I’ve never been successful at New Year’s Resolutions. Just never yet kept one. But I have a decades long record of calculating our net worth every January 1st. I get the current balance of every bank account/investment/CD/whatever – and the same for every credit card/loan/mortgage/etc. I count the cash in wallets and the ‘just in case’ hoard we keep tucked away. I get an estimate of the value of our house from my neighbor (she’s a realtor) and look the cars up. (Don’t assign any value to the furniture and clothes and such – really, unless you have antiques or something, they’re worth nothing.) Add and subtract and boil it all down to a single dollar and cents number.
The first year I did this it was very depressing.
We were not long out of college, had crappy jobs, and I had gone through a medium-level medical emergency with medical insurance barely worth the name, and had lousy financial habits when it came to spending impulsively. I didn’t like the negative number (WAY negative) I ended up with at all, but it served as a really needed wake up call.
Anyway, I’ve done that every January first ever since. Mostly we are cheered by improvements, though not always. (Damn the current market.) Man, we celebrated madly the year we first went positive!!
One thing that amuses me is how I still count and include even utterly insignificant ‘assets’ though they really don’t matter. For example, I include the value of postage stamps. No, not a collection, just the booklet or so I keep on hand. The various unspent-yet balances on gift cards. Oh, and I found a single gold coin in a huge jar of mixed change I ‘inherited’ when I cleaned out a deceased relative’s place. I added it to my list of assets in 2004…and I’ve listed it every year since.
Does anyone else do this type of annual tracking of their financial position?
Nothing annual, but I use Quicken and it keeps a running total. You can pick what you want and don’t want added into the total. I (like most people, I think) have it adding up all my checking/savings/investing etc and subtracting out anything I owe.
When I first set it up, I told it to ignore what I owe on my house since that would bring it down so far I wasn’t likely to see it in the black any time soon. Since I got Quicken to help me be able to see these numbers, right in front of me, all the time, I needed turning red into black to be attainable.
At this point, all my credit cards are paid off and my savings is built (back) up, but since I only owe about half of what my house is worth, I still leave those numbers off since it wouldn’t be realistic, to me anyway.
TL;DR Get Quicken, it keeps a continuously updated net worth for you.
When you do your net worth, you should include the value of your house, and your remaining loan amount. Since your house is worth twice your remaining loan, this should be a large positive to your net worth.
You could leave these out to find a more “liquid” net worth, but a normal net worth would include them.
However, I will admit that when the house becomes involved, it gets tricky. We spent $30K on a major interior home renovation, so on paper, our net worth took a nosedive. But is our home worth more? Probably. How much more? I don’t know, but probably not $30K more.
I think you should always bear in mind, however, that you will always need a place to live, so in a real sense you don’t care whether the property market as a whole rises or falls - even if you were to sell your house, you would need to buy another one.
Most people tend to gradually move to larger houses toward middle age, as they have kids and can afford to upgrade; then tend to downsize and/or move to cheaper areas as they move toward retirement. So, rationally, we want the property market to decline early in our lives; and rise only later in our lives at the point when the kids are moving out and the excess equity in our too-large homes represents retirement savings.
I continually track net worth, but not to the level you do. My assets are cash, stock, real estate, and cars worth over $10k. My liabilities are simply debts owned. I can do it in my head to $50k or so, which is close enough for me. (And yes, I know how that sounds, I’ve been extraordinarily fortunate)
Mine is also going down - but we paid college tuition for two kids this year - I’m expecting another four years of down before steady and up for a few, and then we retire.
Yes, that’s true, and if I was looking for a loan or sell my house or something along those lines it would be included. However, when I started with this, I had a good chunk of credit card debt and not much in checking/savings. What I needed is for that last number to go from $xxxx.xx, through zero and to $xxxx.xx. If my house loan was on there, even when I got my cards paid off, it would still be red. In fact, I’d have to redo the math by hand each month just to see where “zero” is. Of course, just seeing the credit cards work down to zero was helpful, but looking at it each week/month and thinking 'hey, I’m officially at the point where I could pay off everything (but I’d have nothing left), is a good goal to work towards and really helped reign in my spending.
Since that number doesn’t matter as much at this point, I could add it in, but again, having it be that much higher, just doesn’t feel real to me.
Having said all that, the house worth and what I owe are sitting right there, so it’s trivial to add those two numbers to my net worth in my head.
