Lazy Man and Money

Calculating Kids In Your Net Worth

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If you’ve gotten this far in the article, you’ve probably guessed that it was an April Fools’ joke. In fact, the first letter of each paragraph spells out “April Fools Day Joke.” However, the story about the doctor presenting the black market offer is 100% true. To this day, we don’t know if it was his (bad) joke, a test, or something else. Also, the part about spending $250,000 on tuition for two kids through the 8th grade is also true.

A lot of personal finance “gurus” talk about whether kids are expensive. Almost anyway you slice it up, they are. The rare cases I’ve seen when they aren’t expensive is when a family is already financially independent, so a member isn’t working anyway.

Calculating Kids Net Worth
This caricature of my kids probably doesn’t increase their value.

Personal experts agree that for almost everyone, if there isn’t a large direct cost, there’s a large indirect cost. For example, adults have to make sacrifices at work to be there when kids need care. Those sacrifices often come due during performance interviews that determine promotions and/or raises.

Relating it our own experience, kids are expensive. The oldest only eats “prime rib” (his name for any premium steak). I’m to blame for some of the expense because I have a not-so-modest STEM toy addiction. Our biggest expense though is the $250,000 that it will cost to get the two kids through 8th at their private school – and that represents a 50% discount.

If we’re spending all this money, we’re going to have to figure out a way to quantify this investment in our month net worth statements.

Luckily, I have an idea.

Calculating the Value of Your Kids

First, we clearly made a pair of terrible decisions. How can we turn this around? How do we get a return on this investment?

One of the most obvious ways to calculate the value of your kids is to use their value on the black market.

Of course, this wasn’t my idea. It was actually our doctor’s idea. I don’t know if he jokes with everyone this way, but when our first was born, he said that we can get $250,000 on the black market.

Like it or not, I’m going to take his word because I don’t want my Google searches to put me on some kind of list.

Does that mean we can get $250,000 for each of our kids today. No, we’re going to make some adjustments to that.

Almost all buyers are going to want babies more, that’s more time to bond and mold them. Our 6 and 7 year olds may be too attached to us now. They probably wouldn’t latch on to the new family too easily. (Note the use of “probably” – there’s some room for doubt.) However, at 6 and 7 they are potty trained and can get dressed and make their own breakfast. That should count for a lot.

You could also guess that, having invested in their education thus far, they may be able to command some kind of premium on the market. To maximize their value, we’d probably have to get some IQ and neuropsychological testing done. I’m comfortable that would boost their value. We can do some physical testing as well, but neither father nor their mother are considered athletes. I feel like these kinds of tests are either all good (Olympic Athlete), all bad (serious medical condition), or a non-factor (the vast majority).

Just trying balance the two factors is difficult. I think the value of having a fresh baby may be worth more. I have nothing concrete to base this off of. Maybe because puppies are at a premium and older dogs are less likely to get adopted.

One way of balancing those two factors is to split it in the middle – the value, not the kids. (This isn’t a King Solomon story.) If our doctor’s appraisal was on the level, I would guess we could probably still get $200,000 for each child.

Kids aren’t typically viewed as an asset. As my old physics teacher might say, have much more potential earnings than kinetic earnings. Hmmm, maybe he used a different “E” word there.

“E”-words aside, I’m going to have to go with the personal finance experts on this one. It pains me to have to agree with them, but it doesn’t make much sense to include some theoretical (and illegal) value of your kids in your net worth.

Important Disclosure

There are a lot of articles asking brands not to do April Fools this year due to COVID-19. First, I’ve never considered this blog much of a brand. It’s just one guy typing. I don’t sell a product. I don’t do anything that any traditional business would consider marketing.

Beyond that though, I feel that we need humor more than ever. Obviously COVID-19 is terrible and should be taken seriously. Social distancing is difficult – humor can make it easier. Let’s not COVID-19 ruin all the fun in the world.

Also, I had drafted this idea in late 2019. It was literally the only article I had planned for 2020. It wasn’t created in the time of the COVID-19 being what it is today… and it certainly isn’t related to COVID-19 in any way.

My 2015 Finances Reviewed: Net Worth (and Everything Else)

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[This is the fourth and final part of My 2015 Financial Year in Review. (Yes, it feels like it might have stretched into 2017.) You can read the previous versions there (or just go to , , and .]

At this point, you should have a good view into my financial year. I’ve given details about my stock investments, my real estate “empire”, and my blogging/income. One pattern emerged as I was writing the articles… each area was greatly challenged in 2015. Fortunately, there were some good things that happened at the end that made it a positive year.

I wanted to start with our net worth. Some bloggers give out their net worth and blog anonymously so it doesn’t really matter to them. Since some scummy people created hate sites about me because I expose their pyramid scheme fraud, I’ve decided it really isn’t too important to give exact net worth numbers.

