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Tracking Personal Net Worth


frugalchief
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Hey all,

 

Newbie to the forum, so this topic might have been discussed by now.

 

I've started tracking my family's net worth, assets, liabilities, investments as if I was running My Family, Inc.  Does anyone else do this?

 

Curious of anyones insight on what they look at, what an average return would be?  Of course the higher the better.

 

I'm just in the beginning of my "real world" life (only 26 yrs. old), so I'm having some good "returns" right now since there isn't a lot of numbers to average out.

 

I've always felt the more I track my personal finances as if it were a business, the better off I would be.  I'm watching the pennies, spending wisely, and investing as much as possible to grow net worth.

 

Anything specific ya'll track?  Any other suggestions...?

 

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I'm 26 too and I've been doing this for a few years now.

 

I have a spreadsheet that tracks my "balance sheet" and I update it every 2 weeks. I keep track of three things, the balance sheet, investment returns, and ordinary income. At the end of the year, I sum up what happened that year in a paragraph. Each year's paragraph gets added to a running word document. My idea is that over the years I'll be able to go back and catch a little snapshot of what happened that year and the financial results. I've come to really enjoy the process.

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I have been doing this for about 25 years. I have two words of advice 1) try not to worry about the day to day fluctuations - I calculate net worth each month end but try to focus on year to year changes and 2) set goals just like a business does.  ie.  $100,000 by age 30 etc...

 

Best of luck

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Try out one of the personal finance online tracking sites (I'm 27 for reference).

 

After you enter your bank accounts/brokerage accounts, Mint tracks all inflows and outflows allowing you to categorize and tweak as necessary. It is an incredible online application.

 

https://www.mint.com/

 

Produced by Intuit, and allows you to track net worth, expenses, income etc....

 

I would highly recommended it after using it for over 3 years.

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I have an excel spreadsheet and I track it at the end of every month. It's kinda neat seeing how much it goes up month to month...and then 2008 happened. Not fun there.

 

Two times a month though, JBird? Man, and i thought I was pretty hardcore. haha

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Try out one of the personal finance online tracking sites (I'm 27 for reference).

 

After you enter your bank accounts/brokerage accounts, Mint tracks all inflows and outflows allowing you to categorize and tweak as necessary. It is an incredible online application.

 

https://www.mint.com/

 

Produced by Intuit, and allows you to track net worth, expenses, income etc....

 

I would highly recommended it after using it for over 3 years.

 

x2. The investment section can be a little weak, so I primarily track investments via Excel and leave everything else to Mint.

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I've been doing this for several years. Update once a month in a large excel spreadsheet. I follow a bunch of different metrics (monthly, quarterly, LTM, since inception, and annualized since inception) but the most important for me are:

 

change in assets

change in net worth

change in liquid net worth

 

cash to monthly expense ratio

liquid assets to monthly expense ratio

 

breakeven income (income needed to cover current run rate expenses)

 

I account for all deferred or unpaid taxes on unrealized gains as well, think a lot of ppl miss that

 

At your age, net worth returns are really dependent on income level.

 

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Personal Capital (www.personalcapital.com) is my favorite tool and its free. It includes net worth, investment tracking, investment analyzers, spending tracking, and income.

 

http://dreamscashtrue.com/wp-content/uploads/personal-capital-review-dashboard.jpg

 

http://www.moneyunder30.com/images/2013/05/personal-capital-cash.jpg

 

http://dreamscashtrue.com/wp-content/uploads/personal-capital-review-performance.jpg

 

 

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Personal Capital (www.personalcapital.com) is my favorite tool and its free. It includes net worth, investment tracking, investment analyzers, spending tracking, and income.

 

http://dreamscashtrue.com/wp-content/uploads/personal-capital-review-dashboard.jpg

 

http://www.moneyunder30.com/images/2013/05/personal-capital-cash.jpg

 

http://dreamscashtrue.com/wp-content/uploads/personal-capital-review-performance.jpg

 

Does that net out deferred taxes? If not, it's not "net" worth!! Really a pet peeve of mine

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I've been using Quickbooks for about six years.  It's the same software most small businesses use.  I track all of our expenses so it works really nice.  The software creates an income statement, balance sheet and statement of cash flows.  Plus I can reconcile my bank and credit card statements which is handy.  A CPA friend suggested I go this route and I'm glad I did.  It's probably not worth it though unless you're inputting all of your expenses.  If you want to just track account balances, there are better programs. 

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The problem with these online tools is they can't handle equities if they're not US listed, or if they're OTC. 

 

I check our net worth maybe once a year.  I'm not even sure why this is something you need to update often.  Our savings are stable, we are paying down our house, and I'm focused on longer period portfolio returns.  As long as we keep saving and the portfolio does well over time my net worth will grow.  I'm not competing with anyone so I don't see why I'd need to know twice a month or more often.

