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.
March 2021 Net Worth Update
These numbers are taken from March 6, 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 the purchase of another clean vehicle. (I’m seriously SICK of shopping for new cars!) The new car accounts for much of the increase in property value and all the increase in liabilities.
Our tax return, including almost $7,000 for a clean vehicle rebate, came in. We padded our savings in anticipation of paying down debt on the newest car that we bought at the end of February.
The stock market also went up; we contributed money to retirement accounts, and real estate went up a bit.
Maybe most people don’t think a $20,000 increase in a month is good, I think it’s great!
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.
This month we added money to savings so we could reassess where we wanted our money to go. Our savings should go down next month as we once again prioritize 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…
Our brokerage account, which holds high-dividend utility stocks, inched down, again. This 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. I don’t think we ever intended to have so much money in the brokerage account, but it just sits there and keeps increasing in value (usually).
The stock market decided to increase just a bit 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 5k to show for our efforts. I figure any month with a positive number is good.
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!
Real estate is rising slowly in our town, where we have both our primary residence and our investment property.
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! In addition, as we have solar panels that are paid for but overproduce during off-peak hours, we can plug in each car during those off-peak hours and pay nothing for the electric miles driven.
Total Assets
A little bit in real estate, and a little bit in retirement, a little bit in savings, and a whole lot of new car. We just broke through $800k in assets!
Liabilities (Debt)
Alright, here is the not-so-happy side of things: DEBT!
And no, that $4 in rental mortgage debt is NOT a typo!
Two car loans and I am freaking out!
After working so dang hard to bring our debt down, it’s kind of a blow to bring it back up. But I’m getting ahead of myself.
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 before getting the second car. We took about $4,000 from the clean vehicle tax credit and paid this guy down to basically nothing. We decided not to wire the last few dollars. That’s how they wanted the payoff funds! Why pay money to do that? We are going to let it get paid off with the next payment. 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 will keep an eye on that.
Back to the cars. Our goal is to pay off the Pacifica by the end of the summer (fingers crossed). We are also dramatically reducing our fuel costs with these cars. And since we have solar panels (completely paid for!) we can plug it in at night at off-peak hours and not pay a cent for most of our driving. Even though insurance and registration are higher, in the long run, it should save us money.
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!
Down $9.
Meh.
We also know that next month the interest on the Pacifica loan with catch up to us. And since the dealer offered $1,000 in cash incentives to finance with them, we took their dismal interest rate with the intent to refinance ASAP!
Milestones
Alrighty, then! What are our major accomplishments?
Total net worth is above $650,000!
Enough said! Every $50,000 mark is HUGE!
Total retirement funds are above $300,000.
That is exciting! After putting off financial benefits in exchange for five kids and one income, we know we are behind many of our peers. That makes cracking this milestone that much more meaningful.
Our rental property mortgage is paid off!
Okay, $4 remains. So, it’s BASICALLY paid for! Considering that we still need to pay insurance and taxes, it really only saves us just over $260/month. It still feels GREAT!
Assets are over $800,000
We’d really like more of this in retirement funds, but the rental property is also helpful.
Goals
Savings:
Next up is using our increased savings to start paying down the Pacifica. Otherwise, I think we are pretty good here. 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.
I really hope we don’t buy a car anytime soon. I can’t stand car dealerships! It’s all about smoke and mirrors with thier numbers as I sit there and comb through every line item. Some shady practices that I called into question did save me about $750 on this last trip to the dealer…I shouldn’t get started…I’ll never stop…they drive me CRAZY!
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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