2018 Net Worth

Where did the time go?

I still can’t believe that 2018 just flew by. As I’m writing this post, it’s already the third week of January. Well, they say as you get older, time goes by faster. I totally agree with that now. Also, it’s been 2 years since we moved into our new house. It’s been that long?!?

This year, I’ll do our Net Worth reports a bit differently. I’ll show real numbers instead of just percentages. It’s always been on the back of my mind that I wanted to show actual numbers. When I decided to blog 2 years ago, I thought long and hard whether or not to show actual numbers. It was kind of scary (and embarrassing) to share our financial numbers publicly. So I began sharing our net worth in percentages. Starting this year, I’ll share actual numbers!

Why?

5 reasons to share actual numbers on our net worth report

1. You

The purpose of this blog is to help you to achieve financial freedom and eventually be on the path to financial independence (FI). Without sharing actual numbers, it’s hard to understand the key principles of personal finance which is a number itself. It seems silly to me to exclude this key principle when I talk about money and net worth. Readers who come to my blog want to learn how to be financially savvy. I want to share enough details to you, so you can eventually figure your way out.

2. Accountability

Whatever your goals are, it’s more concrete if you write it down in detail. By sharing actual numbers with the world, it adds another layer of accountability to myself. Imagine, if I write my numbers down, share all of the financial details on the internet and people see and read it, I’ll have to come back and update, and tell the world if we’ve achieved our goals. Therefore, this indeed holds us accountable.

3. Credibility

One of my goals with this blog is to inspire others to do the same. I’ve learned so much from other personal finance bloggers. If it’s not because of them, I wouldn’t be on the FI path and started my own blog. Being transparent about my own FI path, our net worth, and my own details should help build that credibility.

4. Record

Another goal of this blog is to document our journey to FI. By writing actual numbers down, it can serve as a good and detailed finance record for years to come. It also helps me compare our numbers at various points in this journey. It’s another financial metric we can easily track. For example, instead of knowing how much we spent on groceries as a ratio of our take-home pay in a given year, we’ll know exactly how much we spent. Without sharing actual numbers on this blog, we’ll lose that benefit. I want to document our journey to FI on this blog so why not share it.

5. Progress

By sharing actual numbers, I can better keep track of our spending. It’s hard to compare our household spending in percentage sometimes. Knowing exactly how much we spend on shopping in previous years, for example, can help us improve our spending in the years to come. If it was in a percentage, I have no clue as to how much we actually spent. Most importantly, I can leverage the detailed information (numbers) to show the progress we made over the years. Sharing those specific details down to the numbers could help others learn from my mistakes and successes.

Without further delay, let’s take a look at our 2018 finances.

INCOME

Mr. 50 and I received a small cost of living increase adjustment to our salaries. I did some side hustles. We also had some dividend income from our investment accounts. Here is a breakup of our 2018 income sources in a percentage of our total income:

• A non-paycheck income (Side Hustles and Investments) represents about two and a half percent of our total income which is significantly less than last year. In 2017, we sold a ton of stuff when we moved into the new house (which is the house we currently live in now). And we made quite a bit of money from it.
• My side hustle income is also significantly less than the previous year due to several reasons. Last year was the first year that I didn’t earn any side hustle income from photography. I am an amateur photographer, a contributor on iStock and an Etsy seller. I make a few thousand dollars each year with these side hustles while working full-time.
• The main reason for the decrease in hustle income was that I forgot to renew my listings on Etsy! I didn’t realize that all of my listings expired in September. I lost out on a third of the year! No wonder I didn’t get any sales during Black Friday, Christmas, and New Year’s. So if you’re an Etsy seller, setting your listings on “Auto-Renew” is a smart thing to do. If you’re not an Etsy seller, why don’t you consider becoming one? You could make hundreds or thousands. Many people are even able to quit their day jobs. Check Out CreativeLive’s Free On-Air Classes, sometimes they have an awesome “Get Started on Etsy” class listed there.  🙂
• The 1.60% also represents income we received from credit card cash back and money-saving apps like Ebates. We exclusively use a credit card for everyday expense now. It earns cash back. This year we took full advantage of it. I’m happy to earn a little money back from everyday purchases like groceries and gas. Keep in mind that we pay our balance in full every month.
• If there’s a better deal going through Ebates, we’ll use them for our online and in-store purchases. The key is checking Ebates first whenever you spend your money on anything. It’s because there’s a good chance that you’ll earn easy cash back from them. You use it to shop online or in-store like you normally would. Joining is free and it’s super easy to use. I received my 3 payouts last year totaling $100.97. Not bad, right? It pays quarterly through PayPal or by check. Earning cash back from Ebates is so easy. If you sign up through my referral link, you’ll receive $10 when you make your first $25 purchase. My mind was blown away! I’d been missing out all along. We left easy money on the table. So please join Ebates to start earning today.