I do track our net worth fairly regularly (and it’s very easy thanks to Personal Capital). Here’s how it has grown the last few years:

  • In 2013, it grew 21.8%
  • In 2014, it grew 14.6%
  • In 2015, it grew 10.6%

The problem with reporting percentages is that growth of 10% means a lot more if you have a million dollar net worth than it does if you have a $10,000 net worth. We’re a lot closer to the former than the later.

If you read those previous reports you know about my terrible stock picking (Twitter and oil, you two seriously suck). You also know that my asset allocation which is heavy foreign stocks didn’t help. You know how real estate didn’t appreciate and instead cost us a good deal of cash in repairs.

I was shocked to read that we grew our net worth by 10.6%. It just didn’t seem possible. I double and triple checked for errors.

There were two main reasons for why it happened:

1. We paid down a lot of debt. By having our real estate in 15-year mortgages we (with the help of our tenants) are paying off a lot of principle. It wasn’t just real estate, but we paid off a lot of our cars that are on 1% interest rates over 5 years.

2. The purchase of our solar panels helped a little.

That second one requires a bit of a longer explanation. We got a $23,000 HELOC to finance them (we’ll get a $7000 tax credit this year). It didn’t seem right to add this to our debt, when we really purchased an asset of considerable value – estimated to be decades of free electricity. So for accounting purposes, I included the full price of the solar panels ($33,000 before state grants) and I will deprecate their value each month.

It was a financial decision more than typical home improvement, so I wanted to treat it as such.

Is that fair, readers? You tell me.

The other thing about our net worth is that it isn’t very accessible. I already mentioned the real estate and if you read my last annual retirement income outlook you’ll know that a vast portion of that net worth is in retirement accounts. I haven’t done the calculation in awhile, but it’s really hard to touch around 90% of our net worth. Some might want to be more liquid, but I think this prevents a lot of lifestyle inflation.

The biggest lesson I learned this year and the takeaway I want you to have is how powerful slow-and-steady real estate investing can be. It is a pain in the neck from time to time, but between the properties, it can be $40,000 in net worth each year by simply chugging along. It’s great to have assets that aren’t tied to the stock market and this past year was a great example of that.

Calculating Net Worth: Personal Capital vs. a Spreadsheet

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A couple of months ago, I joined Personal Capital and started tracking my net worth there. In the past, I had a Mint account, but I always got tied up in categorizing payments to make the budgeting look right. That was a lot of time spent and I’ve found that I’m better off just being generally frugal with a few splurges here and there.

Where Mint struck me as a budgeting tool first and an investment tracker second, Personal Capital is the other way around. It seems to be 90% investment and net worth focused with only a small budgeting component.

Before I get too far into Personal Capital, I need to take a step back. Since I started this blog in 2006, I’ve been tracking my net worth with a spreadsheet. That means I can go back to watch 30% of my net worth disappear in the housing crash in 2007. My net worth was very small back then and it was paper money. And sadly, the price of my condo hasn’t caught up to what it was before the crash.

It’s geeky fun to stroll down financial memory lane.

I still update my net worth with a spreadsheet today. I used to do it on a monthly basis, but now it is typically quarterly. That’s simply a factor of not wanting to bug the wife to get her password for her Thrift Savings Plan, which seems to be quite the chore. (Don’t tell anyone, but sometimes I cheat and do a net worth update and just assume the value of her investments went up or down similarly with mine. I mark these as “estimated net worths.”)

What I like about spreadsheet is that I fill it in quickly. It probably takes me a half hour. I do this by bookmarking the 20+ websites where I have money and using LastPass to login quickly to pull the numbers. I even have links to Edmunds to estimate our car’s value.

The spreadsheet is also particularly good at combining my money with my wife’s money. It simply has infinite flexibility. I can create new categories such as the kid’s money, our liquid cash, our retirement account totals, and our real estate holdings.

So why would I join Personal Capital when I already have a working system? Personal Capital updates my net worth in real time. If my Google, err… Alphabet, stock goes up, it’s reflected immediately. I don’t need to log into 20+ websites and transfer numbers. It’s the ultimate “Lazy Man” tool.

Personal Capital also gives me different information. I have four retirement accounts with different holdings in each. Personal Capital can look at all them and show me how much of my money is invested in emerging markets. This view into my asset allocation is not something I can easily track with my net worth spreadsheet.

Sometimes, I think I’m crazy to use two net worth tools. I wonder if 90% of people even use a single tool or ever do a net worth calculation. However, I think they both have their benefits and I’ll take a bit of each.

