Category Archives: Finances

What Makes Up Our Net Worth?

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I’ve been posting information on our net worth for more than a few months now, but I haven’t ever gone through what I include in it, and what I don’t – and where I get those numbers from. You’ll also see why I rarely include this information in detail, because we have a lot of accounts…

Stack of money for net worth

Photo credit: AMagill

This “month’s” net worth is: $474,731 (measured on July 8). I pick the 7th or 8th of the month for my statement, because by then, almost all of the payments for debt and bills have been sent out and credited to the appropriate debt account, and debited from our checking and there’s not much change in the accounts other than incoming paychecks.

Our liabilities are pretty well defined: I do not include our “working” credit cards though – the ones that we pay off every month. I take those into account when the payment leaves our checking (tends to fudge our net worth on the high side – probably $1,000-$1,500 every month).

Mortgage (the big one) $422,543.44
Car Loan $22,500.00
Student Loans $13,203.96
Chase CC $5,808.44
Total $464,055.84

It’s our assets that are a little more fluid. I include our house (because it’s value offsets our mortgage) as Zillow sees it, and our cars’ trade-in values on KBB. I only update the car values every 3 months or so – we don’t really intend on selling them anytime soon, but they are part of our value. I also include our (multiple) investment accounts and our 529 plan. Finally, I include our checking and savings accounts. Our primary checking account tends to have a pretty high balance because we operate on the YNAB methodology of living on last month’s income (Rule 4), which gives us one month of expenses while we re-work our budget and figure out what we’re going to do.

When I do the Net Worth calculations, I just let Mint tell me what the accounts are valued at, so it changes day to day. I don’t keep track of what those values were, just the aggregate amount, so the checking and savings values below are not necessarily accurate as of July 8 (they are as of July 9).

Tangible Assets:
House value $591,348.00
Mom’s car $27,091.00
Dad’s car $3,116.00
Total $621,555.00
Investment Assets:
Mom’s 401(k) $15,333.84
Dad’s 403(b) & 401(a) $40,855.66
Mom’s Traditional IRA $79,171.71
Dad’s Traditional IRA $151,445.20
Mom’s Roth (from when I could contribute) $6,518.89
Mom’s “fun” account (this is where I dabble in dividend investing) $283.58
Daughter Person’s 529 $4,596.30
Total $298,235.18
Non-Investment Assets:
Main Checking $11,369.96
Overdraft Savings $406.68
Secondary Checking (our mortgage sits here until it’s paid at the end of the month) $2,089.85
Main Savings $6,052.37
Total $19,918.86
Total Assets $939,709.04

That leaves our net worth on July 9 at $939,709.04 – $464,055.84 or $475,653.20

I hope I helped you understand how I calculate my net worth, and how you can too if you don’t already. The choices are in what you choose to put in and leave out of the calculations. If I left out my house value, or reduced it to the last known appraisal, it would significantly affect my net worth: -$115,694.80 for leaving it out and $424,305.20 for using the appraisal from April 2012. We’re planning on using our house as an asset during retirement (selling it and moving to a cheaper location), so I include it.

What else do folks add into their calculations or leave out that I don’t mention?

Detailed Financial Picture – July 2013

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June’s Numbers

As of July 8, 2013, we are $464,055.84 in debt (that includes the mortgage).  Without the mortgage, we’re at $41,512.40 in debt.  This includes a credit card, student loans, and an auto loan.  We currently have $938,786.98 in assets (including our house).  Our retirement accounts are at $297,180.17.  Our Net Worth is $474,731.14 (includes house and mortgage), down from $476,125.47 last month (0.29% decrease).

Our net worth has decreased this month – and that’s mostly due to Zillow’s estimate of our home value decreasing (down to 580k from about 601k).  I’m contemplating replacing Zillow’s estimate with the appraisal we had done in April 2012 (540k) and just leaving that number static.  It doesn’t reflect that our neighborhood is changing though.  There are three houses in our neighborhood that are the same model as ours that just went under contract (less than a week on the market!), and their asking prices were all in the 580-590s.  I’m waiting for the final paperwork to be done to see what the final sale prices of those houses were.  I’ve been drooling over the pictures of the insides of them from the listings though – I have lots of ideas on how to improve our house 🙂  One had wood floors on all the levels, not just the main level like ours, and it looked really good.

We haven’t gotten the approval from our HOA for changing our paint colors yet – I expect that this week or next, so we’ve got quite a bit of money sitting in a savings account waiting to be used.  Next month will be the last month that we’re planning on paying the minimums on our debts, then we can go back to really attacking them in September.

