Using Net Worth to keep me sane - hopefully

[dex]

I track my net worth at year end, and, with and without an estimate for home net home value (after selling expenses). I just found out that there is a home, similar to mine, posted with a net selling price 25% lower than what I paid for my home. I don't know why it is so low - there are smaller homes for sale for not much less. I'm guessing it is desperation. However, this will be difficult to overcome when comps are used.

I find it helpful, in times like this to play mind games. The first one is the living cost one. I bought a home in 1999 and sold it for what I paid for my current home. Now my current home is worth 20K less than the purchase price of my 1999 home.
First mind game - housing cost per year ($20K/11 years) $1,818/yr + opportunity cost + maintenance + taxes + ins. = Rental cost? I say it is close.

Second mind game - total net worth. I'm estimating my total 2010 year end net worth at 2.7% lower than my total 2006 net worth (1st year of ER - house at Gross purchase price ).

Looking at a 2.7% loss over 4 years is easier than thinking about a 25% housing price loss.

 

[NW-Bound]

I do not pay much attention to the values of my 2 homes, but just from the comps of the neighborhoods, know that I "lost" a few hundred Ks. Talk about RE mania here in 2006...

"Losing" the same amount in my portfolio hurts me more. And I am talking about mental pain of course. But it is recovering. I am checking it daily, actually in real-time as I am posting.


PS. Forgot to stress that as both my portfolio and my RE values are down quite a bit, I have no reason to add them together to see the total "loss".

 

[bbbamI]

I have a total net worth (includes everything) and a total net funds (money only).

In my own little world, I don't think about the value of my house. My house shelters me and I feel safe. When/if I decide to move, the value will make a difference as I would not want to pay more for the new house.

My house is simply my home.

Total net funds...well, that's another story. More than likely I'll have to adjust spending habits along the way.

 

[Pete]

"Losing" the same amount in my portfolio hurts me more. And I am talking about mental pain of course.

For a group of people (those who post on this forum) who might arguably have had the same strategy(8% return+4%withdrawal=ER) the portfolio drop would have greater implications.

 

[Pete]

If you're using mind games to stay sane, one that works well for most people is the comparison game. A 20K loss on a home is nothing compared to the people around me where, in some cases, 30 to 50% of value has gone bye bye. I hope that helps.

 

[NW-Bound]

By the way, at this point my portfolio loss as counted from its high water mark in 2007 is less than my RE value drop, as counted in $ amounts. But as my portfolio is more than 2x the value of my 2 houses, its loss is less than RE loss in terms of percentage.

So, for the mind game, I did the right thing by not adding the RE pain to the portfolio pain.

 

[dex]

In my own little world, I don't think about the value of my house. My house shelters me and I feel safe. When/if I decide to move, the value will make a difference as I would not want to pay more for the new house.
My house is simply my home.

Good point. I think there are a couple of issue around the home for me. One is losing money - obvious.
The other are:
The lack of freedom - being able to easily sell and move.
Acknowledging having made a mistake.
Not knowing how low housing prices will go.

I do like where I currently live - no issues there. It is a good area. I could stay here for decades.

I do not foresee any financial problems for me especially when SS kicks in. It is more of a psychological challenge.

I do think that the stock market over the past 10 years and the housing market does point out how difficult it is to financially plan and execute an early retirement.

Possibly, the way I (and others) look at the situation might help others in the same boat.

 

[bbbamI]

Possibly, the way I (and others) look at the situation might help others in the same boat.

Absolutely...the quest for peace of mind.

 

[Gone4Good]

Another effective mind game with respect to housing prices . . .

If I'm not planning on moving, who cares what its worth?

 

[W2R]

I just found out that there is a home, similar to mine, posted with a net selling price 25% lower than what I paid for my home.

(groan) I feel your pain! The housing market here is awful, too. As long as I am not selling, I can hide my head in the sand and continue to live in my house happily. No need to concern myself about the price.

Although I do have a cell in my Excel spreadsheet for computing net worth, I don't pay a whole lot of attention to it. My portfolio size gets more of my attention than net worth.

 

[NW-Bound]

But the 25% loss means Dex bought relatively recently.

My main house dropped to perhaps 65% of its value at the 2006 peak. Still, it is around 250% from when I bought it, which was 20+ years ago.

 

[jebmke]

I only include the house when I give a listing to my lawyer who drafted the will. The value of the house is what it is ...it has no value in terms of generating retirement cash flow so I don't bother looking at what sales prices have been doing in the area.

