Net Worth First Quarter 2014

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  • http://bigdaycoming.com Big Day Coming

    Thanks for the shoutout on the list at the end!

    Regarding vehicles on the net worth statements – I too held the same viewpoint but became conflicted when I had an auto loan and new vehicle on my balance sheets for the first time this past month. My general feeling is this: If you have no debt attached to the vehicle and its an older car you don’t ever plan on selling – don’t include it. It is a depreciating asset with high maintenance costs. Real Estate is the same, though with a much longer lifespan – which is why people may list it as an investment. In reality, homes you own as a landlord are investments, while primary homes are actually just a very long-term depreciating asset. And valuations should actually include expected transaction costs to sell it – nobody sells their house for free, they pay agent fees, and often do plenty of sprucing up before selling.
    Since I have a month old car with debt attached to it in the form of an auto loan, I chose to include both the debt balance and an estimate of the car value. The important part is to take a very conservative approach to valuing your car, since most people don’t resell privately (or overestimate the condition of their car) and don’t recoup every dollar they think it should fetch. Or they’ll trade in at a much lower value or drive it into the ground.

    • Derek C. Olsen

      I love the way you layout counting the value of a car. Well put! Also agree with your thoughts on housing.

      Thanks for your input.

      As for me, I am currently driving my 1995 Camry into the ground and below!

    • theFIREstarter

      Agreed on cars… not so on housing. How do you figure it is a long term depreciating asset? Obviously houses will require maintenance but overall on average house prices should go up, maybe not as much as the stock market but at least with inflation, so they may not appreciate nor depreciate long term. Also the car is a sunk cost as mentioned in the post as you will either drive it into the ground or sell it and buy a new one, whereas when you get older you can sell your house or take equity out of it to fund part of your retirement, which many people do.

      • http://bigdaycoming.com Big Day Coming

        A house is not guaranteed to always go up in value. I think we saw that pretty clearly back in 2008. In general, yes a house is a much wiser place to store your money than a car. But they both require active maintenance to maintain their usefulness. I don’t know about you, but I have done plenty of spending on my houses to maintain them, repair them and upgrade them. In addition, I get to pay taxes for the privilege of owning them. The house doesn’t throw off value with any cash flow like a dividend. Selling a house requires a lot of time and effort, plus a lot of fees and often a lot of upfront maintenance/upgrades to make it attractive.
        People like to just point out that the sale prices of homes tends to rise over time. That’s generally true, but if you actually factor in maintenance costs and taxes paid during that time, how much of your gains will remain?

        • theFIREstarter

          “A house is not guaranteed to always go up in value. I think we saw that pretty clearly back in 2008.” – the same could be said about stocks using exactly the same argument 😉

          The costs are legion no doubt about it, it would be interesting to work out exactly how much you’d have spent on all that stuff over say a 25 year mortgage, and then sold the house, whether you’d make any “profit” or not.

          But the thing is all of the costs you mentioned have to be paid whether you rent or buy, in the costs you are paying for the landlords taxes, repairs, and so on anyway.

          So let’s make everything else equal and say that in an imaginary area it costs exactly the same to buy and to rent, at the end of 25 years with the mortgage you have a house to sell regardless of what costs you have paid on maintenance and tax, whereas renting you don’t (despite paying indirectly for exactly the same expenses).
          So personally I think it is fairer to call those ongoing costs that are completely separate to your house value/equity.

          If you can find a similar house in your area that is cheaper to rent and then invest the difference then it could be a different matter, but that is a completely different argument of renting vs buying which is highly location dependent.

          Cheers for the healthy debate, I’ve been thinking deeply about exactly this over the last few days so it’s helpful to get an alternative viewpoint!

          • Derek C. Olsen

            I think there isn’t a clear ‘rent vs. buy’ answer that is for everyone or every situation. There are so many changing unknowns to consider along the way. The future is difficult to predict.

            I think perhaps there are ways to rent your entire life and make it work out financially and ways to mortgage a house and have it work out well too.

            Whatever the answer is, I love hearing all the different opinions on the rent vs. buy debate. Good stuff. That is part of what makes personal finance so much fun.

            Thanks again for stopping by, FIRE starter!

      • Derek C. Olsen

        Thanks for your reply.

        Question:

        When you sell your house when you get older, what will you do with that money? Buy another house?

        If you plan on funding part of your retirement with the money earned on the increased value of a house over time (which includes all the expenses, taxes, and the mortgage along the way) why wouldn’t you just invest in retirement accounts along the way instead?

