November 2016 – Net Worth Update
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We have been tracking our net worth for almost 2 years now (19 months to be exact).
In that time, we have seen several of our asset classes grow, while our liabilities have dropped.
When you are building wealth and growing your net worth … that is exactly what you want to see. Grow your investments (i.e. assets) while lowering your expenses (i.e. liabilities).
That is what we have been doing since first reporting our net worth numbers back in March 2015. In that time, we have seen our net worth grow by almost $84,000!
Who knows, by the time this March rolls around … maybe we will be up $100K!
Before we move on to reviewing our latest net worth numbers, I wanted to point out that we are using our Personal Capital account to do most of the work. We are tracking our net worth through this free account. This tool has made it possible for us to easily track our net worth at a moments notice.
Now on to our latest net worth update –
November 23, 2016 Net Worth
As of November 23rd, 2016 – our net worth is $518,944.32!
We don’t like to post these net worth updates every month, since there is little value in frequent updates. There are a lot of moving parts to calculating ones net worth, which is why monthly updates seem to be pointless.
However, I do feel it is important to share our net worth progress 4 to 6 times per year. Doing so offers insight into several of our asset classes like investments. I like to see how our investments are growing – both by new money invested as well as capital gains. This also means that our net worth could decrease between updates.
We seem to have found a good rhythm of posting net worth updates every 2 months.
So here is our most recent update, compared to our last net worth post back in September.
Our net worth in November 2016 rose by 1.2% compared to September (2016). That is an increase of ~$6,300 over the past 2 months.
September 2016 Net Worth = $512,628.79
November 2016 Net Worth = $518,944.32
Net Worth Change = + $6,315.53
A high level breakdown of our assets and liabilities are detailed below.
We currently have 3 main asset categories that we are reporting on – investments, cash, and home value. We don’t like to report our automobiles as an asset, so those are only included as liabilities (for our minivan).
This category includes our dividend income portfolio, 529 plans for the kids, emergency fund accounts, retirement accounts, etc. It is currently our highest valued asset and we are constantly working every single day to make it grow.
From September to November – we have been trying to invest more money into the market. Unfortunately we hit a lull back in the summer with new investments. That has hurt our net worth growth, so we are really trying to pick up the slack.
September 2016 Investments = $381,173.13
November 2016 Investments = $383,284.18
Investment Change = + $2,111.05
These gains in our investments are from a combination of new money going into the market, along with capital gain increases. The value of our investments rose by .6%.
Overall, the health of our portfolio looks strong as we have built a solid cash flow machine.
Our current cash includes all of our checking and savings accounts. We don’t usually carry a high cash balance and like to move it into the stock market to purchase income producing assets. However, it is also important to have some cash on hand in order to cover unexpected expenses.
September 2016 – Cash = $7,539.60
November 2016 – Cash = $7,150.99
Cash Change = ($388.61)
We saw a slight decline (-5%) in our cash since last reporting. This is really nothing more than the timing of when these net worth reports are posted.
Overall, we want our money to be put to work earning more income for us. So we are never going to grow our cash balance much higher than where it is now.
I have never been a big fan of reporting on our home value in our net worth. However, it is one of our largest assets so we need to include it.
We are currently using the Zillow estimate on our home, which is calculated directly through Personal Capital. This asset will likely see a bunch of ups and downs each time I report our net worth.
September 2016 – Home Value (est) = $327,054.00
November 2016 – Home Value (est) = $328,141.00
Home Value Change = + $1,087.00
It is hard to put much confidence in these housing value numbers. The estimates shown above are based on similar homes that have recently sold in our area.
Despite the limitations of reporting our home value, it is neat to compare our home value estimate against our outstanding mortgage balance (approx. $184,000).
Overall, all three of our assets we report on (home, investments, and cash) saw modest increases. That is always a good sign that we are slowly building our net worth.
Total assets rose by almost .4% since last reporting.
