How We are Growing Our Net Worth – February 2017
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We have been tracking our net worth for almost 2 years now (22 months to be exact).
Since that first report, we have seen our net worth grow by 20.7%! That is an increase of almost $90,000 in less than 2 years. Not too bad.
If I hadn’t had to buy a new car last month … we would have increased our net worth by well over $100,000.
Over the past 2 years (less the 2 months) … we have seen our assets start to really grow, while at the same time most of our liabilities decrease.
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).
The only time our liabilities actually went up was when we took on the debt of our new car payment. The good news is that we are paying 0% interest.
How We Track Our Net Worth
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.
Note: This post contains affiliate links.
Now on to our latest net worth update –
February 2017 Net Worth
As of February 22nd, 2017 – our net worth is $524,911.38.
In the past, we didn’t really want to post net worth updates every month. Instead we opted for posting updates every 2 or 3 months. Since there are so many moving parts to calculating ones net worth, it seemed pointless to me to go through the exercise every month.
Well … things change … and now we plan to provide an update every month.
Why did we change our mind? We have been really trying to focus on saving a lot more of our income each month in order to invest it.
By reviewing our net worth once a month, I feel that it will help us stay motivated with our goal to save (and invest) more.
Here is our most recent update, compared to our last net worth post in January.
Our net worth in February 2017 increased by an astounding 2.6% compared to January (2017). That is an increase of over $13,000 in just 1 month!
The majority of the increase is a direct result of recent stock market gains.
January 2017 Net Worth = $511,718.16
February 2017 Net Worth = $524,911.38
Net Worth Change = +$13,193.22
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.
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.
Since last October (2016), we have been focused on investing new money into the stock market. We want to grow our investment portfolio – with a heavy focus on growing our dividend income stream.
January 2017 Investments = $393,535.91
February 2017 Investments = $405,956.80
Investment Change = +$12,420.89
As you can see … the stock market is on a tear lately. All those gains have trickled down to our net worth totals (in a good way).
We are also constantly investing new money and reinvesting gains back into our investments.
The value of our investments rose by 3.2%.
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.
January 2017 – Cash = $4,540.70
February 2017 – Cash = $4,605.01
Cash Change = +$64.31
We saw a very little difference in our cash since last reporting.
There were several larger bills that we needed to pay off like our home owners insurance and car insurance for our new vehicle.
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.
January 2017 – Home Value (est) = $329,363.00
February 2017 – Home Value (est) = $329,363.00
Home Value Change = + $0.00
For the first time that I can ever remember, there was no change in the estimated value of our home.
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 good to see the perceived value of our home increasing a little each time we report our net worth.
Overall, 2 out of 3 assets we report on (cash and investments) saw increases. Our home saw no change in estimated value.
Total assets rose by almost 1.7% since last reporting.
January 2017 – Total Assets – $727,439.61
February 2017 – Total Assets – $739,924.81
Total Asset Change = +$12,485.20
There are 3 main liability categories that we will report on. The first and largest is our mortgage balance. Then we have our credit card balances … which is how we pay for almost every purchase we make.
The last category is our car loan(s). We just took on more debt back in January, when I purchased a new car.
My old car died … so we ended up buying a new car that gets great gas mileage. I commute about 60 miles per day to work … so I need something that doesn’t waste a bunch of gas.
While my wife and I didn’t really want to take on additional debt, it was time for me to replace my old car as the ongoing maintenance costs were rising.
One month at a time, we are slowly paying down our mortgage principal.
We have a 30 year mortgage on our home with a rate of 4.375%. That isn’t too bad of a rate, so we don’t really pay any extra on the mortgage each month.
Every few months, we consider refinancing … but it never seems like the savings are worthwhile. So we continue to pay our mortgage every month.
January 2017 – Mortgage Balance – ($183,578.97)
February 2017 – Mortgage Balance – ($183,170.06)
Mortgage Balance Change = + $408.91
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 recently took on a lot more debt after we bought a second car … which I will refer to as “car loan #2”. Back in January, my 16-year old vehicle finally died and I needed reliable transportation.
Fortunately, I was able to purchase a new vehicle that gets over 35 mpg with a 0% financed loan.
As far as our “family car”, we have a very low rate and are on year #4 of the loan. We refer to this as “car loan #1”. Since our rate is 1.56%, we haven’t really considered paying extra on it. We would rather take any extra money and use it to invest instead of paying down this specific debt.
January 2017 – Car Loan #1 – ($10,263.60)
February 2017 – Car Loan #1 – ($9,582.67)
January 2017 – Car Loan #2 – ($17,712.00)
February 2017 – Car Loan #2 – ($17,709.92)
Car Loan(s) Change = +$683.01
The balance on both of these loans should drop a decent percentage each month going forward. Since we have low interest rates on both loans, we are paying a bunch of the principal off with each payment.
Note – We will make our first payment on car loan #2 in a few days. I did not get the correct balance updated in our January 2017 net worth update … which explains the slight decrease.
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.
January 2017 – Credit Card Balance(s) = ($4,166.88)
February 2017 – Credit Card Balance(s) = ($4,550.78)
Credit Card Balance Change = ($383.90)
Our credit card balances fluctuate a lot month to month. This past reporting cycle, we took on almost $400 more in credit card debt..
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, our mortgage balance has dropped – as expected. It is good to know that each payment we make, we are paying less and less interest.
So for every mortgage payment made … the principal drops at a higher and higher rate.
Which brings me to the most important point of all –
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.
January 2017 – Total Liabilities – ($215,721.45)
February 2017 – Total Liabilities – ($215,013.43)
Total Liabilities Change = + $708.02
I never like to see our liabilities increase. Over the last month, we have lowered our liabilities by (0.33)% … which is a good thing.
As I like to point out every time we talk about net worth … there are 2 sides to the equation. So a decrease in liabilities by ~$700+ is just as important as increasing our assets by the same amount.
Net Worth Summary
We plan to keep these net worth posts updated every month now, which is a change from the past.
After reviewing our net worth number for this February, it is obvious that the stock market gains over the past couple of months are helping.
On the flip side, buying a new car wasn’t exactly a positive step towards building wealth … but one we felt was necessary.
The good news is that our assets increased over 2.6% in just one month, which is helping to offset our new car debt.
Lastly, remember that 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?