As you may have noticed, I recently added Tracking Your Net Worth as part of my “Take Action” suggestions at the bottom of each blog and I imagine some of you might be thinking, “Why is this important?”.
Well in addition to being an Entrepreneur and Real Estate Investor, I wear the important badge of FIRE enthusiast. This means, that I have “money goals baby!” and I want to know how close I am to achieving them. Plus, I believe what you focus on grows, so why don’t we all put a little more attention on those sexy bank accounts?
In 2011, when I started reading the Blog Mr Money Mustache, I decided that I wanted to be just like Pete (I mean, who doesn’t?), so I set my goals to save 600K in index funds and have a paid off house. In theory, this would produce 2000 - 2500/mo in earnings/dividends to live frugally, but comfortably for life. Well life has a funny way of surprising us; even though I just surpassed that 600K in Net Worth (since I began working on this post), the breakdown was different than expected -- 3 paid off houses (6 owned total) and only 54K in Index Funds.
Even though I am nowhere near that Index Fund goal, I was able to hit that $2500/mo cash flow number 5 years ago when I was just 28 years old. Happy dance!
Before I share my real live numbers, I have to say that it is an incredibly vulnerable experience to completely open my wallet to the world (I can attest to this because I’ve been dinking around avoiding writing out the numbers for the last 10 minutes). While I am happy to answer any clarifying questions for us all to learn and so that I may make future posts more interesting -- I am asking you to be kind and considerate in your comments.
Here is my current breakdown as promised (9/13/19):
Investments: $92,606 (54K index funds)
Homes: $665,717 (this is just my portion of ownership value of the homes I own with a partner)
Credit (statement balances paid in full each month): $7916
Mortgage / Loans: $126,617
Net Worth: $633,957
6% is the new 4%
I like the idea of being diversified, so for awhile I had been a little bummed out by the low index funds number and was wondering if I should make a concerted effort to beef it up. My main problem is the moment there is a little extra moola lining my accounts, I rub my hands together and start dreaming up the next cozy little cottage that I could purchase. Oh well, we all have vices.
Of course timing is always something to consider and even though the common wisdom states that we can “never time the market”, I foresee a drop in the stock market approaching and some potential real estate scores in my future. Lastly, this amazing nugget dropped in my lap the other day and it really reassured me of my path and choices: Six Percent is the New Four Percent.
The basic overview is that instead of the tried and true 4% rule of safe withdrawal in retirement, when you get your income from homes instead of index funds, you can estimate a six percent return. Why is this? With Index funds you are taking out your principal as well as your earnings. With real estate, the nest egg of equity stays put.
3 Reasons to Track your own Income!
Ok enough of me and back to you! The reasons I think it is wise to start tracking your income are:
-It helps you set Goals. Seeing where you are and what you frequently spend a month, will help you decide how much income you need to produce when you retire and therefore shows you the amount you need to save to be Financially Independent
-Watching helps you become more responsible. Half of the success of budgets or tracking is that they: remind to be cautious, help us keep our goals in mind, and show us where the unnecessary spending is happening. My sister said that starting a budget allowed her and her husband to save twice as much even with her working less.
-Where you put your attention, magic happens. Okay I’ll admit that this last point is a little more woo woo, and yet if you are a believer of the Law of Attraction or a master manifestor like myself, you will know that it really works. “Attention goes where energy flows” -- and all that attention and energy can create some real abundance. Yay!
I would like to make Tracking My Net Worth a regular feature on the blog, let me know what numbers/information would be helpful or beneficial to your learning and growth.
Have you been budgeting or tracking your own Net Worth? Share your magic and tricks!
Upcoming Events (See me Speak Live!):
Denver Investor Success Summit - Oct 12, 2019, Denver, CO
Financial Freedom Summit - May 1-2, 2020, St. Louis, MO