• We also use money-saving apps to get cash back and to save money on groceries. Check out my Resources page to learn what apps I use to earn hundreds.
• Mr. 50 and I received a good rating at our jobs. So we received nice bonuses at the end of the year. We saved our bonus money in a high-yield online saving account which will be used for 50 junior’s school tuition and serves as an emergency fund.
• Our investment income was a bit higher than last year and I hope it continues this way. If we decide to retire early, this investment (and future rental income) will bridge the gap until our retirement income comes in.

EXPENSES

The housing was the biggest expense again this year. You’ll see actual numbers on the Sankey Diagram below. We had a nice vacation in Utah and Wyoming. It was a trip of a lifetime. It reminded me of how important spending time on vacations with family really is. We spent a good chunk for the trip but it was all worthwhile. In my opinion, a good vacation is an important part of our life yet we spend so little time making it happen.

Here is a breakup of our 2018 expenses in a percentage of our total take-home income:

And here’s how our money flows in and out in 2018:

By 50 Journey Household Money Flow Diagram: 2018

• A total of about 39% went to housing-related expenses. This includes mortgage, home maintenance (general maintenance repairs), and utilities. We spent a large amount on home maintenance again this year. A total of $4,900 went to fix a leaky roof, plumbing issues, and improper installed HVAC. The rest went to a new fridge, a new electric riding lawn mower (we bought it on sale at 50% off 🙂 ), and lawn maintenance.
• There are a couple of things on the list we need to fix soon; rotten side rail gutter guard, rotten wooden retaining walls, and a dead HVAC (a different unit 🙁 ).
• A total of $28,557 or 25.85% of take-home pay went to a home mortgage. We added $3,842 extra to the mortgage principal. My ultimate goal is to be financially independent by the time we both turn 50. To reach the goal we will need to be completely debt free. The only debt we have left is our home mortgage. After weighing the pros and cons of paying mortgage off early, we decided to pay our mortgage off early after we accumulate a year worth of living expenses.
• Experts say we should not spend more than 25% of take-home pay on a mortgage. According to this benchmark, we might be at risk of becoming house poor.
• It appears that our total cost of living ($35, 954 or 32.55% of take-home pay) was still very low. We live in a small college town so the cost of living is pretty low. If 50 junior’s school tuition is subtracted from the living expenses, our cost of living ended up to be $20,540 or 18.59% or $1,711 a month. Surely, 50 junior school tuition is a major expense of our household.
• Our cost of transportation (gas money, car insurance, and car maintenance) was very low compared to other categories. We spent $1,933 or about $161 on average a month for 2 cars which I think was a little high. Car maintenance and new tires were totaled at $967.
• We save about 24% outside of work. This was double compared to the amount we saved the previous year.
• The medical and dental cost was very high this year due to hospitalizations, physical therapy treatments, and 50 junior’s dental cavities. 🙁
• I also spent a significant amount on this blog (mainly site redesign and a couple of blogging courses).
• The one thing that satisfied me is our “General Merchandise” spending was decreased dramatically compared to previous years. Thanks to our homestead for keeping us busy and Personal Capital for keeping us on the budget. Besides the benefit of reduced grocery bills, homesteading can really save you money in many other ways.

SAVINGS & INVESTING

• A total of $11,809 went to a high-yield online savings account that Mr. 50 and I got from our job bonuses. It’s for 50 junior’s school tuition and serves as an emergency fund.
• A total of $18,201 went to my employer-sponsored retirement savings plan; $14,948 went to my Roth 401(k) and $3,253 went to my 401(k). I missed the IRS contribution limit by a couple of hundred dollars. But I’m okay with that. My employer matches dollar-to-dollar for the first 3% and half a dollar for the next 2%.
• Mr. 50 also maxed out his 401(k). However, he is only allowed to make a contribution up to a certain percentage of his salary (which is way less than the IRS contribution limit). A total of $11,456 went to his 401(k). He receives a little matching contribution from his employer. I still don’t understand the logistics as to why his company only allows their employees to contribute to their 401(k) up to a certain percentage, not to the IRS contribution limit. If anybody has any idea as to why or have similar experience/situations, please share your story/insight. 🙂
• We continue contributing $300 a month to 50 junior’s college savings plan. I also added $600 he received from the grandparents throughout the year to his college savings account.
• I closed our regular saving account and transferred the balance to our high-yield online saving account. This made managing our cash flow more efficient.
• A total of $6,876 went to a taxable brokerage account.
• We made $3,842 additional principal towards our home mortgage.

How to calculate annual savings rate an easy way

Savings Rate = [ (Total Savings Amount + Employer Matching Contribution) / (Total Take-Home Income) + Employer Matching Contribution) ] x 100

Total Savings Amount. It’s everything you save for the future in a year. If you make additional principal payments towards your loans (mortgage, car, personal loan, and student loan), include them here as well. In our case, we have contributed the followings: Thanks to Personal Capital for making it so much easier to get these numbers together.

• Employer-sponsored retirement plans ($29,657)
• A pension plan ($828)
• A college savings account ($4,200)
• Taxable investment account ($6,876)
• Savings account ($11,809)
• Additional principal on a mortgage ($3,842)

Total savings: $57,212

Employer Matching Contribution. It’s the matching amount you receive from your employer when you make your retirement contribution. If you don’t know, you can figure it out by looking at your pay stub and multiply the number by 26 if you get paid bi-weekly or by 52 if you get paid weekly. We received $5,984 between the two of us. If you’re self-employed, just ignore and remove it from the equation. 

