As I mentioned before, I kept my own net worth calculator in a spreadsheet; I even wrote up how exactly to make your own. I also used to post monthly status reports in order to help keep myself (and the readers) motivated to stay on a good course. However, with the recent purchase of a house, I had several major decisions to make about my net worth calculations.

First, I elected to stop the updates for two months. This gave me time to readjust my finances with the purchase of the house. I knew that there were going to be a lot of expenses during the months of June and July that were far outside the ordinary – and there certainly were. Only now are things getting back to “normal.”

The reason for this pause is that my finances before and after the home purchase are basically incomparable. So many numbers used in the total changed so significantly that it’s almost worthless to compare the pre-house numbers to the post-house numbers. If a similar major financial shift occurs for you, it’s okay to pause things for a bit until things get straight again – a net worth calculator is primarily useful as a motivational tool.

After some debate, I decided to include the assessed value of the home in my net worth calculation. Why the assessed value? In this area, the assessors are quite active in making sure that the value of the house and land are pretty close to the market value – my purchase price was over, but less than 20% over the assessed value – and it included all appliances. If I removed all appliances and left, I believe I would be able to sell the home for somewhere close to (likely slightly more than) the assessed value. Being conservative, I decided to stick with the assessed value.

I considered not including the value of the home at all, but I felt that would be terribly inaccurate. I generally feel that an estimate of the value of the home with all removable items stripped out of it is an appropriate number to use, and in this area, the assessed value is pretty close to that.

I basically started over with the calculator on August 5. As I mentioned before, I calculate my net worth weekly, so I started over on the first Sunday in August. Calculating my new net worth was painful – comparing that raw number to the last time I ran the numbers (the final Sunday in May), I almost gasped at the incredible drop. However, I look at it as though I bought a pile of appliances, furniture, and many, many other expenses (closing costs, etc.) in the interim, so it isn’t as bad as my gut was telling me. I still have a higher net worth than I had at the start of the year, which does make me feel quite good, but if I draw a graph of it, the cliff-like drop in the middle is startling.

I do take solace in a few things. First, many household tasks will now be cheaper. We have our own washer and dryer now, so no more pumping coins into the machine. It used to cost $1.75 just to run the load – now the electrical cost for a full load is way under a dollar. We also have a very nice, large garden that my wife and I are very excited about – we already have a compost bin being filled with yard waste and vegetable kitchen scraps. Plus, actually having a large and usable kitchen means cooking at home just became easier and more worthwhile, and we now have a deep freeze to store our food. Even though our monthly housing bill went way up, some areas are actually cheaper now than before.

What’s the real lesson here? A net worth calculator, if kept up and used, is a great tool for keeping yourself on task for positive financial growth. Each Sunday when I fill in the numbers, I can see right off whether or not we’re making good financial choices and whether there are any areas that need to be focused on. Keeping a weekly or monthly net worth calculator is a wonderful psychological and financial tool.

Given the transformative effect of the home purchase on my personal finances, I’m skipping the June and July personal financial review posts because they don’t accurately describe much of anything – they have no meaning. I will return with these in August, as then I will be able to compare my financial situation at the end of August to the one at the end of July and it will actually have some meaning.

Early Retirement Planning: Taking Early Withdrawals Without Penalty From Your 401(k) or IRA You can withdraw money from 401(k)s and IRAs without penalty earlier than the prescribed date – here’s how. (Hint: you have to retire early.) (@ my money blog)

5 Good Reasons To Avoid Debit Cards The crux here seems to mostly be that they limit consumer protection, their rewards aren’t all that good, and they encourage bad habits. Good points, but like anything else, it mostly comes down to good money management and sensible consumer choices. (@ consumerism commentary)

A Dollar Amount Cannot Be An End Goal While I do believe that a dollar amount can be an end goal, I have found it to be an awful motivator. More tangible goals work far, far better. (@ money, matter, and more musings)

The Simple Dollar Retro: Stay At Home Parenting: Is It Worth It? My wife and I are still vaguely toying with this idea.

It’s time for that monthly financial review again, where I make sure I’m keeping up with my short-term financial goals. I generally break things down by evaluating my assets, my debts, and then my net worth, and then using these numbers, I attempt to set goals for the coming month. This is a useful exercise for everyone to do, simply so they can keep tabs on their overall assets and debts and make sure that they are consistently heading in the right direction. Let’s break it down.

