About a year ago I set a financial goal for the 2015 year. My goal was to gave a 250K net worth by the end of the year. I missed that. By a long shot.
My net worth a year ago was $227,074. My net worth today is $227,948. An $874 increase.
Of course the stock market is tanking, that's a big factor.
I've also taken on more debt - to renovate that barn that I was talking about last time I was actively blogging, and braces for DD1, that I blogged about in April/May.
Also, when we were lining up the barn loan, our house was appraised. It wasn't fully appraised. We got what is called a BPO - Broker's Price Opinion. That's a drive-by appraisal.
I had our house listed on my balance sheet at 85K, and the BPO came back at 80K. Who knows, if the broker had walked through the house, he might have been closer to an 85K number, but to "official" number was 80K, so I changed my balance sheet to match that, so that's a 5K difference.
I wish I had recorded and saved what my retirement fund balance was a year ago. I have no idea, but I know it is less than it was a few months ago.
I suppose it only makes sense to set my 2016 goal back at 250K for 2016. We'll see how I do this year.
Viewing the 'Financial Calculations' Category
About a year ago I set a financial goal for the 2015 year. My goal was to gave a 250K net worth by the end of the year. I missed that. By a long shot.
Happy New Year! It's Jan. 5, so maybe I'm a bit late.
I'm not sure if I've ever set a New Year goal in this blog. After I post, I'll check the archives to see for sure, but I don't think I have.
My financial goal for this 2015 year is to end the year with a $250,000 net worth - a quarter of a million dollars.
My current family net worth is $227,000 - 23K short of 250K. To reach the goal, we'll have to increase net worth by about 2K per month - or $1,916.67 per month to be a bit more precise.
We currently have three debts - house, mini van, and pickup. We'll be making average principal payments of about $1,080 on the house, $300 on the van, and $140 on the truck. That's $1,520 average monthly decrease in debt. The rest will have to come from growth in retirement investments. Between my employer and personal contributions, I invest about $780 per month into retirement.
Between investment and debt reduction - that's about $2,300 per month increase in net worth. As long as the stock market doesn't tank, I should reach my goal. We'll see.
Some of you my disagree with how I calculate net worth. I include home equity as well as vehicle equity, and even include $3,700 for household items. Basically, if we were to sell each and every item my family owns, how much would be left.
I do estimate home and vehicle equity low.
I just did some minor updating on my personal balance sheet, and I noticed that my total debt is less than my annual salary.
The exact calculation is - total debt = 91.6% of my annual salary.
Doing some backwards math, it looks as if debt dropped below salary in March.
It seems like that must be a step in the right direction.
The only non-mortgage debt we have right now is the loan on my pickup. I bought the (used) pickup a year ago December, and borrowed $12,750. I took out a 36 month loan. The current balance on the loan is $5,784.59. Most months I've made extra principal payments, especially after our CC debt was retired last August.
According to KBB.com, the value of the pickup is just slightly more than $10,000 ($10,018 to be exact). The L/V ratio is 0.577. Because I am prone to wondering such things, I calculated what I would owe, and what the L/V ratio would be if I hadn't made the extra principal payments, or if I had taken out a longer (48 month) loan.
If I had just made required minimum payments on the 36 month schedule, the current balance on the loan would be $7,271.03, and the L/V ratio would be 0.726.
As far as the hypothetical 48 month loan goes, I'm not sure what the interest rate would have been if I had asked for one. My 36 month rate was 3.99%. Maybe they would have charged more, maybe not. I'll stick with a 3.99% 48 month loan. In that scenario, making only minimum payments, I'd owe $8,723.56, and the L/V would be 0.871.
I've gone this far, I might as well figure the 60 month loan while I'm at it. I'll use the same interest rate, and assume minimum payments. At 60 months, the current loan would be $9,594.32, with an L/V of 0.958. That's not quite underwater, but close. If I hadn't have made a down payment, it would be underwater!
That's pretty convincing evidence for me to shorten the loan period, to make a down payment, and to pay ahead if and when you can.
Anyone who has been following my blog for most of the past three years knows that I spend a lot of time putting together financial projections of all sorts. That includes my retirement, even though it's 20 plus years away.
