Spring Clean Your Finances With 5 Easy Steps

Spring has been pretty much absent here in Michigan.  Last weekend we had an ice storm.  Temperatures have been about eight degrees below average for the month.  Snow showers and accumulations are still a regular occurrence.  Still, spring has to come sometime, right?   We’re still hoping.  But, even if the weather isn’t cooperating, spring is still on the calendar.  Now’s a perfect time to spring clean your finances.  Here are a few easy tips to get started.

Calculate Your Net Worth

We calculate our net worth every month, so this is easy.  But if you don’t do this regularly, now’s the perfect time.  Net worth is an easy calculation.  Simply add up all of your assets.  Then add up all of your debts.  Subtract debts from assets and that is your net worth!

Compare Net Worth To Last Year If Possible

Hopefully you know your net worth from last year, in which case you can do a comparison.  If you’re doing things right, the number is higher. If so, celebrate.  Keeping regular comparison points along the way will help show you how things are going.

If you don’t have last year’s number handy, don’t fret.  Simply mark down this year’s and do the comparison next year.  It’s never too late to get started!

Run A Credit Report

You get three free credit reports per year, one from each of the major bureaus.  Now is a perfect time to run one of your free reports.  Ideally, run one report every four months, rotating between the three.

When you get your report, look through it line by line.  Make sure you recognize every account and that the balances make sense.  This will summarize what you owe and what you can potentially borrow.  It also helps to make sure nobody has opened any credit in your name unknowingly.  Plus, you can make sure there’s nothing that’s been forgotten about.

Check On Goals And Revise Them (Or Make New Ones)

If you’re like me, you set some financial goals at the beginning of the year.  Now’s a great time to check on those and see how you’re doing.  If any revisions are necessary, make them now.  Or, if you didn’t set any goals back in January, why not set some now?  It’s never too late.  Plus, you have eight months to get things done!

Clean Up Your Tax Documents

Tax season is behind us, and unless you filed an extension, your taxes should now be filed.  Now’s the time to make sure your tax records are in order.  You need the last seven years of records in the event of an audit.  Make sure you have all of those in one place and that they’re safely locked away.  We keep ours in a fireproof safe.

If you still want to keep your records beyond seven years, I absolutely think that’s a great idea.  But, make sure that you have the last seven years worth at hand.

What Spring Cleaning Do You Do?

It’s your turn.  What spring cleaning activities do you do for your finances?  Let me know in the comments below.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

How I Calculate Our Net Worth

I used to post net worth updates, but they were my least commented upon posts.  So, I stopped. But, I still track our household net worth every month.  This goes back over fifteen years.  Things change and evolve, but the process has largely stayed the same.  Here is how I calculate our net worth.

When

I always do our net worth on the 7th of the month (give or take a day). The reason for this is because a lot of transactions take place around the 1st of the month, and can take a couple of days to clear. I want to make sure that everything is processed. Waiting a couple of days past the first of the month is the best way to make that happen. These things include:

  • Mortgage payments
  • Credit card payments
  • Transfers from end-of-the-month paychecks to savings / money market accounts

How

I love Microsoft Excel for my tracking.  It’s gotten complicated, but

  • Snapshot – This is a snapshot of the most current month.  It’s broken down into the categories which I will outline in a bit. This summarizes everything that I track and rolls it up into several categories.
  • History – I roll up the high level numbers each month into a month-by-month breakdown. This lets me see how things have progressed over time.
  • Balance Sheet – This is where I separate the assets from the liabilities.  Yes, I took lots of accounting classes in college.
  • Debt – I track all outstanding debts and their balances.
  • Savings – This is how we track any money that’s set aside for savings.  I break it down by goals that we have earmarked.
  • Monthly Summary – This is a hybrid of an Income Statement and Cash Flow statement.  I track our bank account activity and spot any trends.
  • Ledger – This tracks our day to day spending from our bank account and credit cards.
  • In Case of Emergency – I have a tab dedicated to outlining all of the required information in the event that something were to happen to me or my wife, such as account locations, website addresses, etc.
  • A few other tabs – I track a few other things.  These include charitable contributions, dividends , cost basis for investments, etc. These aren’t used every month but kept pretty up to date, and help around tax time.

