Do you track your net worth?

[momtosam]

I'll admit it -- I wouldn't even really know where to start.

 

[ssawka]

Watching your budget doesn't mean you aren't also paying attention to your family and relationships.

For us, especially my husband, not knowing where we stand financially is extremely stressful, and it prevents him from focusing on "what is really important". For example, he's been a bit on edge financially about our oldest heading out to college. We have the money many times over, but he's worried about whether we should pull it from this account or that account, should we use the savings bonds first or save them for the year when we'll have two in college, etc. Once she chose her college and he could see the actual costs, he relaxed a great deal. Neither of us deals well with "maybes".

True, but budgeting and "net worth" are two very different concepts. "Net worth" simply looks at the value of your assets versus your liabilities and ignores the issue of liquidity. For example, let's say I have a million dollars in cash (I wish!) and I decide to spend it all on a large home. My "net worth" has not changed, but unless I sell that house, I no longer have that million dollars available for my budget.

Also, failing to watch your finances can cause trouble for your loved ones. I don't feel obligated to provide my children with their every whim, but I don't want them to have to borrow for college or figure out how to support me in my old age because I didn't save. Those things are also really important!

Yes, but so can obsessive budgeting and over analyzing your finances. As long as you are putting money into savings and meeting your financial obligations (and I'm not talking about making minimal payments!) then there really is no need to waste your time obsessing over where every dollar goes and who's spending what on what. I know this doesn't work for everyone, but DW and I are both relatively conservative when it comes to spending, so we both trust each other to not spend excessively. This has made for a happy marriage in the sense that there is one less thing to argue over.

[Edit]
I just read your previous post and you and your DH sound a lot like DW and I. However, we have never really done the budgeting thing. Maybe it is because I was fortunate to pick a lucrative career, but my philosophy has always been that as long as we are living below our means and meeting our financial obligations, then all is good!

 

[brymolmom]

OK - I'll admit it - I have a What is Net Worth question.

First of all - we don't budget at all - and I would prefer that we do at least some/more of that, but dh is resistant and it is tough to do it one sided. That said, we do well financially and don't spend a lot (except on vacations - even those are on the budget side). I know our retirement goals and we meet with our financial analyst once a year so I know we're on track. So it isn't like I don't have a clue where we stand...I just don't watch it week to week, etc.

Now, as for Net Worth - I know that it's Assets minus liabilities....I'm just not certain what to include in those figures. For example, a whole life insurance policy (where we will eventually get payments from in our older age)...Does that get included? Do you include your kids' college 529's (even tho you only anticipate using them for college expenses)? Do you include as a liability your kids future college costs or only current debts?

 

[zurgswife]

Nope. Too depressing. Currently using the "Ostrich" method.

ditto!!

 

[RitaE]

OK - I'll admit it - I have a What is Net Worth question.

First of all - we don't budget at all - and I would prefer that we do at least some/more of that, but dh is resistant and it is tough to do it one sided. That said, we do well financially and don't spend a lot (except on vacations - even those are on the budget side). I know our retirement goals and we meet with our financial analyst once a year so I know we're on track. So it isn't like I don't have a clue where we stand...I just don't watch it week to week, etc.

Now, as for Net Worth - I know that it's Assets minus liabilities....I'm just not certain what to include in those figures. For example, a whole life insurance policy (where we will eventually get payments from in our older age)...Does that get included? Do you include your kids' college 529's (even tho you only anticipate using them for college expenses)? Do you include as a liability your kids future college costs or only current debts?

Well the technical definition is if you own the money, then it is part of your Net Worth. If you owe the money, then it is part of your net worth. Since the legal owner of a college account 529 is the parents (or whomever set up the plan) owns the money, then you would include it. Since you don't legally owe the college bills, then you don't include them.

Now however you WANT to do it for your own purposes is another matter. I include the balance of our mortgage in the Quicken Report I have set up to report my Net Worth. A couple of years ago I took out the corresponding value of our house. Why??? I don't know. I just decided that whatever our house is worth is what it is and whatever we sell it for some day in the future will be okay. I was trying to look at our mortgage payment in terms of rent than an investment. It's just a mind game I play with myself.

