Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Using Net Worth to keep me sane - hopefully
Old 06-18-2010, 01:38 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Using Net Worth to keep me sane - hopefully

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.






__________________

__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-18-2010, 01:50 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,389
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".
__________________

__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 06-18-2010, 01:55 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Dallas 'burb
Posts: 9,039
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.
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 06-18-2010, 02:07 PM   #4
Recycles dryer sheets
Pete's Avatar
 
Join Date: May 2008
Posts: 350
Quote:
Originally Posted by NW-Bound View Post
"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 is offline   Reply With Quote
Old 06-18-2010, 02:24 PM   #5
Recycles dryer sheets
Pete's Avatar
 
Join Date: May 2008
Posts: 350
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. :-)
__________________
Pete is offline   Reply With Quote
Old 06-18-2010, 02:30 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,389
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.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 06-18-2010, 02:45 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by bbbamI View Post
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.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 06-18-2010, 02:53 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Dallas 'burb
Posts: 9,039
Quote:
Originally Posted by dex View Post
Possibly, the way I (and others) look at the situation might help others in the same boat.
Absolutely...the quest for peace of mind.
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 06-18-2010, 03:38 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Another effective mind game with respect to housing prices . . .

If I'm not planning on moving, who cares what its worth?
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 06-18-2010, 03:46 PM   #10
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,826
Quote:
Originally Posted by dex View Post
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.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 06-18-2010, 03:56 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,389
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.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 06-18-2010, 04:29 PM   #12
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 882
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.
__________________
jebmke is offline   Reply With Quote
Old 06-18-2010, 04:39 PM   #13
Recycles dryer sheets
 
Join Date: Feb 2007
Posts: 94
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.
__________________
ikonomore is offline   Reply With Quote
Old 06-18-2010, 04:54 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Purron's Avatar
 
Join Date: Nov 2007
Posts: 5,584
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.
__________________
I purr therefore I am.
Purron is offline   Reply With Quote
Old 06-18-2010, 05:13 PM   #15
Full time employment: Posting here.
ESRwannabe's Avatar
 
Join Date: Mar 2010
Posts: 629
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.
__________________
ESRwannabe is offline   Reply With Quote
Old 06-18-2010, 05:49 PM   #16
Thinks s/he gets paid by the post
73ss454's Avatar
 
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,378
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.
__________________
73ss454 is offline   Reply With Quote
Old 06-18-2010, 06:01 PM   #17
Thinks s/he gets paid by the post
Coach's Avatar
 
Join Date: Nov 2005
Location: Colorado, USA
Posts: 1,127
I'm hoping to die in my current house, so I don't pay much attention to its value.

Coach
__________________
"Comprehensive health insurance is an idea whose time has come in America." President Richard M. Nixon, February 6, 1974
Coach is offline   Reply With Quote
Old 06-18-2010, 06:22 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Jun 2010
Location: France
Posts: 1,195
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?
__________________
BigNick is offline   Reply With Quote
Old 06-18-2010, 07:14 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Dallas 'burb
Posts: 9,039
Quote:
Originally Posted by BigNick View Post
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.
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 06-18-2010, 07:21 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Moemg's Avatar
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 10,030
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 .
__________________

__________________
Moemg is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Hi, my net worth Gazingus Hi, I am... 21 01-11-2008 05:12 PM
Net Worth Benchmarks saltydog Young Dreamers 46 10-27-2006 08:11 PM
Home to net worth %?? cardude Life after FIRE 56 09-10-2006 03:47 AM
Net worth sunrunner4@hotmail.com Life after FIRE 23 08-11-2004 12:23 PM

 

 
All times are GMT -6. The time now is 07:34 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.