I sold quite a few things on Craigslist this month, and “earned” over $200 from that and my Amazon seller account.  I put some of that towards the Chase bill, and the rest went to eating out :(.  As we’re cleaning up the basement for tiling (and possibly some minor renovations), I’m selling, donating, or otherwise trashing things located there.  I try to make money on it first, then donate it.  I’ve got a large box ready for donating, I just need to schedule a pickup or drive out to Goodwill myself.  The basement work itself has stalled as I’ve been traveling for work and catching up on work I missed in the evenings, and baking cakes for parties, but I hope to get back to it after this weekend.

I also did some math on how we’ve improved since the beginning of the year.  4.32% increase in net worth for the year.  And a 15.62% increase in our retirement accounts since the beginning of the year.

Debt (in the order we’re paying it down):

  • Line of credit (8.75%): $0.00
  • Chase (4.99% for life): $ 5,808.44 (-108.83)
  • Student loans (aggregated 6.55%):  $13,203.96 (-137.04)
  • Car loan (0%): $22,500.00 (-490.00)
  • Mortgage (4.125%): $ 422,543.44 (-660.04)

Total paid off in June: $1,395.91

July Challenge – do not eat out

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Dad and I are challenging ourselves for the month of July – do not eat out except for date night provided by Grandma on July 5.  We’re quite guilty of taking Daughter Person out for lunch on the weekends.  We all get out of the house, she’s entertained, and we all get fed.  Our restaurant spending has been creeping up the last few months, so the goal is to eat out once (about $50-$70) in July.  Can we do it?  I have no idea – given that our latest restaurant spending has been about $400 per month, I hope so!

There are already several issues we have to work out though: I’m traveling July 15 – 18 (to Palo Alto, CA), but my company picks up the tab for that, so I’m not counting it. We’re going to Grandma’s for the July 4th “weekend”,  a family reunion in Parsons, WV the following weekend, and we’re almost out of food from our last cooking session.  We’re planning a cooking session in the next week or two (whenever we can get it in given our traveling schedule), and it’ll be almost all grilled food to avoid heating up the kitchen.  We’re working on planning more lunches in the recipes we’re making, so we’ll see if we meet our challenge.

Do you have a challenge for July?

Sometimes it pays to call your bank

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We’re working with Fidelity and their “Wealth management services” (I still can’t believe that a combined balance of 250k is enough to qualify us), and as part of that I was looking at maybe converting our checking and savings accounts over to their cash management account – and pretty much have all of our money in the same place.  So, I was looking at their current rates, and comparing them to our current banks (PNC Bank and CapitalOne360) to see if it might make sense.  There’s quite a bit of inertial pull to stay with what we’ve got because of the paperwork required to change it, so any changes need to offer a much better situation for us.

Almost no one can beat CapitalOne360’s interest rates – even if we pretty much use it for our emergency fund and to “store” our mortgage payment until the end of the month (and we get paid about $4 to do so).  Everything else is in our PNC accounts, and the interest rate is pretty dismal (0.01%).  So I was looking at PNC’s web page to see if they offered another level of checking/savings that we qualified for (without paying a monthly fee of course), and because both Dad and I deposit our paychecks into that account, we’re well above the minimum direct deposit threshold for no monthly fee.  It’s interest rate is 5 times what we were getting previously. (.05% vs .01%, but still…)  It’s still not as high as CapitalOne360 (.20% checking, .75% savings) or Fidelity’s cash management (0.07%), but it gives us all kinds of perks like free checks, free cashier’s checks, free international wire transfers, no fees for using any ATM at any time (and reimbursement of other ATM fees – including international ATMs), increased identity theft insurance, AND another discount on our line of credit interest rate – so if we ever need to use it, it’s even lower.

So, I called up PNC and asked if our account could be upgraded, and the nice gentleman on the phone also got our savings account upgraded as well (part of the “package”) and we’ll now earn more interest on the piddly amount we have there as well – it’s basically to cover our checking in the very unlikely event of an overdraft, everything else is in CapitalOne360.

So, just by doing a little research and making a phone call, we’ll be “earning” about $5-$6 more per month (at least until Interest rates go up, then we’ll earn more).  I know, I know, that’s not much, but I have a hard time turning down basically free money – and $5-$6/mth over 10 years is $600-$720.

Have you ever called your bank/credit cards/lender to ask about a “better” account or “better” services for you?

“Lifetime” of a car is 100,000 miles….

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We had another surprise expense last week when Dad’s car needed a new catalytic converter.  Our mechanic (I love Kevin!) got us an after market part, which was about $1,200 less than the Honda part.  So, $800 later, we have a new catalytic converter on Dad’s car (and a scheduled oil change).

