Net Worth Analysis for 2012: The Good, the Bad and the Ugly

I was reminded by a few different blogging buddies when doing their recaps of 2012 to look at my own Net Worth for 2012.  Everyone seems to calculate their net worth differently (if at all).  These days, a lot of people are switching over to a free service from Personal Capital to keep everything in one spot and get real-time updates.  I’ve been using a spreadsheet since I have some weird entries like assumed net worth of a partial stake in a real estate deal, company stock options, etc.  But for people who have primarily stocks, bonds, CDs, savings, etc., it’s much easier and real-time with Personal Capital.  Regardless, I run mine monthly.  I look forward to it, good, bad or ugly.  I like to see progress of course, but in a month where the market’s down or we dumped a bunch of money on a major home repair or something, it’s still good to see where we stand and I especially like looking at my year-end number to re-set goals for future years.  I have the spreadsheet going all the way out to retirement to keep me honest (and put my kids through college-undergrad at least).

Since some people we know personally read the blog, I felt it would be a bit awkward to post exact dollar amounts, but as a compromise, I’m sharing the actual dollar amounts in each category to give a decent sense of where we performed well, and where we should have done better (I’m not pulling any punches).  I also used very conservative assumptions where appropriate since I’d much rather be wrong on the low side than wrong on the high side when estimating net worth.

• Home Net Worth + $10K – I made a great move with our primary residence this year.  I got out of a 30 year mortgage at a higher rate for FREE with a No-Cost Refi.  I was able to move down to a 25 year when I had 27 to go and didn’t pay a dime out of pocket (nor add to principal – important distinction) while lopping $100/month off my payment.  So, while I only paid down $9K this year, that number should accelerate moving forward as I move further into the amortization schedule.  And no, at an effective rate of around 3%, I’m not pre-paying at all.

• Real Estate Investment Net Worth + $4K – You might be questioning, where the heck is the money with a sizable real estate investment?  Well, as I’d outlined in some prior posts in my real estate section, last year was the first and very “challenging” year where we learned what investing in college campus real estate is all about – kicked in doors, broken windows, phallic symbols carved into our sidewalks and all.  From a cash standpoint, we’re roughly even, but this is equity/principal appreciation.  I’ve assumed an extremely conservative 1% per annum increase in valuation for the first couple years (even though we were able to increase rents 4% next year and already have 4/5 units signed on for 2013-14), and also my share of the mortgage principal paydown of course.  This valuation may seem skewed in 2013 though since any cash we take as distributions would show up in my taxable savings account, not this one anyway (i.e. once the check is cut, that equity has left the real estate bucket).
• Retirement Accounts (401k and IRAs) +58K – I have to credit a strong stock market this year with some help here.  I’ve also been repaying the 401(k) loan I took to do the real estate investment (full explanation and justification here).  So, with the large monthly payments into the 401(k) and continually seeking to beat the market in my self-directed IRA, I was pleased looking at this number.
• College Savings +11K – I view this number as a bit of a failure.  While the 529 plans we’re using performed well, I have sought to put away at least $1000/month, so with a strong year in the market that would have put the total gain at like $15K or more.  There were some months I had to meter down the investments though to meet other goals, maintain our emergency fund level and such.  Seeing close to a thousand a month leaving the budget to repay the 401(k) loan isn’t helping, but I suppose in the long run if the real estate is used to fund the kids’ college in some way, it’s a wash or better right?  Anyway, while I’d like to see a $12K gain next year at a minimum, I’m thinking it may be a bit less again in 2013.
• Taxable Accounts – Flat – I saw some gains in trading accounts while exercising some stock options and using that money for monthly expenses/transfer to college savings along the way.  So, it was roughly a wash when you consider all the balances I have in that bucket from company stock/options, savings, stock trading account, etc.

$83K Net Worth Gain for 2012 – So, that’s it in a nutshell.  I’m employed, have a happy and healthy family and have nothing substantive to complain about.  But I am not really pleased with the results, as we could have done much better.  Here’s why:

Where We’re Going Wrong – An Honest Appraisal

I’m definitely not throwing up 6 figure gains like many of my fellow blogging buddies.  I could make excuses about single income, lots of kids or whatever, but the biggest culprit is really overspending.  I would have preferred to have socked away much more in taxable trading accounts, 401(k) and more.  But it seems like there’s something MAJOR every month.  Each month where we might have been a couple grand ahead, there’s a vacation, Christmas, a home repair, the kids’ preschool bill is due for the year or whatever.  For all the “wins” I’ve had saving money on everything from my Comcast Bill each month to making some kickass investments (like this one up EVERY DAY practically even in down markets like today), to getting 6% back on virtually everything we buy, the net result isn’t that impressive.  I’d like for next year to be substantially better; maybe to put a goal out there, we’ll call it a $100,000 gain for next year’s target.

If you’re not tracking your net worth and don’t want to set up a spreadsheet, like I mentioned, just set it all up through Personal Capital and you can actually get a nice report daily.

Do You Track Net Worth?

How Was Your 2012?