September 2016 – Total Assets – $715,766.73
November 2016 – Total Assets – $718,576.17
Total Asset Change = + $2,809.44
There are 3 main liability categories that we will report on. The first and largest is our mortgage balance. Then we have a car loan for our family vehicle. Last, we charge almost all of our expenses through 2 credit cards.
My wife and I have had a debate for some time. Rent or own a home?
For our family, it just makes more sense to own and have a mortgage. Once our kids have grown and move out, then I would prefer to rent. But for now, we own a home and are paying a mortgage on it.
Our 30 year mortgage rate is 4.375%, which isn’t too bad. We have considered refinancing, but at this point the numbers don’t say it is worthwhile. So we continue to pay our mortgage every month.
September 2016 – Mortgage Balance – ($185,199.82)
November 2016 – Mortgage Balance – ($184,392.35)
Mortgage Balance Change = + $807.47
In the past, we had paid extra on our mortgage each month to try and knock years (and interest) off the loan. Based on our low interest rate, we now opt to put this money to work for us in the stock market. I like to think we can earn a dividend yield higher than our mortgage rate (4.375%).
We have an incredibly low rate on our auto loan (1.56%), so it doesn’t bother me that much to make these payments. Just like our mortgage, every month we see our principal decreasing and our net worth increasing as a result.
September 2016 – Car Loan – ($11,198.23)
November 2016 – Car Loan – ($10,881.60)
Car Loan Change = + $316.63
Every month we continue to pay down the balance on our auto loan. Based on when I last reported, we have only made one car payment. Otherwise, our loan would have dropped another $300+.
Credit Card Balance
Since we are not paying any extra money on our mortgage and our car loan has such a low rate, our credit card spending is the biggest area for improvement.
Note – We have always paid our balance off every month on our credit cards.
September 2016 – Credit Card Balance(s) = ($6,739.89)
November 2016 – Credit Card Balance(s) = ($4,357.90)
Credit Card Balance Change = + $2,381.99
Our credit card balances fluctuate a lot month to month. One of our goals since we last reported net worth was to work on lowering our credit card balance.
Since we pay off the balance on our cards every month, lowering the balances doesn’t save us any interest, etc. It is just a reflection that we are spending less … which is what we want to see.
Note – The balances shown above are at a point in time and don’t reflect the amount we spend in a month.
Since last reporting, both our mortgage and car loan balances dropped – as expected … along with our credit card balances.
Growing your net worth is not just about increasing your assets. It is just as important to lower your liabilities at the same time. The larger the gap is between your total assets and total liabilities is the key to financial independence and something my family is working towards.
September 2016 – Total Liabilities – ($203,137.94)
November 2016 – Total Liabilities – ($199,631.85)
Total Liabilities Change = $3,506.09
I never like to see our liabilities increase. An increase in over $3,500+ is what I like to see!
Remember that there are 2 sides to the net worth equation. Increasing your assets while lowering your liabilities. Eliminating debt is just as important as building your assets when it comes to growing your net worth.
Net Worth Summary
We plan to keep these net worth posts updated about every two months. Once a month seems too frequent, but anything past a couple seems like not enough.
After reviewing our net worth number for this November, there are two positive pieces of data that I see.
First is that for the first time ever, we have pushed our total liabilities under $200K. It may not seem like a big deal, but it is certainly a milestone … and I like hitting milestones.
Second, and more important is that we had another first for our net worth. Our liability increases ($3,506.09) were higher than our asset increases ($2,809.44).
Of course, I would have loved for our assets (especially investments) to jump through the roof. That didn’t happen but our lowering liabilities picked up the slack.
I think that is a perfect example of just how important lowering your debts can be when it comes to building net worth.
Remember, the overall goal is to grow your income while keeping your expenses low. Anything left over (aka “the gap”) needs to be invested. That is how wealth is built.
Do you track your net worth? What steps are you taking to widen the gap between your assets and liabilities?