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.

Friday Favorites: December 1, 2017

Happy December.  How have things been with you?  Here’s a roundup of my favorite posts over the past couple of weeks.  Also, here’s a little tidbit of what’s going on.  I hope things are good with you!

Pain In The….

I’ve really started to enjoy running. Unfortunately, for the second time in the last three years, I’ve had to take a break.  I started feeling a pain in my foot and recognized the signs of plantar fasciitis.  Like last time, I know taking a timeout from running will help.

This time, I’ve decided to work on the elliptical machine as a replacement.  This has been going all right, except until this week.  I’ve been upping my intensity, and guess I pushed it a little harder than I should have.  I pulled a muscle in my calf.  This is also on the right side of my body!

Thankfully, the strain seems to be very mild.  After three days of hobbling around, I could feel improvement.  With a mild strain, I should hopefully be back to normal within a week.

Still, not much fun!

Favorite Posts

Here are some favorite personal finance posts over the last couple of weeks.

Have a great weekend!

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.

Why Cut Taxes Right Now?

Everyone hates taxes, right?  I know I certainly do.  You may not think so based on the title of this post, but I get it.  As every American probably knows, the big move right now is to reform taxes.  The President wants to cut taxes.  The Republican House and Senate seem to be moving forward.  I guess I’m just not sure: Why cut taxes?  At least right now.

Does Anything Get Fixed With The New Proposals?

My biggest concern with what I’m reading is that things don’t seem to get fixed.  When I look at taxes, the problem I have is how arbitrary things are.  You have, as an example, a $3,000 limit if you lose money on stocks.  That’s the most you can write off in a year.  This is completely arbitrary.

Take the alternative minimum tax.  That’s been in place for decades. They always do a year by year change to exempt most people from it.  Does the new plan get rid of it or fix it for good?

The rich currently benefit from the thousands of deductions and credits more so than any other group.  It does stand to reason that if you make more money, you have more opportunities here.  Still,  ‘simplifying the tax code’ was a rallying cry for President Trump.  Is it going to get any simpler?

Business taxes are going to be cut under the new proposal.  This is supposedly to attract or keep businesses in America.  The thing is, I haven’t heard a single business say that this would make a difference?  Will it?  Or will businesses simply pocket the money?

At the same time, businesses paying less are supposed to expand.  In theory, taxes go down meaning there’s more money.  More money should fuel growth.  Will this work?

The tax cuts are supposed to increase household income.  But does this rely on businesses paying more from their tax savings?  I’m not sure businesses will do that.  More often than not, shareholders, not employees are rewarded.

These are just a few examples off the top of my head.  And while I may have missed some details, I’ve not seen these things addressed.  Are we really ‘fixing’ anything so much as ‘changing a bunch of stuff’?  And is that a good idea?

Does A Tax Cut Make Political Sense?

I’m kind of confused why Republicans are standing behind this.  Polls show that most citizens have doubts about this.  They seem to be pretty knowledgeable that the middle and lower class are not the primary beneficiaries.  Yes, the ‘trickle down’ effect is supposed to help them, but there’s a lot of skepticism.  With good reason, I would think.

So, I wonder why Republicans are standing behind this.  People would love a tax cut.  I’m just not sure the majority of voters will love this tax cut.  If this passes, and people aren’t happy about it, they’ll take it out on politicians next November.  After Republicans lost several key elections last month, this has to be worrisome.

But, it could be that they’re screwed either way.  After all, to be the Republican that says no to a tax cut, even a flawed one, could be used against them.

The Economy Is Bad, Right?

No, of course not.

Usually tax cuts happen when the economy needs a boost.  Tax cuts happen to get us out of a recession.  Or when growth is flat.  But, we’ve been in a period of economic growth for practically ten years.  It hasn’t been fabulous growth, but it’s growth nonetheless.

So, what’s the motivation for the tax cut?  And is it a good idea?  After all, if we cut taxes now, what happens during the next eventual recession?  A tax cut now will make it harder to play that card when it might be needed.

My Opinion

As I’ve said above, I would love to pay less taxes.  I’m just not sure this is the way to go.  I’m not in favor of any plan that puts the majority of cuts in the pockets of the rich.  The middle class is losing pensions and pays more for health care.  The lower class has a harder time than ever finding full time jobs.  These are the people that need the help the most.  Promising that the help will get there by first giving the savings to the rich is a bad idea.  The rich show that they will likely use that money to simply get richer.  They’ll invest it. They’ll save it.  What they won’t do is pass it down.  At least, not as their first option.

And I’ve already made it clear my thoughts about the impact to the deficit.

So, the answer for me is a firm no.

Readers, what do you think of the tax cuts?  Are they fair? Should we cut taxes at all?  What changes would you make and what would you keep?

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.

When To Make The Switch To LED Christmas Lights?

We got our decorating done this past weekend. Usually, we go in full force the day after Thanksgiving, but we decided to start a bit earlier this year.  We have a mix of LED Christmas lights and regular lights.  Pretty much everything inside is regular and outside is LED.

Benefits of LED

According to the site Holiday LEDs, there are many benefits of switching to LED lights, which include:

  • Much less energy use – They say that LEDs use about 90% less energy than traditional light strings.
  • Longer life – They say that the bulbs last 50,000 hours, which is up to 20 times longer than a normal set of bulbs
  • Safer – LED bulbs throw off a lot less heat than normal bulbs, which reduces the risk of fire caused by overheating
  • Easier to use – Many LED light sets do not suffer from the frustrating problem of a loose, missing, or broken bulb causing the entire line to fail.
  • Brighter – The LED lights typically emit a more bright, crisp light, so you don’t use as many lights on the tree.

Drawbacks

  • Price – The price has come down for LED bulbs.  Still, they remain higher than regular bulbs

    Image from morguefile courtesy of earl53
  • Performance – We replace at least 1-2 lines of outdoor LED lights per year. The bulbs might last, but the lines don’t.  I expect being outdoor lights, they won’t last as long.
  • Availability – Last year I saw quite a few stores carrying them, but most had a limited selection or were sold out quite early.
  • Color – We use regular lights inside because they’re much warmer lights.  The LED bulbs have made some strides. Still, they’re much more harsh lights.

We definitely see a bump in our electricity bill during the holiday months.  I think this would be higher if it weren’t for our mix of bulbs.

So far, our mix of bulbs seems to work for us.  I would love to switch more of our internal bulbs to LED lights, especially since we have one pre-lit tree that now needs lights strung over about 80% of it, since other lines have burned out. I think it will take a while. Maybe in a few more years we’ll get there.

Readers, have you made the switch to LED yet?

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.