Single Ma’s 2006 Net Worth Review
Yesterday, Miguel asked:
…if there was one thing that most contributed to your ability to attain your present NW, what was it (i.e. windfall, home purchase, 401K ?).
I responded with a vague guesstimate, but I went back to review the numbers so I could give you all a better answer. First, let’s review my net worth progress from the start of this blog to date:
- December 2005: Guesstimate of negative ($2,500)
- January 2006: No Update
- February: No value, but I realized my net worth wasn’t as bad as I thought. Added car value and $5k est. for personal possessions.
- March: 1st quarter review - 26% of my goal
- April: No Update - BOUGHT HOUSE
- April/mid-May: 26% to 31% of my goal (sans real estate)
- May: Lots of spending and more spending on new house
- June: 6% decrease (to 25%??) after moving expenses and triple celebratory events
- July: I said there was No Change but referred to 36% ??
I provided no explanation of the 25% to 36% jump, not sure what changed, my finances were messy, more homeownership effect, I did a complete financial overhaul, paid off lots of debt, moved some money around, and opened new investment accounts.
In an effort to clean up the mess, I added real estate (primary residence based on the appraised value) to my net worth calculation for a COMPLETE financial picture, then started seriously tracking in an Excel spreadsheet. The new, more accurate number reflected 53% of my goal.**
- August: 53% to 55% of my goal
- Sept: 55% to 59% of my goal
- October: No change, 59% of my goal.
I was going to change my home value based on the Zillow estimate, which would have resulted in a 9% decrease. However, Miguel’s comment caused me to do a little research and reconsider my decision. I continued to use the appraised value, resulting in an immaterial reduction.
- November: 59% to 63%
- December: 63% to 66%
**Here’s a “summary” spreadsheet from July, my first month tracking everything in detail, through December 2006:
[click image to enlarge]
So to answer the question more definitively, I’ve attained my current net worth through home ownership and aggressive saving. The continuous growth can be attributed to long term “investment” focus. From July to December, I have not changed the value of my home, yet my net worth increased by 25% in six months. Hence my +50% goal to $100k for 2007.
———————-
I’ve received several emails about what should be included in the net worth calculation and I’ve tried to answer them by expanding on the general ‘assets minus liabilities’ formula. There’s much debate about what should be included (or not), but here’s a general summary that I found helpful.
If you haven’t already done so, I encourage you to get a clear picture of your net worth. It’s not just for rich people! It really is THE only true measurement of your financial health, NOT how much money you earn.
From now on, I’ll start including a detailed spreadsheet in my monthly net worth reviews for full disclosure and accountability.
Peace & Blessings
~*~*~*~*~*~
Work to achieve, not to acquire.
And as always, BE FABULOUS!
~SM
~*~*~*~*~*~Work to achieve, not to acquire.
And as always, BE FABULOUS!
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High Five to Single Ma!
I 100% agree about the power of the Net Worth spreadsheet. That monthly habit of plugging in the numbers and seeing what has increased and decreased since the prior month is very educational. Everyone even remotely interested in personal finance should create and maintain one!
I’d have to agree with you too. Most of my net worth growth (if any) in 2006 was from my condo and from socking away savings. Regularly saving money is the surest way for me.
A quick question: How are you basing the value of your house? I noticed you went down from 297,975 to 296,925. Is that the amount you owe or is that the appraisal value of the home?
Just curious. I’m really finding a lot of value in your site.
I created my spreadsheet and I can’t even begin to tell you how helpful it is. Even though the decrease from Dec. was Jan. was minimal it was still there and I know where I need to tighten up. Thanks again for all your help.
I’ve been a lurker for a while, but I have to say I agree with you 100% on this issue. Now if I can just muster up the discipline to do a cash flows worksheet…
By the way, I really enjoy your blog and find it so inspiring.
I sooooooooooo need to get on the ball. You’re so informed on finances. Do you do this for a living? If not you could definately coach the rest of us.
boston gal - ^5 sis! I’ve learned so much since starting this blog. Thanks for all of your help.
mapgirl - Can’t go wrong with saving!
kerstin - The spreadsheet is a summary and doesn’t show the individual assets. The small reduction is not from my house.
I use the appraised value from the purchase in April. The builder is expanding the neighborhood and similar houses are selling for much more, but I’m not going to change it.
Thanks for reading!
chele - See, it helps you see the big picture so you can stay on point. And you’re welcome.
wanda - Add it to your 2007 goals. Nothing to it but to do it!
african girl - LOL no I don’t work in finance. I’ve always wanted to but the lifestyle was too demanding. My babygirl comes FIRST!
I’d love to help you. Short of writing on this blog, do you have any suggestions or specific requests? Subject ideas for me to write about?
I’ve been dragging my feet on the net worth calculations. The first ones I drew up were early last year and were astoundingly negative — maybe not as bad a Make Love, Not Debt, but pretty close. Now that I’ve got more of a handle on the joint finances, I can paint a much more accurate picture of our situation and hopefully see it grow into the positive range this year.
Nice follow-up. Now you know me… of course, I have a question.
In your initial NW calculation, are you including the deposit for the downpayment on the house? I’m having some trouble mentally reconciling this - unless you bought the house with zero down, you should have had some savings or deposit money before the home purchase closed. So, when you say your networth increased from buying the house, is that from an increase in market value, or is it that you are now accounting for something that was off-balance sheet as they say in accounting lingo (i.e. not previously being counted in the calculation)?
At any rate, I find it immensely helpful to track my NW and update it several times a year. It provides motivation to increase it. And it also forms the foundation of my investment & retirement planning, as well as estate planning. You’ll find that as your finances grow more complex, this type of tracking is quite valuable.
In my initial calculation, the down payment was not included. Keep it mind, I bought NEW construction.
I was already under contract and construction had begun, so I had to put up a sizeable amount in earnest. At closing, it was refunded and that became my deposit.
I bought in the first phase (nothing but dirt and the builder’s vision) that took nearly a year to complete. So yes, when I closed, the market value had increased significantly. DC ‘burbs…
re: tracking. I’m learning, I’m learning. Thanks for making me evaluate the numbers and look at my finances even closer.
Cool, thanks for the explaination.
way to go!!! I am finally calculating my net worth. I used the spreadsheet I created for my budget and last month I plugged everything into my microsoft money.. rather updated it because it has great tools.. I love to see the graphs.. the big picture and when I see that pie chart get bigger in money that I am keeping rather than putting out.. I’M EXCITED..
Maybe I’ll send you a topic to write about.. or ask the write question that will generate a response