2018 is at an end. I don’t know why but the end of the year always catches me off guard. I guess it’s the one time of year when it feels like time is actually passing by, even more so than birthdays. Although the year ended on a high note personally–we’ve hit some many amazing milestones in our lives this year–our net worth is ending on a bit of a low.
WHY WE TRACK OUR NET WORTH EVERY MONTH
Doing a net worth update every month keeps our financial goals front and center where they belong. It gives us a high level overview of our finances so that we the progress that we’re making from month to month.
Now that doesn’t mean that our net worth will always go up. Some months it will go up and some months it will go down. The goal is to see an upward trend over time so that we are able to meet our financial goals.
OUR FAVORITE TOOLS
While we track and report our net worth updates for the purposes of our blog using a basic spreadsheet and powerpoint, we also having been tracking our net worth using a free app for years.
Personal Capital is a free tool that connects your bank accounts, investments, credit cards, loans, you name it all in one place. It automates the whole process of checking your net worth. And it keeps great historical information that we refer to all of the time. It even tracks your home’s net worth. You can try it out for yourself with a free Personal Capital account.
We also use a simple budget spreadsheet to keep track of our monthly expenses. Budgeting is essential and helps us stay on track with our financial goals.
OUR DEBTS: $544,400 (-$400)
This is where we list all of our debts aside from our student loans. We talk about those in a separate category down below.
Though we have focused on debt pay off in the past, for 2018 we decided to slow pay our debt. That is, we paid just the minimum payments every month. We had other financial priorities we were focusing on this year like increasing our college savings for our daughter–who happened to start college two years early.
CAR LOAN $6,900 (-$200): We own two cars and one of them has a car payment. Our interest rate is 2.74% and we have less than two years of payments remaining. We include the value of both cars down in our assets and the debt associated with them up here. That way we are including both the asset and the corresponding liability in our net worth calculations. Because we round our numbers (for privacy) the month over month decrease is a bit lower than normal.
A/C LOAN $4,000 (-$100): When we bought our house we knew that it was going to need a lot of work. Replacing the thermostat was first on our list. We are able to score a sweet five-year zero percent interest financing deal so we replaced the HVAC in our home–the A/C unit, the furnace (an ancient oil heater), and the water heater. We have about two years of payments left.
401K LOAN $11,100 (-$100): We took out a loan from our 401K three years ago to use as the downpayment on our current house. You can read more about why we decided to take out a loan on our 401k here. The loan is currently on a 15 year repayment schedule but we are on track to pay it off in eight years. It has a 2% interest rate that is paid directly to us. So, yes, we are paying ourselves 2% interest.
MORTGAGE $544,400 (-$0): We bought our house three and a half years ago with a 30 year mortgage at 3.5%. Thanks to rounding it doesn’t look like we paid anything on it this month, but I promise that we did. At this point we have no intention of trying to pay our home off early.
OUR STUDENT LOANS
We both went to law school and have the student loans to prove it. We are both currently on income-based repayment plans and are both participating in Public Service Loan Forgiveness. We anticipate that Joseph’s loans will be discharged in another 32 months and that mine will be another 71 months.
OUR ASSETS: $953,500
For our assets, we only consider the big ticket items that we own that we could sell for money. We know that the value of all of the things that we own would boost our net worth but we like to keep things simple and realistic.
OUR HOUSE: $630,000 ($0): We use Wealthfront’s home value projections to estimate the value of our home. We also stay on top of the prices houses are going for around us so we feel pretty confident that the estimate is in the ballpark. Our house is in a great school district in the Washington, D.C. area and is right in the middle in terms of price for our neighborhood. Of course we do still have a mortgage so our net equity is much lower.
OUR CARS $20,000 ($0): We have a 2012 Dodge Journey ($8,000) and a 2015 Honda Fit ($12,000). We pull their value from Kelly Blue Book every quarter or so. They continue to depreciate but the amount has slowed quite a bit. One of the cars, the Fit, still has a car payment which we account for up in the debt section.
INVESTMENTS AND SAVINGS $303,500 (-$14,900): This category includes all of our retirement accounts and our HSAs. It does not include our emergency fund or our childrens’ savings and college investments. Our investments took quite a hit this month along with everyone else's. Still, it’s nice to see that we’ve put away another hundred thousand in savings. Hopefully we can keep that three there even as the market drops.
OUR CURRENT NET WORTH: $15,500 (-$14,500)
Although we experienced quite a bit of a drop in our net worth this month, it’s all about perspective. We started out this year with a negative net worth. -72,000 to be exact. So that fact that we even still have a positive net worth at all is just so thrilling. We know that over time this number will continue to climb.
THOUGHTS ON OUR DECEMBER NET WORTH UPDATE
Our net worth has increased $86,000 this year!
Even though the market isn’t doing so well lately, we’re still very happy with the progress that we made this year. Frankly, this was the first year where we didn’t really have to pay attention close attention to our finances because everything ran on autopilot. We weren’t aiming for any audacious financial goals like the year before where we worked to pay off $30,000 dollars worth of debt in five months and also cashflow a family vacation to Singapore.
Despite that, we still were able to increase our net worth by over $87,000 and to be net worth positive for the first time in our adult lives. It’s a really exciting milestone!
But we also know that it’s just the beginning. Building wealth is kind of like that. Which is why we put so much emphasis on creating a happy life that lets you enjoy the journey along the way.
We have some big plans for 2019, some pretty bold goals. If you are curious, you can check out our 2019 family budget spreadsheet for all of the details.