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.