NET WORTH UPDATE

Editor: Crass Cash

I've been tracking this since 2010 and I should have been tracking it my entire life.  The other problem is that I used to only track it on my birthday and January 1st.  I think it truly is best to do it once a month.  I got the idea from reading Rich Dad Prophecy, in which his Rich Dad advocated him doing such a thing in case there was a mistake, then the individual could change it quickly.  

Ok, so you remember the net worth formula right?  Assets - Liabilities = Net worth just like it's shown above.  So here is how it's broken down for the end of March. 

Assets: $1,125,941
Real Estate - $853,000
Retirement accounts - $194,613
Brokerage - $69,172
Cash equivalence - $5,530
Other - $3,626

Liabilities: $414,704
Real Estate - $414,704

Net Worth:  $711,237

From a month ago this was a substantial change of 2.3%.  I only started keeping track of it on a monthly basis just one month ago, so I can't pin point it from a year ago.  However, from the beginning of 2013, it's increased by 16.5%.  This is quite good and I'll definitely take it.  A consistent increase of 1% per month would be awesome! It's very doable from what I've seen from other bloggers and also there's nothing extraordinary about it.  

Take a look at the blogger milliondollarjourney.com to see how his changes each month.  He has almost 8 years worth of data.  Even during the down turn in the years 2008 to 2009 his was still able to accumulate money on a monthly basis (usually).  He's married, so it shows you how much faster you can reach a million dollars when you have two thrifty people living under one roof.  His goal was to be a millionaire by the time he was I think 35, which is at the end of 2014.  He's very close to it, so he should be able to easily do it before then.  His net worth on 1/1/07 was about $200k and he'll be a millionaire in less than 8 years from his starting point.  Excellent work considering he weathered the Great Recession.  It should also be noted that I don't think he nor his wife ever made much more than say $60,000 each.  I think he's an engineer from what I can read, but engineers in Canada don't make nearly as much as in the states, which is why a lot of them move to the USA.  They had student loans and also started a family during this time period.  

The biggest and easiest contributor to increasing my net worth would be to pay down mortgage debt, which I have been trying to do with reckless abandon!  I hate debt!  Paying it down acts as kind of a reverse compounding mechanism.  The more you pay down the faster it will go down exponentially.  But I also recognize that if used wisely it can be a useful tool for increasing ones net worth, although it increases the risk of bankruptcy.  Dave Ramsey and Robert Kiyosaki would agree with me on this.  

If you want to see what it's like to increase your net worth exponentially than read about the early years of Warren Buffett.  That man (who eventually became the richest in the world) consistently increased his net worth at a staggering 50% per year for most of his twenties!  As a result he retired by the age of 28 with a paid for house and 3 kids.  If you know anything about compounding interest than you'll know that you don't need to start out with much in order to end up with a ton!  

A couple of notes on figuring your net worth in concerns to real estate.  I would first of all figure it based upon how much you paid for the real estate (historical cost), along with any cost that you also put into it.  I however, would not advocate figuring any sort of guesstimate as to price appreciation.  Only after you sell it could you change your net worth.  I know for a fact that the real estate bought over the past 3 years has appreciated in value.  I would never count that though.  Also I would not count your primary residence as an asset unless you derive cash flow from it, meaning maybe you have a home based business or you rent part of it.