, CDs, peer to peer lending, and possibly other avenues.
Cash will be any balance I happen to have in savings and checking accounts.
The Liabilities will cover any loans I have and current credit card balances. The heavy majority of this debt lies in three mortgages: my primary home and two investment properties (rentals).
I’ll be using my Mint account as the source of the numbers. A good thing to keep in mind here is that Mint uses Zillow estimates of real estate values. These can sometimes be high, and real estate is not very liquid – you’d typically end up cutting at least 6% off the value to be paid out in realtor fees alone. So this does inflate the net worth a bit. But given that a large amount of my money and cash flow are tied up in these houses it’d be worse to keep those numbers out of this picture.
There’s no history on this site to compare back to, so I’ll give some quick numbers for August as well:
As of August 31st, 2013:
|— Real Estate||$591,026.00|
|— Credit Card||$4,430.03|
As of September 30th, 2013:
|Net Worth||$537,174.52||+ 20,655.85|
|— Real Estate||$596,105.00||+ 5,079.00|
|— Investments||$300,106.14||+ 13,083.48|
|— Cash||$15,935.17||– 821.51|
|— Mortgages||$372,281.22||– 1575.42|
|— Credit Card||$2,690.57||– 1739.46|
The credit card balance at month’s end tends to fluctuate over time, but I always pay the balances in full on their due dates. As you can see, the month of September was very good to me. The heavy majority of the difference in net worth can be attributed to three things: a good month for the stock market; home appreciation (which I would discount as not being a real boost in net worth); and paying down debts.
So the reality is that while I deposited roughly $1500 into my 401k that month, the heavy gains were really from my investments that I have accrued over my working career – my money is working for me! The same can be applied to the debt paydown: some of that is coming from paying the mortgages on the two rentals where the tenants are covering that for me – so I’m paying off debts and earning equity in homes that Zillow thinks have appreciated in value. It’s a win-win, though as I caution above the Zillow values rising should really be ignored. I have no plans to sell these properties any time soon and I think Zillow doesn’t account for the transaction costs that would drop the value anyways. Additionally, I think they might be on the high end of estimated value anyhow.