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.
November 2020 Net Worth Update
These numbers are taken from November 5, 2020.
(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 stock market went down a little, we contributed money to retirement accounts, real estate went up, and we paid our debt down. Overall, $8,381 in a month is pretty good for us.
I’m watching our retirement accounts compared with our property. I would love to see retirement overtake property for the most valuable, but that is still a ways off.
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 just over $1,200 to this savings account so we have money when summer comes and we don’t have a reliable income.
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 up. 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 even intended to have so much money in the brokerage account, but it just sits there and keeps increasing in value.
Meh.
Mrs. C Roth IRA: We invested $1000 into my Roth IRA.
Mr. C’s Roth IRA: It’s already maxed out for 2020.
Mr. C 403 (b): He also puts in $1650 to his 403(b) 2 every month during the school year (10 months long).
Mr. C Supplemental Pension: A little interest was earned in Mr. C’s supplemental pension account (which is 100% vested and not really a pension at all). Contributions come from a convoluted formula that dumps money in once a year.
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).
Mr. C worked for the state of Alaska several years ago, and we left his contributions there just in case he ever went back.
We got a grand total of $18 to show for it all.
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. So, right now, on paper, our cars are worth nothing! Haha.
But, they run and get us where we need to be!
Total Assets
We broke $700,000 last month, and barely held on again this month! Yay!
Liabilities (Debt)
Alright, here is the not-so-happy side of things: DEBT!
But, we paid off almost $3,000 compared with last month. That’s awesome!
We make the minimum payments on the 30-year loan for our primary residence. It has a good interest rate of 3.125%
We have been making some really great progress this year on our rental property’s mortgage. It was sitting just above $40,000 at the beginning of 2020. Let’s hope we can pay it off before the end of 2021! At that point, we will reassess and decide what our next goal will be. Maybe our primary residence’s mortgage?
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 is finally below $10,000! Wahoo! (Who knows, maybe a new president will forgive some student loan debt? Our net worth wouldn’t mind.)
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!
Five bucks may not seem like much, but it is progress! Plus, we just broke through the $350 mark! I remember when we broke $400. That was just this past June! We are saving almost $70 each month compared to the beginning of this year!
Milestones
Alrighty, then! What are our major accomplishments?
We finally owe less than $10,000 in student loans.
Every time my husband went back to grad school, this loan automatically went into deferment. So, it has taken us FOREVER to reach this milestone. It’s good, but then again, with 0.625% as an interest rate, we have never made this a priority and always make the smallest payment possible. So, it looks like it will be with us a long while still. And, we are okay with that.
We paid less than $350 in interest!
That’s one I get really excited about! I know $350 is less than most people with mortgages and student loans, but it is still money that is basically thrown away each month. I would love to stop paying interest and only earn interest.
Goals
Savings:
We don’t have any plans to increase our savings in the near future. With over $23,000 in long-term savings (and invested, so it makes money) and over $25,000 in short-term savings, we feel like we are in a good position right now.
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 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…
Liabilities:
We have paid almost $20,000 towards our rental property’s mortgage just this year. If we keep that up, we can pay it off entirely next year!
Our other debt will take a backseat until that time comes.
Whew! There it is. Another month come and gone and happily our net worth grew.
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