Author Topic: 2 years of tracking net worth  (Read 5932 times)

Coloradostache

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2 years of tracking net worth
« on: July 01, 2014, 02:55:24 PM »
Today marks 2 years of tracking my net worth. Not that that is really a big deal, the bigger part is that it forced me to set goals and track my money, something I hadn't previously done.

So in two years, I've increased my NW from $297k to $567k (+$270k), of which $332k is home equity. I only recently (jan 1) started tracking my expenses and am working on improving them. Once I get those down some more, I should be well on my way. Long term goal is to retire in 10 years at 43.

Only regret is I didn't start tracking this 10 years ago!  Better late than never I guess.

Bob W

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Re: 2 years of tracking net worth
« Reply #1 on: July 01, 2014, 03:18:58 PM »
Dear Coloradostache,

Extremely nice job at 33!   You must be making a very decent income. 

A few questions --

1.  What did you use to track?  Paper,  program,  other?

2.   Did you use the formula of subtracting debt from assets? i.e. Home value minus amount owed?

3.  What are your rough percentages in asset classes?   25% stocks, 10 % bonds,  55% real estate?

4.  If your net worth is 567K,  and assuming this accounts for all debts,  you are well past what many readers here would consider FI.    In my beautiful Ozarks country that would be enough for a very good lifestyle at a 4-5% withdrawal.   I can see adding another 200K over the next 2 -3 years but the question is why wait 10 years to retire?   I know this is individualized but just curious.  Probably has something to do with children, educational expenses etc?

5.  Assuming you will not make lifestyle changes, what is your FI number? 

6.  Have you considered "supercharging your home equity"  by refinancing a large chunk and investing that money in diverse funds averaging 10% returns with low betas?   With a 4% home loan and tax deductions you could be earning an additional 25K per year.  I know that many readers here prefer the slower less diversified paid off mortgage route.  So I'm not arguing, just interested in your thinking process. 

7.  Are these shared numbers between you and a partner? 

Just curious,  feel free to share as you desire.

Special Thanks,

Bob Werner


Coloradostache

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Re: 2 years of tracking net worth
« Reply #2 on: July 01, 2014, 03:42:11 PM »
Thanks for the reply Bob.

I used excel to track. I'm an engineer, so it's second nature. I tried a few other programs, but found excel easy to customize to my exact situation.

Yes, debt less assets. More specifically, $645k house, $313k mortgage, and the rest in 401k (136k), brokerage account (10k, just started playing), 60k in vanguard account and $30k in a collector car.  I didn't include my current vehicle as an asset though.

10 years is a moving target. I mentioned I only started tracking expenses 6 months ago, and that was in an effort to both reduce my spending and to get an annual cost of living number.  I figure I'll need another year of tracking to know what I consistently spend on a monthly basis and I can look at how long I want to work based on that and figure out my FI number.

These are single numbers, I live on my own.

With regards to the mortgage, I've been considering a number of things. My house is face punch worthy, and I've been looking into downsizing. I'd like to move to a larger piece of land and smaller house. I figure I could buy land and build for around 450k, which would leave me with a much smaller mortgage, and still equity to invest. My only debate is commute. I have an easy commute now and this would require a longer one. I'm debating holding off on this until I stop working. Right now, I have 13 years left at 2.875%. I'd love to hear some more ideas on this.

Income has been good. I finished my MBA 2 years ago, and salary jumped from 158k in 2012, to 211k last year.

dragoncar

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Re: 2 years of tracking net worth
« Reply #3 on: July 01, 2014, 06:00:38 PM »
Cool, I'm at 4.5 years of tracking now, and in that time my net worth has grown 7x.  Like you, I'm probably FI in a lower cost of living area, but will probably settle here only because we are fortunate enough to have high enough income.  I'm definitely less obsessive now about updating my monthly excel sheet (although I do it, of course!)

Coloradostache

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Re: 2 years of tracking net worth
« Reply #4 on: July 01, 2014, 09:51:35 PM »
Cool, I'm at 4.5 years of tracking now, and in that time my net worth has grown 7x.  Like you, I'm probably FI in a lower cost of living area, but will probably settle here only because we are fortunate enough to have high enough income.  I'm definitely less obsessive now about updating my monthly excel sheet (although I do it, of course!)

Wow, 7x in 4.5 years. Impressive.

My next two milestones I'm chasing are more in investments than home equity, then more in investments than my mortgage balance.

I'm torn on the housing situation. I'm not overly motivated to pay any extra at 2.875, but the idea of downsizing and eliminating primary residence mortgage and getting into an investment property is appealing.

dragoncar

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Re: 2 years of tracking net worth
« Reply #5 on: July 01, 2014, 11:01:56 PM »
Cool, I'm at 4.5 years of tracking now, and in that time my net worth has grown 7x.  Like you, I'm probably FI in a lower cost of living area, but will probably settle here only because we are fortunate enough to have high enough income.  I'm definitely less obsessive now about updating my monthly excel sheet (although I do it, of course!)

Wow, 7x in 4.5 years. Impressive.

My next two milestones I'm chasing are more in investments than home equity, then more in investments than my mortgage balance.

I'm torn on the housing situation. I'm not overly motivated to pay any extra at 2.875, but the idea of downsizing and eliminating primary residence mortgage and getting into an investment property is appealing.

Haha, 7x sounds good until you realize it just means my net worth totally sucked in year 1 :-)

ch12

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Re: 2 years of tracking net worth
« Reply #6 on: July 02, 2014, 10:07:11 AM »
My house is face punch worthy, and I've been looking into downsizing. I'd like to move to a larger piece of land and smaller house. I figure I could buy land and build for around 450k, which would leave me with a much smaller mortgage, and still equity to invest. My only debate is commute. I have an easy commute now and this would require a longer one. I'm debating holding off on this until I stop working. Right now, I have 13 years left at 2.875%. I'd love to hear some more ideas on this.

