Tracking Net Worth and Compound Interest Calculating

[tmm99]

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Originally Posted by audreyh1 I record net worth at least quarterly. The number is always displayed in Quicken. I also compare my net worth against accumulated inflation since I retired. If net worth growth is beating inflation since retiring I feel like I’m I ahead of the game. I use this cumulative inflation calculator: https://inflationdata.com/inflation/...alculator.aspx

It's a good feeling when your money is beating inflation. I hope that trend will continue.

Do you add the value of the house to your net worth? It looks like some of us here are doing that, but I'm only adding what we've paid for...

[pb4uski]

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Originally Posted by BlueberryPie I find the idea of fixed "compound interest" for a 401(k) to be an over simplification unless you have 30-40 years to go. The stock market or your portfolio does not return a fixed percentage.thats why tools like Firecalc which look at best and worse case are useful. They sure help dispel any sense of oversimplification. There are Firecalc calculations where I have a 1% chance to run out of money by age 99, but also have a 1% chance to die with $20M in my bank account! Understanding the spread (i like to look at the 10th percentile) is more useful than a fixed interest calculator.

You can also use FIRECalc to look at 401k growth. Say you have $500k and contribute $15k annually adjusted for inflation and you have another 20 years of work. Enter spending of $1 and portfolio of $500,000 on the first tab and then go to the Not Retired tab and enter 2041 and $15,000 annual portfolio additions.

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Because you indicated a future retirement date (2041), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 20 years of preretirement plus 0 years of retirement, or 20 years. FIRECalc looked at the 131 possible 20 year periods in the available data, starting with a portfolio of $500,000 and spending your specified amounts each year thereafter. Here is how your portfolio would have fared in each of the 131 cycles. The lowest and highest portfolio balance at the end of your retirement was $500,000 to $4,888,006, with an average at the end of $2,178,454. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

[youbet]

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Originally Posted by W2R I do not track my net worth.......... I track my portfolio plus bank account total.

Practically, aren't those about the same thing? Just add the value of your house to the portfolio and bank accounts total and it's approximately your net worth. Since housing values usually change slowly, updating that every year or so would be more than adequate.

Maybe I just feel this way since I feel knowing my net worth within a couple percent is fine.

[audreyh1]

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Originally Posted by tmm99 It's a good feeling when your money is beating inflation. I hope that trend will continue. Do you add the value of the house to your net worth? It looks like some of us here are doing that, but I'm only adding what we've paid for...

It’s in my Quicken data, but is such a tiny percentage of our net worth and changes so little, I don’t worry about it.

[W2R]

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Originally Posted by youbet Quote: Originally Posted by W2R I do not track my net worth, since I have no purpose for doing so. [...] I track my portfolio plus bank account total. Practically, aren't those about the same thing? Just add the value of your house to the portfolio and bank accounts total and it's approximately your net worth. Since housing values usually change slowly, updating that every year or so would be more than adequate. Maybe I just feel this way since I feel knowing my net worth within a couple percent is fine.

It seems to me that the dollars in my bank account or funds at Vanguard have a specific, immediate dollar value. I feel like the value of the house does not, and has the potential to be a giant "fudge factor" in the computations. It's not a number so much as an opinion. One could get a value from Zillow, from realtor dot com, from sales prices of neighborhood houses that one THINKS are equivalent, from Crazy Aunt Sally down the street, or from any of a number of other sources. One could really get an off kilter result if adding in house value, IMO, and it doesn't even take much effort to do that. That may be especially true now that we are in such a frothy housing market.

Again, this is my opinion! Do what you want. I just see no value in a result that is based on vague estimates.

Also, I do not plan to ever move so it makes no practical difference to me if my house is worth 10 million dollars or 10 cents. It's just the place where I live. Therefore I simply assume that it is worth $0.00 .

[karen1972]

Quicken Net Worth tracking was a huge motivator for me and let me get to my goal.

I met someone once I was already at FI, we bought a bigger new construction home end of 2018 setting us a bit back, but entered this year with under 30 failure scenarios running Firecalc so created what I call our countdown calendar.

Using Firecalc investigate tab, I plugged in and figured out the $ we need to cross each of the last 28 scenarios to get to 100% success with merged finances. Put it in calendar format so its easy to see on a single page, has the $ to 100% at the top where the Month would go.

We only have 13 squares to go.

