Net Worth Update: May 2016

Happy May!  I hope April treated you well and tax day didn’t crush you like it crushed me!  Even though taxes came due, our net worth still went up $6,379.32!! I’ll take a $6K jump every month…

April Financial Breakdown

House: $383,728 – $321,484 $62,244.  I’m just using zillow.com as the baseline here.  They give their estimate for how much they think you’re home is worth.  I’m not saying it’s accurate but it’s a decent way to keep track without bringing an appraiser in every month to help you track your net worth. This month it said the value of my home went up $4,197.00.

My 401k: $18,689.37.  Right now 5% of my salary is going into my 401k via my employer. Nothing crazy here.  According to my account at personal capital, my portfolio only increased 1.79% over the course of April.

Pension Fund: $8,215.40.  I’m one of the few remaining workers in America that contribute to an employee pension fund and if I decide to stay with my employer and retire 24 years from now I will receive a pension.  I DO NOT PLAN ON DOING THIS!  I’m all about early retirement!!!

My Old 401k: $8,497.11.  This 401k is from an old employer.  I need to roll this over into a Roth IRA.  Hopefully I get to this very soon…


Wifey 401k: $4,682.47. Same situation as my 401k.  5% match from her employer.

Wifey Old 401k: $3,300. Also in the same situation as my old 401k.  We also need to roll this over to a Roth IRA very soon.

Car: $13,174.00.  Well, I don’t know what to say on this one.  According to kbb.com, the value of my car actually increased by $174 over the past month.  I won’t expect an increase on a vehicle ever again but it’s a nice surprise.

Jeep: $10,763.00.

Emergency Fund: $8,016.98.  The emergency fund took a hit this past month due to taxes.  I owed over $3k and was able to cash flow over $2k of it, but I had to dip into the emergency fund for just over $1,000 of it.

TOTAL NET WORTH: $137,582.33 (+$6,379.32)

So 2nd post of my net worth in the books.  I’m not expecting to see gains of over $6,000 for a while, especially since over $4,000 of it was due to gains on the value of my home.

Keep in mind, the first few years of beginning to build your net worth are slow but once you get some momentum it’ll shoot up faster than you can imagine!

**If you like talking about Money, Paying Off Debt, Building Your Net Worth and Retiring Early…This is the place for you!  Subscribe to receive emails of new blog posts, news, tips, and exclusive content!!!

Motivate Yourself To Build Wealth!

Getting control of your finances, increasing your net worth, and building wealth is not an easy thing to do. It’s actually extremely difficult. It will never happen without a plan, telling your money where to go, and the dedication to follow through with your plan.

Because of this, it’s important to figure out why you want to build wealth. Think about it right now! Why do you want to build wealth? Do you have specific goals you want to accomplish? Do you want to retire early? Do you want to change your family tree? Do you want the freedom to do whatever you please? Maybe you just want some “f#ck you” money? Whatever your reason is, it is important to have that reason fresh in your mind because you’re going to need to refer back to it frequently for motivation.

debt-slave

Personally, I don’t want to be a slave to anyone. I use the word slave because I firmly believe that if anyone has control over me and can manipulate me due to my finances, that’s exactly what I am…a slave to that person, job, loan company, etc.  Currently, the only outstanding loan I have is the mortgage on my house and it’s driving me crazy.  My mortgage, although extremely affordable as a percentage of my take home pay, is stressful because if keeps me from being able to leave my job if I wanted to quit today (to see how much house you can afford, look here).  My emergency fund keeps me safe for 6 months if I lose my job but my mortgage is keeping me from being able to choose any job I want, regardless of what that job pays.

So, for me, not wanting to be a slave is my “why”, and the motivation from my why will keep me disciplined and help me achieve anything I want! Do I want to have f#ck you money? Yes. Do I want to retire early? At this time I do. Do I want to change my family tree? It will be done. Any goals I want to accomplish can become a reality, all because I have the motivation to never be a slave to anyone.


