Net Worth Calculations No Longer Exciting
Feb. 2nd, 2014 03:04 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
livingdebI've been calculating my net worth once a month for a while now. Your net worth (the sum of all your assets minus the sum of all your debts) is considered to be a nice snapshot of your overall financial health.
Here's what I've liked about keeping track of my net worth:
* The first time I did it, my net worth was positive, and I really hadn't known if it would be, so that was fun.
* One of my favorite finance books, Your Money or Your Life, explains that your net worth will show you how much you'd have if you sell everything you own, and that might be enough to live on.
* It's fun to compare my lifetime of earned income to my net worth. Some people can be worth more than they've ever earned by working by a) not spending it all and b) earning back what they did spend via investment income.
* It's instructive to see how insanely the stock market can fluctuate. Even daily price changes can make your fees look like nothing (at least in the short term). It's fun to be rich enough to lose thousands of dollars in the market in a single day.
* It's fun to keep track of diversification goals.
Why net worth calculations are no longer exciting to me:
* Who cares how much is in my pension? I'm never removing that money--it's worth much more if I keep it in the pension (because we don't get the employer contribution if we withdraw the money, though they are used to improve the monthly pay-outs). What really matters is whether I qualify for the pension yet. (No, I don't.)
* The value of my house is actually inversely related to my wealth so long as I'm not selling my house. That's because property taxes are based on the value of the house, so the more my house is worth, the more I will owe in taxes. And I'm learning that compared to other states, my state's taxes are crazy high. When I first bought a house I was surprised that taxes were so much higher than homeowner's insurance; insurance costs (including flood insurance) are actually trivial for me compared to property taxes.
Currently I estimate my home's worth by averaging my county's latest estimate (which can be up to one year out of date) with Zillow's estimate (which can fluctuate wildly, but actually ends up pretty close to the county's estimate when they are made at the same time. My county's latest estimate is 165K, which seems kind of high for a house I paid 61.5K for (admittedly, 18 years ago). However, this month's Zillow estimate is 232K, up from 220K last month. Holy yikes, Batman! Fortunately, taxes can go up a maximum of "only" 10% per year in your primary home, but 10% per year does add up.
Admittedly, if the house becomes crazy expensive, I can sell it and move somewhere cheaper (but probably ickier). Also there's such a thing as reverse mortgages where a bank gives you money every month in return for getting your house when you die, but I've heard the fees are generally insane on those and so although it sounds good, it's generally a pretty bad deal.
* The value of my house has always been a huge percentage of my net worth, so I've had the goal of making it be only 1/3 of my net worth. That's not happening, although it's finally less than 1/2.
* I only had to pull $200 out of my savings last month due to actually earning some money and to not having anything expensive happen, but officially I no longer have any extra savings for "early retirement." I have plenty of savings, but it's all set aside for other budget items such as future car repairs and future vacations. (Which doesn't mean I won't borrow from that savings before withdrawing from my retirement accounts because the interest rate is puny.) Yet my net worth rose 3.5K over last month. (Only savings and retirement accounts went down; other stocks, bonds, my pension, and property value went up.)
Net worth is not what matters right now in my financial life. What matters most is whether I get this latest job I've applied for. I guess that's always true: In the short term, if you're not yet independently wealthy, than what matters most is what you're earning and what you're spending.
**
In other news, I finally tried my new white whole wheat flour instead of the whole wheat pastry flour I've been using (because the former is now cheaper for me). For cookies at least, this also works perfectly. Thanks to my sister without whom I wouldn't have realized this was a good option for me! (I like the fiber in whole wheat flour, but I was raised on white flour and like the sticks-and-twigs texture of whole wheat only in certain breads.)
Here's what I've liked about keeping track of my net worth:
* The first time I did it, my net worth was positive, and I really hadn't known if it would be, so that was fun.
* One of my favorite finance books, Your Money or Your Life, explains that your net worth will show you how much you'd have if you sell everything you own, and that might be enough to live on.
* It's fun to compare my lifetime of earned income to my net worth. Some people can be worth more than they've ever earned by working by a) not spending it all and b) earning back what they did spend via investment income.
* It's instructive to see how insanely the stock market can fluctuate. Even daily price changes can make your fees look like nothing (at least in the short term). It's fun to be rich enough to lose thousands of dollars in the market in a single day.
* It's fun to keep track of diversification goals.
Why net worth calculations are no longer exciting to me:
* Who cares how much is in my pension? I'm never removing that money--it's worth much more if I keep it in the pension (because we don't get the employer contribution if we withdraw the money, though they are used to improve the monthly pay-outs). What really matters is whether I qualify for the pension yet. (No, I don't.)
* The value of my house is actually inversely related to my wealth so long as I'm not selling my house. That's because property taxes are based on the value of the house, so the more my house is worth, the more I will owe in taxes. And I'm learning that compared to other states, my state's taxes are crazy high. When I first bought a house I was surprised that taxes were so much higher than homeowner's insurance; insurance costs (including flood insurance) are actually trivial for me compared to property taxes.
Currently I estimate my home's worth by averaging my county's latest estimate (which can be up to one year out of date) with Zillow's estimate (which can fluctuate wildly, but actually ends up pretty close to the county's estimate when they are made at the same time. My county's latest estimate is 165K, which seems kind of high for a house I paid 61.5K for (admittedly, 18 years ago). However, this month's Zillow estimate is 232K, up from 220K last month. Holy yikes, Batman! Fortunately, taxes can go up a maximum of "only" 10% per year in your primary home, but 10% per year does add up.
Admittedly, if the house becomes crazy expensive, I can sell it and move somewhere cheaper (but probably ickier). Also there's such a thing as reverse mortgages where a bank gives you money every month in return for getting your house when you die, but I've heard the fees are generally insane on those and so although it sounds good, it's generally a pretty bad deal.
* The value of my house has always been a huge percentage of my net worth, so I've had the goal of making it be only 1/3 of my net worth. That's not happening, although it's finally less than 1/2.
* I only had to pull $200 out of my savings last month due to actually earning some money and to not having anything expensive happen, but officially I no longer have any extra savings for "early retirement." I have plenty of savings, but it's all set aside for other budget items such as future car repairs and future vacations. (Which doesn't mean I won't borrow from that savings before withdrawing from my retirement accounts because the interest rate is puny.) Yet my net worth rose 3.5K over last month. (Only savings and retirement accounts went down; other stocks, bonds, my pension, and property value went up.)
Net worth is not what matters right now in my financial life. What matters most is whether I get this latest job I've applied for. I guess that's always true: In the short term, if you're not yet independently wealthy, than what matters most is what you're earning and what you're spending.
**
In other news, I finally tried my new white whole wheat flour instead of the whole wheat pastry flour I've been using (because the former is now cheaper for me). For cookies at least, this also works perfectly. Thanks to my sister without whom I wouldn't have realized this was a good option for me! (I like the fiber in whole wheat flour, but I was raised on white flour and like the sticks-and-twigs texture of whole wheat only in certain breads.)