My old Honda Civic had major problems with the emissions system – replaced the catalytic converters (yes 2!), and the O2 sensors twice before 100k miles.  Turns out this was an issue and Honda reimbursed me since I had kept all the maintenance records and receipts – that was a nice surprise $5k check.  But when our mechanic told us that Dad’s was going bad, I had to look up what the expected life of a new catalytic converter was.  His car is old enough and worth little enough that we’re starting to look at cost of repair vs a new car payment.  Everything I read through mechanic Google indicated that a catalytic converter should last the “lifetime” of the vehicle.  Dad’s car has about 150k miles on it, it’s an old Honda Accord, and our mechanic is pretty sure he can keep it running until 300k.

So, if a catalytic converter is supposed to last a “lifetime”, it should last about 300k miles and maybe something else is wrong with Dad’s emission system.  Through more Google searching, I discovered that “lifetime” means about 100k miles – one obscure article about the expected life of a catalytic converter mentioned 100k miles.  Then I started a general search for “vehicle lifetime”, and turns out, about 100k is when most people sell, junk, or otherwise get rid of their vehicles.  I just have a warped sense of “lifetime” I guess.

Growing up, my dad insisted on American cars (turns out it had something to do with a discount buying program he got through work), and 100k miles was a *lot* of miles.  I don’t think we ever had a vehicle with that many miles on it for very long.  My dad was also a hobbyist mechanic, and would rebuild engines and transmissions for fun (and profit), so I probably never noticed when a car was getting older.  We did keep the cars for 5-10 years though.  My very first vehicle (an F150 long bed, extended cab truck) was traded in for my Civic Hybrid at about 110k miles. I didn’t trade it in because it had high mileage – it was still running perfectly – but because I couldn’t park the dang thing in the DC area and I needed a smaller vehicle.  My Civic made it to almost 200k – which I think was a very respectable life, and now I expect all of my vehicles to make it to at least 150k or more.

But, based on Google, it seems that 100k is kind of a choice point for most folks.

When you’ve disposed of vehicles (by choice!), what was the mileage?  Is there some mileage point that you start to look at new (to you) cars?  What criteria do you use for deciding that it’s time for a new car?

Detailed Financial Picture – June 2013

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May’s Numbers

As of June 7, 2013, we are $465,451.75 in debt (that includes the mortgage).  Without the mortgage, we’re at $42,248.27 in debt.  This includes a credit card, student loans, and an auto loan.  We currently have $941,577.22 in assets (including our house).  Our retirement accounts are at $293,456.12.  Our Net Worth is $476,125.47 (includes house and mortgage), up from $472,903.54 last month (0.6% increase).

Our retirement accounts went up by less what we contributed to them this month (0.29%), as the markets have slightly corrected themselves, and while I know a percentage point here or there really isn’t that big of a loss, when you see your account “losing” $3-4k in a day, it gets a little nerve wrecking.  I just have to avoid looking at the accounts on the “down” days.  Over time, I have no concern that the market will go up, and we have plenty of time to ride out a correction before we need the money for retirement.

The job front is looking good for me.  We just got in a lot of work – almost too much for us to handle, so we’re having to schedule it out a month or two.  So we’re bringing in new work pretty regularly, and things are looking up there.

We’re expecting to make a large payment this month and next to pay for some house repairs, so I’ve only paid the minimums on our debts so that we (maybe) don’t have to borrow anything for those repairs.  The minimums are still pretty significant, but still the minimum. Due to the timing, we have two months to “save up” for the repairs – we need 30 days for HOA approval, and I just mailed that in earlier this week, and then we put 35% down for the repairs, and we get scheduled within 30 days, and the repairs will be done in 5 days, and we don’t have to pay the remaining until then, so we’ll have one payment in June (maybe early July, depending on the HOA), and another in July/August.  If we make the second payment in August, we won’t have to borrow anything.  We will be taking quite a bit out of the emergency fund though, and will be “repaying” that first before we aggressively start attacking the debt again.  Dad has a 3-paycheck month in August though, so that’ll really help.  If we make the second payment in July, we’ll be borrowing about $1000 from our line of credit, and then paying it off in August.