Assets My focus this month was in building liquid assets to make moving easier, and it certainly worked out well, with a 6.2% increase in assets. My wife was thrilled with this, as it was incredibly clear evidence that the ongoing success of The Simple Dollar and our frugal May are really paying off.

Debts A very slight increase in debts, mostly due to carrying a small credit card balance (gas and groceries, actually).

Net Worth The big jump in assets without much change in debt saw a very nice jump in net worth this month. Because of this, we feel very ready for the big move into a home in early July.

Last Month’s Goals (see last month’s review)
An asset increase of 5% We did this and more! Our happiness with the 6.2% increase in assets in a month cannot possibly be overstated.
A debt reduction of 0.5% We didn’t get this one done, but we’re fine with that, because the “overage” on the asset increase would have taken care of it and more and we were on time with all of our payments.

June is going to have a similar focus as May: maximizing liquid assets so that when we move, we don’t have to put necessary purchases on credit – we can pay cash for everything.

This Month’s Goal
An asset increase of 6% This is our only goal for June. We would like for that asset increase to be mostly liquid so that our move is easier.

How am I going to handle the big changes July will bring? July is going to look like a devastating month in my net worth roundup because (a) we’re going to spend at least some of that liquid buildup on a point on the mortgage, closing costs, our first mortgage payment, and lots of stuff for the home, and (b) the house will become a part of the equation, with the assessed value being a positive and the mortgage debt being a negative. The end result is that our net worth will see a precipitous drop as our debt skyrockets. I will probably not set a numerical goal for July because of this major change.

Several readers have asked me how a person’s primary residence should be used when calculating net worth. As we’re on the verge of buying our first home, this becomes a very relevant question to us for the first time, so I spent some time looking at the options:

Include the debt, but don’t include the house at all. The argument here is that if it’s your primary residence, then you’re not going to be liquidating it ever, thus it’s not an asset. For many people, this would push their net worth far, far into the hole and if you’re making interest-only payments, it’s a hole you’ll not be climbing out of.

Include the debt, but only include the equity in the house. In other words, only include the portion of the house that you could draw equity from through something like a home equity line of credit. This means that any payment directly to the principal actually counts double towards your net worth, as it decreases the debt and increases the equity in the house.

Include the debt and also include the purchase price of the house. This means that the house itself has no direct effect on your net worth upon purchase and it slowly goes up as you reduce the principal of the debt. Many people seem to follow this path because it somewhat disguises the debt.

So what are we going to do? We’re going to actually follow a fourth path, which is an interesting one.

Include the debt, but only include the assessed value of the house. This means that right after purchase, our net worth takes a small hit, but as time goes on it climbs back as we make debt payments. Plus, each time the house is reassessed, the value of that asset changes – and given the location and the quality of the house, it will likely go up. In essence, this route means we are not counting the appliances as assets in any way, nor are we considering some of the more aesthetic appeal of the house that isn’t directly affected by the tax assessment.

What this means is that in the short term, my monthly net worth calculations will look disastrous, with some big losses, particularly in the month where we sign all the papers and take possession of the house. After that, however, our net worth will begin to climb again, albeit at a slower rate than before because our housing payments are going up. Then, whenever our home is reassessed, our net worth will likely see a bump (even though that also means that we’ll be paying more in taxes, which is a downer).

I would recommend that others follow the same path as well for including the primary residence in calculations. It is an asset and can be liquidated, but the aesthetics of the house and the appliances within and so forth will often make some difference in the actual purchase price that may only be of value to you.

It’s time for that monthly financial review again, where I make sure I’m keeping up with my short-term financial goals. I generally break things down by evaluating my assets, my debts, and then my net worth, and then using these numbers, I attempt to set goals for the coming month. This is a useful exercise for everyone to do, simply so they can keep tabs on their overall assets and debts and make sure that they are consistently heading in the right direction. Let’s break it down.

Assets My assets went up 2.2%, which exceeded my goal by a significant amount. This was mostly due to a very nice month on the stock market.

