February 29, 2012, 5:00 am

February Net Worth -0.85%

by: The Financial Blogger    Category: Assets and Net Worth
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Doh! I knew this would happen!

 

Say what! After this whole big speech about “I’m going to concentrate on paying down my debts”, I’ve been fooling around again?

 

I’ll reassure you right away, this is not the case. My finances are under control, but…

 

Because there is always a “but”….

 

We had our 3rd child at the beginning of the month! This is great news for my wife and I but not for our budget ;-). In fact, a kid means:

–          2 days of dining out expense for breakfast, lunch and supper (‘cause the hospital food is completely disgusting)

–          A drop in my income since I’m on paternity leave for the whole month (more time but less money!)

–          Tons of last minute expenses for the baby (diapers, clothes, etc)

–          A bunch of medical receipts that I need to file claims for to get reimbursement from my insurance

 

In addition to that, I got my first bill for municipal taxes ($429) along with a $500 cash deposit for my pool this summer. But don’t worry; the pool is being paid in cash. But I’ll get the cash with my tax return… which I will only receive in May or June. Therefore, the $500 deposit has to be taken from my own money in the meantime.

 

So overall, my liabilities have temporarily increased by almost 2K but I’m not too worried. Starting on March 12th, I’ll be going back to work with a salary increase and I’ll be able to catch up pretty fast considering the fact that I won’t have to spend $800 in transportation anymore. Yup! I’ll be working 5 minutes away from my house!

 

On the other hand, when I look at my assets, I’ve noticed that I’m fairly conservative. For example, the neighbor in front of my house sold his for 340K last fall. My house has about 20K more in features (heated floors everywhere + central AC) & materials and is 400square feet bigger. Last year, I added a small increase that equals the cost of my central AC. This year, I’ll do the same thing with the pool. I’m aware that I can’t use the full price of these 2 things and add it to my price as it’s not “worth what I paid for” when it comes to selling my house. However, I don’t consider inflation in the price either. This is why it’s about the same thing.

 

Then we have our cars. I even out the value of my Tribute with its loan and I drop my RX-8 by $400/month since I bought it. By the end of the year, the car will be virtually worth nothing (less than 2K). However, I’ve done a quick search and the cheapest car I found for this year was selling at 7K.

 

Finally, I have my company shares. This could be quite arguable as they don’t have a “real liquid value”. However, following our valuation model (we consider 36 times our monthly income minus debts), our company is already worth more than the $196,000 (98K each) that we established. The next update will happen in May after our annual meeting. I can’t wait to have a new evaluation ;-D

 

I guess the most important point when you do your net worth statement is to be highly conservative with your assets and track down every single expense. You don’t want to boost your net worth artificially. This is called “living on a cloud of dreams” and prevents you from seeing dramatic situations. This is when I realized I was spending too much in 2011 and made corrections for this year.

 

I’m expecting a good month for March. This is really where we will see if I made a real statement when I said that I was taking care of my finances in 2012.

 

Here are the details:

 

Assets:

ASSETSPREVIOUS
MONTH ($)
CURRENT
MONTH ($)
CHANGE (%)
CHECKING ACCOUNT $1,000 $1,000 0.0%
EMPLOYER STOCK
ACCOUNT
$3,083 $3,139 1.8%
RRSP ACCOUNT $29,804 $29,545 -0.9%
PENSION PLAN $20,218 $20,218 0.0%
HOME $345,640 $345,640 0.0%
COMPANY SHARES $98,000 $98,000 0.0%
MAZDA TRIBUTE $17,794 $17,360 -2.4%
MAZDA RX-8 $5,600 $5,200 -7.1%
TOTAL $521,139 $520,102 -0.2%

Liabilities:

DEBTSPREVIOUS
MONTH ($)
CURRENT
MONTH ($)
CHANGE (%)
CREDIT CARD $6,358 $8,287 30.3%
LINE OF CREDIT $19,804 $19,213 -3.0%
HELOC $263,400 $263,400 0.0%
CAR LOAN $17,794 $17,360 -2.4%
Personal Loan $10,624 $10,416 -2.0%
TOTAL $317,980 $318,676 0.2%

Net Worth: $201,426

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Comments

Have you thought about publishing an income statement? It would help us readers to understand just how much outgoing money is splurging, conservative, etc.