[chassis]

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Originally Posted by Blue531 I've been tracking my net worth on a monthly basis since 1999--the first year in which it first went positive. I had been investing in my company 401k for a year and saving money aside from it, too. I have found tracking NW to be a simple yet effective exercise that kept me motivated and on the steady path to financial freedom. I would suggest to anyone starting out to begin logging theirs. It is very empowering to see one's wealth increase little by little over time, assuming, of course a person is working toward decreasing spending and increasing investments or at the least maintaining spending and increasing investments. I would also suggest using a compound interest calculator or a 401k calculator and play with the numbers as a motivational tool. Seeing how compounding of my money could grow over time was also a very effective tool for me. And what an amazing one it is! What exercises, tools or the like have helped you on your journey to financial freedom and independence?

Let's be clear on the net worth calculation.

Net worth = all assets - all liabilities. Excluding assets (like RE) or liabilities (like mortgage debt) is not a net worth calculation. Net worth and owner's equity are synonymous. Fudging the calculation by picking out this or that is simply fudging.

To the OP: "compound interest" or rather compound average growth rate (CAGR) is a useful measure in my view. CAGR is return on equity. CAGR when applied to historical net worth filters out all of the noise: the vacations taken in a good year, the market losses in a bad year, the year we sold a house, the year we bought a house, the year with no income, etc. It is a fairly high level calculation on your financial performance. I calculate CAGR in 1/3/5/10/15/20 year rolling intervals. It's very useful.

I use my own personal CAGR to sanity check my forward-looking retirement model. One's own CAGR is a reasonable indicator of future performance. It's a quantified measure of one human's, or one household's, financial behavior.

[NW-Bound]

I have a diary that logs the daily total value of my investable accounts, going back to 1999.

I never look at the values of my 2 homes, but just now realize that they add up to a 7-figure sum. That is still a lot less than my investable accounts, which are a lot more liquid than the homes.

I never bother to include the homes in Quicken or MS Money. Even with no mortgage, my homes cost me money and labor for maintenance. My investable accounts generate positive cash flow for me. It's obvious what I like more.


PS. I should have kept track of my expenses early on. I only started doing that in 2010.

[sengsational]

My liquid net worth sheet that I started in 1987 got more "features" over time, such as IRR for each position. Even though I only updated it quarterly, it became too much trouble to keep up to date, so a few years ago, I quit updating it. It was more than net worth...it showed netted income and expense for the quarter and so I could see how much contribution to savings there was. But too much trouble to maintain.

As a replacement, I built a web scraper that pulls pages from all of my 6 financial entities and drops the current balance of each position into a spreadsheet. The scraper also has the asset allocation split, so this let's me monitor for rebalancing. It's all automated, but they're constantly changing their web pages, so I've always got tweaking to do. At least it's not repetitive data entry.

[ThunderFIRE]

I've been tracking NW since 2007. I don't even remember why I started. I do it monthly and the "old school" way by logging into every account and entering data into an Excel spreadsheet.

I've considered using one of the aggregator tools like Personal Capital, but for me I find the exercise of manually logging into every account (brokerages, multiple 401k's, and three pension accounts) is a good way to make sure my passwords don't expire and I'm seeing any messages from the various sites as many of them have transitioned to dual factor authentication, etc. and need more information (like a cell phone number for texts).

I'll be retiring in the next several months and expect that I will still log everything monthly. It is a good exercise for me to stay motivated in accumulation mode and will be a good exercise for me to watch our expenses after we retire.

[NW-Bound]

I do remember why I started to log the daily total value of my investable accounts - after-tax as well as 401ks.

I was a founding member of a couple of tech startups in the early 90s, and quit megacorp to work full-time at one in the mid 90. We were making money at first, and were able to pay ourselves a salary. By the late 90s, both start ups were in trouble, and I started to work with no pay, hoping to revive our business. It was a very dark time.

I now had the time, and the motivation, to open up all the account statements that piled up unread for many years. And the 90s being a hot period for the market, I discovered that my total was a 7 figure. Dang!

That really eased my financial worry. At least, if I had to go find work again, I could afford some time to shop around, and not have to beg for anything that I could find. I ended up doing part-time contracting work, and never a full-time job again, until I quit for real.

I just looked up the inflation from 2000 till now. It's about 1.6x, so in the money was worth a lot more back then. And I was far from an active investor back then. In fact, I was quite conservative, and kept 50% in fixed income. Good thing fixed income was also doing OK then, due to the falling interest rate. Still, I could have a lot more by doing 100% equity.

And also that was when I decided to learn more about investing. None of this thing about looking at your statements once a year. It's for people who cannot stay in the kitchen, the faint of heart. Me, I am like these Chinese cooks handling a flaming wok. I can take the heat.

PS. I did not dive in headfirst though. Slowly, slowly. You don't want to singe your eyebrows.

Even then, there were lessons that one only learned with time, by doing. And I am still learning.

[audreyh1]

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Originally Posted by audreyh1 It’s in my Quicken data, but is such a tiny percentage of our net worth and changes so little, I don’t worry about it.