I've got a retirement tab on my master spreadsheet. It includes an accumulation phase, where I estimate how savings will grow, and a depletion phase where I estimate how well that fund will stand up under various scenarios.
I've struggled for some time deciding what kind of number to plug in for Social Security payments, and to a lesser extent when to plug in a beginning age for collecting SS.
Until recently, I've used a 15K number (annual), and begin drawing at age 72. I thought of those numbers as low-ball estimates.
I know that there is a prevailing attitude among many in the SA community (particularly people younger than about 45) that they are making retirement plans assuming that there will be no SS 25 or 30 years from now, and that they will consider any SS payments to be gravy in their retirement.
While they may be right - there may be no SS 25 or 30 years from now - I'm betting that there will be SS in some form, reduced from where it is now. I just don't know what I can expect for a reasonable guess as to what that amount will be. I don't think anyone younger than 50 does either. The law is clearly subject to (and expected to) change.
So, I set to come up with a more reasonable, and still conservative number to plug in to my spreadsheet. I did some very quick "research" on the internet, and found a site that quoted that SS trust fund reserves would be exhausted by 2033 (oddly enough, a few years prior to my own retirement), and after that tax income would be sufficient to pay about three-quarters of scheduled benefits through 2087.
I also went to the Social Security web site, and found my current projected monthly payments at ages 62, 67, and 70.
I took the number projected at age 67, multiplied it by 0.75, and plugged it into my spread sheet, starting at age 70.
It turns out that I wasn't that far off with my previous estimate. My new number is $2,000 greater per year, and I'm starting the payment two years earlier in my projection now.
Certainly every single number in that projection is subject to a great deal of change. What I really want is a target retirement fund figure to shoot for. That number will change. However, I think my estimate now is a bit more refined than it was a few days ago.
I'll continue to go in and adjust things from time to time. Hopefully in another 15 years, I can have a very solid plan for retiring 5-10 years after that.
If anyone is interested, this is the page that I quoted above: http://www.thenewamerican.com/economy/commentary/item/16497-the-future-of-social-security
Truck Loan $8,555
Lawn Mower $103
Total Debt - $64,579
Retirement Fund $127,771
DD1 Savings $5,442
DD2 Savings $339
DS1 Savings $1,000
DS2 Savings $1000
Emergency Fund $800
Total Savings - $136,292
Debt reduced by $6,392
Savings increased by $3,657
About $1,700 of that increase in savings is because DD1 received her check for selling hogs at the fair. It's her money, but is earmarked for college savings, so I'll include it as a family asset.
I intended to pay the lawn mower loan in full last month. I went into the website to pay it off, and it's not easy to navigate. I entered the wrong amount to pay. When I went back in to see if the payment had posted, I saw that there was still a balance. I was unable to set the payment date for any sooner than 9 days before it's due. So, it will be paid in full on the 18th of this month.
I have another milestone to report. Our total family debt is now less than our annual household income! That sounds pretty good to me. Also, our total family savings is twice as much as our debt. Also good!
One last thing on the EF. We intend to beef that up. Right now the money sits in checking, which I've not listed here. Basically, we keep our EF in a bank in DW's home town. That way it's inconvenient for us to access. It's also inconvenient for us to add money. Our goal will be to get that money transferred over to the savings account before the end of this month.
We've retired some debt this month. All credit cards completely paid off. Truck loan - took a big chunk out of the loan. Lawn mower loan - almost completely retired (balance will be paid next month).
So, I decided to re-figure our debt to income ratio. It's now 24.5% - that is a wee bit less than 1/4 of our before tax income is required to meet monthly minimum required debt obligations.
That being said, we'll plan to send more than the required minimum to the truck loan per month from here on out. Not quite a double payment, but I'm thinking a payment that would amount to 10% of gross monthly income. That will bring our effective DTI to about 30%, and retire the loan about 14 months early. I think we can live comfortably with that.
I assigned a percentage value for each of the assets listed on our balance sheet. That is - the percentage that each asset represents of the value of our total assets. Not sure why - just to see where everything falls, I guess. Nothing too fancy.
Retirement Fund: 56.7%
Pick Up Truck: 4.9%
Household Items: 1.1%
Lawn Mower: 0.8%
Savings Account: 0.4%
Checking Account: 0.1%
These are not net values - that is the value that I used for the house is an estimate of its current market value, and not value minus mortgage.
