Coffee heat rising

Month: March 2011

Using Net Worth as a Personal Finance Benchmark

by

This is a post by Miranda Marquit, who serendipitously appeared just as the present nasty virus was making me think I would die if I had to write a single word today. I think you’ll enjoy the article that she kindly wrote for us. Thank you, Miranda—you couldn’t have come along at a better time!

Miranda publishes her own (very engaging) blog at This Time It’s Personal.

When it comes to your journey to financial freedom, it helps to have milestones along the path. One of the personal finance benchmarks you can use is net worth. Your net worth offers you a picture of where you are at now. You can use it to chart progress toward financial goals.

Net Worth: A Financial Moment in Time

Your net worth represents a financial moment in time. It is a snapshot of your current money situation. You figure your net worth by subtracting your liabilities from your assets. Once you have that number, you have a place to start.

The first step is to add up your assets. This includes the market value of your home, as well as the value of your investments, your checking account, your savings account, and any other items of significant value. Next, you add up your liabilities. Your liabilities include what you owe on your mortgage, any debts you have and other obligations that you have incurred.

Here is a basic example of how you can do a net worth calculation:

Assets:

  • Market value of home: $180,000
  • Savings: $10,000
  • Checking: $3,000
  • Investment account values (including retirement accounts): $35,000

Total: $228,000

Liabilities:

  • Mortgage balance: $165,000
  • Car loan: $9,000
  • Credit card debt: $4,500
  • Medical bills: $2,000

Total: $180,500

Net worth: $228,000 – $180,500 = $47,500

As you can see, the net worth in this case is $47,500. To increase your net worth, you will need to either pay down debt or increase your assets. Your assets can be improved by increasing your income, or by making investments that appreciate in value.

Measuring Your Progress

Once you know where you stand right now, you can begin making plans to improve your situation. Take stock at regular intervals. Decide whether you want to measure your progress every month, every quarter, every six months, or every year. Many people find that tracking their net worth monthly or quarterly helps to keep them motivated.

It is important to realize, though, that there are some things that you won’t have complete control over. If you are engaged in long-term investing, such as the investing you do through a retirement account, your net worth might fluctuate in the short term with the market. Many people experienced a lower net worth during the recession, as their retirement accounts dropped. (However, those who weathered the down market are now seeing a sharp rebound in net worth.)

Remember that your net worth is a picture of your current situation. Try to figure your net worth on the same day of the period, such as the first day of the month, or the last day of the quarter. This way, you will be more likely to be comparing apples to apples when it comes to your pay schedule, and the bills you pay.

Create an overview of your financial situation by tracking your net worth over a period of years. As you work on a debt repayment plan, as you pay down your mortgage, and as you look for ways to increase your assets, you will find that your net worth trends higher—leading you toward a more secure future.

Miranda writes for a variety of personal finance web sites, including the AllBusiness Personal Finance Corner, and Credit Cards Canada, a site specializing in the best Canadian credit cards.

More to Come…

by

Lenten thank, Day 12

Thank God I don’t still live in Saudi Arabia!

My mother, who was a low-key enthusiast of Edgar Cayce and things mystical, used to say the Apocalypse would come from the Middle East. She used to say a lot of things…but why not? It’s gotta come from someplace, after all.

We’re now engaged in another war in another Middle Eastern country, where we’ve been at war longer than we were during World War II. The entire region is erupting, a development which does not bode well.

IMHO, if we don’t free the West from dependence on Arab oil, we will see something very like an apocalypse, because that is what the collapse of a dependable, cheap energy supply will do to our economy. Someone else once said it better: a hard rain’s a-gonna fall.

But…maybe it’s just the mean virus speaking. It was a long, dark night.

Now I have to run to teach two classes—mercifully, they’ll be parked in front of computers today. By the end of the day, though, a lovely guest post should be ready to mount. Meanwhile, don’t take any wooden nickels!

Betcha didn't think there was such a thing, didja?

Image: ColWilliam. Public Domain.

New Financial Goal

by

Lenten Thanks, Day 11 (i think)

And O.K., God. Thanks (i guess) for the pittance Funny about Money earns off Adsense. It’s…better than a hit in the head, at any rate.

But it is a pittance.

Just finished putting together a presentation for the business group in which I intend to propose that my new Scottsdale business friends advertise on Funny about Money.