Which btw takes me about 10 seconds to click on and look over so I'm really not sacrificing time playing with my kids to do this and if I wanted to do it seven times a day I might have wasted a whole 3 minutes or something.

I have one friend who has a savings account that she calls her absolute last choice Emergency Fund and she does her best to never consider it in her "calculations." It is money she has at least figuratively hidden from herself so I'm guessing if she wanted to calculate her "Net Worth" for her own purposes she'd probably exclude it.

 

[Kathi OD]

I know, but I think we spend too much time basing a person's worth in monetary terms instead of worrying about what is really important!

Personally, I don't see the point in calculating your net worth. You have what you have and you know weather it is enough to support your lifestyle. It's nice to have a general idea of how you are doing, but I don't need an exact number.

This is pretty much how I look at net worth. I always have a general idea of what it is, but I don't need to know down to the last penny. Sometimes we're doing really good, and sometimes we make a decision that causes that number to drop.

If I can sleep at night, without worrying about bill collectors, the sheriff, or the repo man showing up at the door, then our net worth is just fine.

FTR...DH has no idea what our net worth is, nor does he care. He figures as long as there's money for food, clothing, shelter, and a little R&R, life is all good.

 

[HayGan]

This is pretty much how I look at net worth. I always have a general idea of what it is, but I don't need to know down to the last penny. Sometimes we're doing really good, and sometimes we make a decision that causes that number to drop.

If I can sleep at night, without worrying about bill collectors, the sheriff, or the repo man showing up at the door, then our net worth is just fine.

FTR...DH has no idea what our net worth is, nor does he care. He figures as long as there's money for food, clothing, shelter, and a little R&R, life is all good.

I have absolutely no desire to think about what my net worth is down to the penny. I have a general idea of where we stand and that is good enough for me. I have plenty of riches in my life that can't be measured in a spreadsheet. I focus on those as my top priority and just keep an eye on the monetary value of our lives.

 

[Alexander]

Nope, no budgeting, no worrying about what we are worth.

Have a house that will be paid for in 4 more years, have 115 acres of land that we own debt-free, two vehicles that are completely paid off. Don't really care about the rest, day-to-day budgeting--No way, not happening here. If there's money in the wallet, we spend it, if not, we don't.

 

[Colleen27]

This is pretty much how I look at net worth. I always have a general idea of what it is, but I don't need to know down to the last penny. Sometimes we're doing really good, and sometimes we make a decision that causes that number to drop.

If I can sleep at night, without worrying about bill collectors, the sheriff, or the repo man showing up at the door, then our net worth is just fine.

FTR...DH has no idea what our net worth is, nor does he care. He figures as long as there's money for food, clothing, shelter, and a little R&R, life is all good.

That's about how we are too. I suppose it would be easy enough to tally it up - we don't have any debt so I'd just have to add up the balances in various accounts and guesstimate the value of our home - but the number is so irrelevant to our day-to-day lives that it isn't something I'm concerned with knowing. We have food on the table, a roof over our heads, a little extra in the bank, and vacations in the planning. What more could we want?

That CNN calculator was rather interesting, though... By both age and income we are apparently doing very well, which is not something I'd have guessed given our fairly simple/frugal lifestyle and modest savings. I feel like we're way behind the pack on retirement savings but I guess we're not the only ones a long way from the goals the experts recommend.

 

[bettymae1121]

Wow, used that net worth link and we are doing great for our age but terrible based on income. But we owe on our house what it is worth (or are even under water) so maybe that's why. According to the link our net worth should be twice what it is based on income. I don't see how that would be possible unless one has a lot of equity in their home, which by our age we normally would have, but due to the craptastic housing market in our area, isn't the case.

Anyway, the only reason I know our net worth at all is because of Quicken. Otherwise I'd just have a general sense of monthly cash flow and savings vs. debt.

