Author Topic: Net Wealth November!  (Read 4273 times)

shitzmagee

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Net Wealth November!
« on: October 27, 2014, 05:09:11 PM »
Bust out the stache wax! It's time to start prepping for the first annual (I think) Net Wealth November. The winner gets bragging rights until next November.

The challenge is simple...who can increase their net wealth by the largest percentage during the month of November (hint: it's not gonna be me). So it doesn't matter how big or little your stache currently is, it is strictly percent change in your net wealth. For those mathletes out there that's (1 Dec NW - 1 Nov NW) / 1 Nov NW x 100.

Standard definitions of net wealth, assets, and debt apply...that means your 0% interest credit card balance DOES count (debt is debt and no hiding it!).

For those that need examples:
Stache 1 - If on 1 Nov I have $1K to my name and I have $0 in debt, then my net wealth is $1K. Then on 1 Dec I have a total of $2K in the bank and still $0 in debt then my net wealth is now $2K. So for this challenge: ($2K - $1K) / $1K x 100 = 100% increase in your net wealth

Stache 2 - If on 1 Nov I have a fat stache of $1M in the bank, a house worth $250K, and a car worth $12K but I owe $200K on my house, $10K on my car, $2K in student loans, and $8K in credit card debt, then my net wealth is $1.042M (NICE!). But then in the month of Nov I only manage to lower my mortgage principal to $199K, my car loan to $11.5K, and my cc debt to $6K while my stache earned $10K, then my new net wealth is now $1.0535M. For this challenge: ($1.0535M - $1.042M) / $1.042M x 100 = 1.1% increase in net wealth.

Obviously stache #2 is much bigger than stache #1, but stache #1 grew by a much larger % so they win.

If you're down, post your NW on or about 1 Nov and then post again with your final numbers on or about 1 Dec.

Of course all of this in prep for Money Mustache March! which will be % increase in monthly savings rate...I know you're excited.

Let the savings begin!

arebelspy

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Re: Net Wealth November!
« Reply #1 on: October 29, 2014, 10:34:50 AM »
While measuring in absolute dollars is flawed towards people who already have a high net worth (their stache will earn them a large amount, assuming their investments are up for the month, and people who just earn more at their jobs can save more), this seems to me more flawed in the opposite direction: someone with a low initial net worth has it quite easy.

If I have a net worth of 1 penny and save 5000 for the month, my net worth is up 49,999,900% for the month.

Good luck beating that, person who's worth 100k, as you'll need to increase your NW to 50 billion in one month to beat me!

;)

I like the spirit of the challenge, but I think the implementation needs to be tweaked.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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Hannah

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Re: Net Wealth November!
« Reply #2 on: October 29, 2014, 11:58:51 AM »
Making up scores is fun!
what if there was a two part scoring rubric each part being weighted equally:

Part One: Investment Percentage- Out of 100% of your income for the month how much did you/will you "invest" (Ie if I made $2000 in Rent (after business expenses), $3900 from my job and $100 from selling on Craigslist  and $0 in Dividends my income is $6000; I will invest $3000 therefore my investment rate is 50%).

Definition of investment- Principal mortgage, principal debt, 401K/Roth/Post Tax Accounts/Current & Future Real Estate. Long term savings for stuff like insurance, cars, etc is not saving its deferred consumption.

50% out of 100= 50 points

Part Two: Investment ROI- How much money did your money make you? The investment ROI is a little tricky for me to conceive of because I want to not double count the investment percentage, but I am thinking something like how much money did your already invested money make for you in November, and then scale it with any return (for the month) greater than 5% worth 100 points, and

Beginning of Month
401K- 100K
Property Value 1 (less mortgage): 60K
Property Value 2 (less mortgage): 40K

Beginning of Month Value= 200K

End of Month
401K- 110K (less 3K contributions during month)= 107K
Property Value 1 (less mortgage): 61K (less 1K principal payment to mortgage) 60K
Rent Property 1: 1K
Property Value 2 (less mortgage): 41K (less 1K principal payment to mortgage) 40K
Rent Property 2: 1K

End of Month Value= 210K

(209K-200K)/(200K)= 4.5% return (in one month Great job!!!)

4.5/5=.9*100=90 points

Total Score for the challenge is 140/200

Thoughts? Criticisms?


shitzmagee

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Re: Net Wealth November!
« Reply #3 on: October 29, 2014, 03:58:29 PM »
While measuring in absolute dollars is flawed towards people who already have a high net worth (their stache will earn them a large amount, assuming their investments are up for the month, and people who just earn more at their jobs can save more), this seems to me more flawed in the opposite direction: someone with a low initial net worth has it quite easy.

If I have a net worth of 1 penny and save 5000 for the month, my net worth is up 49,999,900% for the month.

Good luck beating that, person who's worth 100k, as you'll need to increase your NW to 50 billion in one month to beat me!

;)

I like the spirit of the challenge, but I think the implementation needs to be tweaked.

You're right...I had a hidden intent with this challenge. I want the Bald Faces and Pencil Staches (of which there are many lurcking in the forums) to see that even though their gains might be significantly smaller in magnitude compared the Tom Sellecks that post regularly, their gains are definitely relatively more significant. If a challenge can motivate even 1 person (lurcker) to finally take the leap towards FI as a goal, then I'd consider this challenge a success.

Plus a challenge that favors the little guy over the big guy is definitely a plus every now and then for the self esteem ;)

arebelspy

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Re: Net Wealth November!
« Reply #4 on: October 29, 2014, 04:12:42 PM »
No doubt challenges to encourage people just starting out are great.