Debt (in the order we’re paying it down):

  • Line of credit (8.75%): $0.00
  • Chase (4.99% for life): $ 5917.27 (-59.31)
  • Student loans (aggregated 6.55%):  $13,341.00 (-285.98 amount already deducted for June)
  • Car loan (0%): $22,990.00 (-490.00)
  • Mortgage (4.125%): $ 423,203.48 (-657.78)

Total paid off in May: $1,493.07

Murphy schedules a visit

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Just as we pay off the line of credit, we may need to use some of it.  We have a lot of wood trim around the house (exterior), and much of it is rotting, and the paint is deteriorating, and the gutters are failing (and causing a leak).  I’ve got quotes for the work, and the guy I’m going with will run us about $7,000 to do all of the work – replacing the rotting wood, painting, etc.  And we’ll finally get to change up the colors on the house.  A previous owner had some warm cream siding installed, with a bright white and bright blue trim.  The clash of warm and cool colors even bothers my design-dumb eyes.  While I’d prefer the cool color scheme, the siding isn’t getting replaced anytime soon, so since we’re repainting the trim, it’ll become “warm”.

I’ve got at least 30 days to come up with as much as I can before dipping into the line of credit, and we’re going to use some (not all) of our emergency fund to cover it.  I estimate that we’ll need to borrow up to 3k from the line of credit, which would get completely paid off (again) in September.  I don’t want to drain the emergency fund, so we’re taking 3k from there (leaving us with 2k), and before we really attack the line of credit again, I want to “refill” the emergency fund, which is why September is the payoff date rather than sooner.

We have to file for an architectural change with our HOA, which can take up to 60 days (neighborhood rumors say it takes less than 30), then the company has 30 days to start work.  We need to put down 35% for materials, and pay the rest when he’s done, so we might not borrow as much depending on when the work is completed.  The work needs to be done before our rainy season in August/Sept, but we can push it off just a little bit to try to save more, but there is some wood that I hope will survive the next month.  We’ve already put it off as long as we think we can, and the leaking was the final straw that told us “OK, you need to take care of this”.

We looked at covering it with vinyl so that we never had to paint again, but several trusted contractors said not to do that because the wood still rots under the covering, and we wouldn’t know about it.  So, we’re going with painting, which is guaranteed for 4 years, so it’ll be a while before we paint again 🙂

Detailed Financial Picture – May 2013

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April’s Numbers

As of May 7, 2013, we are $466,805.10 in debt (that includes the mortgage).  Without the mortgage, we’re at $42,943.84 in debt.  This includes a credit card, student loans, and an auto loan.  We currently have $939,708.64 in assets (including our house).  Our retirement accounts are at $292,621.36.  Our Net Worth is $472,903.54 (includes house and mortgage), up from $454,769.31 last month (3.97% increase).

Our Line of credit is paid off!  I took a little from savings to do so, so this month is mostly paying ourselves back rather than really attacking debt.  It was worth it in for how good it felt to send in that last payment.  Now, we have a significant line of credit which will become part of our emergency planning (new roof, other major disaster, etc) until the rest of the debt is paid off.  It costs us $50/year to keep the line open, but we figure that it’s worth it for the relatively low interest rate it provides.

Our retirement accounts did great this month (up 4.55%).  We’re still contributing less than I would like, but not an insignificant amount of our incomes is going towards our 401(k) and 403(b).  I haven’t really noticed the tax hit from changing 1% of my contribution from my 401(k) to my Roth 401(k), but until the debt is paid off, we’re leaving the contributions where they are.  I’m really hoping the markets aren’t going to correct themselves anytime soon, but I know that’s inevitable someday.

I’ve switched our order of repayment around a bit due to Chase being PITAs as well as a potential job loss in our future (near the end of the year).  My company is not doing so well, and we have enough money in the bank to keep running until the end of the year (and that’s without getting any new work), and so there’s a potential I won’t have a job next year – at least with the same company.  I love where I work, and who I work for (and I own part of the company – sort of – through phantom stock options), so I’m sticking around to help make it work out.  I’ve told my boss if things aren’t looking better by September, I was going to start looking for another job.  I’m confident that I can find another job because of my line of work and my skills, but I’d rather not leave a company that I really like.  But I’m not being stupid about it either.  We’ve switched to paying off the Chase card before the student loans because the student loans can be deferred if I do get “laid off”, the credit card can’t.  I ran the math, and should things go well, we’ll have paid an extra $30 in interest by paying off Chase before the student loans – that’s a $30 insurance policy as I see it.

On the plus side, I’ve just brought in enough work to completely pay my salary (and benefits) for the next year and a half, and our busy time doesn’t happen until September through December, so I think we’ll be OK.