I’ve refinanced my house 3 or 4 times since I got it. Personally, I just use the number from the most recent appraisal. Sure, the one I have now is a few years out of date, but for me, it doesn’t really make a difference if it’s a few thousand over or under. It’s just a number so I have some kind of idea.
Not that it has any real bearing on the selling price of your house, but your property tax bill would give you a new value each year and if you pulled permits for the work, it should include that as well. Zillow/Zestimate can help as well.
I don’t do this at all. But we only have two major assets, home and IRA, and one major debt, mortgage. So I have a pretty good idea of where we are.
However, this thread, especially **Dangerosa’s **post, brings to mind something I am curious about - how much of this do you share with your children, if you have any? Are they aware, for example, of how their college expenses affect the family’s bottom line? Have they followed the various ups and downs caused by external things like the economy? Are they learning what they should be doing in their own lives, when they are on their own?
I ask because my parents, although they were very good in many other ways, never shared anything with us about how they managed the family money or made it grow, nor the challenges they faced. I’m wondering if that was a generational thing (they were both Depression children) or if it still goes on.
I don’t really have the discipline to do it continually. Anyway, what I wanted to know was basically if we were headed in the right direction or not, and for that the once a year number is okay.
In fact, maybe better. You aren’t as likely to be distracted by ‘normal’ rises and dips, like ‘blowing’ a ton of money on your property taxes or ‘yippee!’ the income tax refund just hit the bank.
Is that similar to Trump claiming a few hundred million as the worth of his name?
Heh. You never know, some day that $4.50 worth of stamps will MATTER. Ooooh. I think the postal rate goes up to .55 later this month. Instant rise of .45 to my net worth, hurrah!
We didn’t have children. We’ve heard various brothers and sisters and their spouses talk about the subject, and it sounds like NONE of them discuss anything like this with their kids. “Don’t want to worry them” and “None of their business” seems to variously cover their attitude.
I don’t know how to count the value of my retirement annuity. After 19 years, I have already collected 138% of its original value, so how do I value what’s left. Then there is our house. I know what the assessment is, but what is its worth. The current assessment is about 25 times what I paid 47 years ago. Other than that, I know pretty well.
I list my real property on my balance sheet. Once a year, I check for similar property sales and adjust the value, (less balance owed of course). Then that number has 5% deducted for the real estate fee I’ll have to pay upon selling. That should be a very valid number to use on your net worth calculation.
I never track net worth, it is a moving target of little use to me. Monthly credit card bills constantly vary, as does home value, 401k and checking account balance. Then there is the unknown values of possessions and Social Security.
Cash flow is much more important to me, so I keep two spreadsheets on a monthly basis.
One tracks required expenses for utilities, taxes, gas, food, insurance and monthly ‘allowance’. This lets us see increasing trends that might mean belt tightening for our allowances.
We’ve done the annual net worth thing for the last several years. Just the accounts and investments. No house, cars, etc.
I’ve got a table with a column for each year. But that’s not workable anymore. Too many years. Some accounts were closed and consolidated with others, etc. It is becoming a mess.
But in any case last year was the first year Mrs. FtG finally let her breath out. No big change in finances. Which is sort of the point. She realized that things were clearly going okay in the long term.
We do it monthly when we get the statement from our financial planner, but not down to the penny. We can check what our house is worth on Zillow, don’t count cars, and don’t pay too much attention to the checking account. Since I’m retired the only thing that matters is that we have enough.
I know you realize that you have to shift Years to rows instead of columns but I found an reasonable way to deal with old accounts.
I created 3 summary investment columns - Taxable, Pre-Tax and Roth. Other columns were for IRA, 401k etc. As I added, merged or split accounts, I added additional header rows. I now have what looks like 3 stacked sheets but the summary columns extend down in through 3.
I use mint.com, which gives me an estimate of my net worth whenever I want to check. I don’t have any sort of a regular schedule for that like Jan 1 of every year, and I’m not as detailed about it as you are.
I have a very simple spreadsheet which I use for budgeting and tracking cash flow. I have monthly budgeted and actual figures for my savings account, our credit card, our savings accounts, our mortgage and my retirement fund. Summing these up gives me a rough net worth figure. I just use the tax assessed value for the house.
For the first few years I just blanked the lower rows and started over each year on the same sheet. A couple of years ago I started using a new sheet each year. It’s quite nice to see how much the totals have increased over time.
