Net Worth Assessment (January)

I’ve never been a huge fan of the net worth statement though I understand its importance; for me it only paints a one sided picture of how you’re doing financially. Essentially net worth is your assets minus your liabilities and it’s really a snapshot at the time you do the statement. It doesn’t really tell you how you’re doing financially because you might have a great net worth statement but be spending so far beyond your means that it doesn’t matter because you’re already in financial hot water.

With that said this is a tool that can be used as a measuring stick on how you’re doing from month to month and as part of my overall goal to get my finances in order I decided that I needed to track my net worth regularly. I tracked my net worth as of end of each month starting with December 31st and this year and I am going to do this the first of the month for the rest of the year (using my balances at the end of the month).
For the month of January here is my net worth:

Dec 31 Balance 31-Jan-11 (Calculated Jan 30)
Consumer Credit $10,183.89 $9,463.85
Lines of Credit $30,787.46 $30,086.17
Mortgage $241,378.68 $240,701.26
Car Loan $20,924.80 $20,484.30
Total Liabilities $303,274.83 $300,735.58
House $360,000.00 $360,000.00
Investments $41,790.55 $40,790.25
Total Assets $401,790.55 $400,790.25
Net Worth $98,515.72 $100,054.67
Growth $1,538.95
% Increase 1.56%

A couple things of note – the house value is approximate because between the last assessment we did about a year ago and the average selling price in our neighbourhood is $65,000 I split the difference leaning towards the banks side to be safe. Essentially I believe that we would be able to sell the house at that price without any problems and would likely get more. The second thing some of the savvy folks out there will notice is that I have a car loan in my liabilities but no car in my assets; this is done intentionally and yes I still have the car. When I was last meeting with my banker he indicated that they often don’t consider the value of a car as an asset because it can vary so much. If I were to include this then my net worth would likely increase by about $12-15,000.

Overall I have to say I’m quite happy about this because the liabilities have decreased by a little over $2,500 which is quite respectable and if it wasn’t for my making some changes in investments I think the overall increase might have been slightly higher. Based on the January results I am going to attempt the following goal for February and March: Increase my net worth each month between 1.5-2% each of the two months. I believe that this goal is entirely achievable since the repayments should remain the same and my investment contributions will slowly increase the assets.

The next big challenge will be to take a look at my expenses for the month and really figure out where my money is going and how to adjust this so less of it is going to unnecessary items.

Goal: Get Finances in Order

A few days ago I wrote that this was the Year of Recovery for me and that I would post about some of my goals with my financial goals being first. I’ve been giving this much thought and getting my finances in order is the goal but unfortunately this is a bit of an ambiguous goal with no clear direction nor anything truly measurable by which to determine success. But rest assured there is a lot more than just a flimsy statement behind this goal.

The overall goal is: Get my finances in Order

The immediate and shorter term goal is assess the state of my finances in detail this month in order to be able to set some measurable and attainable goals. I’ve been reading and writing about finances for years now and I know how to approach most of the tasks for this goal. But I also know that I am not an expert in these matters and for some of these items I’ll be reaching out to professionals (you should too especially if you’re not sure about something).

The Assessment of my financial state breaks down as follows:

  • Determine Net Worth
  • Determine Expenses and Cash Flow
  • Centralize banking with fewer institutions
  • Automate wherever possible
  • State of Investments

Determine Net Worth
In general this is a pretty straightforward activity because you take your assets and subtract your liabilities and the number you’re left with is your net worth. By itself I don’t think that this number has much real value because it only paints a portion of the picture of your financial state. But what it does do is give you a snapshot of where you stand which can be a great benchmark for measurement.