If it is TMI for your comfort I understand….but it never hurts to ask.

by: The Financial Blogger | February 29th, 2012 (1:13 pm)

Hey Jason,

that’s a good question… I would have to checkout where my money goes actually 😉 the thing is that it greatly varies from months to months because I have 3 kids. For example, in February, we bought winter suits for next year our 3 kids. This was a huge month in term of expenses!

Mint.com.. I don’t know what kinds of privacy concerns you have, but about 30-60 minutes of maintenance per month is all that is needed to have everything tracked, view pretty good reports, etc. It’s not perfect, but it is very convenient.

You can also look at what are one-time expenses, and what are recurring monthly expenses. And you can trim expenses you don’t even use. For example, The Learning Annex was charging me $40 per month for two full years without me catching it (or authorizing it). Sonsovbitches. I was able to get 6 months refunded through my credit card company, b/c I had all transactions so detailedly logged.

by: The Financial Blogger | February 29th, 2012 (2:13 pm)

It’s funny you mention this, I’ve just registered to Mint 2 days ago 😉 So far, I find it awesome!

I used to work with Microsoft Money several years ago but I quit after 2 years of entering most of my transaction manually! Mint is way more effective.

Yes, I had used Quicken, and while line-entering to see the pretty reports was fun for 2-3 years……..the fun ran out.

While I’m in creative ideas mode, it would probably help if you included the year in your net worth update titles. For example, this article’s “Similar Posts” lists includes a January and a December update… but January is 2012, December is 2010, and it can be tricky to navigate. Just a constructive request from someone who enjoys browsing through your back-posts….

Is that an $8000 balance on your credit card that you carry or just what you’ve spent this month?

Hi MIke

Interesting that you put a 36 times valuation. Currently, I only using a 10 times to be conservative 🙂

The thing that make me nervous about putting virtual assests in my net worth is the fact that they can all go away if Google does another panda. I don’t know what percentage of your traffic is from search but mine is at least 50-60%.

Have you thought about investing in domains? At least their value don’t change with traffic. I have not invested in but would like to.

by: The Financial Blogger | March 1st, 2012 (1:21 am)

@Aaron,

I put a 36 times valuation because I have own several web properties and they have been consistently generating income for the past 3 years. I don’t see my sites as simple blogs anymore, I do run a business now. The problem with my share value is not the value rather that it is not liquid at all. If I had to seek for liquidity, my house would probably sell faster than my sites ;-).

As for the business risk, I don’t agree with the “G supremacy” argument anymore. It is a risk, but what makes you believe that you won’t lose your job tomorrow morning or that another house market crash won’t drop your house value down by 30-40%? Everything can move up or down, we just have to give a fair value at the time we look at it ;-).

I own several domains as well but I like running websites more ;-).

@MIiockm,
this is what I spent this month. The balance will be paid in full during March. Never pay interest on credit card, that’s my motto!

I’m not trying to hate, but it seems strange to pay all cash for a pool (this isn’t the strange part) when you have that much debt. I know you are confident in your income and side income, but I bet you could push off the pool one more year, pay off some of that debt, and free up a lot more of your monthly income. With that said, I understand not everyone thinks the same way as I do.

by: The Financial Blogger | March 1st, 2012 (10:50 am)

@20’s,

I totally understand your point and I guess that most readers think like you ;-).

The thing is that I’m not too concerned about my level of debts. I’m confident in my income but that is not the main reason why paying off my debts is not my ultimate priority. I don’t pay much interest on my debts (my mortgage rate is at 1,50% for example).

On the other side, I just received over 20K (after taxes) in bonus in January and I used it solely to pay off debts. I’m not taking any vacation this year because the pool will be my vacation. I could definitely use this extra 6K to pay off debts and not buy my pool, but I rather enjoy life than just paying my debts.

This is why I want to pay cash for an “extra”. Therefore, I will pay my debt on a steady basis while I don’t increase it to finance my lifestyle.

It’s not optimal in term of debt repayment plan, but I really like my lifestyle and I know that I’ll be making the same income for several years ahead.

I hope I make more sense 😉

Congrats on the new kid! Have you thought about what added liquidity you’d have if some of those debts were gone? Like the minimum payments.

by: The Financial Blogger | March 1st, 2012 (11:30 pm)

@Evan,

the thing is that I would have to pay off my car loan to make a difference ($434/month). My minimum payment on my line of credit is interest only (which is 1.5%) so it wouldn’t make any difference in my budget.

