Curious About Net Worth % Growth YOY

[Vincenzo]

Hi All,

I'm curious to know how I'm doing compared to others here.  Silly, perhaps, I know.  I know that there are some who would say that I'm doing great and others who may say that I'm not doing all that great.

I've been keeping track of our net worth for about a year now and calculated the % change from last year.  We had a 10.2% increase.  That does not include the home.  Does this sound decent?  Does anybody keep track of their year-over-year NW increase?

A little about us:

DW: 41
Me: 40
Bottom line (not including home): $881k
Hope to FIRE: ASAP!!!

Thanks in advance for the feedback.

 

[Ed_The_Gypsy]

nm

 

[retire@40]

A 10% increase on $800K is excellent, especially in a flat market.

I've been keeping track of my net worth increases for about 10 years as I would think most people planning to ER would also be doing the same.

I keep a chart showing my net worth at the end of each month with a projection as to how much I should have at the end of each future month going forward using historical growth and savings.  That gives me a number I need to meet in order to reach full-time ER.  If I don't meet the projected number it one month, I try to boost my income or cut some expenses to make up for it in the following month(s).

 

[Vincenzo]

This may not need to be said but I just want to be clear that this 10% is not the return from investments, it is the increase in NW - so whatever we made/lost on our investments plus the money from our salaries we've been socking away.

retire@40, you gave me a great idea for adding the projections to my spreadsheet. That would be interesting. Thanks.

 

[Ed_The_Gypsy]

nm

 

[TromboneAl]

That's just about what ours would have been had we not had to pay for college this year. Sounds like you're doing things right.

With a financial app like Quicken you can keep track of this very easily.

 

[youbet]

This may not need to be said but I just want to be clear that this 10% is not the return from investments, it is the increase in NW - so whatever we made/lost on our investments plus the money from our salaries we've been socking away.

Keep in mind that as your RE savings portfolio grows, the impact of earnings will likely dwarf current savings.  Example:
$1MM portfolio earns 8% one year.  You save an aggressive 30% of your $80K salary that year.  That's $80K earnings vs. $24K savings........

Of course, the earnings can also be negative!

One of the important factors in my final decision to RE was the realization that, despite disciplined LBYM and saving, earnings on the existing portfolio was the dominant factor.  Of course it took 30+ years hitched to the plow to get to that point!   

 

[justin]

I prepare quarterly financial statements showing net worth. I now have 1.5 years of results. I was up 139% from June 30 2005 to June 30 2006 (from $51000 to $122000). Of course I just started working 2 yrs ago and DW just started 7 months ago (fresh out of college). It's easy to double your net worth when you are leveraged like we are (lots of debt) and have very little net worth to start with. I wouldn't be surprised if I see another doubling by 6/30/07.

That being said, the % increase in net worth will slow down dramatically. Right now, our investment contributions and debt reduction funded from working trumps the moderate market returns we are receiving. As the portfolio grows, the market returns will be the driving factor for portfolio growth. 10% of a 200k portfolio is only $20,000 (a lot less than our savings per year right now). 10% of a $900k portfolio is $90,000 ( a little more than our annual savings).

 

[LOL!]

As stated above, increase in net worth is dependent on both investment return and contributions you make to investments.

If you are just starting out and have zero or negative net worth, then your contributions will have more weight. If you are retired and make no contributions, then obviously contributions will have no weight. Those are the extremes.

Rather than compare yourselves to others, why not compare to market averages? I use my children's 529 plans because they are a diversified mix of no-load, low-expense ratio index mutual funds from Vanguard with large cap, mid-cap, small-cap and international funds represented. Another benchmark might be a LifeStrategy or Targe retirement fund with a similar mix to your personal investment mix. Another possibility is a good balanced fund.

You should be doing better YOY than your benchmark because of contributions you make.