Determine Expenses and Cash Flow
The second and arguably the more important part of the financial puzzle for me is Cashflow and this is determined by knowing how much money you’ve got coming in versus going out. To know this in details you need to know exactly where your money is going. To accomplish this i am going to track all of my spending for the month in a spreadsheet. I know this isn’t the most advanced approach but it works for me because I use Google’s Docs and I can access this online at all times. This lets me enter an expense pretty much right away so I don’t accidentally forget about it. With this information I can determine what changes need to be made and to measure the results. I don’t expect surprises but a detailed breakdown will reveal all.

Centralize Banking with fewer institutions
I’ve placed this on the list because I had my banking and investments in 4 institutions and the reality is that this is pointless and makes keeping an eye on everything a pain in the ass. To start this off I’ve already met with my financial adviser and I have started the process of transferring all of my investments to one institution and one banker that I trust. I am confident in his abilities and his recommendations. My banking has been taken down to two institutions and I’m going to see what’s involved in getting it down to one!

Automate wherever possible
This action really belongs with the centralized banking because as I find where everything is I’m going to ensure that there is no need for me to write checks or manually pay anything. Not automating it means that I can make a mistake way too easily or forget something which I definitely don’t want to happen. By automating payments as well as investment contributions means everything happens at set times and I don’t have to worry about if a payment is has come out or not.

State of Investments
Finally the state of my investments; I don’t have a lot of investments which by itself is not great but the little that I had were not actively being looked at or reassessed. The good news is that I was making contributions but they were small amounts to a few institutions and in the end it really wasn’t adding up to anything substantial. I’ve already centralized this with my financial adviser at one institution and I’m happy with the current setup. I’ll post about this in more detail later this month.

Overall these steps are meant to give me information so that I know exactly where my finances are, what investments I have, what my worth is, and most importantly knowing where my money is going and what its doing. I know that some of it is going to waste and the cashflow assessment will tell me where any how then I’ll be able to make some changes and start putting more of my money to good use rather than to waste. I’ll share more in the coming weeks about this assessment so that if anyone is interested you can see what I’m doing to get the big picture with my money and how I am working towards the overall foal of getting my finances in order

2011 – The Year of Recovery

Over the past few years I’ve started the year off with a look back at what happened in the past year and again I looked forward to what the new year held. I typically set out some goals which I have had some, but not great, success with. This year I think the format will be similar but when it comes to the goals I will separate them out and deal with them one (possibly two) at a time. I find that attempting to do too much at once just slows the process down for everything.

Another thing I’ve done in the past is given the upcoming year a theme or a title. Last year it was the Year of Less and for me this year is going to be the Year of Recovery. There are a few areas of my life that while they are not bad or broken they are also not in as good shape as I would like.So 2011 will be the year where these areas of my life recover (as much as they can).

At a high level this Year of Recovery for me will fall into a few areas that I’ll be working on and they are:

  • Physical
  • Mental
  • Social
  • Financial

This one is pretty easy – I smoke and I’m not in the best physical shape. Thankfully I’m also not completely out of shape and struggling. This is one of those areas that falls into the not horrible but not nearly as good as they could be. The really big one here will be to drop the smoking; its something I’ve been mentally gearing towards for a while now and this year will be the year this happens. From the health and wellness I’d like to get more exercise on a regular basis and eat better but quitting smoking is first and most important.

I think I need to take more time for myself and get some downtime to start with. My job is mentally challenging and I quite like that but at the same time its also very demanding so turning the work off in the evening (mentally) can be tough. I’m not exactly sure what I’ll do about this just yet but I definitely want get some recovery from the day to day in there. Now it might sound like a contradiction but I also want to stretch myself but not in any of the ways that I’m already doing. I want to learn something new. Essentially I want to bring in some of the concepts of Lifestyle Design that people like Tim Ferriss subscribe to.

One of the drawbacks to working long hours and having a little one is that you very often don’t get a chance to see your friends as much as you’d like. At least this is the case of me – I have lots of friends but we’ve all become so busy that we simply don’t get to see each other. This is something that has hung heavily on my shoulders for a while because I really do enjoy seeing my friends and this year my social life will definitely undergo some recovery.

