Once a month I update my net worth in Quicken (by adding in any expenses, updating my fund prices, etc.) And once a year I give you all a review of how I did the previous year. This is my wrap up for 2010. Here are the highlights:
- My net worth ended 2010 at an all time high, up 20.9% versus the previous year. Note that this includes my entire net worth -- including the value of items that didn't go up during the year (like my house, my cars, and cash investments), which weren't inconsequential in total value. This compares favorably to the market (S&P 500), which was up 12.8%. My gains were fueled by the market's rise as well as my savings for the year.
- I had all-time net worth highs for the months of September through December. In fact, at the end of August my net worth was relatively flat (just up a bit for the year.) Then the market went on a tear, up 19.9% since the end of that month (and took my net worth with it.)
- This year's performance brings the compound annual growth rate of my net worth to 14.94% over the past 14 years when I started tracking it in 1996.
- This year I had my fourth-highest percentage gain in net worth and second-highest in absolute dollars gained. The best year (on both those measures) was last year. Overall, my net worth is up 55.7% since the end of 2008 (which, BTW, was the only year I've had a loss in net worth.)
- If my net worth continues growing at 14.94% each year, I should hit my crossover point in five years. :-)
Overall, a great, great year -- I hope there are many more like it. To do my part in trying to make this happen, I'll keep doing the same old things: growing my career, spending much less than I earn, saving a ton, and investing in index funds.
Another great sign that the economy is rocking! Congrats!
Posted by: Financial Samurai | February 03, 2011 at 05:42 AM
I'm curious as to why you keep your home in the Net Worth calculation. I realize it's technically an asset, but if you're not planning to sell and take profit from it then perhaps it's not a true asset.
Since you do use this set of assets did you factor the decline in value here, especially for your home. As many of us have seen our home value has declined at least some % over the last 2 years. I run my net worth both ways, but by default have removed the personal home from my assets. It's not that I don't want to know how much has changed (-18%), it's that it doesn't matter as I do not plan to downsize (by value) my home when I retire. And the next home will also have changed in similar value.
Regardless, it's interesting to see the change and proves out the theory of staying put in the market when lots of people were bailing. We never sold a stock other than minor adjustments to portfolio classes. We actually saw our biggest % gain from 2008-2009, and ~18% gain 2009-2010.
BTW, this site has been a primary motivator for me and has helped us stay course, since many of us silently compete with you :>).
Keep up the good work !
Posted by: beachin' | February 03, 2011 at 06:40 AM
Congrats on the great work. We had a pretty good year as well, I think we finished up around 15% if memory serves.
Posted by: Money Beagle | February 03, 2011 at 07:57 AM
@beachin - there is always a reverse mortgage. Also, for giving inheritance to children, a house is most definitely an asset.
Posted by: Michael Goode | February 03, 2011 at 08:28 AM
I have 2 different net worth values, one that includes house and one that doesn't. I do know that once the kids are gone, I will be selling this one and moving into something smaller and less costly. In that sense, I could count some of the equity of the house as 'investment money'.
Anyway, that is great! I loved getting my investment statements at the end of 2010. It was just a flurry of good news. That would be great if you could be all set in 5 years!
Posted by: Everyday Tips | February 03, 2011 at 08:36 AM
beachin' --
A few reasons:
1. Net worth = Assets - liabilities. My house is an asset.
2. I've included it from the start -- way back when I had both a house (asset) and mortgage (liability.) So I've always included it and want my comparisons to be apples-to-apples.
3. I have it in Quicken at the true value (yes, decreased dramatically versus a few years ago) less cots it would take to sell the place. THis is my true value if I liquidated it.
4. The house isn't that large of a percentage of the total net worth -- 10% or so.
Posted by: FMF | February 03, 2011 at 09:39 AM
2010 was a record year for investments and income for my household. My family is truly grateful for it.
@FMF - Regarding your crossover calculation, do you account for inflation? A lot of the indicators (record food prices and commodities for example) are showing we should be bracing for an inflation run.
