Monthly Net Worth Check Point: November (still dropping)
Scares! Shrieks! Is it Halloween, you ask? No, it’s time to check all our account balances and update our net worth for the month. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . If you don’t like spreadsheets (who doesn’t like spreadsheets?!), I also have a post on some online tools for tracking your net worth .
Over at One Caveman’s Financial Journey, recently there was a post on why your net worth isn’t the best gauge of financial health . It’s an interesting post with some valid points. I agree that the usefulness of your net worth as an indicator of financial health is clouded by external forces such as the stock market. That is actually the main reason I created my net worth spreadsheet in such a way as to provide a information on different account categories. For instance, it might not be very illuminating to simply see that our net worth decreased 4.5% this month (OUCH!) but being able to see how our liquid savings did separately from our accounts with stock market exposure is still useful, I believe.
Our assets dropped 2%
Just like last month, I expected our assets to drop more than they did. Every account with stock market exposure dropped significantly. For instance, our taxable investments dropped 12%, our retirement accounts dropped 7.5%, our 529 plan dropped 5.7%, and my stock options dropped a whopping 49.5% in value! My options have been hammered lately, dropping 48%, 33%, and 49% over the last three months. That means compared to their value in August, my stock options are down more than 82%! (Luckily, I guess, they weren’t worth that much money to begin with)
All of this was buffeted by the fact that our liquid assets increased 9.9% this month. So, for the past two months while all of our accounts exposed to the market have been tanking, our liquid assets have balanced this out somewhat as they have grown 25%. So, I feel that looking at our increase or decrease in liquid savings is probably the best measure to see how we’re doing financially in this current environment.
Our liabilities decreased by 0.49%
Another very important financial metric to me is our level of liabilities (seeing that level go down to be specific). Our mortgage drops a similar amount each month and our lone remaining debt (my wife’s contractual obligation if she stops working) drops a set amount. As long as this keeps decreasing, I’m happy. I do not have any plans to accelerate our mortgage repayment in the near future, but it is an idea with which I am toying.
Our net worth decreased approximately 4.5%.
All of this adds up (subtracts up?) to a 4.5% loss in net worth this month. At least the downward decline is decelerating compared to our 8% drop last month. Again, the most important measures to me are the direction of our liquid savings and our liabilities. As long as our liquid savings are going up and our debts are going down, then I feel like we’ve been successful for another month.
I am still not overly concerned about the stock market
I am not super excited about the drop in our stock market accounts…well, in a strange way, I am actually somewhat happy about it (in a very selfish way, I admit). I am in a position that I do not need to draw on my retirement savings for decades and hopefully our emergency fund will prevent us from having to cash out any mutual funds or stock options in the near future. In that respect, the lower prices for stocks are actually helpful as we continue to purchase more every month. In fact, I recently increased my 401k contribution 4%.
I know it’s not pretty looking at the current numbers; instead I try to focus on how many more shares I am purchasing each month compared to the number I was buying last year at this time. If I stay focused and calm and continue to dollar cost average each month, it has the potential to pay off in the long term when the market recovers. (that assumes, of course, that the new president-elect and democrat controlled congress will attempt to stabilize the economy instead of causing it crash and burn so they can switch us over to socialism)
Monthly Net Worth Check Point: October (down a lot!)
Well, it is that time of the month again…time to check our current net worth. Unfortunately, it is not the greatest week to update all those account balances. To track how we are doing financially, I monitor our net worth and update it on a monthly basis. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . If you prefer, I also have a post on some online tools for tracking your net worth .
Our assets dropped only 3.3%
I am not sure how our assets only dropped 3.3% when each individual component seemed to be down - some by very large numbers. Our non-retirement investments were down 13.5%, our retirement accounts were down more than 10%, my daughter’s 529b balance was down more than 10%, and my stock options decreased in value by a whopping 33.4%. I’ve already checked the overall number once, let me do it again quick….yeah, it appears to be correct. Our liquid savings did increase more than 13% due to a gift we were given…but I didn’t realize it would be enough to balance it all out.
Our liabilities decreased by 0.35%
After paying off the last of our student loans last month , our decrease in liabilities will now be much more level (and much smaller) each month. Basically, we have our mortgage and a decreasing contractual obligation that we track as debt.
Our net worth decreased approximately 8% in August.
With our assets dropping more than 3% and our liabilities only decreasing a little bit, it all adds up to an 8% drop during the month of September. It would have been worse without the gift we received (over 10% drop). When I look at these numbers, actually, I have to admit it was not nearly as painful as I expected them to be. I think this is a product of when I checked the numbers and is quite misleading. I took all these balances on the evening of October 6th - which was Monday night. Obviously, a lot happened during the rest of the week. If I had checked the numbers Friday night, I bet they had been much, much worse (I am NOT going to check them again right now!) What this does mean, however, is that even if the market stabilizes the rest of the month, my net worth will show a big drop next month.
