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Net Worth Update

July 23rd, 2007 at 07:58 am

Well, there is no doubt we will make our net worth goals this year. Well I shouldn't say that. Unless something terrible happens, we will meet our goal. I read that you should grow your net worth by 1/2 of your annual expenses, every year, by the time you are 40. It then goes aggressively up from there, as your assets grow more on their own accord. I figure I am 30 and that is a doable/worthy goal. Puts me 10 years ahead.

So this year I started with a round goal of $25k increase in net worth. Our more basic living expenses run around $4k/month or $50k/year in round figures. So 1/2 of that is $25k/year. I found this a very aggressive goal but I was going to shoot for it.

As of today our net worth is up $20k, and with my profit sharing it will be up a good $25k easy this year. We've pretty much made it. I just noticed, so I am stoked. Not a lot of it is even in investments so there is not a lot that can set us back too far right now.

Our actual expenses probably run closer to $5k/month which would put us at a goal of $30k/year.

I think I will revise my goal to increase our net worth by $30k next year.

$4k Mortgage payments
$5k IRA
$5k Savings
$8k Profit Sharing
$5k Investment Returns
$3k Kids College

That puts us right at $30k. I think it is both a worthy and a doable goal. In case of a bad stock year though I think aiming for a range of $25k-$30k year is probably the way the go. As we could easily live on $25k-$30k in the course of 6 months. Then it goes for the net worth increase.

This is why having 2 incomes and not relying on them moves you ahead so fast... IF dh had a job we could save his entire wage. But since we don't rely on that income, looking at it in terms of our actual living expenses I think makes a lot more sense. If he made $10k/year after tax (not a huge stretch) that means we could technically increase our net worth by $40k with little extra effort. I am just motivated to do as good as we possibly can on my income alone, and then his income down the road will just be gravy. IT was gravy before, but it helped us get into a house and have more time with the kids. Now looking at the gravy of early retirement is pretty sweet. Better yet, just working less while we are young.

Not there yet, but I feel we are well on the way... I mean at this rate our net worth will be in the range of $700k at 40. That's with no raises and no second income. But most of the increase will be in cash and investments. IT is nice that we are no longer putting so much to our home; to watch our more liquid investments grow.

Actually, I think even more exciting, our non-house assets will probably hit $100k this year. Woohoo. In addition our cash paid into our house will hit $90k. It will mean we will have saved up about $190k in our young lives, for the most part. The sad thing is we have invested so badly in the past, our retirement assets are barely more than we have contributed (not a lot of appreciation, if any). That is going to change going forward. I can't even imagine where we would be today if we had invested better. Sometime you just have to live and learn though.

4 Responses to “Net Worth Update”

  1. Ima saver Says:

    I think you are doing great!!

  2. fern Says:

    MonkeyMama, you are SO on top of this stuff, good for you. I hadn't heard of that rule of thumb about increasing net worth by 1/2 your annual expenses; that'll be a good one to remember...

  3. Broken Arrow Says:

    Wait, did you say half your expenses?

    Hmm, my expenses are rather misleading because I currently have no rent/mortgage or car payments.

    However, even if I had theoretical rent & car payment that's 1k/month, I think I am still on target for myself. It's as aggressive as I can get it without breaking the piggy bank.

    Currently, my savings is roughly one third of my gross... That's before any investment gains....

    I wonder what that is overall? Oh well, whatever it is, I wish I was you instead though! 20-30k is massive!

  4. monkeymama Says:

    I think in your case you would have to consider rent or a mortgage, though you don't pay it now. The point is if you are saving 1/3 of your income, that should be producing some decent returns with time. I feel at the starting line now when it comes to returns, but those should grow largely for us in the next decade so we don't have to save so much to grow our net worth so much.

    Plus you have a huge savings advantage without mortgage or rent. Don't forget debt payments (to principal anyway) count as well. I am sure you are doing great.

    I put the link to that article in Fern's blog (comments). I checked it and that was for retirement at 72 or something. So what am I on track to? Retirement at 62? who knows.

    It is interesting though because before kids we figured $40k/year could support our lifestyle. It has grown since and kids are expensive, but still now we settle on $50k as our more basic living expenses, but $10k of that is health insurance. We are still pretty much on the same mark we were before. & being a second job away from upping our net worth $40k/year is crazy the more I think about it. Will we really need to live on anywhere near that much when the house is paid and the kids are on their own? I figure we have to hedge for inflation though. & HEALTHCARE which is already insane. So I will always aim high for worst case sceanrio.

    Then again we are in an insanely low tax bracket (a huge point) and have my boss's retirement contributions. I am trying to get to a point where we don't rely on these. Taxes will rise and I won't get an automatic 10% contribution to my retirement every year most likely, when he retires in a few years. I had just always hoped we had a second income by the time these things change. (Then again it's a catch 22 as second income would probably be taxed so heavily).

    I actually feel behind because I would really like to be putting about 25% of our income to retirement/savings and I think we are about 10% short on our own accord.

    If it makes you feel better I don't think our net worth has gone up in 5 years. We have catching up to do!

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