It seems like there is always a lot of talk about budgets-why you need one, how to get on one, and what it should look like.
But the big question is: WHY?
Budgeting is a tool to help you and your family be secure, now and in the future. And that all comes down to what you own and how much you owe. In other words: NET WORTH.
While budgeting every month is how we track down every dollar and decide what is best to spend it on, increasing our net worth is the end goal!
With that in mind, one of the best motivations we have found for sticking to our budget, paying down debt, and investing for the future is through tracking our net worth. Every. Single. Month.
If you have even wondered how to track your family’s net worth, stick around, and I’ll show you how we do it.
April 2021 Net Worth Update
These numbers are taken from April 13, 2021.
(Once in a while we will find we have a little extra money before the month is over, and will pay down some additional debt. That’s why there is sometimes a little discrepancy between our net worth balances and the balances that show up on our monthly budget updates.)
The big story of the month was our car loans were paid down thanks to tax returns and another stimulus check. We also shuffled some money around by selling about $7,000 in stocks and to help pay down the car loan.
The stock market also went up; we contributed money to retirement accounts, and real estate is starting to go crazy.
$30,000 increase in a month is good for us!
Here’s a breakdown of the categories:
Assets (Money and Property)
We keep most of our savings in an American Express Personal Savings account. They consistently pay out one of the highest interest rates for savings accounts. It’s all online, so we transfer money in and out of it from our checking account.
Our savings went down as we once again prioritized debt.
We also keep around $1,000 in our savings linked to our checking account (it pays basically NO interest) for overdraft protection. You know, just in case…
We sold off about $7000 in our brokerage account that holds high-dividend utility stocks to pay down a car loan. The brokerage account with Vanguard is where we keep our more long-term emergency fund. Yes, it could lose money (and has in the short-term), but we feel comfortable with the risk given our other savings account.
The stock market decided to increase again this month.
Mr. C: We invested $500 into Mr. C’s Roth IRA and $1650 into his 403(b). Mr. C also has another employer-sponsored fund that a little money went into.
Mrs. C: As I don’t work (outside the home–seriously, I work darn hard!) I only have access to a Roth IRA that we put $500 into.
Mr. C Pension: He also contributed over $1,000 to his pension (this balance only includes his contributions that he could theoretically cash out at any time but will most likely turn into a pension when he retires).
We got over 12k to show for our efforts. That’s a pretty good month for us.
We always take it with a grain of salt. It goes up, then comes down. No panicking here. We are investing for the long haul.
In 2013, we turned our primary residence into an investment property and bought a bigger house for our growing family. At the time real estate was doing pretty poorly and we didn’t feel like selling in such a market. It was, however, a really, really great time to buy!
While real estate has been going crazy in the rest of the country, we have been slower to see appreciation. In the past few months this seems to be changing and things are beginning to heat up.
To include cars, or not, in your net worth, that is the question.
Some people do, some don’t. Ultimately, we make a compromise: we include the car’s initial value and then depreciate it quickly.
After buying a plug-in hybrid (Honda Clarity) that qualified for all kinds of rebates and incentives from federal, state, and local agencies at the end of 2020, we decided to bite the bullet and buy a second car (Chrysler Pacifica) with the same incentives/rebates. The cars qualified for about $17,500 in incentives EACH. While we weren’t excited to have TWO car loans, we also didn’t know how much longer these rebates would be around. We are planning to keep each for at least 10 years, so we should be done with new cars for a while!
Total Assets
A little bit in real estate, and a little bit in retirement. Our assets inched up and stayed above $800k!
Liabilities (Debt)
Alright, here is the not-so-happy side of things: DEBT!
Two car loans and I am still freaking out!
Let’s go in order.
We make the minimum payments on the 30-year loan for our primary residence. It has a good interest rate of 3.125%.
The good news is we paid our rental mortgage off completely!
WAHOOOOOOOO!!!!!!!
After four graduate degrees between the two of us, we only have a student loan from my husband’s undergraduate degree. We have held onto it for so long because it is at a 0.625% interest rate.
The student loan took FOREVER to finally drop below $10,000! Finally! President Biden has floated the idea of paying off up to $10,000 in student loans for each borrower, so we hate to see this balance go down below that mark. Haha!
Back to the cars. Our goal is to pay off the Pacifica by the end of the summer (fingers crossed).
Bonus
This is probably one of my favorite things to do each month: I love to look at the interest we paid on our loans. I hate paying interest, so to see it decrease each month is great motivation!
UP $105!
This is BAD.
We initially thought we would refinance the Pacifica with its horrible interest rate of 5.8%. However, we started paying it off so quickly that it doesn’t really make a lot of sense. We should see a dramatic reduction in interest paid on it next month!
Milestones
Alrighty, then! What are our major accomplishments?
Primary residence mortgage is less than $100,000!
So very wonderful!
Liabilities are once again below $150,000.
You only have to look back to February to see it below $150,000, but at least we only spent one month above the 150k mark.
Pacifica car loan is below $15,000!
Having $35,000 in debt on a single car was causing some serious stress for me even though I KNEW it was temporrary! I don’t know how people do that kind of thing on a regular basis. It’s a good thing we were able to pay off our investment property before that. Otherwise I don’t think I could have signed on the dotted line.
Goals
Savings:
Summer is coming up (which is a no/low-income time for us), but we are on track with our savings.
Retirement:
We max out both of our Roth IRAs and have for a while.
When Mr. C left grad school, we started contributing to a 403(b). Mr. C is on track to contribute $16,500 to his 403(b) this school year (up from around $14,500 last year). While that’s awesome, it is also $3,000 short of the max. We are hoping to max it out during the next school year.
It would feel great to know we are maxing out all retirement account options!
On top of that, as an educator, Mr. C should have a healthy pension when retirement comes. It’s on track to cover about one-half of his regular salary. He plans to retire the year our youngest graduates from high school.
Property:
We don’t have plans to move from our current home, and we don’t have plans to buy or sell any rental properties. Although having an investment property has really helped our financial position over the past several years, it is NOT passive income. We don’t want to take on any more properties.
We plan to sell our rental a few years from retirement on a 1031 exchange and buy a rental somewhere we actually want to retire. Then we can have the option to turn that rental into a primary residence and avoid paying capital gains taxes. That’s a long time off still…and a few conversations with a tax professional will have to happen.
Liabilities:
With a rental property completely paid for, it’s time to attack the car loans. Biggest one goes first!
Whew! There it is. Another month come and gone and happily our net worth is still growing.
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