Thursday, July 7, 2011

Net Worth Update

As of July 1st, my net worth was $146 887 (down 2.1% from $150 080). If I exclude house-related assets and liabilities, my net worth was $100 844 (down 5.5% from $106 667). The significant decrease in my net worth is due to the purchase of my new car and how I record its value. That impact is muted somewhat because my last net worth update was for May 1st, and May was a good month with a tax return and a slight increase in the value of our house.

Assets ($242 779, up 17% from $207 064)
  • Bank Accounts $4 927 (up 28% from 3 837)

  • Emergency Funds $3 922 (up 130% from $1 697)

  • RRSP Accounts $69 641 (up 0.9% from $69 005)

  • Non-Retirement Investments $34 761 (up 2.3% from $33 980)

  • Home $100 530 (up 2.1% from $98 430)

  • Car $28 517 -- New!

Liabilities $95 892 (up 68% from $56 984)

  • Credit Cards $3 169 (up 70% from $1 868)

  • Mortgage $54 487 (down 1% from $55 017)

  • Line of Credit $0 (stable)

  • Car Loan $38 154 -- New!


  • Debt / assets: 0.395 (up from 0.275)

  • House value / total assets: 0.414 (down from 0.475)

As you can see, purchasing a new car has had a big impact on my financial situation on paper. One reason for this is how I evaluate the value of the car vs the amount of the car loan. While the car loan includes the taxes various fees associated with a new car, I do not include these in the actual value of the car. Above that, I immediately remove 10% off the value of the car. So, even though it cost me $38 000, I record its actual value at $28 500. That's almost $10 000 removed from my net worth right there.

Going forward, I will decrease the car's value by 9% of its original value every year (or 0.75% per month). This means the car will be worth $0 after 10 years. Meanwhile, the car loan will be paid back in 5 years. This means that the net value of the car will rise with time, as the car loan is paid back fater than the car itself devaluates. Then, once the car is fully paid back in 5 years, depreciation will keep reducing its value until it reaches $0 in 10 years. This, I think, reflects reality fairly well.

1 comment:

Eddie L. said...

You are very smart.

I also track my personal net worth. And just like you, I maintain a peronal "balance sheet" that lists my assets and my liabilities. I do the totals on the first day of each month and track them on a spreadsheet.

I've been doing this for awhile and it really helps me to see how I am doing in terms of gains and losses in my financial life.