Here are some YOY benchmarks:
Vanguard Target Retirement 2045: 11.13%
Vanguard LifeStrategy Growth: 11.04%
Vanguard STAR fund: 7.82%
Dodge&Cox Balanced: 7.66%

And to satisfy your curiosity, we are in our late 40s and have a portfolio that varies between about $1.8MM and $2.0MM (not including home). Our YOY increase in net worth according to MSMoney was 11.1%.

 

[wabmester]

In another thread, somebody posted a link to a site that lets you compare net worth with your peers:

http://www.networthiq.com/

My crude excel spreadsheet tells me that our net worth is up about 12% YoY, and that's after a withdrawal for expenses of about 3%.

I do include our home in our net worth, but I just use our cost basis rather than market value.

 

[haha]

Keep in mind that as your RE savings portfolio grows, the impact of earnings will likely dwarf current savings.  Example:
$1MM portfolio earns 8% one year.  You save an aggressive 30% of your $80K salary that year.  That's $80K earnings vs. $24K savings........

Of course, the earnings can also be negative!

One of the important factors in my final decision to RE was the realization that, despite disciplined LBYM and saving, earnings on the existing portfolio was the dominant factor.  Of course it took 30+ years hitched to the plow to get to that point!   

I believe this is somewhat misleading, because if you have no earnings, you must draw from your portfolio to live. So if your $1mm portfolio earns for example -5% in given year, you are down not $50,000 but that $50,000 loss plus the $50,000 additional that you withdrew for living expenses.

Ha

 

[kcowan]

10% including savings is not much. Have you stayed out of the equity markets?

 

[dmpi]

In another thread, somebody posted a link to a site that lets you compare net worth with your peers:

http://www.networthiq.com/

That’s an interesting website. I do wonder about some of the high new worth listings. They sound phony to me…. But after all, this is the internet.

 

[LOL!]

That’s an interesting website. I do wonder about some of the high new worth listings. They sound phony to me…. But after all, this is the internet.

Actually, I was surprised that the net worth's are so low. I also noted that many folks have much of their net worth tied up in real estate.

Also the links on the site to publicity for the site promise more financial links. There are none. It appears to be a little database run by high school students. Even the polls here on TheEarlyRetirementForum seem to have more information.

 

[dmpi]

Actually, I was surprised that the net worth's are so low.  I also noted that many folks have much of their net worth tied up in real estate.

Also the links on the site to publicity for the site promise more financial links.  There are none.  It appears to be a little database run by high school students.  Even the polls here on TheEarlyRetirementForum seem to have more information.

I just looked at the high net worth people and I'd say of the top ten maybe only two of them (frankarr & dk25) are real people. Get a load of the so-called top dog "NerdMoney". 51M & he's got a blog that looks like it got put together by a HS student. Also your right, the site has no financial information other than the people's networth and a link to their blog.

 

[NetworthIQ]

Actually, I was surprised that the net worth's are so low. I also noted that many folks have much of their net worth tied up in real estate.

Also the links on the site to publicity for the site promise more financial links. There are none. It appears to be a little database run by high school students. Even the polls here on TheEarlyRetirementForum seem to have more information.

I just looked at the high net worth people and I'd say of the top ten maybe only two of them (frankarr & dk25) are real people. Get a load of the so-called top dog "NerdMoney". 51M & he's got a blog that looks like it got put together by a HS student. Also your right, the site has no financial information other than the people's networth and a link to their blog.

Hey everybody, appreciate the comments. I just wanted to jump in the converstation here and mention a couple things.

I can assure you we're not high school students . Yes, there is no other financial information other than people's net worth, I feel bad if you guys felt deceived. NetworthIQ is a simple app, that allows you to track, share, and compare your net worth. By using the entries and comments it's also possible to carry on converstaions about your situation to get feedback from the community and debate various approaches to finances. The site is a work in progress though, but simplicity is one of our mantras, and we don't promise any other financial information (yet).

As far as the data, it's likely some are fake, yes. But they are not that statistically significant when comparing medians. There is little incentive to enter fake data, and we try to limit the most obvious ones and work on ways to diminish unlikely net worths.