So will the events of last week change anything?
So, am I freaking out? No (at least I don’t think so). I have not considered pulling any money out of the market (too lazy for that frankly - I don’t want to have to pay attention to everything all the time in the futile attempt to time the market). In fact, I’m planning on buying more mutual funds (hey, it’s kinda like a 40% off sale). I have quite a few years before retirement and judging from history, the market will recover. It might not be soon, but then again it might be and I don’t want to miss the recovery. In the middle of last week, I finally signed up to have Vanguard pull out a few hundred bucks and invest it in some index funds each month. Tonight after I finish this post, I’m going to decide what to do with some money in a rollover IRA I still have in cash and probably put in a buy order for tomorrow.
Photo Credits: Terence ChangMonthly Net Worth Check Point: September (down 6.1%)
To track how we are doing financially, I monitor our net worth and update it on a monthly basis. I think it is a great way to keep track of how all your planning and hard work is paying off. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . If you prefer, I also have a post on some online tools for tracking your net worth .
Yikes! A 13.4% drop in our assets!
The hard work does not seem to be paying off (at least not this month!) It was actually a crazy month for us finance-wise. For example, our total assets dropped 13.4% driven by a whopping 65.6% drop in our liquid assets. Of course, since you are all faithful readers, I’m sure you remember that we paid off our final student loan this month and that accounts for the vast majority of the drop.
On top of that, however, it seems to have been a poor month for my mutual funds and company stock. Actually, the value of my company stock holdings dropped more than 7% and the value of my stock options fell off a cliff, dropping almost 50%! My other stock market exposure (in 401ks and mutual funds) also accounted for some of the asset drop, but they were down less than 2% each.
Woohoo! Our liabilities decreased by 17.5%.
Again, the weirdness of the month created quite a large drop in total liabilities. Ahhh, it is so nice to not have to obsess about paying off the student loan anymore. I haven’t really started obsessing about anything in its place yet (like paying off the mortgage, for instance). I’m still waiting for our liquid assets to recover a bit over the next months due to not putting so much cash towards that loan each month. After a trip to IKEA , however, I’m not sure how fast those numbers will rebound.
Our net worth decreased approximately 6.1% in August.
Putting those two large numbers together yields a slightly smaller, but still pretty large, drop in our net worth. Obviously the stock market wasn’t too kind to us this month. Taking into account the fact that a large amount of our cash buffer was used to pay off the student loan, you can see that the stock market exposure will continue to have a large impact on our net worth in the months to come.
This month, however, was much more about getting rid of our last student loan that anything else. I am very happy with our decision to use some of our cash to eliminate it. We are now down to only having the mortgage (and the other contractual obligation to pay back if my wife stops working in the next 15 months). From a net worth point of view, it will probably be bumpy for the foreseeable future as it will depend in large part on stock market performance.
As we go forward, we won’t be looking to replenish our cash reserves to where they were previously. We will keep our emergency fund at its current level of 3 or so months of expenses. We have started some short term savings for vacation, gifts, large home purchases, and yearly expenses. Also, I finally decided on an asset allocation for my rollover IRA and our taxable mutual funds. We will start putting more money into those mutual funds soon and probably increase our kids’ college savings accounts as well.
So, I sum up the month thusly: 6.1% drop: bad . No more student loans: great!
Online Tools for Calculating and Tracking Your Net Worth
Last week, I created a post that included some video describing how I create and update a spreadsheet to keep track of my net worth. I find a simple spreadsheet to be the most powerful way for me to monitor my net worth. Of course, I understand that not everyone is exactly like me (probably a good thing) and that others will not find the same method as useful.
In the short life of BFN, I’ve already stated multiple times the importance of using net worth to track how healthy your finances are and what their current trend is. Today, therefore, I thought it would be helpful to list some other methods for tracking net worth. These methods are all online (so no Quicken or MS Money) and all free (thereby precluding Quicken online, for instance).
Simple calculators
Calculating your net worth is quite simple as long as you have all the data - it just requires some simple addition and subtraction. You can easily find myriad calculator choices using a simple web search. Type in something like "net worth calcuator" and results will be displayed such as CNN’s calculator and Kiplinger’s calculator.
Though these are straightforward and easy to use, I don’t feel that they are as useful as other tools. Simply calculating your net worth will not provide you with historical data and allow you to see how your finances are behaving over time. If you are going to calculate your net worth periodically and save the data somewhere, then you might as well use a spreadsheet .