Now it’s your turn to think about why you want to build wealth.  If my reason works for you, great! Roll with it and use it to live your dream of being free and financially independent.  If my reason doesn’t resonate with you, sit down and figure out:

  1. What are your goals that you want to accomplish in life? Write this down on a piece of paper and write down whatever comes to mind.  What would you do with the rest of your life if money wasn’t an issue?
  2. How would you live if you only had 6 months to live? What kind of life would you live?  How does it compare to how you’re living now?  How would it change if you didn’t have to worry about money?
  3. What are your most important goals? While you’re reviewing the goals you’ve written down, pick out which ones are most important to you.  Will you be able to accomplish your goals without getting control of your finances?  How will your goals be affected by building wealth?  How will they be affected if you don’t change how you spend/save money?

After completing this exercise you should have an idea of what’s important to you right now and how building wealth will only aid you while trying to accomplish your dreams.  Your goals will probably change over time so you’ll want to revisit this exercise periodically so that you can adjust.

So…What’s your why?

**If you like talking about Money, Paying Off Debt, Building Your Net Worth and Retiring Early…This is the place for you!  Subscribe to receive emails of new blog posts, news, tips, and exclusive content!!!

Net Worth Update: $131,203.01

Welcome to April everybody!  I hope March treated you well and you were able to take advantage of a market that wasn’t losing money.  The S&P 500 increased 3.98% over the last 30 days.  It wasn’t a great month for investments but at least it wasn’t like January!

Since this is my first post on my net worth updates, I’m just going to list everything out and I won’t really have any detailed explanations about what’s going on like I will in future net worth posts.  You can also see in the “My Net Worth” excel pic that there is nothing there for “last month.”  That’s because this is the first month I’ve started using it.

I’m currently not investing in any 401k’s or other investments.  I do have balances in 401k’s but the only changes in those investments are from my employers contributions and the ups and downs of the market.  Right now I’m in Step 3 and I’m just building up an emergency fund of 6 months worth of expenses.

So, here we go…

April Financial Breakdown

House: $379,531 – $322,085 $57,446.  I’m just using zillow.com as the baseline here.  They give their estimate for how much they think you’re home is worth.  I’m not saying it’s accurate but it’s a decent way to keep track without bringing an appraiser in every month to help you track your net worth.

My 401k: $17,660.16.  Right now 5% of my salary is going into my 401k via my employer.

Pension Fund: $7,975.  I’m one of the few remaining workers in America that contribute to a pension fund and if I decide to stay with my employer and retire 24 years from now I will receive a pension.  I DO NOT PLAN ON DOING THIS!  I’m all about early retirement!!!

My Old 401k: $7,991.85.  This 401k is from an old employer.  I need to roll this over into a Roth IRA.  Hopefully I get to this very soon…


Wifey 401k: $3,779. Same situation as my 401k.  5% match from her employer.

Wifey Old 401k: $3,300. Also in the same situation as my old 401k.  We also need to roll this over to a Roth IRA very soon.

Car: $13,000.  I know, I know.  Many people don’t like counting the value of vehicles towards their net worth for whatever reason they choose, but I do because I could easily sell my car and have $13,000 in cash if I needed it.

Jeep: $11,000.  Same here…

Emergency Fund: $9,051.  I’m sad to say that I do not have my 6 month emergency fund saved up yet.  But, we’re working on it and will hopefully be where we need to be in the next 6 months or so.  GOAL? $20,000 right now.

TOTAL NET WORTH: $131,203.01

So there it is.  My first post on my net worth.  It’s obviously not where I want it to be right now but when I’m done building a solid foundation I will be able to invest a lot of money and build my net worth much faster than I can right now.

The first few years of beginning to build your net worth are slow but once you get some momentum it’ll shoot up faster than you can imagine!

**If you like talking about Money, Paying Off Debt, Building Your Net Worth and Retiring Early…This is the place for you!  Subscribe to receive emails of new blog posts, news, tips, and exclusive content!!!