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Thanks for all the input.

 

I do use Quickbooks for all my accounting, then summarize some key figures after my monthly reconciliation in a Google Spreadsheet.  I feel like my life was lost without QB....I'll ponder on some figures monthly to see if I haven't been disciplined in a certain area, so I don't let it get out of control.

 

I'm not eager about watching daily, weekly, or quarterly results...do care more about annual results.  B/c of years like 2008, I'll probably look at it more over a 5 year rolling basis.  Watching the compounding of BRK over almost 50 years makes me strive to attain at least 20% annualized on net worth...my only competition is the market and increasing our earnings (which is parlayed into savings/ investments) to make that happen.

 

 

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Guest longinvestor

Very interesting topic, especially to this crowd,. Most here are likely to have larger and growing net worth. I'd venture to say that those following the herd are likely worried more about this than knowing what it is or tracking it.

 

I'll admit, it is by far the bigger part of the chatter inside my head than anything else. Before I got into value investing, it almost did not matter checking what it was, since I knew it was not going up! Without kidding myself, knowing that my net worth is secure and going the right way is priority #1. Then what? The thought "how much is enough" is uppermost. I'm finding the answer from outside of finance/investing/numbers. It is a very relative thing and I'm convinced that the spiritual mooring around what I need versus want is the answer. Balancing the practical and spiritual is something I'm a curious student of. Why I admire Buffett's thought on this subject: "I have way more than what's of utility to me". Call me a wide eyed fan boy or anything like that, I owe one to Buffett for teaching this important life lesson. Besides, he is quick to point out that people with lesser means give away to the point of giving up something useful to them (ice cream for kids). The most touching stories I've read about have been ordinary folks tithing during the financial crisis, from unemployment checks etc. I give away, regularly, more now than at any time in my life because of these lessons and with a sense of security. Knowing how to compound is something society should benefit, perhaps is my duty, especially as I look around me and find people worried/making mistakes with investing. Close friends of mine are simply not in the same place that I am in. Working on that but it is slow going.  The relationship with money is perhaps just as important as all other relationships in life.

 

 

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I check our net worth maybe once a year.  I'm not even sure why this is something you need to update often.  Our savings are stable, we are paying down our house, and I'm focused on longer period portfolio returns.  As long as we keep saving and the portfolio does well over time my net worth will grow.  I'm not competing with anyone so I don't see why I'd need to know twice a month or more often.

 

I do a quick net work calculation ~1 time per year. Since a significant portion of our net worth is still investment real estate, there is real uncertainty to the values on the asset side.

 

To those doing this more often:

 

Are you changing actions you take in your life because you have this information?

 

What insights have you gained from the process?

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I'm finding the answer from outside of finance/investing/numbers. It is a very relative thing and I'm convinced that the spiritual mooring around what I need versus want is the answer. Balancing the practical and spiritual is something I'm a curious student of. Why I admire Buffett's thought on this subject: "I have way more than what's of utility to me". Call me a wide eyed fan boy or anything like that, I owe one to Buffett for teaching this important life lesson.

 

I couldn't agree more.  I've been a follower of WEB since college when I discovered what BRK actually was.  I've also been a listener and follower of Dave Ramsey since just before college.  So I've had these conservative fiscal principles beaten into my head (luckily) before I got out of college.  I have friends my age (mid-20's) who I've briefly touch on the subject of getting out of debt and investing their hard earned money.  I spoke with one recently who just bought a new car for $30k+, all financed of course (and that's almost their 1 yr salary...no savings, no investments).  They are in the mindset that b/c everyone else buys new cars every few years they have to too.  What's worse, is they want to always have a car loan b/c they want to drive a nice car.  I guess it's a different mindset and way of thinking, but I see those car payments being worth 10's if not 100's of thousands in a few decades....hope it was a nice car!  I realize I can't change everyone, value investing is a unique mentality that very few can grasp.

 

Ramsey teaches consistent investing for retirement, and of course living a debt free life.  Much of what WEB talks about.  Ramsey says save X per month, compound by Y%, for Z years = $$$$$$$$.  Apart from the future returns, it's the simple rule of consistently saving and investing to have those results.

 

While I've run calculations on what I should be saving monthly for my retirement, the future is unknown.  I'm guided, but not dependent, on the recommended dollar amount I must save each month, but further guided by how I can exceed my expectations/goals later in life (always better to have more and not need it, then need it and not have it).  There's no guarantee I could compound my net worth at 20% for the next 50 years, but I'll darn try to!  If that goal became reality, I would be happy because I could give 99% of it away and be very content with what's left.  Even that 1% would be more then needed.  It is definitely a spiritual journey...I'm managing God's money for Him.

