After reading the My Money Wizard blog, I decided to follow in his foot-steps and start tracking my net worth on a monthly basis for everyone to see.
I am going to only track my personal finance, and not the finance of my current/previous businesses. Therefore, the cash balance is the balance I have in my personal account, not my business accounts.
I WILL NOT be transferring any money from my other accounts into this personal account. All income is from my salary, investments, and sale of assets.
How Does Tracking Your Net Worth Work?
In the finance world, net worth is generally deemed to be king. You could be making millions a year, but if you’re still losing money due to your debts and expenses…your claim is worthless.
It is difficult to lie when it comes to net worth. But what is it exactly?
Net Worth is essentially a snapshot of your total wealth at a given point in time. In simple mathetmatical terms, it is your total assets, minus your total liabilities. Or, in other words, “What you own” Vs “What you owe”.
Some examples of Assets:
- Retirement Accounts
- Real Estate
Some examples of Liabilities:
- Mortgage Payments
- Car Payments
- Credit Card Debt
- Loan Repayments
- Bills etc
Ground Rules for My Net Worth Updates
As previously mentioned, I will only be including assets and liabilities directly attributable to me personally. I am not classifying business bank accounts etc as personal assets (mostly to keep this less complex).
When it comes to assets which may depreciate, I will make a rough judgement of the depreciation, or current value of the asset. This won’t incorporate any complex depreciation calculations, for the sake of simplicity.
For appreciating assets, I will take a value of a comparable item I can find online. For example, I own a couple of guitars which will appreciate in value over time. Therefore, each month, I will try and find a comparable item which has sold for a rough current value.
What is the point in tracking this? Are you just showing off?
Firstly, I don’t think there’s much to show off about. I don’t believe my net worth is even vaguely large compared to other people my age (I’m 25 by the way).
Secondly, the main point of tracking my net worth is primarily to give myself some accountability to improve my investments, saving, retirement fund etc. As well as reduce the amount of stupid financial decisions.
Thirdly, I think being so transparent about these things can teach people about their own finances, and hopefully encourage people to keep a track of their own net worth (and grow it over time!)
Overall, putting the numbers down on this blog will allow me to keep a track of my progress towards my financial goals, and bring you all along for the ride!
Let’s break it down!
So, let’s start off with this months breakdown.
So, this is the first snapshot! Let’s hope it improves from here.
By the way, while I’m posting this on the 11th of June, all the figures are based on balances at the start of the month. This is how it will work going forwards.
Here’s how the balances are broken down:
Cash: £18,923 – I have always felt it was pretty important to keep a relatively decent cash float going, just in case. Some may disagree and feel as though this is being wasted and devalued by inflation. However, I’m a believer in keeping cash aside for rough times, as well as great investment opportunities.
I have spent quite a lot of money this year, and this balance was closer to £25,000 at the end of last year. The aim for the next month or two is to get this balance back above £20,000
My cash balance in my personal account is entirely supplemented by my salary currently. This is approximately £1,950 per month after tax and payments into my pension.
Appreciating Assets: £5,200 – As mentioned, this is always going to be a rough estimation based on current sales values. This balance consists mostly of two guitars which I bought as investment/fun assets. They’re two very limited release items, which over time will appreciate in small amounts.
These assets won’t set the world alight in their annual gains, however, they allow me to have a ‘fun asset’ without wasting my money away. I am a strong believer in buying things which will either retain their value, or in a perfect scenario, increase in value over time.
Depreciating Assets: £3,400 – Consists mostly of my two motorbikes. They’re relatively old, and therefore won’t depreciate much over the rest of their life.
I suspect one of these motorbikes will be sold before the end of the year for around £1,000-1,500
Other Assets: £12,200 – Mostly consists of watches I have purchased over the years. Once again, sticking to the mantra of only buying things which will hold their value or appreciate. I have considered selling one of these recently, so this balance may change soon.
Rent: £475 – Total rent for my two bedroom house is £950, which I split 50/50 with my girlfriend. We will be moving in October to a house which is £900 a month, but bills will be included. As I write this, I realise I forgot to include bills in the breakdown, so I will add this for the net worth breakdown for July.
Loans: £12,362 – Almost entirely made up of my Student Loan. This is being paid back via Direct Debit each month for around £140/mo. The interest rate is so low on this that there is very little intensive to pay it back any quicker than required. If my salary picks up in the next few years, I may pay it off just so that I don’t even have to think about it. The current balance is roughly £11,000.
In addition to this, there is a £1,200ish loan to my employer. When I first joined, they provided a £7,000 loan to help pay off my student loan. I used this on other things instead, seeing as it was a 0% loan.
Join Me! Calculate your Net Worth!
If you’ve never calculated your net worth before, I would highly recommended. The amount of people who have no idea how much they’re truly worth is astounding.
No matter where you are in your journey, whether you have £100,000 net worth or whether you have a negative net worth. Join in, and keep a track of it in an excel sheet.
I will make a post at some point showing everyone how they can do this very simply each month.
I hope you found this post useful. Make sure you subscribe and tune in each month to get an update on Tracking My Net Worth!