Since I blog about personal finance, naturally you would be interested in my financial progress. In this post I’ll mention about this progress and the growth rate of my net-worth value over the last 12 months. I never talk about my income publicly and probably will never do it, so I am not revealing the absolute number.
I will only be limited to the growth of my net worth in percentage term. Let me clarify first that I am not wealthy by any means, am rather, a common man. As I said often, I am not a financial expert; I am just a ‘guy next door’.
I blog and give friendly advises because that helps in my education and blogging let me manage my own finances better. This blog is my way of learning personal finance effectively with a hope that you learn a thing or two in the process as well.
Probably this is first time I am going to reveal a few things on my own finance.
Net-Worth to me, is a number which indicates my financial health, a sort of “financial scorecard”. I track all my financial accounts in one place, Yodlee Money Center.
Although net worth is useful, I don’t spend a lot time worrying about this. When you start getting into tangible “assets” like a house, car, etc., it becomes very hard to put a value on them. We can’t objectively measure their value.
The values of the tangible assets are just opinions. Your house is always worth more to you than what others think it might be worth. You may be able to sell your car for more than the Kelly Blue Book value.
In general, I tend to not include full value of my cars as assets. They’re really not, they’re expenses. Assets put money in our accounts, and last time I checked, my cars were taking money out of my pocket.
I have two cars, a 2002 Hyundai Elantra and a recently purchased 2011 Toyota Camry. The Toyota came with 0% Toyota financing (You need to have an excellent credit score to get such an offer).
I calculated the amount I paid off on my Toyota so far in net-worth calculation. I also deducted $3000 from it towards depreciation. For the old Hyundai, I didn’t include it in my net worth. Although it can bring in a couple of grands when sold.
I do track the progress or growth rate of my net worth periodically for the below “not too compelling” reasons.
|1. The best benefit I get, and you might disagree, is the boost in confidence and a good night sleep seeing it growing.
2. It helps when I am trying to convince myself not to spend on a big ticket item and wait for our home to be paid off.
3. This is the only method I found to assess our rate of financial progress.
As i said earlier, the absolute net worth number doesn’t make much of a value. I get to see it as I track all my accounts on Yodlee Money Center and net worth is just another feature in it. I admit, I look at it every time I am on Yodlee.
One of my New Year’s tasks was to gauge my financial progress in 2011. I took the difference of absolute net worth values between December 31, 2011 and December 31, 2010.
I think, I did a meticulous job of erasing ‘Y-axis’ values, in best effort to hide my net worth. My net worth increased by 20.40% in last year.
I am satisfied with my progress. Before you start thinking this is a huge increase, let me tell you that, I am not already on a strong and high net worth base. In absolute term, the increase is normal and not extra ordinary.
Effectively I started earning in this country from year 2005, my first job wasn’t a big paying job. Three jobs and 6 years later I am in a job with satisfactory wages (read how to get a raise).
February – The big jump you are seeing between Jan 2010 and Feb 2010 is due to the huge bonus payout which is a significant part of my yearly wage. (another bonus is just round the corner )
March - The drop in net worth value during March was due to the visit to my home country. We visited India and spent generously on our extended family. We received a ton of goodies in return as well. Some of my air miles were used to pay for the extra luggage. We take this trip every other year and it’s a big expense.
July to October- The drop in net worth during middle of the year was due to the car purchase. I paid for almost 50% of the car cost upfront and rest is in 0% loan, as mentioned earlier. I finally added the manually calculated value of our car in October, hence there’s a slight jump in October.
Liabilities – One aspect I think I did well with throughout the year was to keep my liabilities in check. We generally pay all our purchases with credit cards, and pay off all the cards fully before payment due date. You can see the size of the red bar staying constant throughout the year. That means we didn’t carry any credit card balance. Let this be your inspiration to keep your credit card debt in check.
Since I didn’t include full value of our car in total asset, I didn’t consider the outstanding car loan in my liabilities.
More than 50% of my assets are in stocks or stock funds. Even a slight up or down stock index movement creates a difference of few thousand dollars in my net worth. That’s one of the reasons I don’t value the absolute number much.
With the expectation of another good bonus and some possible windfall from somewhere ( my blog perhaps?), it will be interesting to track the growth this year.
A few tips to accurately capture net worth
As a financial literate, you should track your worth and it’s progress over time. Don’t go overboard though. When I started tracking, I used to check it every day. That was foolish.
As I mentioned above, net worth calculation technique is a highly subjective matter and how you calculate this, depends on personal opinions and preferences.
If you do not agree with my way of calculating some tangible stuff like car, that is absolutely fine. I find financial experts and bloggers differ among themselves on this aspect. Whatever you do, the bottom line is, tracking the progress rate is much more important than the tracking the absolute number.