 

 

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To those doing this more often:

 

Are you changing actions you take in your life because you have this information?

 

What insights have you gained from the process?

 

Monthly snapshots allow me to visualize if I've stayed on track, and re-analyze and correct if needed.  I'm much more focused now that I can compare today's numbers to the last few years results.  For me, if I can't visualize my goal, I'll be running around in circles "hoping" it happens.

 

I hate debt too, so watching the mortgage get knocked down is exciting.  Seeing that liability number get smaller gets me more energized.

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I know the ball park net-worth and the general trajectory.  That's enough.  The idea of tracking monthly or quarterly in a spreadsheet seems weird to me.  I closely track thing's I directly control (bank accounts and investments), but leave the rest (pension value, home equity, retirement accounts, etc.) in the roughly right pile.  I look at them from time to time, but I don't specifically account for them in a spreadsheet or other calculation.

 

To me the number doesn't matter, it's the trajectory and the implications of where it ends by the time I need to retire. 

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I check our net worth maybe once a year.  I'm not even sure why this is something you need to update often.  Our savings are stable, we are paying down our house, and I'm focused on longer period portfolio returns.  As long as we keep saving and the portfolio does well over time my net worth will grow.  I'm not competing with anyone so I don't see why I'd need to know twice a month or more often.

 

I do a quick net work calculation ~1 time per year. Since a significant portion of our net worth is still investment real estate, there is real uncertainty to the values on the asset side.

 

To those doing this more often:

 

Are you changing actions you take in your life because you have this information?

 

What insights have you gained from the process?

 

Doing actual vs what I've budgeted for (a variance analysis, if you will) is the big thing. In the plastic society we live in, it's pretty easy for a few $10-15 lunches (or $20-30 dinners) to add up quickly. Net effect is I'm able to plow more of my income back into my investment funds.

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I've been tracking mine for a while.  One thing I like to do is compare the net-after tax income with the amount of asset change I have in a year.  Initially, it was a savings rate, but since most of my assets go up on their own, it has become a weird hybrid measure.  I've been over 100% for a few years now (helped a lot by investment returns).

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I usually know it within a few percent unless there's been a lot of volatility.  It's good to have a decent idea of it so you know how to size positions if nothing else, but I have no interest in calculating it too often.  If it helps other folks stay motivated then I suppose  it's good for them.

 

I've made it a point to compute the look through earnings and net assets of my holdings once a year.  I got the idea after reading the letter Buffett wrote to Katherine Graham about their pension plan.  I think it helps with my mindset to spend more time on this and less on market values.  As long as I consistently grow my equity and earnings the net worth should eventually follow.

 

I also  keep a spreadsheet of my fixed expenses, and calculate the deficit between that and my look through earnings, and try to come up with ways to reduce it from both ends

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Ramsey teaches consistent investing for retirement, and of course living a debt free life.  Much of what WEB talks about.  Ramsey says save X per month, compound by Y%, for Z years = $$$$$$$$.  Apart from the future returns, it's the simple rule of consistently saving and investing to have those results.

 

Dave Ramsey is good, but conventional.  Mr. Money Mustache is better.

 

http://www.mrmoneymustache.com/2013/02/22/getting-rich-from-zero-to-hero-in-one-blog-post/

 

Monitoring liquid net worth is important, but MMM recommends giving equal, if not more, attention to your expenses.  Once your savings reach about 25X your expenses, you can retire from your day job (in other words, 4% annual withdrawal rate from your savings to maintain your lifestyle).  Therefore, the smaller your expenses, the quicker you'll be able to retire. 

 

So consider being an unconventional saver by radically cutting your household expenses, and I wouldn't be surprised to see you retired by age 35-40.  This goal would be possible if you were only index investing.  You're already unconventional enough to subscribe in value investing.  Best wishes. 

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Monitoring liquid net worth is important, but MMM recommends giving equal, if not more, attention to your expenses.  Once your savings reach about 25X your expenses, you can retire from your day job (in other words, 4% annual withdrawal rate from your savings to maintain your lifestyle).  Therefore, the smaller your expenses, the quicker you'll be able to retire. 

 

So consider being an unconventional saver by radically cutting your household expenses, and I wouldn't be surprised to see you retired by age 35-40.  This goal would be possible if you were only index investing.  You're already unconventional enough to subscribe in value investing.  Best wishes.

 

Thanks for the advice cobafdek.  I'm frugal as it is and try to cut expenses as much as possible, just have to get the wife on board 100%!  ;D

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+1 for personal capital. I'd also add that while it doesn't perfectly track non-US equities, it does a good job of keeping track of your account balance, so the number in your investment account is accurate. To account for this I keep a separate google spreadsheet to track my equities. I have yet to discover a tool that is as good as a custom spreadsheet for tracking equities.

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