Income has been good. I finished my MBA 2 years ago, and salary jumped from 158k in 2012, to 211k last year.

http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/

You may want a smaller house, but look for one near work. Stay where you have an easy commute, then move after you retire. That's what Mr. Money Mustache did.

With your high income and high net worth increases, you will probably be ready before 10 years. Check the math, plugging in your income after tax.
http://networthify.com/calculator/earlyretirement?income=160000&initialBalance=567000&expenses=30000&annualPct=5&withdrawalRate=4

Bob W

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Re: 2 years of tracking net worth
« Reply #7 on: July 02, 2014, 11:08:45 AM »
Thanks for the reply Bob.

I used excel to track. I'm an engineer, so it's second nature. I tried a few other programs, but found excel easy to customize to my exact situation.

Yes, debt less assets. More specifically, $645k house, $313k mortgage, and the rest in 401k (136k), brokerage account (10k, just started playing), 60k in vanguard account and $30k in a collector car.  I didn't include my current vehicle as an asset though.

10 years is a moving target. I mentioned I only started tracking expenses 6 months ago, and that was in an effort to both reduce my spending and to get an annual cost of living number.  I figure I'll need another year of tracking to know what I consistently spend on a monthly basis and I can look at how long I want to work based on that and figure out my FI number.

These are single numbers, I live on my own.

With regards to the mortgage, I've been considering a number of things. My house is face punch worthy, and I've been looking into downsizing. I'd like to move to a larger piece of land and smaller house. I figure I could buy land and build for around 450k, which would leave me with a much smaller mortgage, and still equity to invest. My only debate is commute. I have an easy commute now and this would require a longer one. I'm debating holding off on this until I stop working. Right now, I have 13 years left at 2.875%. I'd love to hear some more ideas on this.

Income has been good. I finished my MBA 2 years ago, and salary jumped from 158k in 2012, to 211k last year.


Very impressive!

I'm thinking I'll hold off on the face punch and pat you on the back instead.   

My idea on the home would be to put it on the market at what you think would be a relatively high price and be willing to wait 1 or 2 years till it sells.     

You will have a 10% tax hit on the equity plus a sizeable real estate commission if you decide to go with a broker.   

In that time you can decide what your really want to do!    You should be closing in on 700K by that time as well. 

I find that homes own you and that you don't necessarily own them.   

For example, a home impacts your decisions about careers and locations.   Say you were offered a year long gig somewhere you really have always been interested in and it paid more.   Your home would be a drag on that decision.

That's just me,  some people are absolutely wed to their homes.  It just seems for a single guy you could rent a really nice place near to work (walk or ride)  just about anywhere on the front range for well under your current (very low) mortgage.   

Let's say you ended up with 600K after the home is sold ---- your average return in some nice low beta funds would be around 60K per year.    Your housing cost might be 20K.  A net of 40.   If you were within biking or walking distance from the job it would be scandalous how much you could save each month.  Basically, it would be your entire pay check. 

For a little comparison --  My wife and I live in a very nice 3,000 sq ft home in a lake community at the Ozarks.  Our per person spending is around 20K per year.   It is a very nice lifestyle.    There are many places in the states and around the world where 20K = nice life. 

Good luck my friend! 

usmarine1975

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Re: 2 years of tracking net worth
« Reply #8 on: July 02, 2014, 01:22:45 PM »
I have started using Quickens Rental management software.  The beauty of it is that it tracks spending, expenses, income and separates our rental expenses from personal.  The reason it is pertinent to this post is that it also tells me what my Net worth is without me having to alter all the figures myself.  It is linked to our accounts, retirement, bank etc...  I just open the program and hit update and I have my new NW number which Right now is about 250k.  Two or three years ago we sat at just above 60k.

hybrid

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Re: 2 years of tracking net worth
« Reply #9 on: July 03, 2014, 10:12:01 AM »
Nice job OP. I'm exactly one year behind you, I started tracking net worth monthly starting June 30 2013 and just passed my first anniversary - very gratifying.

How did you come up with you home value, and did you adjust it any during the year?

Coloradostache

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Re: 2 years of tracking net worth
« Reply #10 on: July 03, 2014, 10:58:40 AM »
Thanks Hybrid.

I had been tracking everything with the original purchase price of the house (545k in 2010), until last month when I started looking into downsizing. In order to make a realistic decision on what made sense with housing, I had to put an estimated current value on it. The number is based on zillow and recent sales, which both seem to line up. I'll likely re-evaluate that number on an annual basis.

I've read a lot of posts asking how to best incorporate housing into NW, and I'm just doing what makes sense for me. In my case since I plan to downsize (3400 sq ft, 1 dude), some of the equity will be freed up to invest after I do it, so I want an accurate number to base decisions on.

Jack

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Re: 2 years of tracking net worth
« Reply #11 on: July 03, 2014, 12:08:31 PM »
I'm torn on the housing situation. I'm not overly motivated to pay any extra at 2.875, but the idea of downsizing and eliminating primary residence mortgage and getting into an investment property is appealing.

Why would eliminating the primary residence mortgage be required to get into an investment property? It doesn't sound like you're having problems with cash flow or debt-to-income ratio.

Also, what kind of engineer are you? I look at your salary compared to mine and clearly, I'm doing something wrong.

Coloradostache

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Re: 2 years of tracking net worth
« Reply #12 on: July 03, 2014, 02:15:29 PM »
There's nothing holding me up on a rental property other than the high prices where I live. I'd feel better about it if my mortgage was paid off as I could offset the high cost better.

I'm in management in the natural gas industry. Been with the same company for 10 years, started at $49k.