Over the past 3 years, I’ve overspent to get an awesome quality of life that I can now enjoy (and pay back since I have a much higher salary 😉 ).

My income is increasing in mid March (I’m going back to work on March 12th) so my net worth growth will be positive by April 😉

I am not an anti-debt guy but there is something nice about a low income to debt ratio…mainly use that extra income to then invest/build

Yeah – that makes sense. I certainly agree that life needs to be lived and it sounds like a fair trade off. Life would be really boring if we stuck to the numbers all the time. Plus, I’m sure your kids will love it. You’re right – that’s the benefit of a decent paying job. Enjoy it.

by: The Financial Blogger | March 2nd, 2012 (10:27 am)

@Evan,

there is something nice indeed! I know I’m a bit complicated and very demanding; I want to have everything at the same time:
– family
– big house
– investing in my company

it’s an edgy situation…

After years of being deep in debt, I became an anti-debt guy.. it is slavery, or at the very least indentured servitude.

One risk is injury/illness–and disability doesn’t cover 100% of your salary. Another is that your big salaried job might turn to dust. A new CXO (or VP) could come in who is a total narcissist–I have seen this happen to four friends in the financial space. Two friends survived/outlived that horrible boss, and two did not. What would you do if your job suddenly went away? With good skills/resume you would probably be able to find something else, but you want to be careful about exposing yourself to financial stress. You never know what any next year is going to bring… and the fewer options you have available (in other words, the more you depend on that ever-increasing salary), the more risk you are taking on.

These are good and thougthful comments. Here’s what think most will find. In your 20’s there’s a horizon so long that you have ample to to recover or take some risks (increased debt, go for broke on a startup, etc). In your 30’s, you typically start to feel the burden of family responsibilities that limit the type of risks you took in your 20’s. In you 40’s, you start going “oh crap”, time is getitng by and I need a plan. I had that moment in my 30’s after watching co workers a rude awakening. My plan is to get ahead of the natural order of things…that gives me maximum flexibility and options. I’m debt free except mortgage and although I can afford a bigger lifestyle, we’re steadily lowering our lifestyle to stamp out shock factor if something goes terribly worng.

by: The Financial Blogger | March 3rd, 2012 (7:44 pm)

@Jason,

My biggest flaws is probably critical illness. If I ever get a cancer, I would only get 50K from my insurance company. As for invalidity, I will get 70% of my based income + I can derive a part of my online income if needed be.

I’m fairly confident in keeping my job as there is currently a huge lack of financial planner in my area. This need for financial planners will probably last at least 10 years (we are currently forming 200 financial planner per year and 300-400 are retiring each year).

Nonetheless, I need to pay more attention to my debt level. You’ll see it going down this year!

Cheers,

Mike

Hey Mike,

Congrats on kid #3! Any plans for #4? 🙂

Question on assets: Is your total liquid assets you can draw from $1,000? Or, is it $1,000 in your checking plus the other stuff, which I don’t understand?

Where did the 20K after tax bonus go in your balance sheet? Why not use half to pay off the CC debt?

Sam

@Sam,

thx! I’m pretty happy with 3, I don’t think the 4th one is part of our plan!

I also have liquidity from my line of credit (HELOC and regular line of credit). This is why I always show the “same” $1,000 in my checking account. The rest of my investments are in RRSP (which is very similar to 401(k).

If you look at my January statement, you’ll see that I paid 13K in credit card and 10K for my RRSP loan (which was just an early contribution). My bonus went directly to pay off my debts this year. It’s quite boring but definitely worth it!

Cool. Are you happy with your net worth progress? What are your NW goals? Btw, if you check out my latest post on vacations, I hope you will see that I’m not quite living like a beggar by saving 55-75% of my after tax income!

by: The Financial Blogger | March 4th, 2012 (11:13 pm)

I want to go under 300K of debt this year, that’s my goal.

I can’t comment your situation, Sam; because you haven’t put the number on the table. If you are making 500K/year and you are saving 75% of your salary, you still have 125K to live with! My point was that your article was delusional unless you make a huge income. Even a 100K income wasn’t enough to support an interesting lifestyle.

[…] The Financial Blogger had his third child in February.  He has $201k in net worth.  Not bad! […]