For me this is one of the more important areas of my life that needs to under go some recovery; and again it’s not an area that is hurting but it is definitely an area that could be a lot better. I write a personal finance blog so it seems a bit counter intuitive that my finances are not in perfect order – part of this is learning and understanding where the issues are and finding out what options are available (sometimes too many options becomes the problem). My wife and I are both in agreement on this one and 2011 will not be a year of wasted money on things we do not need or care about. We are already working on this and I am going to start my more specific goals with this area of my life.

I haven’t covered areas of my life that I’m happy with just ones where I’d like to focus on and improve. I definitely want this year to be a great one and I will share my successes and failures on this site, though I’ll probably focus on my financial ones (it is a Personal Finance blog after all). I wish everyone all the best in 2011!

2010 A Year in Review

When I started off 2010 I had a series of things I wanted to accomplish in mind unfortunately my Year of Less was not really as effective as I would have liked it to be. But that does not mean that it was a bad year nor does it mean that it was not a year of less in its own right. From the spirit of the title it really was a year of ‘less’ for me because I really adopted the mantra of less in many aspects of my life.

My Highlights for 2010

  • I got a new job
  • I kept my finances in order
  • My family was healthy and my daughter turned 2
  • I was happy

Now as with all year end reviews I have done a bit of soul searching prior to writing the post (we’ll ignore the delay due to the site compromise). The reality is that I didn’t get through most of the items on my goal list and while I could come up with any number of valid excuses they’re nothing more than excuses. The big learning for me is I can see evidence of goal setting with no real follow up is kind of pointless (I’m not sure how frequent the reviews should be but they definitely need to be more than annual).

I am still smoking and drinking but before I’m chastised for this (feel free I know these are stupid) I have definitely become much more aware of both of these and while I didn’t accomplish the goal for these I have given both a great deal of thought and I’m no longer as interested nor as active in either. I know what you’re thinking: he’s writing right after New Years when the resolutions are still holding but I think I’ve grown up a bit and I just don’t care for either as much. The smoking much more so and the frequency of this is going down on its own.

My finances are not in disorder and are in better shape than they were at the beginning of the year – not perfect but definitely not a complete failure either. I think the biggest gap here was the fact that I wasn’t as diligent about tracking and staying on top of this.

I did not find my passion but I have learned a lot about myself this year. I think finding a passion is a challenging thing and I definitely think I am closer to this goal now than I was at the beginning of the year. Again I think the biggest gap here was that this stayed in the back of my mind and I really didn’t explore as much as I could have. This is more of a lost opportunity than anything else.

Overall it was a Year of Less especially on the materialistic front, I just don’t need or want as much crap as I used to; I just see more and more of this as junk. The house has been quietly purged a few times during the year and now I try to remove at least as many items as come in. Not perfect but I am a lot happier about the place and what is in it. I am no longer attached to items simply because I own them.

As a year 2010 was a good year for me, I watched my little girl grow and start to be able to communicate with me. This is the highlight of the year for me because she has become my world and I’m happy that she’s in it. I’m healthy, I’m happy and while everything isn’t perfect it was a pretty decent year. Could I have accomplished more and taken more opportunities? Of course I could have! I am content with the choices I made this year and definitely learned a lot and see a lot of potential in the future.

Site Compromised – An exercise in Frustration

Normally I like to start the year off with a quick assessment of the previous year and then again with some goals for the new year. I have thought through both but when I came to my site to start entering the information it seems the site has been deemed a malware risk by Google. They pointed out a small issue on the site which I’ve fixed and it’s liked to some other sites on the same hosting company I am with.

This is very frustrating because I don’t get a chance to work on this site very often and when it is monopolized by someone spreading malware it is that much more frustrating and in some ways like a violation.

To my readers – this site does not have any malware; I’ve checked and rechecked. I am now just waiting for Google to re-review the site and hopefully remove it from their blacklists. Thank you for the patience and sorry for the inconvenience.