Debts My debts went down 2.3%, which wasn’t as much as I wanted. I did not waste money this month, however; I had almost $1,000 in income tax that needed to be paid. If it had not been for this payment, I would have come extremely close to reaching my target of 5% debt reduction.

Net Worth With my assets going up and debts going down, it was another good month for my net worth. A 7.6% increase in my net worth was quite nice, growth that I mostly attribute to a steady hand with paying off debt and a solid month on the stock market.

Last Month’s Goals (see last month’s review)
1. An asset increase of 1.5% I beat this goal with an asset increase of 2.2%, which felt really good considering I had a large income tax payment to make.
2. A debt reduction of 5% I didn’t make this goal this month, unfortunately, mostly because of the tax payment.

I didn’t meet both goals this past month, but I believe I could have met the debt goal without that income tax bill. Now, I want to focus on building up liquid capital for the upcoming house purchase.

This Month’s Goals
1. An asset increase of 5% My wife and I are focusing on making this month frugal and instead of focusing on student loan payments, we’re going to pay the minimum and hold on to our cash until we buy the house.
2. A debt reduction of 0.5% Minimum payments made on time and no credit card debt should make this goal reachable.

It’s time for that monthly financial review again, where I make sure I’m keeping up with my short-term financial goals. I generally break things down by evaluating my assets, my debts, and then my net worth, and then using these numbers, I attempt to set goals for the coming month. This is a useful exercise for everyone to do, simply so they can keep tabs on their overall assets and debts and make sure that they are consistently heading in the right direction. Let’s break it down.

Assets My assets increased in value 2.5% this month. I bought into the Vanguard 500 on the downside of the big drop in the stock market at the start of the month and this rebounded a little, resulting in a lot of the growth here.

Debts My debts dropped 3.4% this month. I set a goal of 5% debt reduction this month which I didn’t quite reach, mostly because I took some money and bought stocks with it instead, as mentioned above. Aside from that, this was a pretty good month for paying down debt.

Net Worth With my assets going up and my debts going down, it was a good month for my net worth (assets minus debts). A 10.6% increase is very, very nice for the month, my highest growth month in quite a while. Where did this growth come from? The biggest thing, in my opinion, is learning how to continually live more frugally.

Last Month’s Goals (see last month’s review)
1. An asset increase of 1.5% I beat this goal with an asset increase of 2.5%. However, I intended this month to be one to focus on debt reduction, so…
2. A debt reduction of 5% The month was actually a disappointment, with only a 3.4% reduction in my debt. Next month, I can do better.

I didn’t meet both goals this past month, but I believe I could have met the debt goal with better focus. So I’m going to repeat the goals again for the coming month.

This Month’s Goals
1. An asset increase of 1.5% I simply want to maintain my rate of asset growth because I’m setting a big target for the debt…
2. A debt reduction of 5% As my debt gets closer and closer to zero, it becomes easier to hit monthly rates. But 5% is still a pretty big chunk for a single month, as I learned this month. However, the raw dollar amount to hit this goal is lower than last time, so let’s see if I can do it.

This year (so far) has been a strong one financially for me, but I still make some moves that are of questionable financial nature. In terms of saving for the future, here are my five worst moves so far in 2007 and why they were bad ones. By reflecting on my choices, I can strive to continually improve my personal finances.

We conceived a second child. This child is coming in late September. This is a great personal move, but a terrible financial move: another mouth to feed, clothe, house, and insure. That being said, it’s definitely a move I’m happy with considering the overall picture.

I bought my wife a laptop and a copy of Office 2007. She had an old desktop machine that was still (mostly) functional but it was giving her some headaches, especially since it had started spontaneously powering off and rebooting on occasion. So, on Valentine’s Day, she had a gift on the table: a new Sony Vaio laptop (that she had eyed in the past) plus a copy of the latest version of Office (she uses Word, Excel, and PowerPoint in the classroom). It was expensive and probably not wholly necessary, but my wife was so thrilled I’m actually wondering if she loves her laptop more than me.

