May 2007 Review – Net Worth +12.1%, Assets +6.2%, Debts +0.8%

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.

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  1. Great month! Keep it chuggin along…

  2. Brendan says:

    I just started reading your site. Great site. I like the tone, and the advice. I had a question: How do you keep track of your assets? Do you use software like Quicken or MS Money? Or do you just keep track of it some other way? Thanks!

  3. Rick Dahl says:

    You mention that your net worth is going to take a hit because of the assumed debt in your mortgage. But since you are taking the assessed value of your home (which hopefully is at or above the amount your mortgage is for) you shouldn’t see much of a drop in net worth because of the mortgage part. If you are only claiming the equity as part of your net worth (like I do) then you may very well go from a positive net worth to a negative net worth. You will see a drop because of the closing costs, down payment and various other new home things.

  4. Trent Trent says:

    I live in an area where property values are assessed notoriously low, usually trailing the market by several years. This means that all homes are assessed at somewhere around 85% of their market value.

  5. Andamom says:

    Trent, not to get too personal — but would you be willing to go into detail about the asset side? I think it would be beneficial for people to understand what you are doing to increase this side of the balance sheet…

  6. Ted Valentine says:

    First great job. Glad to see your plan is working for you.

    I’m curious to know if your “asset” increase is due to actually saving more of your income or is it mostly an unrealized stock market gain?

    I see a lot of PF bloggers that have just started out in the past 5 to 6 years (or less). They are doing well very well because of their discipline, but also because of bull market. These people did not see their 401ks and mutual fund investments lose 40% in the early 2000s.

    My opinion is that it is folly to track your net worth month to month like a report card. Especially when you’re invested in equities for long term. Otherwise you’re eventually into a big wake up call. It also might cause you to make rash changes that could really hurt long term.

    Hey, I fully admit I love to check my investment balance when the market goes up! Its a big ego boost.

    For what its worth, I think it would be a lot more valuable month to month for you to simply track dollars saved, dollars spent, and percent of income saved.

  7. Mark says:

    Please explain what you consider assets. Lot of people have different ideas of assets. Hard or soft assets makes a big difference.

  8. alex says:

    I echo the sentiment about actually including real dollars, as it would be more helpful and more interesting. All this discussion of goals and frugal do-goodery tends to zull one off to sleep after a while, especially when it isn’t accompanied with specific interesting tidbits (i.e. dollar values)

  9. Good luck man… you’re a few years ahead on me and it’s nice to have some background on things I could do for my future.

  10. Sharon says:

    I can’t believe people are asking for hard numbers in the Asset section. I mean, yes, maybe we can talk about being more open about finances with friends and family, but this is the internet. How many hits did “our beloved Trent” get last month? It is a little personal… And then maybe he should put out pics of his son and wife. And the address of his new house. That way we can visit when we are in town. And the freaks and kidnap his son when Trent makes his first million.
    No hard numbers for me. I think you are plenty open.

  11. Jim Lippard says:

    Ted, Alex: Absolute numbers are more meaningful than percentages for another reason–it’s easy to get large percentage changes when the absolute numbers are small. However, I agree with Sharon–I wouldn’t post the absolute numbers regarding my own finances on a public blog, and Trent has been very open about general information as well as quite a few specific details. The point of the percentage changes here is just for tracking progress against his goals.

    Mark: Trent gives details of how he calculated his net worth in the related posts linked from this one.

  12. I disagree with ted about not tracking your net worth each month. I’ve been investing (including stocks and real estate) since the 80s, so I’ve the booms of the early 80s and late 90s as the crash of 87. As long as you do some research and know the long-term performance characteristics of each asset class, you’ll realise that gains in a boom market are not the norm.

    BTW – if you know that valuations are typically only 85% of the true market value, adjust the valuation by a suitable multiplier to get an indication of the current realistic appraisal. There’s no point kidding yourself about valuations, either on the upside or downside.

  13. Ted says:

    First — I’m not asking for specific dollars. ‘Asset’ is just so generic. Is that 401k? IRA? Savings account? Artwork? Cars? Diamonds? He’s the one who posted this stuff on the internet and he doesn’t have to answer if he doesn’t want to.

    Second – I think Net Worth is more usefully tracked once a year. Seems like a waste of time doing it every month. You’re better off spending time on your budget, savings rates, and looking to reduce expenses month to month. (And in fairness, it looks like Trent is doing this part).

  14. Ed says:

    I love this thread. And am conservative and like to track my Assets. The worry is about retirement funds and cash flows. So would like to build up my Assest at this RIPE AGE of 47.
    Have invested some money in 401K. Ans also in property that shall mature in five years time. and 1/10th of my stocks in gold that have appreciated a bit over last ten years.
    Need advise on what percentage of my income I shoul still save at this age and time. thx!

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