The site has pretty respectable traffic—14,200 unique visits a month, 3.2 million hits a year add up to a whole lot of eyeballs on ads. In theory, many more eyes hit the virtual pages of Funny about Money in a month than ever see the pages of, say, Phoenix magazine. Since ad rates for websites are so low compared to print media with similar demographics, a business owner gets a heckuva buy for his or her advertising dollar.

My goal is to sell enough ads to double Funny’s revenues this year. The plan is to push AdSense below the fold and to use the prime real estate for customers who are willing to pay something more than 30 cents a day. I’ll keep AdSense (though may knock out some of its ad blocks), but downplay it in favor of ads that make a more reliable and fair return.

Since AdSense pays precious little, doubling FaM’s revenues will not be very hard.

It remains to be seen, of course, whether a living, breathing business executive can be persuaded to spend even precious little to see his company’s name in glowing characters on a computer screen. Most of these folks are older and not very techie. However, almost all of them sell services that would interest FaM readers: financial products and management, travel and resort services, healthcare, and the like.

It’ll be interesting to see if I get anywhere with this! 😉

Saturday Meanderings

by

Lovely weather today, assuming it’s not radioactive. Got a ton of things to do, but will pause to offer these discoveries from the blogosphere:

At I Pick Up Pennies, Abby reflects on her many blessings that have buoyed her through some very hard times.

Her mom, Donna Freedman, is back from England, having reported on one last off-the-wall adventure.

The Digerati Life’s proprietor, Silicon Valley Blogger, features a very nice survey of the types of shredders available. Nice timing here: my aged shredder is wearing out & soon will need replacement.

Revanche and PiC are about to buy a Dog Chariot! LOL! I thought I was the only person who bought a vehicle to accommodate the dog.

Mrs. Accountability had to make a difficult decision to deal with some unexpected car costs.

Five-Cent Nickel tells a tale of foreclosure and financial ruin, and it’s a story with some puzzling aspects.

Mrs. Money is getting deluged with unexpected expenses…ain’t that always the way?

Financial Samurai has posted a very detailed discussion of when you should and when you shouldn’t hire an accountant to do your tax returns. This is really quite a good post and it elicits some interesting comments from readers.

Money Crush and spouse are streaking toward their goal of paying off their mortgage.

At BripBlap, Steve issues some excellent advice to those who are feeling less than thrilled with the day job.

You have to move fast to keep up with Bargain Babe. Go there today for leads to 17(!) coupons and freebies.

At My Journey to Millions, Evan and The Wife contemplate a move to bigger quarters, now that the parents wish to visit for the purpose of doting on the new babe. When we said “there’ll be some changes made,” were we psychic or what?

And finally, in the hilarious excess department, check out this outrageous story at The Consumerist. “Floozy”! Who would think anyone under the age of 60 had ever heard the word, much less knows what it means? 😀

Alley Treasures

by

Lenten thanks, Day 10

Thanks, God, for leading the late, great tax lawyer to shuck me off her rolls and for moving a tax accountant into Dave’s (former) Used Car Lot, Marina, and Weed Arboretum. She and her husband not only are splendid neighbors, she saved me a ton of money on this year’s taxes and charged a fraction of what the lawyer’s been billing.

If this doesn’t warm the cockles of Frugal Scholar‘s heart, nothing will.

So I’ve been building a berm around the north side of the biggest orange tree, where the grade slopes enough to draw the irrigation water away from the tree and direct it under the gate and out into the alley. This has been a longstanding annoyance, but I’ve been too lazy to do much about it.

Having dug a couple of deep holes for a pair of new roses, I finally had some nice, clayey, sticky dirt with which to form a low semicircle that I hope will trap the water…without my having to find enough dirt to build an entire circle. That’s the plan. To shore up this mound, I want to cobble its surface with river rock. I do not wish to purchase the river rock.

Luckily, the alleys around here are full of loose rock, quite a lot of it just what I have in mind. So I spent half a morning walking up and down the alleys scavenging stones. As I’m skulking around, what should I find but a big framed giclée print, brand-new, still in its Costco cardboard protectors, just sitting there next to the garbage can.

Why is it in the alley?

Its glass is cracked.

Somebody paid $29.99 for this thing, marked down from $39.99. Think of that.

