Why we track our net worth every month
Here in the TPM household, I have tracked our net worth for over 10 years. This process started soon after we got married. For the first year, we spent a lot. We had a new house and plenty of furniture to buy. We both were earning good salaries, but we weren’t increasing our wealth. Our spending was out of control. That first year was a wake up call, we were still flat broke even after earning over six figures.
Something had to change. We made budgetary guidelines and tracked our expenses. We updated our net worth every month. It was not always a straight march upwards, but usually we added something.
Watching our net worth grow every month has been extremely helpful in wealth building. The positive reinforcement has pushed us to make many additional changes to increase our savings rate. We ate out less. Bought slightly less fancy cars. And we never financed consumer purchases, ever.
Even if your net worth is negative, you should calculate this at least on a quarterly basis to see how your hard work is paying off. Everyone starts somewhere.
Turning Point Money Net Worth
For the purposes of this post, I will catch us up on the history of the TPM household’s net worth from 2007 to 2015. I will provide more detail to our 2016 later.
But first, let me take you back in time to when I was 26. I was wrapping up my MBA in the spring of 2006. I already had a job offer in hand at a very large IT consulting company, and good thing as I had about $6000 left to my name after living like a broke college kid for the past 2 years. (This is not including a small 401k balance from a software engineering job right out of undergrad)
I had two months before my new fancy consulting job started. Guess what I did? I spent all the money I had on a ring. I was flat broke and $20k in debt from college loans and still paying for a Chrysler I financed for 5 years. My engagement, this bottom dollar wager turned out to be my first financial turning point. It turned out, my wife’s financial picture was ok, not great. She had about $8k in a bank account, no debt and little retirement savings in her companies 401k plan. Little did I know, she would become extremely frugal even as our incomes soared.
Before we get into the details a couple disclosures regarding how this is calculated.
Net Worth Calculation:
Assets – Liabilities = Net Worth
Mortgages –We relocated once from Pennsylvania to Georgia. All house values are carried at purchase price.
Pre-tax Retirement accounts – These are carried at pretax value. I don’t know the tax rules when we will withdraw from these accounts so I leave them as is.
Automobiles – carried at Kelly blue book value and adjusted quarterly
Since I will not disclose exact dollars, I am presenting percentages. I know, everyone wants to see actual numbers here. However, I do not want to disclose actual numbers.
Annual Net Worth Results
2006 – slightly positive net worth
2007 – 196%
2008 – 72%
2009 – 54%
2010 – 46%
2011 – 46%
2012 – 30%
2013 – 35%
2014 – 22%
2015 – 17%
2016 – see detailed post