Cat food and cat littler. I made a huge error buying these in bulk. Less than two days after buying a huge amount of both (that seemed like a good deal), the brands of both we used cut their prices everywhere a bit, plus the place we buy our supplies also had a huge sale on the items in bulk. I overpaid by about 35% on the bulk purchase. I realize it’s hard to know that such things are going to happen, but looking at prices and realizing I could have saved $50 or more by just waiting two days was painful. Even worse, I could have foreseen this price change had I done a bit of research before buying.

I ate out for breakfast and lunch way too much. I’ve been entertaining a lot of guests recently and thus have eaten meals out with them on a very regular basis, depleting my cash more than I would like. I should just invite some of them in for a home-cooked meal, but that also detracts from the conversation potential.

I bought into an index fund too early. I intended to buy into a broad index fund on the way down, but I got excited and it dropped a little more after I bought it. I still got about a 6% deal off of where the market peaked, however.

Upon request from a reader, and building upon my February net worth calculations and my recent postings on building your own mortgage calculator, I thought I would discuss how I built a simple net worth calculator that lets me quickly calculate my net worth each month. You can build this for yourself at home – and you don’t even need to spend the money on Microsoft Excel (unless you want to – it’s a fine spreadsheet, but there are pretty good free options)!

Step 1: Get a spreadsheet
If you already have a spreadsheet program, you can skip this step. If not, I highly recommend downloading OpenOffice, an open source version of Office that contains a very nice spreadsheet, Calc. I’ll be using that program for this description, but everything I show in this tutorial works exactly the same with Microsoft Excel.

Step 2: Make a list of your assets and debts
Make a list of your assets (meaning your open accounts, retirement savings, and your major assets, like your home and automobiles) and also a list of all of your debts. We’re not worried about account balances yet, we just want something to start building the calculator with.

Step 3: Fire up the spreadsheet and add these lists to it
Open up your spreadsheet and in cell A1, write Net Worth Calculator in bold, then in A3 write Assets in bold. Below that, make a list of your assets starting in A4. After your assets, put in an entry that says Total Assets in bold, then in the cell below that, put in Percent Change in bold. Skip a line and repeat the entire thing, except with debts. Below all of the debts, skip a line, then enter two more things in bold: Net Worth and below that Percent Change. When you’re done, it should look like this:

Step 4: In the B column, enter each of the amounts
Next to the word Assets, in the B column, put in today’s date, then next to asset and debt, enter the dollar (or whatever currency you use) amount. When you’re done, your worksheet should have progressed to this point:

Step 5: Total up your assets
Next to the word Asset Subtotal, you’ll need to enter a formula to automatically calculate the sum of all of your assets. You’ll need the cell identifier of the first asset (B5) and the last one (B??, depending on how many assets you have). In the example here, my first asset is in B5 and my last one is in B7, so I enter =SUM(B5:B7)

If your last asset value was in, say, B14, then you should enter =SUM(B5:B14) in there instead.

Step 6: Total up your debts
Here, we do the same thing totaling the debts, next to the Debt Subtotal. See here:

Step 7: Wait a month
If you want, you can calculate your net worth now (asset subtotal minus debt subtotal or, in the example above, =B9-B16 ), but I generally found it didn’t really mean anything until I had a second month worth of data.

Step 8: Enter another month of data
If you add a new asset, all you have to do is click on the row above where you want the new asset or debt to go, go to the Insert menu, and choose to add a row. The automatic calculations will update for you. Even niftier, you can click on the previous month’s total, click on that black square in the lower right, and drag that little black square over, as shown below, to automatically do the totaling for you:

Step 9: Calculate the percent change
Below the current month’s Asset Subtotal, across from the Percentage Change label, you’re now ready to calculate the percentage change. Let’s say the previous month’s subtotal is in cell B11 and the new subtotal is in C11; then in C12 you would enter =(C11-B11)/B11

Step 10: Finish it out
Now it’s just repetition. You can calculate the percentage change in debt and net worth in almost exactly the same way as the change in assets.

And there you have it! Each month, just add in the new numbers, then drag over the six calculations from the previous month (total debts, total assets, net worth, and the three percentage changes). You can use this to set goals for yourself for the coming month. I usually find that setting percentage goals works better for me than raw number goals. A good “starter” goal is to have a negative change in debt along with a positive change in assets (meaning you paid off a debt and had more money in your checking at the end of the month than last month).

Good luck!