Total Take-Home Income. It’s the total amount of your annual take-home pay you make from your job, any money you earn from side hustles and selling stuff. If you have interest and dividends, include them here too. We earned a total of $110,454 from jobs, side hustles, and investment. 

Take-Home pay = Gross income – Taxes and Deductions

So our 2018 Total Savings Rate is:

[ (57,212 + 5,984) / (110,454 + $5,984) ] x 100 = 51.79

51.79% 🙂 🙂 !

Note: 

A portion of 401(k) and my pension contributions are contributed pre-tax. When I calculate our savings rate, I do it as after-tax or as a percentage of take-home pay. To keep it simple, I ignore the “pre-tax” part of the equation and just sum-up total savings amount. I’m more than happy to hear how you calculate your savings rate though.

Because I’ve been using this formula to calculate our savings rate since 2013, I’m not sure it’s a good idea to change the formula moving forward. If I did change the formula, I can’t really compare our 2013-2018 net worth years to future years. Personally, I think whatever formula you use to calculate your net worth is fine as long as you keep it consistent throughout the years and know the baseline.  That way you can compare apples to apples. I find this formula simple and easy. Additionally, it reflects how much you actually save based on how much you bring home.

At the end of the day, a net worth number is a very personal number. It can’t be judged discretely. It’s a great tool to help you achieve your financial goals when you compare it to yourself. The only reason I track, evaluate, and monitor our net worth is so we can eventually free ourselves from 9 to 5 grind to do more of what matters. What is your net worth? Are you tracking it? Head to Beginner’s Guide to Net Worth Tracking if you want to learn more.

NET WORTH

Liability

1. Mortgage balance = $382,054

Assets

1. Cash from checking and savings accounts = $32,693
2. My retirement = $114,660
3. Mr. 50’s retirement = $48,416
4. 50 junior’s college savings = $11,861
5. Taxable investment brokerage account = $13,096
6. My car value = $2,200
7. Mr. 50’s car value = $17,200

Total = $240,126

So our 2018 net worth is 240,126 – 382,054 = – 141,928

What I learned and what I want to accomplish next year

Personal Capital screenshot showing our 2018 net worth

1. The screenshot above is showing our net worth with our home value included. The spike up in the middle was when I first included our home value. The drop after that spike was when I removed the home value. Later, I decided to include it because I’d like to know the value of our home from time to time. By adding our home to my Personal Capital account,  I don’t have to open another tab and do some more typing to get my Zillow’s Zestimate. All of our assets and liabilities are there in one place. From the number above, it looks like we came close to Financial Independence (FI) with a net worth of $733K. In reality, we’re not even close. This is the main reason I don’t include our home equity  into our net worth calculation.
2. Did you notice several jumps and a big fat jump towards the end of year? That was from the value of our home being up and down (Zillow’s Zestimate). This is another reason I don’t include our home equity into our net worth. Home values in our areas flutuate so much.
3. A primary residence is harder to convert it into cash. Again, our home value fluctuates so much in our area and it would skew our net worth. The term is irrelevant to us right now. I’ll put the value of our home as soon as we really own it (when we pay it off). I know, I am very conservative here when it comes to putting home equity into the net worth.
4. We are still in the negative net worth zone. The more important thing is whether or not your net worth is increasing over time. As long as our net worth increases every year, I’m happy.
5. Our net worth increased $49,546. My goal for the year is to increase our net worth by $60,000. This is a very aggressive target since our salaries barely increased. Two sure ways to achieve that number are to reduce our spending and to save more.
6. Having a big house is a lot of work and a lot of maintenance. More square footage to take care of means more chances for things to break. I learned to keep the house somewhat minimalistic, keep things optimized and seriously take good care of things. For example, I educate myself on subjects like how a furnace & HVAC work, how to save money on utilities, and how to optimize stuff around the house.
7. Our savings rate is over 50%. We met last year’s goal. 🙂
8. The stock market had a terrible year in 2018, especially at the end of the year. The S&P 500 index lost about +10%. The market adversely impacted our retirement and brokerage accounts. On the good side, it was a good time to buy more. Not to mention that the U.S. government shutdown operations just before Christmas and it dragged on for 35 days. It was the longest shutdown in the U.S. history. The fear of uncertainty in the government also adversely impacted the market.
9. By looking at our numbers, there are a couple of goals I want to accomplish in 2019:

• increase the savings rate to 55%
• increase the net worth by $60,000

It’s a good financial habit to calculate your net worth every so often. I use Personal Capital to track our income and spending. It’s quick and easy. I can see all transactions in one place with fancy graphs and tables. Are you tracking your net worth? You should. It tells your financial health on a grand scale. Are you trying to achieve FI or just want to be financially savvy? Calculate your savings rate and tracking your net worth are good places to start.

How did your household do in 2018?

What are your financial goals for this year?