Posted by: texashaze | February 03, 2011 at 09:55 AM
texashaze --
Yes, for basic inflation. But I have no way of predicting a larger r8un, so the way I plan for it is to save much more than I think I'll actually need.
Posted by: FMF | February 03, 2011 at 09:59 AM
@FMF, you should try Yodlee. You can view your net worth daily.
Posted by: Alex | February 03, 2011 at 10:17 AM
@FMF
1. In regards to your house you said "THis is my true value if I liquidated it". I believe the true value of a house can only be achieved once it has been sold and the money is in your bank account. Anything else before that is just an estimate.
2. Your net worth increased 20.9% with respect to the previous year. The only way to know if this represents a meaninful increase is if you provide actual figures. My point is: if your net worth went from $100 to $120.90 is not a big deal, if it went from $1.000M tp $1.209M it is a big deal.
Posted by: Tony | February 03, 2011 at 01:27 PM
Tony --
1. I have a pretty good feel for prices in our area since I looked for a new place for several years (don't know if you were reading FMF in those days) and even had our place on the market a bit.
2. First of all, my net worth is closer to the second number than the first. Second, read between the lines: "This year's performance brings the compound annual growth rate of my net worth to 14.94% over the past 14 years when I started tracking it in 1996." Pick a reasonable starting net worth for 1996 and then compound it for 15 years. You'll see that it's meaningful.
Posted by: FMF | February 03, 2011 at 01:36 PM
So if at ~15% per year you'd reach your "Number" (which is $3M stated in an earlier post) in 5 years, your net worth must be ~$1.5M today? Congrats! Penta
($1.5M * 1.15^5 = $3M)
Posted by: Penta | February 03, 2011 at 02:57 PM
I like everything you're doing, FMF, except I would suggest that investing in only index funds is sort of like having a diet that consists of nothing but green vegetables. Yes, index funds are good, but they are only part of a complete, diversified portfolio. I don't know what index funds you are in, but I have friends who swear by index funds who are only invested in an S&P 500 index fund. To start with, that strategy has very little exposure to mid-caps and no exposure to small caps and limited international exposure (although to be sure, virtually all of the companies that make up the S&P 500 have big international operations and sales), esepecially limited in emerging markets.
I love index funds, too, but I love them in concert with a bunch of other things that round out a sound, diversified portfolio (small cap and mid cap funds, emerging market funds, bond funds, etc).
Otherwise, I'm with you. John Wesley said it best, "Earn all you can, save all you can, give all you can." I grew my net worth by a similar % this year and hope to continue that growth.
Posted by: Bad_Brad | February 03, 2011 at 03:12 PM
Bad_Brad --
I have three main index funds:
1. Total US market index
2. Bond Index
3. International stock index
Posted by: FMF | February 03, 2011 at 03:14 PM
FMF - While conventional wisdom is to keep 40% or so allocated in bonds "at all times", you need to ask yourself how bonds can mathmatically go up in value when interest rates are at all-time lows....Sometimes you need to buck the rules-of-thumb when they just don't apply....Recommend you temporarily replace your bond position with cash til rates rise....Now, you won't "make" anything in your cash while you wait, but at least you'll avoid losing principle in your bonds as rates rise....Then, once you see the "all-clear signal" of 5 year CD's paying 5% again at your local bank, you'll have lots of dry powder to go shopping for bonds....Good luck, Penta
Posted by: Penta | February 03, 2011 at 06:04 PM
FMF must be a boglehead, he's mainly invested in index fund and is not a RE investor (beside his home).
I suspect that he tracks his NW on NETWORTHIQ.
@ Penta, I think you are right about FMF's NW.
FMF is a perfect example that one can become a multimillionaire on an above than average salary by living below one's mean.
There is no secret!
Keep up the good work, I read the blog daily!
Posted by: Cecilia | February 03, 2011 at 08:48 PM
Penta --
Don't worry. My asset allocation has way below 40% allocated to bonds.
Posted by: FMF | February 04, 2011 at 08:00 AM