I’ve been following various bloggers tracking their net worth for a couple of years or so. Over the past few months, there seems to have been a little flurry of posts from some of my favourites focusing on net worth.
After reading some of these, I realised that I track literally every other aspect of my financial life, but this was one thing I didn’t have a full grip on. I mean, I had a rough idea, but tracking my net worth on a page in black and white? I am a newbie!
I built a super simple net worth tracker spreadsheet and started on December 8th. I’ll be updating this on the 8th of each month going forward.
All well and good, but the one thing I have struggled with is how exactly to calculate the magic number. There are so many variations on what people think should be included and I can see it from all sides!
The Sticking Points:
Property: OK, so I own a house worth approximately £120k. The mortgage owed is £87k. Technically my home equity is £33k. But this isn’t exactly a liquid asset, is it? When I retire, I’ll still need somewhere to live.
Perhaps if I was living in a bigger family home, I would include that as an asset as I would likely sell up and downsize after retiring.
This is an interesting way to look at it. It’s not something I would be putting a lot of effort into tracking at this stage of my life, as there are too many potential variables standing between me and retirement.
I do, however, think this would be more relevant to the overall picture closer to retirement.
On the other hand, Luke, at Consumerism Commentary, is extremely persuasive with his stance, insisting that a financial liability is not a physical object. Therefore your house is is an asset.
This is the one real biggie that has me torn. I have decided to track it both ways, one figure simply excludes the value of my home.
Student Loan: My current student loan balance stands at £24,000. Like most UK graduates, I repay the minimum (working out to around £50) from my paycheck each month. If I was in the situation where I needed to liquidate my assets, I assume I would not have an income in this scenario.
If this was the case, I would no longer be liable to make repayments until my income reached the threshold again.
Being on a Plan 1 loan means my balance is written off 25 years after graduating. This is actually calculated from the end of the tax year in which you graduate. So my 25 years began in April 2012. This will make me 50 years old when the loan is forgiven.
Whichever way you look at it, it is not a loan which, like any other, I will carry into later life or that will still be relevant should I fall on hardship.
For this reason, I have chosen not to include it in my liabilities.
The Current Picture
So on January 8th, this is where I stood
This is pretty much exactly where I would expect to be at my stage in life. I bought my first home just over 3 years ago with a mortgage, so this obviously makes up a huge chunk of both my assets and liabilities.
Until 5 years ago, I mostly worked freelance or bounced between short term contract jobs meaning I had no workplace pension. And I only started saving when I wanted to buy a house, then most of my money went towards the deposit and furnishing. All of this makes for pretty dismal reading!
I know I am almost setting myself up for disappointment by committing to track this monthly. It’s not likely to be taking any huge leaps upwards any time soon, if anything, it’ll go down significantly once I’ve finally bought my new car.
I am really hoping to push myself to both save more and pay more off my mortgage this year, so hopefully it will spur me on a bit.
I’m going into 2019 debt free, whereas last year, I had £1200 of credit card debt to clear. Logically, this is another £1200 which I can divert straight into savings.
I’m putting off setting my annual targets in stone yet, as I’m expecting a pay rise in the next couple of months.
At the minute, I’m basing my budget on my current salary so the real plan is to throw any extra income at my savings/mortgage.
Rather than boring you all to death with regular posts on my barely-moving net worth, I’ll be updating it monthly here.