Online Net Worth Tracking
The first site that comes to mind when I think of online tools to track net worth is NetworthIQ.com. NetworthIQ is a "social personal finance manager" that lets you "track, share, compare" your net worth with other users. You periodically enter your assets and liabilities to keep track of where you are financially and where you’ve come from.
The unique feature of this site is the ability to compare your net worth with other users. You can search for other users by age, income, occupation, education, etc. This allows you to see how your net worth compares to others earning your same salary, or in your same occupation, for instance. As an option, you can select to share your financial picture with other users of the site as well.
Online Net Worth and Transaction Tracking
While NetworthIQ focuses on your net worth, other online tools go beyond net worth to include a more complete financial picture. These tools allow you to aggregate all of your various account information (checking, savings, credit cards, loans, etc) into a single application. Of course, it calculates net worth but will also give you more detail on exactly how you are spending your money on a monthly basis. A very nice feature of these sites is that once you configure all of your account usernames and passwords, updating your net worth each month requires nothing more than visiting the site and clicking the refresh or update link. The site then automatically visits all of your account sites and collects your up-to-date account information.
The three most prominent sites that I have found are Yodlee , Geezeo , and Wesabe . They are somewhat similar in how they work and the data they collect and display. Each has the capability to calculate net worth, display categorized monthly expenses, and provide budgeting capability. As I see it, there are two main differences among the three sites.
First, Wesabe and Geezeo integrate a social component into the site. You can share information with other users, you can ask for tips and information, and you can see what others have done in similar situations. This can be very powerful in assisting you to create and stick to your financial plan.
This feature can actually be good or bad, frankly. Allow me to relate a story (or just skip to the next paragraph and I’ll never know the difference). When I first found out about Wesabe, I was so excited about it. I thought it was going to be a fantastic tool to really optimize my finances. I created an account and put in my first main goal as getting rid of my student loans. Wow, it was quite disillusioning when most of the comments pertaining to that goal were about how it was stupid to worry about paying off student loans. ("good" debt and low interest rate and all of that). Honestly, I haven’t been back to that account since then.
The second main difference is found in the way security is handled. Security is obviously of paramount importance when you’re talking about usernames and passwords to all your financial accounts. For Geezeo and Yodlee, you upload your account information to their servers. Wesabe is a bit different, though. As I understand it, you download some software to your computer. That application stores your account information and transfers your account data to your computer and then up to the Wesabe server. In this manner, your account information is never uploaded to the Wesabe servers and that presents one less security risk.
Seriously, the security of your personal financial information is of critical importance. Before you disclose any of it to any of these sites, it is very important you investigate exactly how they collect your data and how they protect it so that you feel comfortable providing the information.
Your bank may offer a similar feature
Another place to look for a net worth tracking feature is your bank if they provide online banking. I have my main checking account at a "brick and mortar" bank that also has a good online banking component. Integrated into the online banking site is an application similar to Yodlee (I think it actually is Yodlee). I can add the accounts not held at my bank and use this tool to calculate net worth and track monthly expenses just like in Yodlee. If you are looking for an online tool to calculate net worth, this is something to investigate. If you are using it, your online banking site already has some or most of your financial information. So, if you can get the desired functionality there, it doesn’t make sense to unnecessarily upload your financial information to another site.
I’ll stick to my spreadsheet
My advice to you is to track your net worth. If you’re still listening for more advice, my next piece is to use a spreadsheet. Of course, if you want to utilize some of the transaction tracking and categorization features or social networking aspects, then a spreadsheet won’t be of much help to you. On the other hand, there are no security issues with the spreadsheet as it is on your computer and does not contain your account information anyway. Furthermore, a spreadsheet can be configured in a very powerful manner to allow you to pull more information out of your net worth updates rather than just the bottom line net worth number.
I am considering using the Yodlee-like feature of my bank to automatically update my financial information each month. I will then transfer this information to my spreadsheet. Using the tool in this way may save me a little time each month and allow me to look at the current status throughout the month.
How I Track My Net Worth with a Spreadsheet
Last week I started a series on the basics of a personal finance plan. In the coming days and weeks, I’ll be going into more detail on each of the topics covered in the first two posts.
It’s a common precept in business these days that if you are going to manage something, you need to measure it. I feel the best way to measure how well you are doing with your financial plan is to monitor your net worth. The net worth gives you a bottom line measure of your finances wrapping up all of your saving and spending decisions. Therefore, the first post in this series will be an explanation of how I use a simple spreadsheet to measure my net worth. Click here to continue reading…
-
Subscribe to Borrow From None
-
Currently Reading...
Social Networking
Links of Interest
What is RSS?