Debt (in the order we’re paying it down):

  • Line of credit (8.75%): $0.00 (-1300)
  • Chase (4.99% for life): $ 5976.58  (-472.43)
  • Student loans (aggregated 6.55%):  $13,626.98 (-139.72)
  • Car loan (0%): $23,480.00 (-490.00)
  • Mortgage (4.125%): $ 423,861.26 (-655.53)

Total paid off in April: $3,057.68

Our Story: The Plan

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Why yes, we have a plan now – unlike previously.  I happen to love my job, who I work for and what I do, but I know that that’s not the case for everyone – especially Dad.  Dad likes what he does, but in the 3 jobs he’s had since I’ve known him, he’s not a big fan of who he works for.  He’d rather work on his own. But, with our debts, we cannot live on one salary, even without them it’s a bit hairy, and we’re not ready to take the chance of no-salary yet.

We’re loosely following Dave Ramsey’s baby steps.  We have $5k set aside in a baby emergency account for when Murphy pays a visit – which seems quite often to us (baby step 1 slightly modified).  Our first financial independence goal is to pay off all our debts except the mortgage (baby step 2).  We think we can do this by July 2014 (maybe earlier if the stars align).  If you haven’t been following me, we have 3 debts that still need to be paid off (a credit card – at a nice fixed rate, student loans, and a car loan).  After we pay those off, we’ll be building up a 6-mth emergency fund (baby step 3), which we hope will be in place by the end of 2014 (or at least most of it).

Once that’s done, we’ll be socking away the maximums to our 401(k) and 403(b) plans, and splitting what’s left between paying off the mortgage (baby step 6) and saving for Daughter Person’s college (baby step 5).

In what I know is controversial, we’re ignoring most of step 7 – giving.  We’re not religious, we’re quite libertarian, and we don’t have very many causes we feel strongly enough about to actually donate money to them.  Dad donates blood regularly (I can’t), and we donate to races, etc that friends are raising money for, but we don’t have a “giving” plan, and certainly don’t give a percentage of our income away.  Instead, we’re using that money to help ensure that we’re never a burden on others.

Our Story – Part 3: The Awakening

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I’ve always been interested in personal finance, but it never “clicked” for me until the end of 2011. Before Daughter Person was born, we didn’t budget, we didn’t do more than the minimum for saving in our 401(k). As long as the cash flow was OK – I thought we were OK. We always had money in the bank, never made a late payment, never even had to time our bills to our paychecks, never been declined/denied for credit, and always had available credit on our credit cards. So we thought we were doing good. Obviously, I (at least) had my head in the sand. This is our story. It’s not intended to be an excuse for our poor decisions, but to give some background.

Part 1: A Tale of Two Houses
Part 2: The Panic

We left off where we were trying to live with $200/mth extra – and I was panicking just a bit. I had found You Need a Budget, and once I figured out the methodology and realized that we had $200/mth left after paying for our “necessities” and obligations, the panic set in. I showed Dad the numbers, and while I think he thought I was crazy, he went along with me. We cut back on a lot of our eating out, wine, and buying random things and got to a point where we were comfortable. We could pay our debts, eat good food, still have a bottle of homemade wine once in a while, and maybe even make some progress on paying off those debts.

Around this time, our county library started lending books on the Kindle. The first book I checked out was Dave Ramsey’s Total Money Makeover. And while there are a few ideas of his I disagree with, he’s certainly good at getting people motivated. So I was fired up to get started with his Baby Steps (we’re still on baby step #2 in case it wasn’t obvious). I got Dad mostly on board, and I think the reason he’s on board is that we allocate a certain amount per month to “fun money”. We each get the same amount every month, and we can do with it whatever we want – spend it all, or save it up for something. At this point, Dad’s still not completely on-board, but he’s humoring me – and I know he likes to see the balances go down.

The next book I check out is The Millionaire Next Door. I start to think that hey, this might be a real opportunity that we could reach $1mil net worth, Dad’s still rolling his eyes at me at this point. But I start checking out more books about living frugally, and reading blogs online, and find Mr Money Mustache. I start reading his blog, and others on early retirement, and think – hey! we can do this! I finally got Dad on board earlier this year when I sent him several of MMM’s articles and he’s thinking, “wouldn’t it be great if I didn’t have to work??” So, we’re both in this together, and I’m allowed to try any hare-brained scheme I want, but if Dad (or Daughter Person) is not OK with it, we go back to status quo.

We’re slowly changing the way we do things, and even considering more drastic changes like living with one car and selling our house (although those are only in the discussion stages at the moment)…

We got ourselves into the mess we’re in, and now we’ve got to dig ourselves out before we can really start on our journey to financial independence, but paying off debt gets us back to zero, then we can move pretty fast with both our incomes.