How We are Growing Our Net Worth – January 2017
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We have been tracking our net worth for almost 2 years now (21 months to be exact).
In that time, we have seen several of our asset classes grow, while our liabilities have dropped (except last month when we took on new debt).
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 to over a half of million dollars!
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 –
January 23, 2017 Net Worth
As of January 23rd, 2017 – our net worth is $511,718.16.
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 November.
Our net worth in January 2017 declined by (1.4%) compared to November (2016). That is a decrease of ~$7,200 over the past 2 months.
The decline in net worth is a direct result of buying a new car and taking on additional debt.
November 2016 Net Worth = $518,944.32
January 2017 Net Worth = $511,718.16
Net Worth Change = ($7,226.16)
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.
November 2016 Investments = $383,284.18
January 2017 Investments = $393,535.91
Investment Change = + $10,251.73
The majority of this increase in our investment value is from capital gains. We have also added new money to the market, which has also helped to a lesser extent.
The value of our investments rose by 2.7%.
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.
November 2016 – Cash = $7,150.99
January 2017 – Cash = $4,540.70
Cash Change = ($2,610.29)
We saw a big decline (-36.5%) in our cash since last reporting. The end of 2016 we had to pay our property taxes (almost $4,000), car insurance ($500+), and payoff any Christmas spending.
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.
November 2016 – Home Value (est) = $328,141.00
January 2017 – Home Value (est) = $329,363.00
Home Value Change = + $1,222.00
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 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 (home and investments) saw increases. The only drop was our cash balance – which makes sense given the time of year and the payments we had due.
Total assets rose by almost 1.2% since last reporting.
November 2016 – Total Assets – $718,576.17
January 2017 – Total Assets – $727,439.61
Total Asset Change = + $8,863.44
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 a few weeks ago, when I purchased a new car.
My old car died … so we sent it off to be scrapped. We ended up buying a new small car that gets over 35 mpg .. which is good for my commute to work.
While 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.
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.
November 2016 – Mortgage Balance – ($184,392.35)
January 2017 – Mortgage Balance – ($183,578.97)
Mortgage Balance Change = + $813.38
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%).
As mentioned earlier, we took on more debt this past month … in the form of car loan #2.
We have an incredibly low rate on our car loan #1 (1.56%), so it doesn’t bother me that much to make these payments.
Despite taking on new debt for car loan #2 … we got a 0% rate for the entire term. So while this new vehicle will lower our overall net worth, it is a good feeling not to be paying any interest.
November 2016 – Car Loan #1 – ($10,881.60)
January 2017 – Car Loan #1 – ($10,263.60)
January 2017 – Car Loan #2 – ($17,712.00)
Car Loan(s) Change = ($17,094.00)
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.
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.
November 2016 – Credit Card Balance(s) = ($4,357.90)
January 2017 – Credit Card Balance(s) = ($4,166.88)
Credit Card Balance Change = + $191.02
Our credit card balances fluctuate a lot month to month. This past reporting cycle, we kept our balance about the same.
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 … 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.
November 2016 – Total Liabilities – ($199,631.85)
January 2017 – Total Liabilities – ($215,721.45)
Total Liabilities Change = ($16,089.60)
I never like to see our liabilities increase. And taking on a new car loan caused our liabilities to increase by 7.5%!
As I like to point out … there are 2 sides to the net worth equation. So despite our liabilities jumping the past two months, our assets increased. So with our assets increasing … we were able to “soften” the big jump in liabilities.
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 January, it is obvious that we took a step back in building our net worth since last reporting.
Buying a new car isn’t exactly a positive step towards building wealth.
The good news is that our assets increased over 1%, which helped offset some of our new debt. Our net worth still dropped, but overall not that much. And we still were able to stay well above $500K.
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?