 

[bdcp]

Absolutely. We have a CFP that handles our investments outside of our work 401k's. We know exactly what we're worth every 3 months when we meet with him. DH also tracks it. I have to report it for work every couple of years also.

I just used the calculator. Wow, we're worth 10x what is avg for our age. Our net worth for our income isn't quite as much as avg, but pretty close. The problem with calculators like this is they don't account for demographics of where you live and what the cost of living is. At our income in a lot of places in the country, we'd have a lot more disposable income to invest. We live in a high cost of living area so more of our income goes towards living than it would in other locations. So, I'd say we're doing pretty good. And, we have debt, but have no problems paying it down. We are in the middle of refinancing our house to get a lower rate and payment and I'll have all our debt except the mortgage paid off in less than 18 months without it hurting at all.

 

[Califgirl]

In case anyone would like to see it, here is where you can see the average net worth by age and income (from a trusted source - CNN MONEY):

Wow! How accurate is this site calculator? The numbers seem really low for average net worth for both age and income. I thought that we are doing badly until I used this calculator.

We do all our finances using Quicken. It is very easy and quick to use.

I'm thinking the same thing. This calculator must be way off, or by net worth they only mean liquid assessts. Even still ...

 

[Zhoen]

When DH and I were first dating, I calculated net worth and taught him what it was, and I was religious about budgeting back then--had to be. As time went by and income went up, we got pretty sloppy, and are looking to rein things back in now.

Regarding the CNN calculator, it's pretty misleading. The median net-worth for my age is $51k ish... that includes the people who have never saved a dime and are homeless with no belongings, the folks with the negative net-worth, and the people who inherited a bunch of money from family... so take it all with a grain of salt.

Looking at that and ball-parking a guess, DH and I are around that number, probably a bit below... our house is worth more than we owe (barely), one car is paid off and the other will be next year, so those are in the positives, and our goal is to have the credit cards paid off by the end of this year, but what we have in retirement is worth more than that (market dependent, of course.)

What's funny is the "median by income." Apparently there's a lot of old money in my peer group,earning the same salary as me... because if I had saved every cent I'd ever earned, I still wouldn't have that net worth. Ohhhhh... maybe everyone ELSE bought shares of microsoft with their summer job money back in the 90's only way I can imagine it...

 

[pumpkinmomma]

We use quicken so we can check it easily but I don't obsessed over it. We look at it about once a month.

We do closely track income and spending with quicken. Its easy and takes very little time.

 

[elaine amj]

I know, but I think we spend too much time basing a person's worth in monetary terms instead of worrying about what is really important!

Personally, I don't see the point in calculating your net worth. You have what you have and you know weather it is enough to support your lifestyle. It's nice to have a general idea of how you are doing, but I don't need an exact number.

We do it every year when we do our budgets at the end of the year. It helps us figure out if we're on track with our savings goals and if I need to fiddle with our annual budget more.

We are trying to figure an easy way to watch our cash flow and track how closely we are following our budget, but have been having a hard time figuring a simple way. Right now, we are supposed to check our bank balance once a month so we can see if we are on track or off track.

I'm pretty sure we are overspending though! Still, we know we're doing pretty OK and we have a fair bit of cushion so I'm not overly worried. If I sat and looked at hard numbers I would probably end up cutting down our spending more - which is why we haven't looked at our budget in 2 months!

 

[caisland]

Took a course from Dave Ramsay. We had been following a lot of what he says even before we took the course. Track your expenses and income so you know how much you are spending. Mortgage paid in 12.5 years. It really works. We have been using Microsoft Money for about 15 years. Can't even get the software anymore. Covers investments, loans, bank accounts, credit cards. Helps us plan future expenditures by putting in expected costs for everything.

 

[MrsPete]

True, but budgeting and "net worth" are two very different concepts. "Net worth" simply looks at the value of your assets versus your liabilities and ignores the issue of liquidity.

