On October 1, 2015, I created a spreadsheet for tracking our net worth broken out by our various accounts. While Mint has been tracking our technical net worth since Kyle and I got married and combined our finances, I consider our true net worth to be slightly different, and those differences were large enough last fall that I wanted a separate place to keep track.
(Our “technical” net worth is all our monetary assets minus all our debt – the standard definition, although we don’t include our property because it’s value is fairly minimal. Our “true” net worth, as I like to consider it, excludes from our asset list two of our savings accounts: charitable contributions and taxes. Since these savings accounts are simply keeping money that is in some sense borrowed from other entities, I don’t want to include them in our assets. The money in our charitable contributions account is money that we intend to give away but just haven’t yet and the money in our taxes account is money we expect to send to the federal government quarterly or yearly. The latter account did give us a sort of refund last year, at which point transferred the money to another account and started including it in our true net worth.)
When I report our spending each month, we always seem to be flirting with the bottom of our bank account. (This is not actually the case as we keep a large buffer in that account.) Did we overspend our available money or not? It seems like as often as we come in under budget, we go over budget, and it’s a little demoralizing. But tracking our net worth as a separate exercise gives a much different picture of our finances. Our net worth has gone up every single month in the past year due to our automatic retirement savings and usually increases in our investments as well. We’ve also seen net worth increases due to our savings goals such as our emergency fund and parental leave fund.
In the last year, our net worth has increased by over $40,000. That is a pretty decent fraction of the the total amount of money we’ve earned in the past year! It’s really gratifying to know that our net worth has been growing growing growing even as I’ve lamented our grocery spending or some other minutiae. Not bad for a year in which we conceived and birthed a baby! It’s easily the largest net worth increase we’ve had in the course of a year, which is remarkable considering that in two other years we received large monetary gifts from our parents.
About three-quarters of the increase is was in our retirement accounts, $1,000 was a reduction in my student loan debt, and the rest was in cash. Increasing our cash reserves to that degree without hardly even intending to (aside from bulking up our emergency fund) has made me realize that we could probably set another ongoing savings goal, such as adding to DPR’s (yet-to-be-opened) 529 or increasing our savings for a house down payment. Seeing the rapid inflation in the housing market in Seattle is making me want to jump into our eventual purchase in California as soon as we have the neighborhood(s) picked out.
It’s so useful to sit back and look at the big picture of your finances from time to time instead of focusing solely on the month-to-month!
What insights have you gained about your finances by examining yourself your net worth? Do you consider your true net worth something other than your technical net worth? What are your current savings goals?
photo by TheGiantVermin