Whew, July is such an exciting month! My 31st birthday is in two days, and it’s been a year and a half now since we paid off our mortgage.
Oh, and we recently made a huge announcement. We just closed on our very first rental property – and we paid in cash! I’ll share all the details soon, but for now, I want to update our net worth as I do around the 15th of each month.
The first time I calculated our net worth was on July 15, 2017. We were almost a year into our mortgage-free journey, and I had just read The Millionaire Next Door by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D. A major takeaway from that book was that if I am serious about building wealth and becoming a millionaire, I need to start consciously working to improve our net worth now, and the obvious first step is to track it. I signed up for free with Personal Capital, connected all of our financial accounts, and within a few minutes, I knew our net worth. You can view that first report here!
If you’re not sure what net worth is or how to track it, I’ll take a few moments to cover that information, and I’ll tell you all about Personal Capital. If you know the drill and just want to see this month’s numbers, feel free to keep scrolling!
Investopedia’s definition is this – “Net worth is the amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health; conversely, net worth may be depleted by annual operating losses or a substantial decrease in asset values relative to liabilities.”
But to put it much more simply, your net worth is just the value of your assets minus your liabilities.
Assets may include your home, vehicles, investments, money in your bank accounts and cash. It can even include the value of your art, jewelry, furniture, etc., and as I was asked one time – yes, it can include the value of your guns! I don’t include any of those things when calculating ours, however, because I just don’t want to take the time to add up the value of each little thing we own.
As for a liability, it’s the amount of debt you owe on these things. My husband and I have not had a liability since paying off our house in January 2018, but when we did have a mortgage, the amount we owed from month to month was subtracted from the current value of our assets when calculating our net worth.
Some calculate their net worth manually using a spreadsheet, but I have never calculated our net worth any other way than using Personal Capital. I mentioned this service a few minutes ago, but I’ll tell you more about it below.
This is the only financial tool I use that I haven’t come up with myself. The service is so quick and easy to use that I’ve just never felt compelled to put a spreadsheet together to calculate it. Plus it’s free!
Personal Capital is an app/service that updates your net worth upon sign-in by connecting to your bank accounts, investment accounts and even Zillow, though I found that our “Zestimate,” their estimated value of our home, fluctuated wildly almost month-to-month. Connecting your accounts is optional, so this is not something you have to do if you don’t feel comfortable with it.
It is good to keep in mind that some companies do not allow third parties to have this sort of access to their information, and because of this, I have to log into my husband’s retirement account and manually update the value on Personal Capital. Also, to get a good idea of the value of your vehicles, I recommend checking kbb.com and manually updating those amounts when you log into Personal Capital.
They are now offering a refer-a-friend program for their free service, so it’s a great time to try it out. If you use this link and connect a qualifying investment account (taxable brokerage, 401k, IRA, 529, etc.) with a balance of over $1000 within 30 days of signing up, you and I both will receive a $20 Amazon gift card!
Alright, let’s check out July’s numbers.
- Emergency Fund: $5,000
- Savings Toward Investment Property Rehab: $12,521.69
- Sinking Funds/Short Term Savings: $3,743.24
- Checking: $375.08
- Roth IRAs: $4,815.65
- 401Ks: $86,372.97
- Real Estate: $30,000
- Home: $150,000
- Vehicles: $10,340
Net Worth: $303,168 (+$6,558 from last month)
As I mentioned a few minutes ago, the first time I calculated our net worth in July 2017 while we were focusing on paying off our mortgage, and it came out to $194,481. In July 2018, about six months after becoming completely debt free it was $248,138. And now in July 2019, after over 10 months of saving an average of 62% of our income and purchasing an investment property, we’ve reached $303,168. It blows my mind to see that it has increased by over $108,000 in these last two years!
Even if you choose to just track your net worth every three to six months instead of monthly like I do, I really suggesting starting now. Watching your numbers increase as you pay down debt and begin to save money is awesome motivation, and it’s great to be able to look back and see all the life you lived through those numbers.
Using Personal Capital turns this into a pretty convenient, passive process. If you need help getting your account set up or with calculating your net worth, feel free to reach out to me in the comments below or on Instagram!