 

 

Escape The Rat Race With Early Retirement

Why is it that whenever I talk to anyone about retiring early, they look at me a little cross eyed and either shrug it off by not really responding because they don’t believe it can be done, or they ask me, “Wouldn’t you get bored?  What would you do if you retire?”

I can understand when people look at me like I’m crazy for thinking I can shorten my working years down to 15 years.  It’s extremely difficult to pull off and it’s hard enough to even get people to behave with their money, budget, and stay out of debt, let alone start an early retirement movement.  But I don’t understand why people would ask, “wouldn’t you get bored?”  Would you really stay in the rat race because “you might get bored?”  Do you know how bored I am working in the same office everyday?  I also have the same commute, same desk, and same type of work…EVERYDAY!!!  Early retirement seems like heaven when you look at it this way.  I don’t know about you, but I have a lot of things I want to accomplish in this life, and I feel like work just get’s in the way of that.  Sit down and think about what you would do if you didn’t have to work for money.  Dreaming is the first step in making it a reality!

day dreaming
Day Dreaming Just Let’s You Know Where You Really Want To Be. Early Retirement Will Help You Get There Faster!

The general perception of a normal retirement is that you’re now 65 or older and you’re just trying to organize the remaining years of your life so that you can be comfortable and have a little fun with the time you have left on earth (harsh but true).  But what if you could “retire” in your 30’s, 40’s or 50’s?  You could potentially have 50, 60, or maybe even 70 years to live life however you want!

As you can see, early retirement means that you have enough money to choose how you want to live your life and spend  your days!  If you just wanted to be lazy, sleep in and sit on the couch all day?  I guess you could do that, but I don’t recommend it.  If you wanted to pursue your passions and do something that is productive but excites you?  Do it, you have that freedom.

My hope is that I can reach millions of people and make them understand that early retirement isn’t impossible and that it isn’t about living a boring life.  Early retirement sets you free from being chained to your job! Early retirement IS financial freedom.  I really can’t imagine a better scenario for anyone than being able to choose how they want to live their lives!

Action-Changes-Things-AcronymIf you’re now like me, and convinced that the 65 and older “retirement” sucks, you have to TAKE ACTION NOW!  You have to pay off your debt, save money, invest, and not spend every cent of your working wages that you bring home.  The less you spend and the more you save/invest, the earlier you will be able to retire.

No one says that you need to listen to all of the conventional retirement advice and wait another 20, 30, 40 years until you retire.  Nerdwallet.com says that the average savings rate for families in America is just under 5%.  At 5%, you probably won’t even be able to retire at 65!  And, for the younger generations (millennials), what if you don’t even get social security?  You’ll be working until it’s not physically possible anymore.

If you’re ok with that type of life, I understand.  It’s easy and doesn’t require any kind of thoughtful planning or sacrifice.  But I can’t live that way.  I have a hard enough time going to work every morning and I can’t imagine doing it for more than a few years.  I’d rather save the most money I can and live the rest of my life writing a blog, trying to become a professional golfer, hunting, or working a job that I’m passionate about even if it doesn’t pay a lot of money.  I just want to be in charge of my future!

And that’s simply what I want you to takeaway from this post.  You can take control of your life!  Take control RIGHT NOW and don’t let anyone get in your way!

**If you like talking about Money, Paying Off Debt, Building Your Net Worth and Retiring Early…This is the place for you!  Subscribe to receive emails of new blog posts, news, tips, and exclusive content!!!

 

Build Wealth and Gain Financial Freedom!

Congratulations!  If you’ve reached this step, you’re now living the good life!  You have zero debt and no payments of any sort.  Can you imagine what you can do with your life now?  Anything you want!  You’ve been investing 15% of your income into retirement and threw everything else at the house to pay it off as quickly as possible.  Well guess what?  It’s paid off!  You’ve been dedicated, disciplined, and intentional with your money so that you could be so close to accomplishing your goals of financial freedom and retirement.  Now what!?!

