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February 09, 2012


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I've been tracking my family's net worth monthly for about two years now. It's been nearly at 0 for almost the entire time as the value of our house plummeted. Now that it's finally seemed to reach bottom, our net worth has been going up. My husband's going to turn 31 next month and our net worth is almost exactly 2x our spending.

It feels good to know that despite the "plateau of despair" (as my husband calls it) that we experienced for 18 months, we might actually be on track. We hope to have our mortgage paid off in the next 3-4 years, then our net worth will really have room to grow.

I use Mint, so I can tell my net worth at a glance (assuming the imports from Zillow for real-estate values are accurate). No need to make lists.

I need to save more. I'm 3 units under.

I guess I go against the grain but I check my net worth several times every WEEK! I don't get too frustrated or too excited but treat it as a very factual exercise. I don't want to go an entire month or, heaven forbid, an entire year not "resetting" my thinking. I do ask a lot of questions of my financial advisor but end up making very few changes. I have done this for years but more so as I approach retirement in 77 days.

Net worth divided by annual take-home pay? These kind of formulas always aggravate me. Does my wife's pension count as "take home pay"? Is my current 401(k) contribution part of "take home pay"? I don't know why it would as I don't spend it for current living expenses.

I know that I have 7-figure net worth. I have zero debt. I know my wife gets a very nice Uncle Sam pension along with affordable health insurance for us both. I know what I will draw in SS. In addition to pension and SS, to meet expenses without hurting (and a little splurging from time to time), I can pull 2 - 3% from portfolio every year and should be OK for long, long time. Then we have Long Term Care coverage to take us through the end stages.

I use Fidelity's Full View to manage my net worth. It pulls in all my online accounts and you have the ability to manually input custom assets and liabilities for accounts with no online access.

I check my net worth a few times every week. I don't include my house or my car. Both are paid for. From just saving and investments I have 31 times my annual spending. I guess I'm ready to retire. I'm 55, so I'll probably stay for maybe another 2-5 years. Right now my job is just so easy and stress free that I might as well stay. Its nice to know that if things chaged,(job stress) I could leave anytime I want.

I calculate my family's net worth every month. It's the only way to truly gauge how you're doing on a monthly basis. I want to see the net worth go up every month instead of going down. If it goes down due to some odd purchases, then i make sure it is made up during the subsequent months.

Yeah, I calculate ours monthly as well, for the reasons you outlined there. Are we doing better? That's the major key for me.

And how quickly?

It allows us to have benchmarks (e.g. this is where we want to be at year's end, month's end, etc etc etc).

I keep track of my net worth (excluding our real estate and credit union accounts) every market day. I use my own software to do the calculations and the software that comes with the proprietary database I use in order to generate a graph in which I can compare my results with various funds or market indexes.

"For every 1 unit you are over, you could consider retiring about a year earlier."

I don't think this is true. Instead, for every *2* units you are over you, could consider retiring about a year earlier. This is because by retiring earlier you will have a longer retirement period which requires more assets to support you. Although, if you have enough assets you could probably live off the interest/earnings indefinitely.

At 31 and a ratio of 2, I guess I'm right on track. Most of this post makes a lot of sense. Like others, I track net worth at least monthly, and with a Mint account can see it any time.

I take exception to the following paragraph:
"If you are trying hard to pay off your mortgage ahead of schedule instead of making a huge effort to save and invest, your attempts are laudable but mistaken. The quickest path to wealth includes holding a home mortgage you could pay off but you choose not to in order to take advantage of the tax benefits. The rich leverage wisely and invest."

On the contrary, if you've read "The Millionaire Next Door," the very wealthy hate to borrow and spend much less than they earn. Many of them have paid-off houses. Do I really want to pay $10K in interest to save $3K in taxes?

As Dave Ramsey likes to point out, imagine the freedom you have without a mortgage payment. Imagine the risk it eliminates. It also contributes to the very net worth Marotta Wealth Management and FMF place so much emphasis on, and correctly so.

I am not a cynic, but it's not surprising that a post from a wealth management firm would prefer you to invest than to pay off your house!

We also calculate our net worth monthly, although we don't make a distinction between liquid/non-liquid assets and immediate/long-term debt. We'll definitely add these percentages to our spreadsheet for next month and see where we are against the benchmarks above.

The 20X goal implies an 80% replacement ratio. That's probably a good target, but I'm curious where social security fits in, if at all?
Most people will find Social Security replacing 30-45% depending on their lifetime earnings. 40% is what you'd withdraw from 10X annual earnings. Still, I agre with the goals in this article, as one doesn't know what the future will bring. Better to have too much at retirement than to be ill prepared.

I really was enjoying reading this until I got to:

" The quickest path to wealth includes holding a home mortgage you could pay off but you choose not to in order to take advantage of the tax benefits. The rich leverage wisely and invest."

This is an untrue statement which has been pointed out by Philip above. I am curious to why the author believes this way? It seems to me it is more about making money for Marotta then sound financial advice.

One other issue with the article, besides what has already been mentioned: For some reason, in the last section, it keeps equating and switching between "take home pay" and "annual spending." Which is it? Because anyone who is saving anything at all knows that the two numbers are not the same.

After reading your article I computed my net worth. Did not include my husbands or my pension in the calculation . I did not know how to get cash value on them. Any suggestions

Lisa --

Do you know when you will receive it, how much you'll receive every month, and for how long?

My husband if he left work right age 55 would receive about 3000 per month. Mine is at 65 and I would receive about $650 per month. and that would be for life.

Lisa --

Others probably have better advice for you than this, but here are my thoughts:

Option 1: You shouldn't count it at all. After all you don't control it and don't have access to it until later in life.

Option 2: You can try and calculate the "net present value" of it and assign it that value. Google it for more info or see this calculator:

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