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Net Worth & Other Interesting Links

February 7th, 2007 at 01:22 pm

Accounting Students Made a Profitable Choice http://accounting.smartpros.com/x56501.xml

Yes we did. LOL. Well I have already alluded to this many times. Starting pay in the industry has doubled in the last few years. Plus desparation for accountants means more bargaining power, more flex time, more working from home, etc. I know I have it good. What I have gotten out of this career is I can work a hell of a lot less for a decent wage - and that is nice. No matter what the pay I Was going to do it, but how hard I have to work is pretty relative to how the profession is going. I like the idea that I may be able to work part-time in the near future and bring in a wage to support my family rather well. On the flip side, we need more bodies. So I don't have to work too much. LOL. I can technically work 35-hour weeks all summer BUT not if I have to much work to do. Bummer...

http://www.thesimpledollar.com/2006/12/31/ten-ways-to-accele...

Just a really good article/blog.

& finally:

http://www.freemoneyfinance.com/2006/10/how_to_compute_.html

I found this one when trying to get a grasp on how much my net worth should grow on an annual basis. I know in the past I have been really stuck on how much cash we have and our house because it took so much blood, sweat, tears... But going forward I maybe can only save $10k/year or something, but when I look at the big picture like I Said yesterday, I think our net worth should go up $35k next year. Is this good or bad. I don't know. I think it is good, but looking for some general rles of thumb, some way to measure progress, etc. I think this will help me look at the big picture too and stay motivated, tracking net worth. The article above does a good job.

The jist is that you:

"Take your age and divide by 166. Then subtract fifteen hundredths (0.15). Finally, multiply the result by your age. The resulting number should be between zero and twenty. That number is how many times your current annual income you should be worth."

The article takes it a step above and says if your income is more than your expenses ( which it should be, right?) you can use your annual expenses instead of your income.

Article points out that it grows faster over time. By 30 you need to be at a 1, but then once you hit 40, you need to increase by 1 every 2 years.

Here's a graph of that calc. by age:

Age, Annual Spending Saved

30, 1
35, 2
38, 3
42, 4
44, 5
47, 6
49, 7
51, 8
53, 9
55, 10
57, 11
59, 12
61, 13
63, 14
64, 15
66, 16
68, 17
69, 18
70, 19
72, 20

For this I completely took the house out of the equation. It has a good year of salary/expenses cash sunk into it which I usually count at the least. But this calc is geared towards retirement. So if we retire in our house, where does that leave us. I am not counting it in my net worth. If I did we'd already be at a 7, or about 20 years ahead.

Take out the house and the mortgage, and puts us at a good 1 for age 30. Well okay then, I can hang. I am super stoked with this equation because I have been feeling like we could pretty easily move our net worth up 1 point in 2 years. On 1 income!!!! I guess that is a good place to be.

I really like that this calculation uses expenses instead of income. BEcause when playing with the #s, I tried to factor a 2nd income down the road. But it really makes it that much harder to save that entire income. Since that 2nd income has always been savings and gravy, it shouldn't really count towards this calculation because our living expenses should always be FAR less. If not, well that is another problem. When I factor that whole thing though we move miles ahead. In the next 10 years or so I guess we will move from 1 to 7 and this will put us where we should be in 20 years. & then if dh got a job at that point, then we skyrocket ahead even faster.

I still really really really do not see setting sights on retirement until 55 at the least, maybe later. But I think that is more the planner in me. I want to do so well, but I know any of many things can slow us down, so I don't want to get too ahead of myself. Even though we may be 10-20 years ahead, very quickly, I don't know if that will mean we will feel like we are ready to retire early. Plus I like working anyhow - LOL. But maybe we could work part-time as we age, etc. Maybe if something catastrophic happens we will be well prepared. Maybe if both boys want to go to med school, we can help. It should leave a lot of options.

I think our net worth will hit $1 mil by 40 - and that is counting our house. I Still haven't ruled out moving out of state to retire super young (or at least work a hell of a lot less...)

Anyway, ironically, the best thing this does for me is help me to set goals in a way that really moves us forward. This is ironic because the person who posted this blog completely discounted the point in the article that said a measure of wealth is having money in the bank to pay the mortgage but not paying it - wisely leveraging debt. I know this to be so true, and yet I still want to pay that sucker down in the next 15 years. I Want to put a big chunk to it. Looking at the net worth big picture I think I can talk myself into investing more money and watching it grow, and knowing I Can even more quickly invest that money and have enough in the bank to pay the mortgage, much faster than it would take me to pay the mortgage. & that is far smarter. HEck sometimes I wish I had a bigger mortgage when I look at it that way. LOL. I truly do. But overall I think tracking my net worth will help me more realistically move ahead financially, and not get stuck on 1 thing, on savings or debt, etc. I can really look hard at where we are at and what we need to do to move our net worth forward faster. & it will help me control my urge to pay down low-interest debt.

Well to truly motivate me I am going to look at the big picture without the house - as I aim for retirement goals and such. However, on an ongoing tracking basis I am still going to count payments to the mortgage because it motivates me. Heck this year i am going to knock $4k off that sucker just making the mandatory payment, rounded up to an even round number. I need the motivation for now.

5 Responses to “Net Worth & Other Interesting Links”

  1. zetta Says:

    I would very much encourage you to consider investing the money that you are currently putting toward extra principal payments into either a balanced or index mutual fund instead.

    I found a prepayment vs investment calculator that takes into account the advantage of the tax deductibility of interest.

    http://www.hughchou.org/calc/prepay_v_invest.cgi
    It was a big eye opener that I really had to go for some low assumptions -- 6% return, only $10 a month extra -- to come out ahead by prepaying the loan.

  2. zetta Says:

    Another advantage is that the mutual fund is liquid enough to be a backup efund, whereas once you prepay on the mortgage it takes a home equity loan to tap it -- I like the idea of 3 months in a money market and 3 months in a mutual fund.

    I'm gonna go post this info on the main board, too.

  3. baselle Says:

    The leveraging debt is kinda true, but it has to be controllable debt. Big Grin

  4. monkeymama Says:

    Thanks for the calculator - I will play with it. THat is what I need!!!

    My debt has always been very manageable and I Can now see how having a little more could REALLY help us. We are anti-debt to a detriment really. I am learning how to use it to our advantage. But that is part of the reason with things so tight we are moving ahead fast on our net worth - not a lot of debt to pay down overall - in comparison to our assets!

    I am not really considering paying down the mortgage much anyway until dh is working again - years ahead. & I have the feeling by then we won't see the point. I am paying $30 extra/month -which is a forced savings I Would get spent otherwise. LOL. So I Will stick with that. But more than that - whenever I have the urge I will try to remember mutual funds. Wink

  5. monkeymama Says:

    Hmmmm, the calculator is telling me to prepay prepay prepay. I am not sure how well it is factoring taxes either. I think I will have to make my own little spreadsheet. I Think the thing is our tax rate is very low so our investment returns about equal our investment rate (just going conservative) since we don't get much tax benefit.

    When we have the money to prepay we will be in a much higher tax bracket so I think it is skewed for now. My $30 prepay isn't hurting though that is for sure - Even $50 would be okay. I will have to get out the calculator when dh is bringing in thousands a month. I am sure then obviously investing will be better with the higher tax bracket and all.

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