Yes, our share of the value of the lawn mower is 2X our savings account. We own the lawn mower with my parents.
The value I placed on household items is probably low. I assign a value to recognize that there is a value there, but I've put in no effort to inventory, and come up with a solid number.
It's the end of the month, and I get paid tomorrow. So, our checking balance is low as of this writing.
Clearly most of our net worth is in the house and retirement fund. Retirement fund is 1.6X greater in value than our house. That's probably good. But, again the value on the retirement fund is solid, and value on the house is an estimate, and I probably low-balled it.
Our state income tax refund was direct deposited into our account Friday. I transferred all of it to our savings. We're now less than $100 away from having our back porch account full funded.
I calculated another pointless personal finance figure. I was curious as to how much of our monthly family income goes toward building net worth, and how much of it goes to other stuff.
What I came up with (month of April projections) is: 32.4% goes to building net worth, and 67.6% goes to other stuff.
Or, for every ten dollars available to our family to spend, $3.24 goes to principal payments or savings, and $6.76 goes to interest payments, food, fuel, insurance (protecting our net worth), child care, entertainment, and some other stuff.
I had to think about how to handle my employer retirement match. I don't think of it as income. It's not available to spend at our discretion. But, it is a big part of the calculation. So, I ended up adding it to income.
I have no idea what a good number is. 32% sounds pretty good. 35 - 40% sounds better. I'll try to track this periodically over time, and see where it goes.
The negotiations with the short sale continue. I'm the pessimist, and lean toward thinking this deal is dead. DW is the optimist (and a better negotiator than I), and knows that this is how the game is played. Still, I believe that this deal has a less than 50% chance of closing. The negotiations are between our bank, and the buyer, so we just sit back and watch at this point.
A number that I've not reported on in a while is my credit card debt to retirement savings ratio. That's a number that I (to my knowledge) made up a while back. Seven years ago, that number was 100%, we owed about 30K in credit debt, and my retirement savings was about $30K. In August 2011, that number was 20%. My retirement savings was 5 times greater than my credit card debt.
Today that ratio is 1.66%. For every dollar I have in credit card debt, I have about $60 in retirement savings. I know that the number is meaningless. It's not as if I'm using my retirement savings as collateral against credit cards.
But, I still remember that day seven years ago, when I realized that CC debt was equal to retirement savings. That was one eye opening experience. And, ever since, I've used it as sort of a personal proxy of financial health. I also like it, because it tells two stories - decrease in CC debt as well as increase in retirement savings.
I have solid net worth figures for Jan. 1, 2012 and Jan. 1, 2013. I had to do some financial forensic work to come up with a Jan. 1, 2011 value. I hadn't started posting here by then. The asset side is fairly solid, but the liability side is an estimate.
What I came up with is:
2011 net worth percentage increase = 19.6%
2012 net worth percentage increase = 78.9%
My retirement portfolio is my asset of greatest value. Thus, the performance of those funds greatly influences the change in net worth. 2011 was a crappy investment year, and 2012 was a better year.
And, of course, there is rapid debt payoff. While I was probably paying off debt a bit more aggressively in 2011, in 2012 much more of my payments went
toward principal, rather than interest.
I couldn't help myself. I projected my Jan. 1, 2014 net worth, based on projected decrease in debt plus monthly contributions to retirement, no asset growth. My projected net worth percentage increase for 2013 is about 32%.
I'll come back here in a year, and see how I did.
My retirement fund is at six digits. Today. And, just barely. I was close the last time the markets boomed, but didn't quite get there.
A year ago, I reported on this blog that for every dollar I had invested in retirement, I owed 20 cents in credit card debt. Today, for every dollar I have invested in retirement, I owe 6 cents in credit card debt. Six years ago, that was a one to one ratio.
On the personal side, my youngest daughter sprained her ankle a couple of days ago. I took her to a playground while DW was at an appointment. It isn't a very nice playground, and the traffic compacted track around the merry-go-round has tree roots growing in it. She tripped on one of the tree roots. So, it just goes to show that there is a reason for the extreme and expensive safety measures at the modern play grounds.
