The big day has finally arrived. Time to see if all these savings techniques have finally paid off. Today is the day when I broadcast to the world how much I am worth. Please note my disclaimers, and check out the FAQ at the bottom of the post:
1.This is my family’s net worth – this is, to me, the only fair way to calculate this if you are married/have a long-term partner.
2. These figures are not exact for privacy concerns. I assure you any changes are minimal.
3. Any accrued pension benefits are NOT counted in my assets for 2 reasons: I like to see how we are doing over time excluding this “outside” source and in order to include our pensions as benefits, they would need to be counted as a lump sum, a benefit that we would be unlikely to take instead going for the more common lifetime monthly payment (I see that as diversification for my portfolio) also, things can change with your pension plan, just ask the municipal workers of Detroit, or the retired civil servants from New Brunswick, or anyone whose company has gone bankrupt.
4. I do include my vehicles. Many others do not include these on their statements. I’ve plowed quite a bit of money into them over the years so it’s nice for them to give me something back on the asset side of things here. I will also note they are under valued.
Here is the low down:
Bank Accounts – $3,000
RRSPs – $44,000
TFSAs – $4,000
Cars – $13,000
RESP – $1,500
House – $205,000
Total Assets: $267,000
Credit Cards (incl car loan)- $12,000*
Line of Credit – $3,000
Total Liabilities: $170,000
NET WORTH: $97,000
There you have it.
Is it good? Is it bad? Maybe you were expecting higher? Lower? Maybe you have no idea what this figure means.
Remember that while a net worth of say 100K compared to a NW of 400K isn’t “as good”, it’s all about what that person/family has to work with (income), and where they are coming from (previous financial decisions), and maybe most importantly where things are planned to go. You should have some sort of goal in mind. So make sure you are comparing apples to apples.
I’ve also included an exciting graph below depicting my net worth growth over time. Please note that the figures are all estimates until 2012 when I actually started to track my net worth.
Taking a look at the graph, everything makes sense. Going through school until mid 2006, my figure drops as I financed my education via student loan, then slowly starts to climb as I enter the workforce in mid 2006, then really starts to take off in 2011 after higher paying employment was found, and tapers off in 2012 due to the preparation of the arrival of our little one in 2013.
Doesn’t your NW take you like an hour to calculate?
No, it takes about 25 minutes. I keep it simple. My online banking makes things pretty easy, log on add some numbers, that is about 75% of the work, then I hit a couple of my preferred credit card sites, get the balances, do some more math, that is it. I don’t count cents and round down to the nearest multiple of $10. For most people it will not matter if your worth is $25,432 or $25,340.
Why don’t you include other stuff like your TV and furniture?
These things aren’t really relevant to my financial position, and frankly aren’t worth a whole lot anyway. If you happen to have thousands of dollars in electronics, I suggest reevaluating your priorities.
How Often to do calculate this?
I’m on a bi monthly schedule. I know some who do this on a yearly basis and others do this on a monthly, weekly or even daily basis. If you are just starting out and getting your finances in order, I would say every 2 or 3 months would be ideal to help you see the progress you are (or are not) making.
Why should I calculate this?
If you haven’t even done this before, do it right now. Seriously. You need this figure to see the big picture, to make sure things are moving in the right direction, at the pace they need to move at.
I want to do this. How exactly do I calculate my net worth?
Add all your assets, bank accounts, RRSPs, TFSA, other investments such as stocks, and subtract your liabilities (debts) like your mortgage, student loans, car loans, lines of credit, credit cards. The difference in this is your net worth! It is that easy.
What about bills such as my power bill or other monthly bills? How do I account for that?
This statement is just a snapshot of your financial picture, today. Your power bill due in 2 weeks shouldn’t have an impact on your net worth (I hope!). It is true you could do this on the day you get paid to inflate your net worth for today, but you would just be lying to yourself. I generally calculate mine on just after major bills have come out and I don’t have large amounts of my pay sitting in my bank account (which doesn’t happen anyway).
Thanks for reading, and as always fire away with any questions you may have or shoot me a topic you would like me to discuss.
*A very large portion of my credit card debt is my car loan. My car loan was moved to a credit card because the interest rate is currently sitting at 1.9% for the next few months. The remainder of the balance on my credit cards will be paid off as of the due date to avoid interest charges.