First, it means one of my neighbors can afford to throw $29.99 directly into the trash. Second, it means they don’t have enough sense or craftsiness to schlep to the nearest glass shop, ask them to cut a piece big enough to replace the broken pane, deconstruct the cheapie frame, and fix it themselves.

Granted, Aaron Brothers or Michael’s will charge more to replace the glass than the junk print is worth. But a glass shop will charge just a few dollars. And taking a picture frame apart is just not very difficult.

The thing is an awful cliché, of course. But I couldn’t leave it to die in the alley. My plan is to replace the glass and then hang it on the back patio, well in under the overhang where it can’t get wet. In time it’ll fade, of course. But for the nonce…hey! Free décor!

Moving on, the rock quarrying endeavor is slowly yielding a nice variety of stones and rip-rap. I found some thick broken slices of unpolished milled granite (??? what do you do with that?), a few pieces of flagstone, and many, many desert stones and river rocks. Here’s the nascent project; it’s much further along now than it was here. I expect another two or three alley expeditions will retrieve enough rocks to cover the entire semicircle.

I hope this works. Sometimes my berming schemes succeed, sometimes not. An awful lot of water pours out of that tree’s bubbler. This mound may not be tall enough to contain it, or it may flow downhill toward the gate fast enough to wash the dirt away, stone paving or no stone paving.

We shall see.

News of the Day

by

Lenten thanks, Day 9

I thank God for the prolific orange trees in the back yard, which despite being battered by hail and hard frost still provide enough vitamin C to kill an army of rhinoviruses.

Too diseased today to write anything original. So let’s entertain ourselves with a cruise through a page of the endlessly entertaining Google News.

Tragedy strikes in Appleville: writing for The Telegraph, British columnist Christopher Williams bemoans the shortage of iPad 2 parts, some of which emanated from Japan. Needless to say, the dwindling supply of Japanese compasses and ultrathin batteries threatens the future of personkind. One commenter on this effete little piece remarked drily, “Until iPads become edible, they are of no real importance in the current circumstances.”

BBC observes that the doctrinaire demagogues in the U.S. House of Representatives have voted to cut funding to National Public Radio. Public media being s-o-o-o-o-o-cialism and good investigative reporting invariably being LIBeral (nevermind that it’s scarcer than fur on a chicken’s egg these days), we should all be grateful for this heroic effort to get rid of all that, so more voting Americans can cast ballots without bothering their sweet heads with things like facts. It might be noted that public broadcasting is not just for the intelligentsia; more than half of Americans access it every month. The Senate has yet to vote on this issue, and so it’s not too late to write to your elected representatives. Go to 170 Million Americans for more information.

If you weren’t already afraid, very afraid, get ready for real terror: America is becoming a Hispanic country! Oh, the horror. Just as it became an Irish country after the potato famine, a Polish country during the waves of Eastern European immigration, a Chinese country while the railroads were being built, a Welsh country while we were importing miners to rip ore out of the earth…heaven help us!

In Japan, a country in no danger of turning Hispanic (yet!), 7,000 people have been confirmed dead, the government has raised the danger level at Fukushima a notch, and Prime Minister Naoto Kan calls the situation “grave.”

That notwithstanding, the Japanese stock market is recovering as the Bank of Japan and G7 countries intervene on the falling yen. Just the other day, Frugal Scholar was worrying about the ethics of taking advantage of investing as markets tumble in response to a disaster. Now’s the time, folks, to buy stock in companies that produce the supplies that will be needed to rebuild Japan.

Citizens of the globe don’t put much stock in their governments’ soothing words about the potential meltdown of not one, not two, not three, but four nuclear reactors. Despite world leaders telling their people don’t worry, be happy, consumers as far away from Japan as Great Britain are racing to buy potassium iodide, a substance said to block the uptake of radioactive iodine. Better buy some stock in the companies that make that stuff, too!

Speaking of the Brits, the Prince of Wales is spending a great deal of energy saving a variety of red squirrel native to Great Britain.

Faced with the threat of invasion by UN forces to “protect civilians,” Libya has declared a cease-fire. It’ll be interesting to see how that plays out.

Stem cell research, that bane of the right-threaded wingnut, is now poised to save many right- and left-wing lives. Injecting stem cells into the hearts of cardiac arrest victims can bring scarred heart tissue back to normal. This astonishing development promises to relieve untold suffering and restore health to millions of people.

Now…if only we could come up with a cure for the common cold…

:mrgreen: