Since it’s the middle of the month, it’s time to update my net worth. I actually updated it a day or two ago on the website. Did you notice?
For the second month in a row, things moved significantly in the right direction. I was aided by a tax return of around $1,800. Yes, I shouldn’t loan the government money like that, but I can never be sure if I’m deducting the right amount.
Highlights of the month:
- I was able to pay off $2000 of my HELOC debt and it currently standing at $8,900
- I grew my Prosper account by around $450, mostly with new deposits.
- My retirement accounts were up another $2,000 – all from market gains.
- I’m putting more effort into my 401k starting this month… I’m contributing 20% of my salary
Comparison of major components of my net worth today to a year ago:
| Item | May 2006 | May 2007 |
| Home Equity | $62,694 | $38,013 |
| Retirement | $72,676 | $103,103 |
| Cash & Possessions | $29,932 | $42,277 |
To sum up the whole month, I gained 3.6% this month – a showing that I’m proud of.
Congrats on the big net worth growth this month!
FT
Yeah i know all the experts tell you not give the govt a free loan, but it’s still better to get a refund than have to pay taxes from a emotional standpoint for most people. Ideally you should be just right, but that’s always hard to get done. This is the first year I had to pay taxes, and have to pay estimated taxes on top of that – it sucks.
20% in your 401(k)! Good for you.
Did your home equity drop due to the housing market bubble? or did you pull money out of it?
Since my wife is self-employed, we do the “safe harbor strategy”: we adjust my withholding each year to hit the “safe harbor” of 100% of the prior year’s taxes. We also set aside about 30% of my wife’s self-employment income in a high-yield savings account that is used for paying the taxes due. After settling the taxes and using some of this money to fund the “employer’s share” of her self-employed 401K, the rest of the money is our “refund”. I don’t include the money in the tax account in our net worth calculation, so it doesn’t take a hit when we pay the taxes. It actually bumps up because of the SE401K and “refund” going to investments.
Congratulation for your growth! One quick question though, how come your home equity is decreasing?
looks like your home equity dropped.
did you do a cash-out refi or did the value drop?
The value dropped. I use Zillow measure the value of my place, but it’s pretty accurate because my property is in a cookie-cutter community. Soon after I moved to the west coast, I noticed that my neighbor sold an equivalent property for $40K less than I paid for mine 3 years ago.
That sucks about the equity. My house was under contract for $420k last year, this year its under contract for $385k and I’m happy about it!
I see “cash and possessions” constitute a large portion (23%) of your net worth.
Are the “possessions” in this category current? In other words, if you had to liquidate them, could you do it in a month or two for the value that you attribute to them? And do you depreciate these possessions over time, as a business would, or just check the market value for the items from time to time? Hopefully this isn’t the value you *paid* for the possessions, be it a car, jewelry, plasma TV, etc.
My theory with the possessions is to not count the liquidating price, but count the cost it typically take me to reacquire them if I didn’t have them in the first place. For instance if I had no sofa, I’d need to buy one. I haven’t really seen someone live long-term without on.
I depreciate my car (which constitutes) a good portion of this number, but everything else is a pretty steady 10K month to month. If there was a major fire and I had to replace everything, that’s what I’d estimate it would cost. I could depreciate this number as well, but it’s nit-picking. I bought a new mattress last month, but I didn’t raise that 10K number to reflect a less depreciated mattress. When I buy a new shirt, I don’t add that to the number as my wardrobe has gotten slightly better.
Remember that calculating your net worth is just a tool for yourself. If you do it in a consistent way each month, you can gather trends and adjust to them. That’s what is really important.
somehow it allows cost 3 times the price of the liquidating cost to replace something!
i don’t count furniture, cars over 6 yrs old or my expensive watch !!!
Hey big fella,
I’ve looked at Zillow and it seems all over the place. I’d go with comparables in your area and only change your home value every 6 months or so.
In regard to net worth, you are absolutely correct in that it is a tool for you and consistency is key to being able to utilize it. However, I might suggest simplifying it for yourself and get rid of the personal possessions portion, etc and just focus on the big items.
Selfishly, it also makes it easier for us to understand what’s going on…the personal possessions are the “chaff”, we just want to see the “wheat” bubba.
PFOdyssey, you are right when it comes to Zillow on a whole. However, in condo complex with 200 nearly identical units, it has enough of a sample size to do fairly well. This is the case with my unit and it definitely falls in the range of comparables. This exercise gives me a chance to review the marketplace – especially since the condo is 3000 miles away.
I disagree that personal possessions are the “chaff.” As Sheryl Crow says, “It’s not having what you want. It’s wanting what you’ve got.” Because I’ve got the possessions, I don’t have to spend down the cash buying them as someone out of college might. I feel this gives a more full picture. Plus this way if I win a Ferrari, it helps my bottom line (thought I’d probably just sell it).