To expand:

The house was in Quicken since the early 90s and I used it to track the mortgage payments and principal.

When I paid off the loan in the late 90s, I zeroed out the loan in Quicken and the principal remained.

Then mid 2000s we sold our home and moved into a motorhome for full time travel. The house proceeds were then transferred to a “House Fund” account to be invested for whenever we were ready to rebuy a house.

In 2010 when we bought a new house that fund was emptied and a new account created in Quicken for the property based on annual county property tax appraisal.

[Ian S]

SigFig makes it easy to track your investments and you can create manual accounts for other things that add to net worth. The nice thing about SigFig is, with one click, you can download a CSV file to produce a spreadsheet of all your investments. I've been doing that on a weekly basis since January, 2016.

I originally started to keep track of my net worth using a DOS program in the 1980's called "Managing Your Money." In those days, there was a lot of manual entry of prices and so forth. After a couple of Windows versions, the program was discontinued in the late 1990's. I still have the DOS files from around 1999 when I stopped using it. At least in Windows 7, you could still run the program in a DOS shell. Perhaps it's time to try it in Windows 10!

[tulak]

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Originally Posted by audreyh1 In 2010 when we bought a new house that fund was emptied and a new account created in Quicken for the property based on annual county property tax appraisal.

That’s what I use to track my house value, at least for the old house. For the new house, I used the purchase price and will switch to the tax assessed value once it exceeds the purchase price.

I’ve always tracked my investment portfolio regularly. I use a spreadsheet for the portfolio.

I can also view the portfolio in Moneydance, using custom python scripts, but the spreadsheet is easier for modeling and has a lot more details.

I’ve always had a visible net worth calculation from Moneydance/Quicken, but it’s only mildly interesting. I’m more interested in the portfolio balance, since that’s what I’ll need to live off of.

I recently started tracking my numbers quarterly in a spreadsheet. I’ve (finally) come up with a plan towards retirement and want to know if it’s on target. For this, I track both portfolio balance, broken out per account type (tax deferred, taxable, tax sheltered), along with net worth.

[sengsational]

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Originally Posted by Ian S I originally started to keep track of my net worth using a DOS program in the 1980's called "Managing Your Money."

I still use it, but not for net worth...just for expense tracking. My investment account totals (not individual positions) are in there (manually typed-in monthly or quarterly from the statement). For non-MYM'ers, the net worth section of MYM pulls from assets, including physical assets, and liabilities. So that net worth includes cars, house etc (not just liquid net worth, like I do with the web scraper).

[jkern]

I estimate my NW periodically for fun. It's not a number I use for expenses or cash flow. It would only come into play after my death to calculate any taxes due.

Since my NW number is just for fun, I don't worry about being precise. I add in the approximate value of my house plus rental properties. I also add a placeholder value for all personal property like cars, jewelry, furnishings, art etc. of $100K. I'm sure if I were to liquidate everything I would get less than $100K, but it really doesn't matter.

[RockyMtn]

Another Quicken user. Started with MS Money in mid 80's. I actually preferred it but when Microsoft dropped the product I went over to Quicken. Nice to have everything automated and update automatically with the push of a button.

[FLJim]

Have been keeping track of Net Worth since about 1975 (pen and paper) and with Quicken since it was available in the early DOS version (!). Not keeping track of NW is like playing golf and not recording your score on each hole and totaling up all 18. I carry 2 paid-for houses at acquisition cost (why I don't know, but seems the conservative way to go), don't account for 3 paid-for vehicles, and don't count any personal property like HHG. Knowing NW helped me decide to retire 10 years ago at 62. Not knowing NW would be like a car with no odometer and no speedometer. Quicken makes it easy to keep a close eye on multiple accounts.

[NW-Bound]

I have no spreadsheets. Everything I need is in Quicken. I use it to "count my money", as well as to track expenses after the fact. I do not include home values in Quicken.

Outside of Quicken, I only have a diary where I record the total daily value that Quicken shows at the bottom left of the screen. That also includes all banking accounts, and outstanding credit card spending.

The reason for the diary is that I can scroll through it to see how much I had in the past, the high/low of each year, etc... I can set the date in Quicken to some time in the past to see how much I had on that date, but this is not the same as scanning through a file to see the "bigger picture".

In that diary file, I also include some notes which help me recall events that drove the market nuts. For example, I recorded all the Wheeee proclamations in that file.

Just joking...

[ownyourfuture]

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Originally Posted by Sunset I track Net worth (not counting tax due on IRA withdrawals) once per year. I even graph it so that I can see a pretty picture, of course that dip after 2014 was not a pretty part

I do something similar. Thought I was the only one
I can only figure out how to put in 5 bar charts (years)