3 Steps to Building Wealth

You’re going to watch your net worth begin to skyrocket.  Now that you’re in this final step you’ll continue contributing the 15% you have already been saving towards your retirement but you’ll also begin to add your house payment and the extra money you were throwing at the house to your retirement and other investments.  Here’s how you want to go about investing:

  1. MAX OUT YOUR 401K– You’re allowed to contribute $18,000 in 2016.  If you have the money, DO IT!
  2. MAX OUT YOUR ROTH IRAIf you qualify for a Roth IRA, you should max out the $5,500 allowable contribution after you max out your 401K.
  3. INVEST IN STOCK INDEX FUNDS– I’ll go into this in depth in a future post but an index fund is a type of mutual fund who’s portfolio of stocks is built to mirror a component of a market index, like the Standard and Poor’s 500 Index (S&P 500).  You’ll want to invest any money you have left over after investing in your retirement accounts in stock index funds.  Look for index funds that mirror the entire market (or at least the S&P 500) while I write a more thorough review of index funds and recommendations for you.

If you can come up with enough money out of your budget to follow these 3 steps, you will become wealthy extremely fast.  If you can’t do all 3, it’s not a problem.  Work your way down the list and do the best you can!  Can’t max out your 401K?  That’s o.k., contribute as much as you can and work on building up your income so that you can invest more money.  The same goes for all of the steps!  Even if you’re on step 3, you want to increase your income so you can invest more money.

Gaining Financial Freedom

financial-freedom-beach-sea-sky-sand

So how much do you need to save to consider yourself financially independent?  25 times your annual expenses.  If you can save 25x your expenses and only withdrawal 4% of your money every year, you will be able to live off of this money forever.  This is the reason you need to keep your expenses as low as you can.  The higher your annual expenses are, the more money you need to save.  For example, if I spend $40,000 per year and wish to continue spending $40,000 per year during my retirement years, I will need to save $1 million ($40,000 x 25=$1,000,000).  Now you can withdrawal 4% every year.  You’ll have $40,000 to spend and the rest of your money will continue to grow.  Don’t worry about the details right now, just start to invest and continue to read these articles.  This blog is mainly about lifestyle transformation and attitude adjustments in how people think about finances.  You’ll learn common sense for your personal financing and investing over time and see that you will change as you save and grow financially.

Remember, you need to know that you’ll never become financially independent if you don’t keep your expenses low.  If you made $5 million per year and spent $4.9 million of it you would never achieve financial freedom.  Keep your expenses low and save as much as you can.  This will make you rich!

*Leave a comment to let us know how your investing is going!  Do you have ideas other than what is listed here that’s working well for you?

**If you like talking about Money, Paying Off Debt, Building Your Net Worth and Retiring Early…This is the place for you!  Subscribe to receive emails of new blog posts!!!

Get Control of Your Finances!

I know, everyone thinks that budgeting is an evil word, but it’s not.  It is an itemized list of all of your income sources and your expenses for a given period of time.  In reality, a budget is simply a guideline for how you want to live and it will keep you on track to accomplish anything you want financially.  My goal here at Net Worth Explosion is to become financially free.

Step 1: Using Budgets as a Tool

Budgets help you prioritize your spending and manage your money.  They show you where you’re wasting money, where you could afford to spend a little more money, and where you may want to tweak a few numbers to better acclimate to your lifestyle and goals.  They create peace of mind and keep you from worrying when something bad happens.  Did your car break down?  Does your kid have to go to the doctor unexpectedly?  Did you want to do something spontaneously with your significant other just because it would be fun?  If you’re doing it right, you’ll know that there’s money in the bank/budget to cover these items.  Stress levels will be lower because you’ll finally have control of your finances.  Nothing bad can happen by creating a budget!