With all of this, I have pretty much everything I need all the time. I actually had attempted to use out of the box tools in the past.  These restricted me.  I couldn’t manipulate the numbers to the degree that I like.

The Calculations

I break our net worth down into the following four major categories:

  • Housing
  • Automobiles / Camper
  • Current (Liquid) Assets and Debt
  • Retirement Assets

Here’s a breakdown of each of those:

Housing

I track the value of our house based on three things: Zillow, our city estimates, and surrounding sales.  For net worth purposes, I actually deduct the anticipated selling costs that would be involved with selling the house. So, I write 7.75% off.The reason for this is simple: The only reason I would ever have true interest in the value of my house is if we had to sell it.  This calculation would give us the estimated cash in hand after a sale.

From there, I subtract our outstanding mortgage principle to give the total value of our home.

Automobiles / RVs

Any cars or RVs we own, I track here.  I use Kelley Blue book and estimates based on current sales.  I usually knock off about 10% just to be safe.  Again, this would give me the cash on hand if everything was liquidated.

Current Assets and Debt

This is where I track anything that is cash or could easily be converted to cash, as well as what we owe for anything outside of the mortgage and car payments.  So, the things that I currently track are:

  • All bank accounts
  • All investment accounts
  • Health Savings accounts
  • Outstanding Credit Card balance (debt) – note: we pay our balance in full every month but this tracks the current outstanding balance at the time I do the monthly check
  • Student Loans (debt)

Retirement Accounts

This is pretty self explanatory, but tracks all investment accounts.

Total Net Worth

Once per month, I log into accounts for each of the accounts and enter the numbers. From there, it calculates the value by each category and those totals equal our net worth.

That’s it! Overall, I know it isn’t the perfect system but it works well for me. I like it because it gives me the information I need.  It’s probably complicated in some ways, but I think that’s OK.  With money and finance, you have to make it work for you.  This method does just that.  There’s always a tweak I could make here and there, but overall, his works.

Readers, how do you track your net worth?  Do you have a system that you use or an off the shelf package?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Financial Goals: 2015 Review and 2016

Well, another year is in the books, and it’s time to look at our financial goals, specifically to see how we did, and how we’d like to see the year play out ahead.

Overall, we saw our net worth increase, but it was a disappointment in the fact that we fell short in a few categories.  This means that we had a gain.  It just wasn’t as big as I’d hoped.  In fact, it was our smallest gain (percentage wise) in over six years.  I guess it could be worse.  It could be back like in the recession when our net worth fell.

I track our finances by breaking it down into several categories, first on the asset side and then on the liability side.  I will do the breakdowns by percentage, rather than list actual amounts.

Here is the breakdown for each major area:

Asset – Real Estate

We only have one asset here, our home.

2015 Goal: +3.8%
2015 Actual: +4.0%
2016 Goal: +2.9%

The value of our home, which I estimate by a combination of Zillow, actual sales in the neighborhood, and estimates from the city, was about on par.  Things seem to be slowing down a bit now that prices have largely recovered from the crash, so I’m lowering the pace a bit, though still projecting an increase.

Asset – Autos / RV

2015 Goal: -11.6%
2015 Actual: -23.6%
2016 Goal: -17.4%

We have two older cars (2007 Buick Rainier and 2006 Pontiac G6) as well as an older RV.  For the cars, I largely use the Kelley Blue Book Private value.  For the RV, I have a straight depreciation method.  I had thought that by nowmb-201403stacks the decline in value year over year would decline.  But, it looks like older cars lose a lot of their remaining value around this age. Bummer!  I’m basing our projections on keeping our current ‘fleet’ and projecting somewhere in the middle of last years values for the estimates.

