Graph Your Net Worth
Hello All,
As you probably know, outlining your net worth can be an useful way of tracking your overall financial picture. A couple of years ago we decided to make a simple chart showing our overall level of net worth. It is shown here because it illustrates a couple of important points about personal finance. So, briefly:
1) Keeping Track Makes The Process Real: As you can tell from the chart below, our financial growth has been about $50,000 a year. While this is not a lot, it does indicate that saving and investing in real estate and stocks is an effective method of building wealth. This is important because it is quite one thing to read about money in a book and another to see it working in real life for you personally. Graphing makes the saving and investing processes real because you can see your wealth increase or decrease.
2) Keeping Track Helps To Determine What Works: You cannot tell from the graph below, but the DINKs bottom line growth has been due partly to stocks and good debt management. For example at the end of 2007, the graph was flat lining so we started putting money into income stocks and maxing out Miel's 401k. Interestingly enough, August of 06' was the time we realized our adjustable rate mortgages were impacting us. By adding up the new worth figures we knew that Washington Mutual's monthly $50-100 increase in ARM payments was eating our lunch. While these may seem like common sense, the processes of doing the net worth calculations greatly illustrated what was helping or hindering the wealth building processes.
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6 comments:
I found a nice little site for tracking your net worth over time - http://www.networthiq.com. It allows you to compare yourself against the average entries in your income range, age group, education level, etc.
I've been reading your blog for awhile and overall enjoy it. I find this statement "..Our financial growth has been about $50,000 a year. While this is not a lot.." to be very pessimistic. $50,000 per year growth is huge, more then 10% of your net worth. What are you expectations given the economy since 2001? Hasn't the historical financial rule of thumb been 8% return a year? You should be thankful for what you have, that you are increasing net worth yearly versus reversing and losing money. You two are extremely smart and finance savvy but have unrealistic expectations on how fast your money should grow. What happened to slow and steady versus fast and now?
Hey Anon,
Thanks for the words of encouragement. You are correct that 50k growth is a very good return when you measure it against the S&P 500 or other overall indices of business equity growth.
I guess sometimes its easy to get discouraged about how things are going, so I appreciate the encouragement and realty check!
Best,
James
Anon - For what it's worth, I think I'd have to agree with you on there something wrong with thinking that $50k a year isn't good growth. I think part of that is James' high expectations of himself, but also a twisted sense of modesty as well.
I think it is pretty damn incredible. The biggest thing to keep in mind is that up until the last six month, our gains were made with only one income of around $60k. James' student stipend and cash throw off from out dividends did help to take care of expenses though.
Just goes to show what good old saving will do for you!
Cheers,
Miel
oh hell yeah, i'm totally w/ Anon on this one! Good job guys :)
I've only been tracking my net worth for a few months now, so i'm def. interested to see how it plays out by the 1-year mark.
while it's not always "fun" watching it go up and down, and least i always know what's up.
i use NWIQ as layne suggests. i wish they would update the site some more to be more in tune with the times but it does graph and allows me to use it on the internet as opposed to something like quicken
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