Both numbers can be important. Budgeting is a useful, everyday tool, but net worth is the ruler that lets you know whether your daily-weekly-monthly budgeting is "enough" to reach your eventual goals.

You don't check your weight on the bathroom scales so that you'll be able to declare, "I now weigh X amount!" Rather, you check your weight so that you'll know whether your diet is successful, or whether you need to put in a little more effort at the gym. The number itself isn't the goal -- the number is an indication of how successful you are at working towards your goal.

I like your example of spending a million dollars on a house, but the topic of liquidity is really opening a tangent: The tangent is the question of whether you have allocated your assets wisely. Clearly, you calculate your net worth not simply to know the number, but to see if you're where you should be financially, to see whether you're meeting your goals. If you periodically assess your net worth, it's an obvious time for you to review just WHERE your money is stored. It gives you a chance to see whether you're on track to have X amount by the time your oldest child finishes college, whether you're really going to be able to retire at 57, whether you might have too much invested in that one stock, whether you can afford the new car you want.

And those numbers can be motivating. This has been a big spending year for us, and I've sometimes felt like we're falling behind. It's a reassuring thing to be able to open a computer file and see for myself that it's all okay, that we haven't lost ground from this point last year. And I can look over the past years and remind myself that in other years we've suffered downs, but we've always rebounded.

Also, as someone else pointed out, this isn't a huge chore that takes days and causes stress -- it's not like your taxes. Instead, years ago my husband made an Excel spreadsheet that lists our various accounts. Sometimes he has to add a new column. Twice a year (New Years and our July anniversary) we just check those balances online and plug in the new numbers. It takes all of 10-15 minutes, and then we can see where we stand in relation to our goals.

 

[MrsPete]

The problem with calculators like this is they don't account for demographics of where you live and what the cost of living is.

Regarding the CNN calculator, it's pretty misleading. The median net-worth for my age is $51k ish... that includes the people who have never saved a dime and are homeless with no belongings, the folks with the negative net-worth, and the people who inherited a bunch of money from family... so take it all with a grain of salt.

Those are both fair complaints, and I'll add one more: Your goals may not be the same as those of the experts who say, "You should have X amount by the time you're ready to retire" or "You will need X amount to send your child to college." Your needs may be greater (or smaller) than average.

So that's one more reason that you should track your own savings and compare them to your own goals. You can't really trust online calculators in this case.

 

[JaymeC]

Yes, we track our net worth. We've used Quicken since we got married and it's been kind of neat to watch it rise from the zero balance it was. We only include somewhat liquid assets. To us, the house and cars are something we need to use day to day basis, not an asset we can sell to help make ends meet thus we don't include them in our networth. We do include the mortgage, which makes it look a little funky. It was almost scary to see it drop down around zero again after the 8 years of gain when we bought out first home But it's on the rise again, which is fun to track.

I will say though that dh and I seem to be more entertained than most by this. But both of us have also considered careers as financial advisers and have backgrounds in financial areas, so I've always assumed we went a little over the top on this.

Oh and I highly recommend Quicken. It's done us well these past few years.

 

[alice99]

Wow, used that net worth link and we are doing great for our age but terrible based on income. But we owe on our house what it is worth (or are even under water) so maybe that's why. According to the link our net worth should be twice what it is based on income. I don't see how that would be possible unless one has a lot of equity in their home, which by our age we normally would have, but due to the craptastic housing market in our area, isn't the case.

Anyway, the only reason I know our net worth at all is because of Quicken. Otherwise I'd just have a general sense of monthly cash flow and savings vs. debt.

I found this to be the case for our family also.
Though, the one thing that hasn't affected us is the housing market, we're in the same house since 1995. Took a few home equity loans, but never seriously raided the equity when the value was up.

We live in an area with a high cost of living..... much of our income goes to taxes (property, county, schools, state)..... much more than in other parts of the country. So, money that could be saved, if we lived somewhere else, is spent on expenses.

We are making a decent amount of money, higher income than others in our age group, but have a lower net worth than stated on the CNN calculator.