But this one, I feel is too slanted to someone with less net worth.  Basically whoever is closest to 0 to start (just got out of debt last month wins).

The closer you are to zero the easier this is.  Even if you just save 100, you'll beat someone who saves 5,000, as long as your NW is even 1k smaller, as long as you get as close to 0 as possible.

E.g. someone making 500,000 annually that has no net worth ($10 as of last month) but saves just $100 beats someone who makes 60k annual and saves all 5k they make that month (by selling things on craigslist and only spending that money), even if the second person has a starting value also very low (say 1k net worth).

Like I said, I love the idea, I think the implementation needs tweaking, because I think the contest as-is becomes "who has a networth closest to 0 as of Nov 1."  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Mrs. PoP

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Re: Net Wealth November!
« Reply #5 on: October 29, 2014, 04:53:36 PM »
No doubt challenges to encourage people just starting out are great.

But this one, I feel is too slanted to someone with less net worth.  Basically whoever is closest to 0 to start (just got out of debt last month wins).

The closer you are to zero the easier this is.  Even if you just save 100, you'll beat someone who saves 5,000, as long as your NW is even 1k smaller, as long as you get as close to 0 as possible.

E.g. someone making 500,000 annually that has no net worth ($10 as of last month) but saves just $100 beats someone who makes 60k annual and saves all 5k they make that month (by selling things on craigslist and only spending that money), even if the second person has a starting value also very low (say 1k net worth).

Like I said, I love the idea, I think the implementation needs tweaking, because I think the contest as-is becomes "who has a networth closest to 0 as of Nov 1."  :)

Absolutely - the ideal starting net worth would be $0.  Since then any non-zero gain would represent an infinity-%!  =)

marty998

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Re: Net Wealth November!
« Reply #6 on: October 30, 2014, 05:24:35 AM »

The challenge is simple...who can increase their net wealth by the largest percentage during the month of November.


Well I'm fucked.

$507,000 is my starting point. Feels odd writing that, only got $20 in my pocket (apologies to Macklemore).

What about the people who are below zero? How do you calculate a % gain for someone with a net worth of -$1 who then goes and saves $2?


shitzmagee

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Re: Net Wealth November!
« Reply #7 on: October 30, 2014, 03:20:56 PM »

The challenge is simple...who can increase their net wealth by the largest percentage during the month of November.


Well I'm fucked.

$507,000 is my starting point. Feels odd writing that, only got $20 in my pocket (apologies to Macklemore).

What about the people who are below zero? How do you calculate a % gain for someone with a net worth of -$1 who then goes and saves $2?

The denominator is supposed to be the absolute value or |Nov 1 NW|. For your example, it's (2-(-1))/|-1| x100 or 300%.

VirginiaBob

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Re: Net Wealth November!
« Reply #8 on: October 30, 2014, 03:32:42 PM »
Sweet - I just took out a loan equal to my net worth specifically for this challenge just so that I get to start at zero.  I plan on saving $1.   The limit as x->0 of 1/x equals infinity.  Therefore, I win.

arebelspy

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Re: Net Wealth November!
« Reply #9 on: October 30, 2014, 03:58:02 PM »

The challenge is simple...who can increase their net wealth by the largest percentage during the month of November.


Well I'm fucked.

$507,000 is my starting point. Feels odd writing that, only got $20 in my pocket (apologies to Macklemore).

What about the people who are below zero? How do you calculate a % gain for someone with a net worth of -$1 who then goes and saves $2?

The denominator is supposed to be the absolute value or |Nov 1 NW|. For your example, it's (2-(-1))/|-1| x100 or 300%.

That introduces a whole NEW set of problems.

Anyone with negative who ends up going to 0 has the exact same gain, regardless of how negative they started.

Example: someone with 1MM in debt (-1MM net worth) who pays it all off and ends with a $0 net worth ends with a 100% gain, same as someone who is worth -$1 and ends with $0.

Intuitively someone getting out of 10k in debt did better than someone getting out of 1k in debt, but not according to this formula.

Stuff like this isn't as easy as it seems, is it?   ;)

(We're not trying to be complainypants, it's just a fun contest, we're just teasing using math!)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

RWD

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Re: Net Wealth November!
« Reply #10 on: October 30, 2014, 04:02:42 PM »
Sweet - I just took out a loan equal to my net worth specifically for this challenge just so that I get to start at zero.  I plan on saving $1.   The limit as x->0 of 1/x equals infinity.  Therefore, I win.

What did you do with the money from the loan then...?

TeresaB

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Re: Net Wealth November!
« Reply #11 on: October 30, 2014, 04:06:42 PM »
Hmm. I'll play! My free trial of YNAB says that our current net worth is -$66,731.20. (I know that looks terrible, but all the debt is student loans. We only graduated in May and have paid off a little over $6k since then.)

Edit on 10/31: We just got a big reimbursement check that I had forgotten about. So in the interest of accuracy, I will fix the number: our current net worth is -$65,666.15.
« Last Edit: October 31, 2014, 10:27:14 AM by TeresaB »

VirginiaBob

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Re: Net Wealth November!
« Reply #12 on: October 30, 2014, 04:28:57 PM »
Sweet - I just took out a loan equal to my net worth specifically for this challenge just so that I get to start at zero.  I plan on saving $1.   The limit as x->0 of 1/x equals infinity.  Therefore, I win.

What did you do with the money from the loan then...?

Burned it, of course silly.  I hope I'm correctly assuming that the grand prize for this contest is $1 million, which will make it all worth it.

Workinghard

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Re: Net Wealth November!
« Reply #13 on: October 30, 2014, 05:07:28 PM »
Guess I won't be able to play. Reading this thread gave me a migraine. :-)