I went through monthly spending and categorized the totals. I came up with the following:
Amount spent on:
Housing - 22%
Other Needs - 35%
Wants - 12%
Savings - 10%
Debt Repayment (or largely past wants) - 20%
According to Disney Steve in the forums the benchmark is 50% Needs, 30% Wants, and 20% Savings. In those terms my breakdown would be:
Yesterday when I updated my monthly debt progress, I upped my monthly debt retirement goal from $1,000 to $1,050.
I was thinking about how that $1,050 number was pretty much pulled out of thin air. I didn't base it on anything other than my gut feeling that it was an amount I thought I could handle without stretching myself too much. I thought I should base that figure on something real. Like, my average monthly debt retirement over the past year. I've already confessed to over-analyzing things.
So, I went through my monthly debt retirement figures over the past year. I omitted the month where I got my tax refund, and I averaged the remaining months. And it turns out I came up with $1,052. Darn close to what my gut feeling was yesterday.
Is it really a good goal to match last years debt retirement? Probably not. So, I will set a new goal. My new goal is to pay off debt at a rate of 5% more than last year's average - or $1,105 per month principal payment.
What a month was March! It seemed as if money was flowing in and out at an abnormal pace. Here are my new updated debt figures. Slowly chipping away.
April 2012 Debt
Mort 1 $103,172
Mort 2 $69,370
Van Loan $5,604
Total principal paid as compared to last month: $1,123. CC 3 is scheduled to be history in October. It's nice to see it melting down. We're also sending $190 worth of principal toward the van now.
I've decided to up my monthly payoff goal. For a year, my goal has been $1,000 per month. I've hit that most (not all) months. I'll up that 5% to $1,050 per month. I think that doable without stretching too much.
Have any of you done the True Colors/Real Colors personality sorter? It's a new twist one the Keirsey-Bates temperment sorter.
I'm a Green - the analytical type. We analyze things to death, and usually need a yellow (my DW, for instance) to take action, and actually get things finished.
My pesonality shows through on this blog, how I am always posting different personal financial calculations. Well, to ring true with my Green personality, I compared my current daily interest cost with my daily interest cost last April.
Current daily interest cost - $19.95
Daily interest cost last April - $24.46
Or, each day I'm paying 82% of the interest that I was last April. I'm such a Green.
It seems as if when I run out of financial things to blog about, I list a bunch of my personal financial calculations. I've run out of things to blog about, so here goes...
Daily interest for the month of February:
First a couple of caveats -
I was comparing my Nov. daily interest to my Jan. daily interest. I was patting myself on the back for reducing daily interest by what seemed quite a bit. Then I realized that Nov. is a 30 day month and Jan. is a 31 day month. That extra day makes quite a difference. A month like Feb., even with the leap day would be even more over stated. So, I'' make my calculation using 30.4 days, the average number of days in a month. Makes for a better month-to-month comparison.
Also, I've transferred the balance of CC4 to a 0.0% card, but the transfer didn't happen fast enough, and I was charged interest in Feb. So my totals will reflect that.
Drum roll, please.
For the month of February I will spend each day:
$2.99 on credit card interest
$3.67 on above plus auto loan interest
$21.45 on above plus mortgage interest
Another calculation. In August I calculated my credit card balance to retirement savings ratio. At that time it was 20%. That is for every dollar I had saved toward retirement, I had $0.20 in credit card debt. My current ratio is 10.47%. It's been cut almost in half since August! Of course, I heard on the radio that Jan. 2012 was the best month the stock market has had since 1997.
That's it for no. If you've made it this far, thanks for reading.
House 1 $80,000
House 2 $73,000
Autos (2) $7,440
Total Assets $256,859
House 1 $103,572
House 2 $69,790
Total Liabilities $191,940
Current Net Worth $64,919
Net Worth last month $56,404
Change compared to last month $8,515
$5,941 (70%) of that change came from the increase in retirement fund.
Something tells me that the situation in Greece, or heaven only knows what other factor will send that crashing down in no time.
House 1 $80,000
House 2 $73,000
Autos (2) $7,580
Total Assets $250,411
House 1 $103,771
House 2 $70,000
Accounts payable - $746
Total Liabilities $194,007
Current net worth - $56,404
Net worth last month - $54,224
Change compared to last month $2,180 to the positive.
A bit less than half of that change came from decrease in debt obligations. Checking is up a bit. Retirement is up a bit.