How We are Growing Our Net Worth – May 2017
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Now into the start of the second year of tracking our net worth, and we had yet another increase. For the 5th consecutive month (starting in January of this year) we have grown our net worth.
Our net worth has grown by 25.8% since our first report back in March, 2015! That is an increase of over $100,000 in just 2+ years. It is an awesome feeling knowing we are growing our net worth by thousands and thousands of dollars every single year!
Since first reporting our net worth over 2 years ago … we have seen our assets 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).
If you can continue widening that gap (difference between liabilities and assets), there is more money leftover to buy assets and less money to pay for liabilities.
Now on to our latest monthly net worth update.
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.
So how did we do this May?
May 2017 Net Worth
As of May 22nd, 2017 – our net worth is $547,395.21!
In the past, we didn’t want to post net worth updates every month. Instead we opted for posting updates every quarter or so. Since there are so many moving parts to calculating ones net worth, it seemed pointless to go through the exercise every month.
Well, things change … and now we plan to provide an update every month. We started providing monthly updates at the start of 2017 and plan to continue for some time.
So why did we change our mind? Our focus is now on saving a lot more of our income each month in order to invest it. And 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 April.
Our net worth in May 2017 increased by a modest 1.1% compared to April (2017). That is an increase of almost $6,000 in just 1 month.
This month, the the majority of the increase was from our investments … which has been very common lately. In addition to investment increases, we were able to decrease our liabilities at a decent rate, which is just as important as growing our assets.
April 2017 Net Worth = $541,483.41
May 2017 Net Worth = $547,395.21
Net Worth Change = +$5,911.80
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. If we really wanted to get detailed, I should probably start thinking about adding these assets in the future.
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.
April 2017 Investments = $417,542.17
May 2017 Investments = $421,583.26
Investment Change = +$4,041.09
Investment increases made up the majority of our overall net worth increase last month. We have been investing a lot of new money over the past 7 to 8 months and are starting to see these assets grow … and generate income on it’s own.
The value of our investments rose by 0.97%.
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.
April 2017 – Cash = $4,346.01
May 2017 – Cash = $5,026.52
Cash Change = +$680.51
Since the holiday’s were over back in December/January …. we have been trying to increase our cash balance. We slowly have been building it back up to a point where we are comfortable.
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.
April 2017 – Home Value (est) = $331,772.00
May 2017 – Home Value (est) = $331,881.00
Home Value Change = + $109.00
A nice tiny increase in our home value … although it doesn’t really mean a whole lot at this point.
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, all 3 of our assets that we report on saw increases. Investments really helped to push our net worth higher this past month!
Total assets rose by almost 0.64% since last reporting.
April 2017 – Total Assets – $753,660.18
May 2017 – Total Assets – $758,490.78
Total Asset Change = +$4,830.60
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.
One month at a time … we are working to pay down our mortgage debt. Fortunately, we have a reasonable mortgage rate and a monthly payment that doesn’t completely hold us down.
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 normally pay any extra on the mortgage.
However, the past couple of months we started rounding our payments up the the nearest $100. That ends up being an extra ~$21 a month or so that goes directly to the principal.
Every few months, we consider refinancing to a 15 year mortgage … but the numbers never seem to work out.
April 2017 – Mortgage Balance – ($182,310.10)
May 2017 – Mortgage Balance – ($181,874.79)
Mortgage Balance Change = + $435.31
At the start of the year, we took on a lot more debt after buying a second car … which I will refer to as “car loan #2”. My 16+ year old vehicle finally died, so I needed reliable transportation.
The good news is that we were able to purchase a new vehicle that gets over 35 mpg with a 0% financed loan. The bad news is that we took on $17,000+ in debt and a second car payment.
As far as our other “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 paid too much extra on it.
April 2017 – Car Loan #1 – ($8,861.28)
May 2017 – Car Loan #1 – ($8,861.28)
April 2017 – Car Loan #2 – ($17,217.98)
May 2017 – Car Loan #2 – ($16,972.01)
Car Loan(s) Change = +$245.97
Based on the timing of these net worth reports, we didn’t make our May payment on car loan #1 yet. Next month should see a sizeable drop.
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.
April 2017 – Credit Card Balance(s) = ($3,787.41)
May 2017 – Credit Card Balance(s) = ($3,387.49)
Credit Card Balance Change = +$399.92
Our credit card balances fluctuate a lot month to month. However, we are really focused on spending less. Lower credit card balance is a good sign our plan is working.
We have been focused on saving (and investing), which will result in lower credit card balances.
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. Because of amortization, each payment we make … the principal drops at a higher and higher rate.
We also saw a drop in our car loan debt as well as our credit card spending.
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.
April 2017 – Total Liabilities – ($212,176.77)
May 2017 – Total Liabilities – ($211,095.57)
Total Liabilities Change = + $1,081.20
Look at how much our liabilities dropped in just one month! That is actually $3 more than our monthly mortgage payment. So basically we reduced our long term debt the equivalent of a house payment … which is pretty cool stuff.
I never like to see our liabilities increase. Over the last month, we have lowered our liabilities by (0.51)% … 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 ~$1,000+ is just as important as increasing our assets by the same amount.
For some reason, I actually get more excited now reporting on how we are lowering our liabilities instead of growing our assets.
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 May, most of our gains came from investments. However, that doesn’t really tell the whole story.
We were able to lower our liabilities by over $1,000 which is great. If we were able to maintain that rate every month, we could increase our net worth by $12,000 for the year!
In addition to lowering our debt, we were able to save a little more money last month and bump our cash balance up. Plus the estimated value of our home increased a bit … although we don’t get that excited about those numbers.
Do you track your net worth? What steps are you taking to widen the gap between your assets and liabilities?