Dave Ramsey Debt Quote

How to Create a Budget

Creating a budget only takes a short amount of time.  The first time you do it may take longer than the rest but it is well worth taking the time to get started.  You want to create a simple zero-based budget.  This budget will consist of every dollar you are expecting to bring in this month.  It will also include every outgoing expense.  Here’s a list of steps to getting started:

  1. Write down your total household income– This is all money that comes into your house (after tax).  Income from however many jobs you may have, social security, disability, rental income, and side gigs.
  2. List all of your expenses- This includes all of your bills (mortgage, gas, electric, car payments, etc…).  You’ll also want to think about everything else you buy over the course of the month (groceries, going out to eat, gas for your car, entertainment, etc…).
  3. Subtract your expenses from your income- There will either be money left over or you won’t.
  4. Track your expenses for the month- You can write these down in an excel spreadsheet like the one below, check out these budgeting forms, or use automated websites that will do it for you.

Monthly Budget Form

Automated Websites You Can Use

There are many websites out there for you to use to track your budget and monitor your finances.  Here are a few that I recommend and have used personally.  Check them out and use whichever ones work best for you!

***Remember to subscribe so you can receive emails of our new posts!

How Do I Know My Net Worth?

To begin with, if you want to improve any situation in your life you need to know where you stand today.  This is the case with your finances and it all begins with knowing your net worth!

What Is My Net Worth?

I asked myself this question 4 years ago and I cringed when I saw that I was looking at a -$58,327 net worth.  That’s right, I had a negative net worth and was almost $60K in the hole!  How is that possible?  I thought that my family was doing fairly well.  I had just left the military not too long ago, had a household income of roughly $122K, and just bought a house for $340,000.  This all sounds great until you really start looking at the numbers behind the scene.  I was living a typical American lifestyle and didn’t think anything was wrong because this is how everyone lives, right?  I began to take a deeper look into my finances and wrote a detailed list of everything.  This included the money that I had in bank accounts (sadly, this was not a lot), any kind of property that I owned, and any outstanding loans that were in my name.  So let’s take a deeper look…

  • House: Purchased for $340,000 but we owed $352,000 because we used our VA loan and put 0% down.  Sadly, we even rolled the closing costs into the loan, so now we are upside down…this means that you owe more money than the house is worth.
  • Vehicle 1: We are $5,000 upside down on this vehicle because we took out a 6 year loan to keep the monthly payments down and the value of the vehicle depreciated faster than our payments paid down the loan. Obviously, we didn’t put any money down when we purchased this vehicle.  We owed $27,000.
  • Vehicle 2: We are $7,000 upside down due to the same reason as vehicle 1 but we also rolled the negative equity from our trade-in into the loan on this vehicle.  Typical thing for people to do in todays car market. We owed $32,000.
  • Credit Card 1: This card had a $24,000 credit limit and we wound up having $22K in debt on this card.
  • Credit Card 2: Had a $14,000 limit and owed $12,000 on this card.

Grand Total Debt: roughly $450,000    Total Net Worth: roughly -$58,000

Now that I look back and see these numbers on paper, it is hard to understand what I was doing!  These financial numbers happen when you simply don’t pay attention to where your money is going.  I never thought I would have $34,000 in credit card debt but the debt just kept piling up every day, a little at a time.  We moved 2 times in 1 year.  Once from Alaska to the east coast and, the other time, only 30 miles down the road.  But, we put the cost of those moves on our credit car.  Going out to eat?  Put it on the credit card.  Putting gas in the car?  Put it on the credit card.  Special occasion?  Put it on the credit card.  Next thing we know, we look up and have $34,000 in credit card debt.  This all stopped once I had the information on paper and it was staring me in the face, which is why it is SO IMPORTANT for you to write everything down and to calculate your net worth.  Once you have that number, you can figure out what you need to do to stop the bleeding and improve your financial situation.

So How Do I Calculate My Net Worth?

Calculating your net worth is very easy.  Once you have everything down on paper, all you have to do it this simple math formula:

Assets-Liabilities=Net Worth

NetWorthFormula

In simpler terms, it is: What you own-What you owe=Net Worth.

Now, go figure out your net worth.  It’s an important step in beginning your journey to financial independance and Freedom!

*Subscribe on our main page by entering your email address to receive notifications of new posts!