Asset – Liquid Assets

2015 Goal: +14.2%
2015 Actual: -1.5%
2016 Goal: +33.0%

These are things that can be converted to cash easily.  These include bank accounts, non-retirement brokerage accounts, CDs, and the like.  I’d projected a modest increase, but we ended up with a small decrease.  This was largely because I’ve ‘written off’ a bit of the amount in anticipation of replacing our HVAC system, which we’ll have to do in the next couple of years, and also had to do with the volatility of the stock market. I’m being optimistic for 2016 in that I think we can add to our savings more aggressively and hoping for some improvement in our portfolio.

Assets – Retirement Accounts

2015 Goal: +12.0%
2015 Actual: +4.2%
2016 Goal: +12.9%

We cut back on our contributions a bit to avoid a potential IRS penalty depending on our tax situation this year.  That’s since been covered so we’ll be making up the difference.  This means that our contribution level will be a lot higher.  Plus I’m hoping that performance is a bit better.  Our investments are more aggressive since we’re still 20+ years away from retirement, so our investments here under performed the market.  Hoping for a turnaround.

Liabilities – Mortgage

2015 Goal: -7.0%
2015 Actual: -7.0%
2016 Goal: -7.6%

We’re not paying extra so as long as we make our regular payments, the projections here are pretty easy.  We were right on track!  Since the balance is declining and the amount to principle expands every month, the impact will be better for 2016.  That helps our net worth!

Liabilities – Student Loan

2015 Goal: -18.4%
2015 Actual: -18.7%
2016 Goal: -23.8%

We only have one small student loan that doesn’t have much time left.  With a fixed rate around 2%, we are currently making the minimum payments.  We’ve got just around 4 years left.  I’d love to go ahead and pay it off sooner, but the low rate keeps this a low priority.

Total – Net Worth

2015 Goal: +15.9%
2015 Actual: +8.3%
2016 Goal: +17.7%

I was disappointed that we didn’t at least hit double digits, but it simply wasn’t meant to be.  Maybe I’m setting us up for even more disappointment by being even more aggressive.  I guess I don’t see it that way.  I want to make up the difference and a good year will help us do just that.  I’m going to put it out there and shoot for the stars.

Readers, how did your 2015 go and what are you setting as goals for 2016?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Declining Net Worth: A Personal Mini-Recession

I think the economy is fine, even though many Wall Street followers will try to lead you to believe otherwise.  But, unfortunately, we’re in a bit of a rut with our personal finances.

I just completed our net worth analysis, and for the fourth month in a row, our net worth has fallen.

Yikes!

Luckily, the amounts every month a pretty small, and even with four months of losses, the overall loss isn’t much.  It could be made back up with one good month, so here’s to hoping.

Still, I thought it would be worth looking at why..

Our Personal Mini-Recession

  • We paid our Disney trip. Trips to Disney World aren’t cheap.  We decided to splurge given that it was a trip we’ve been saving for awhile and won’t repeat immediately.  The payment for that came due.  We had money set aside, but it took cash off the books.
  • That darn stock market.  Even though I think we’re fine, the market has been a bit spastic.  Hopefully that changes for the positive. mb-201102piggybank
  • Summer spending. When temps rise, so does spending, it seems.  We haven’t made any major purchases, but it’s been more the little things adding up.  My wife and I have talked and will be consciously reigning in our spending to get back to where we’re more comfortable.
  • Side income was down. When we camp, my wife’s side hustle gets shut down.  Mine have been in a bit of a lull.  Again, hoping that these both normalize.

That’s really about it.

Am I concerned?  Not really.  While it would be nice to have our net worth go up month after month, the fact is that it doesn’t.  I actually track how often it does, and it’s around 70% of the time for us where it goes up, meaning that 30% of the time it doesn’t.  Over time, it will average out and that’s what I’m targeting.

Readers, have the warm months been kind to your finances or do you have some ground you’d like to make up?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.