Cheers

 

[Gone4Good]

I've been keeping track of our net worth for about a year now and calculated the % change from last year.  We had a 10.2% increase.  That does not include the home.  Does this sound decent?  Does anybody keep track of their year-over-year NW increase?

Don't keep track but its easy to calculate (excluding real estate).

5-yr CAGR 53%
1-yr increase 22%
2006-2007 expected increase 21%

 

[Nords]

5-yr CAGR 53%

Would those numbers be implying that your investment has compounded at an annual rate of 53% for five years?

In other words, (1+0.53)^^5 = 8.38 or a 738% total return?

 

[GMueller]

Okay, I'll bite.  Started out the year with a NW of 919K.  I'm reasonably certain I will end the year with a NW of approx. 1,070K, representing a percentage gain of 16.3%.  This, however, is not a typical year in that I am spending 8 months of the year in a war zone working nearly 80 hours per week.  This unusual circumstance has contributed significantly to the gain.  Last year, was more typical.  Started the year with a NW of 807K, ended the year with 919K, for a net gain of 13.8%.  I have noted that with each year it gets progressively more difficult to achieve percentage returns above 10%.  Next year, when I retire, I expect to be more in the 10% range.  After that, I expect returns to fall below 10% -- I'm very conservative in my choice of investments. As an aside, I'm one of the oddballs that adjusts NW for future taxes. I don't believe, however, this has any appreciable effect on the percentages.

 

[Gone4Good]

Would those numbers be implying that your investment has compounded at an annual rate of 53% for five years?

In other words, (1+0.53)^^5 = 8.38 or a 738% total return?

My mistake. The 5-yr CAGR is actually 61% or (1+0.61)^5 for a ~10x increase.

But that is most certainly not my investment return. The OP asked about NW growth, which is ROI +/- savings. My 5-yr ROI is something in the neighborhood of 8%. The balance reflects new contributions to the portfolio. My 2006-2007 forecast of ~21% only includes an expected portfolio return of 5%.

 

[Nords]

My mistake.   The 5-yr CAGR is actually 61% or (1+0.61)^5 for a ~10x increase.

Phew, what a relief, I was concerned that you might be into something risky or volatile!

But that is most certainly not my investment return. The OP asked about NW growth, which is ROI +/- savings. My 5-yr ROI is something in the neighborhood of 8%. The balance reflects new contributions to the portfolio. My 2006-2007 forecast of ~21% only includes an expected portfolio return of 5%.

I'm not a stickler for accounting definitions, especially not on this board, but the Beardstown Ladies caused a world of hurt & confusion by blowing off accidentally omitting additional contributions. I'd think that comparing CAGRs to CAGRs would be limited to just the growth of the original investment.

http://www.investopedia.com/terms/c/cagr.asp

 

[Gone4Good]

I'd think that comparing CAGRs to CAGRs would be limited to just the growth of the original investment.

I understand the confusion, but I'm not sure I agree with the definition.  CAGR is just a growth rate . . . GDP grew at a compound annual growth rate of 3% over the past 10 years, Toyota's North American Sales increased by a CAGR of ??, etc..  ROI specifically references return on investment, CAGR measures the rate of growth regardless of source. I didn't take the OP to mean ROI but rather growth in NW from all sources.

Just semantics, in any event.

 

[Nords]

Just semantics, in any event.

Par for the course on a board that can't agree on a definition of net worth...

 

[kcowan]

Since retiring in August 2002. and depending on portfolio performance for supplementing pensions, we have achieved the following results:
2003 - 24.94%
2004 - (5.52%)
2005 - 10.95%
2006 - 5.16% YTD

So I guess the ROI for the first 3 years would be close to 6.5%?

 

[kramer]

Here is my portfolio growth -- counting contributions, of course. The amount I had saved as of Jan 1, 2000, was well above my gross annual salary then or now.

2000: 58.3%
2001: 13.7%
2002: 17.5%
2003: 56.4%
2004: 30.8%
2005: 20.0%
2006: up 11.7% so far in 7.25 months

Kramer