Other than starting this personal finance blog, tracking my net worth has probably been the biggest reason for our financial success. I wish I could convince more people to do both.

Net Worth and College Savings

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A couple of weeks ago, I put out an article explaining that our family was approaching a net worth milestone. My key takeaway, was that it was just a number, like any other number. One commenter mentioned how he had a similar situation, but most of his money was in the form of real estate equity and other investments that aren’t easily liquified.

Questions like these are quite common when someone does a net worth calculation. I don’t think there’s a standardization body declaring exact what counts in net worth. My advice is just be consistent with what you count month-to-month and take note of the relative changes. It’s almost as if you have a bathroom scale that you know is not 100% accurate. You know it is very close, and it is going to be consistently inaccurate, by 1-3 pounds low or high. You can still use it to measure your progress, because losing 20 pounds on that scale is the same as losing 20 pounds on any other scale.

However Steve had an interesting question, which was (paraphrased), “Does our daughter’s 529 plan count in our net worth?”

Mind blown!

I usually have an immediate instinct about what the right answer is and this time I did not.

The Case for Excluding College Savings (529 Plans) in Net Worth

I’m going to go with the obvious here. The money is not intended to be used by me… I’ve already made a commitment to give it away. It seems fair to consider that money already given away.

The Case for Counting a 529 Plan in Net Worth

You are reducing your own net worth when you deposit money in a 529 plan. If you don’t account for it in some way, the lower net worth may cause you to think twice about contributing this money, even if it can be a financially sound move.

If you’ve made a commitment to pay your children’s tuition, then meeting this obligation is obviously of financial value. If you suddenly came into a large sum of $50,000 and used the money to fulfill that commitment, it has value in helping you better your financial situation in other ways. It’s a little like putting money in a mortgage, but not counting the equity. If reaching the goal frees you up from making mortgage payments, that’s typically a very big deal.

My Thoughts on Net Worth and College Savings

I don’t count 529 plans. I consider it money that I’ve given to my children. They can count it in their net worth, but at 23 and 8 months, they’d rather watch Baby Einstein.

We make decisions everyday that might not lead to best net worth, but benefit us in other ways.

For example, if you were to look at the recent comments in the right column on any given day, you’d probably see giving a lengthy response to someone leaving a comment on one of my MLM articles. Spending my time on a response is not the best move I can make to grow my net worth… in fact is often a complete waste of time. I’d be better served going forward with one of my many projects that I have lined up. Yet, I love to help people and respond to try to help them. In a sense I’m trading “net worth capital” for “spiritual capital” and I’m okay with that. I like to think that this goodwill/karma comes back to me and so far I feel like it has.

Approaching a Net Worth Milestone

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It’s been a number of years since I revealed my net worth. I’ve still been tracking it, but instead of doing it once a month, it is more or less once a quarter. One could argue that I should get in the habit of doing it on a specific date. That would allow me to compare year-over-year to gauge growth and come up with some pretty charts.

Alas, I haven’t done that for two reasons:

  1. I’m kind of Lazy. With two kids and a dog, it isn’t my highest priority to have it scheduled. Why? Well for the other reason:
  2. Much of the information is nebulous at best.

I want to expand on that later point. Being in my late 38s, a large percentage of my net worth is in real estate and the stock market. Either one, or both, can change drastically at any given time. I’ve seen each them do it several times in my lifetime and if I live out my life-expectancy will see them change drastically several more times.

I can take some action, such as diversifying my holdings, but I have no control over either the stock or real estate markets. I suspect most everyone reading this is in the same boat.

It simply doesn’t matter if I measure my net worth at specific times because I know that at any given point it can be plus or minus 10% what it is right now.

That said, it is still important to look at your net worth. It gives me a gauge of where things are going over time. If it isn’t going up, there’s a problem. If it’s going down, there’s a problem. If I were to take a three-year view of a time of good market growth and saw it stand still, there would be a problem.

I was fortunate enough to look at it last week, which happened to match-up with a time last year. In that time, our net worth is up 18.6%. As expected, a lot of the growth is from real estate appreciation and the booming stock market.

Perhaps more importantly, I can see a net worth milestone in the distance. Until I did this last calculation, my binoculars simply weren’t powerful enough. It’s extremely unlikely that such growth would continue for another 12-16 months, but if it did, we’d probably reach that milestone.

It would be a stretch, as growing kids will certainly bring down our savings a bit (but they are so worth it!). In addition, we’d have to have almost everything fall our way. It’s happened before, but it isn’t the kind of thing we’d want to count on.

Seeing this milestone in the distance gives us a target, something to try to work for. That’s powerful motivation. If we work hard and don’t make it, we won’t be demoralized as we knew that good portion of it was out of our control anyway. It’s a psychological win-win.