 

[ikonomore]

It's not a loss until you sell.
In my neighborhood if i sold 2 years ago i would've lost $170k.
If i sold today, i'd make $30k. I had a woman stop me on my bike the other day and ask if my house was for sale.

Just a matter of timing.

 

[Purron]

Own 2 homes in a high cost area - DC suburbs. Total value down about 15% from the peak. Try not to fret about stuff out of my control.

 

[ESRwannabe]

If I owned a house I would not pay much attention to the "NAV". The way I look at it, the house is paying you a tax free dividend equivalent to (projected rent expenses - your house expenses). Unless you have a lot of house maintenance, that would be quite a generous tax free dividend.

My rent took up about 30% of my expenses last year.

 

[73ss454]

My house is the one asset I have that I hope goes down in value. Since taxes are based mostly on the value of my home I'm hoping that my taxes drop along with the value. Since I have to live somewhere, really it's just a roof and a place to stay. If my house drops in value and I have to sell it most likely the next houses value will also drop, so it's a wash either way. In the mean time maybe my taxes will drop.

 

[Coach]

I'm hoping to die in my current house, so I don't pay much attention to its value.

Coach

 

[BigNick]

Should (ha, "should", it's only a game, but anyway) I include an equivalent portfolio value of the company pension to which I'm entitled, even though I can't cash it in for that lump sum? That is, if I left tomorrow and they would give me 8,000 a year for life, can I pretend for net worth purposes that I have 200,000 which I'm drawing down at 4%? Or does that lead to a slippery slope where I include the future value of my social security pension as an asset?

 

[bbbamI]

Should (ha, "should", it's only a game, but anyway) I include an equivalent portfolio value of the company pension to which I'm entitled, even though I can't cash it in for that lump sum? That is, if I left tomorrow and they would give me 8,000 a year for life, can I pretend for net worth purposes that I have 200,000 which I'm drawing down at 4%? Or does that lead to a slippery slope where I include the future value of my social security pension as an asset?

I calculate our pension, retirement funds and half of what we should get in SS for planning purposes.

As far as figuring the pension and SS in my Total Net Funds, nope. Unless it's in my hot little hand, I ain't got it.

I'm not tryin' to burst your bubble....I'm just talkin' about the way mine floats.

 

[Moemg]

The thing that upsets me about the housing market is how many people are doing short sales because they bought at the peak . Some of them need a good dose of reality in sometimes you make an investment and you lose . Real estate is not always a winning situation . These short sales are dragging down the market even further .

 

[RonBoyd]

It's not a loss until you sell.

Also true of holdings in your portfolio.

 

[Nords]

Own 2 homes in a high cost area - DC suburbs. Total value down about 15% from the peak. Try not to fret about stuff out of my control.

But, gosh, what if the federal government gets smaller?!?

 

[NW-Bound]

Hah! Surely you were sarcastic. The gummint ain't getting smaller, and Purron can take that fact to the bank.

 

[GoodSense]

I have the same issue as OP. I bought in spring 2006. That explains a lot of my problems!

I choose not to include my house in my calculations. Therefore I don't have to think how much equity I have in it.

Instead, I focus on the fact that I have a fairly low-interest mortgage, so my monthly payment is not overwhelming. It's probably comparable to high-end rental. At least that's what I tell myself!

 

[Koolau]

I'm the original worry wart, so I've managed to worry about all these issues of asset value changes (funny, I don't worry so much about the 'upward' changes which occasionally occur, heh, heh). But what seems to keep me sane is that all these value-change issues pale in comparison to the issues I used to face at w*rk. Now, the only time I worry about w*rk is in my dreams. Those dreams are slowly becoming less frequent though they have not stopped after nearly 5 years. It's all a matter of perspective. Most of the things listed here that we are concerned about seem to be "good" things to worry about.

Reminds me of a song - (verse 1 only)

COUNT YOUR BLESSINGS (Instead of Sheep)


(Irving Berlin)
from the 1954 movie "White Christmas".

When I'm worried and I can't sleep
I count my blessings instead of sheep
And I fall asleep counting my blessings
When my BANKROLL (my emphasis) is getting small
I think of when I had none at all
And I fall asleep counting my blessings

YouTube - Bing Crosby - Count Your Blessings (Instead of Sheep)

Of course, YMMV.