        • theFIREstarter

          I’m talking when you are way older… most people downsize their house or you could sell it and use the money to buy an annuity and then rent, or pay for residential care and so on. Obviously it depends on whether you are planning to leave anything for your kids but I am planning on bringing mine up to be financially responsible so they won’t need a pay out when I die anyway.

          To answer the second part of the question… I think you are getting at the buy vs rent argument (but not quite sure?) in which I’ve answered in the reply to BDC below. If I’ve got the wrong end of the stick let me know and I will have another go at replying. Cheers! :)

      • Derek C. Olsen

        Thanks for your reply.

        Question:

        When you sell your house when you get older, what will you do with that money? Buy another house?

        If you plan on funding part of your retirement with the money earned on the increased value of a house over time (which includes all the expenses, taxes, and the mortgage along the way) why wouldn’t you just invest in retirement accounts along the way instead?

  • http://www.savespendsplurge.com/ save. spend. splurge.

    YES! I love that you invest in the S&P 500 Index :)

    Thanks for the link to my net worth 😀 Isn’t that list fun?

    • Derek C. Olsen

      That list is amazing and I love everyone on it.
      And, it keeps growing. It is almost double now from when J.Money first posted it.

      http://rockstarfinance.com/blogger-net-worths/

      We need more people to be more open, honest, and transparent with personal finance.

      HOW THE HELL IS ANYONE SUPPOSED TO LEARN IF EVERYONE KEEPS IT PRIVATE??

      It’s called personal finance, not private finance.

      Also, yeah… 500 Index is always a winner.
      However, I do look forward to (slowly) adding different investment tools to my portfolio.
      Things like real estate, foreign markets, and eventually individual stocks.
      Also, I look forward to one day being able to join The Lending Club.

      https://www.lendingclub.com/

  • http://rockstarfinance.com J. Money

    Welcome to the dark side :) Going now to add you to the list…

    • Derek C. Olsen

      haha, this is all your fault.

  • jennydecki

    How do you make that beautiful spreadsheet looking thing with all your numbers in there? Seriously, I’ve been on WordPress since I was knee-high to a grasshopper and I just have no idea.

    Okay, down to the real stuff. I love your blog! I love that you have a podcast about having better conversations! My husband and I have gone through big emotional changes with us flip-flopping who the primary breadwinner is, kids, house problems, more bills, more house problems, me getting credit cards because I freaked out and stopped being able to convince myself that crafts would be just fine. So we’re good, but everyone can be better :) I look forward to listening and thank you for stopping by, too :)

    • Derek C. Olsen

      Funny story: When I first thought about posting a spreadsheet in WordPress I thought it was going to be super hard and take forever to figure out. The first thing I tried was copy/paste the spreadsheet from a Google Doc into the blog. IT WORKED! I was so happy.

      I don’t know if you can set formulas in a spreadsheet in WordPress, haven’t tried to figure that out yet. I just make sure all the numbers are correct while still over in the Google Doc, then copy/paste.

      Thanks for sharing a little of your story, glad to hear you guys are doing well/better.

      P.S. Here is a sneak peek of the new podcast (It even has a funny unedited part in the middle) Enjoy! Podcast is launching at the end of Feb 2014.

      http://traffic.libsyn.com/beatnikradio/005BetterConvoStealingFromSpouse.mp3

      • jennydecki

        Really? Copy/paste? *headdesk* Easy things can sometimes be the most difficult when you naturally like to over-complicate everything like I do!

        Thank you for the link, I’ll listen after I hit Post :)

  • Yes, I Am Cheap

    It’s cool that all of your debt is pretty much student loans. I wish. I also checked out J Money list and decided to disclose my own net worth. Hey, why not?

    • Derek C. Olsen

      “Hey, why not?”

      Always the start of something great!

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  • http://www.MoneyPlanSOS.com/about Steve MoneyPlanSOS Stewart

    This is cool Derek and Carrie! While I think it’s dangerous to compare myself to the net worth of others (because I’m the jealous type and I can’t help it) I shared how we doubled our net worth in just 8 years.

    It wasn’t that hard, we just got out of debt and started saving. Yes, we lost half in 2008 but kept buying when the market was on sale! That would have not happened if we were still buying new cars and living without a budget.

    If you are interested, I posted it and talked about it in my podcast: http://moneyplansos.com/how-we-doubled-our-net-worth-and-you-can-too/

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