Net Worth Obession Question Part 2

I found you on the NYTimes article. Ready for more fame? So I am doing what you do, but I have trouble getting my husband on board. He has student debt, but he earns more and has a stressful job, so he feels like he can treat himself to lunches out, cabs home, etc. To some degree if you work 120 hours a week you really cannot bring lunch, but some of it is just disregarding my goals. Did you go through anything similar? I read all the financial books and motivational materials, and just don't know how to get him on board.

This is a great question. I find this topic fascinating.

In my marriage, I am the spender and Mr. Sam is the frugal one (although he was not much of a saver and most of the debt that we had was "his" debt). I also earn more than Mr. Sam, so my situation is a little different than the situation presented by the above question.

After we got married, I decided that we should live a debt free life and I talked to Mr. Sam about my ideas here and there. I didn't force it on him all at once. I tried to get him to read the Total Money Makeover, but he is not much of a reader and only read a couple of chapters. He was all for paying off all our non-mortgage debt, but he thought I was crazy and he couldn't see how it was possible. Mr. Sam wasn't really on board until I presented him with a written plan that demonstrated that it was possible to pay off our debt in a year (a very focused, somewhat painful year). Thereafter, I went about setting up systems that enabled us to reach our goal (which I will write about soon, Steps 3 and 4).

So, you know your husband, how does he learn and process information, can you present a fully fleshed out plan to him in a form that will get him excited.

Regarding the eating out and cabs, we went with an allowance system (Steps 3 and 4) which each gave us a set amount of money to spend on discretionary items. Perhaps you could consider such a system and he would still have a certain amount to spend on these convenience items.

I don't think the fact that he earns more means that he gets to spend more. If you are married the money that comes into the household, in most States, is a marital asset. I'm sure there are folks that will disagree with me on this point but that is my opinion.

May Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $11,132 (34%) (goal is $33,000)
(2) - $7500 (75%) (goal is $10,000)
(3) - $500 (42%) (goal is $1200)
(4) - $1350 (39%)($7711 in our baby fund, goal is $10,000)
(5) - $-1000 (-14%)($25,639 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $22,482 (39%)

With the extra push the last two weeks to add to Mr. Sam's IRA, we have gotten our overall numbers back on track. At present, we are now just slightly below our target for today's date.

We may look to add some more stock to Mr. Sam's IRA today or early next week depending on the market and if we can pull together some more funds.

Buy Low

We bought about $2500 in stocks today, within Mr. Sam's 2010 IRA, since the market is so down.

Net Worth Obession Question Part 1

Michele said...

i read the preview article and was wondering - how do you calculate your net worth if you are underwater in your mortgage? do you put your house as an asset at what you paid or what it is worth on zillow.com? i am not worried about losing it (yet) since i am employed and have an emergency fund.

I guess it depends on whether you think the zillow.com value is accurate or not. You can track your net worth however you like and you know the back up for your numbers. As I explained to Ron Lieber, much of our net worth is illusory. We won't know the value of our real estate or stock investments until we sell them.

So this is what we do. The net worth numbers for our primary home and real estate investments are the values assigned by the local property appraiser.

Anonymous said...

I find your $100/month extra mortgage payment hard to understand. With a large mortgage and significant dollars going to other categories, I would have expected the extra mortgage payment to be either zero (especially with your low interest rate) or hundreds each month. Can you share how you settled on an average of $100/month extra payment?

Yeah, I hear you. We would really like to pay off the mortgage on our primary home. But right now our goal is to prioritize our non real estate investments because we are over invested in real estate. So, we decided to add prepaying our mortgage to our 2010 goals, while the amount of $100 is somewhat symbolic it keeps this goal on our radar screen.

Thoughts on the NYT Net Worth Obession

So, now that the NYT article "Net Worth Obsession" article has come and gone, I'm going to answer some of the questions and comments that were posed by NYT readers that clicked over to my NetWorthIQ page and this here blog. But first, I wanted to take some time to mull over the comments to the NYT article which fall into about four different categories.

First category - people who track their net worth are confusing their self worth with the amount within their bank accounts.

Your teaser states, "We all wonder how much money other people really have."No, we do not ALL wonder about that. I could not care less. Further, I never ever confuse a person's monetary assets with their "worth."

Um, not really. My self worth is tied up with my relationships, my contributions to the community, my career efforts and accomplishments, how I treat and interact with people in my every day life, etc., etc. But career accomplishments and my education level DO impact my ability to earn money which impacts our net worth.

Second category - people who track their net worth have skewed priorities.

This is a spoof, right? Would it be cruel of me to suggest that a diagnosis of metastatic cancer or some similar tragedy might be a useful corrective to what I regard as a somewhat misplaced set of priorities in the lives of the featured individuals?

Ouch, please don't wish cancer on me folks. I admit to being focused on our finances and admit that I spend more time thinking, tracking, researching, planning, etc. than most of my peers. And one of my top priorities is to have enough money in the bank to (1) cover an emergency, (2) pay for goods and experiences without resorting to debt, (3) provide for our retirement. But the idea that "money" is my top priority is wrong, my top priority is to live a good, fulfilling life with the man I love.

Third category - people who track their net worth in a public forum are showing off.

Tacky. Poor taste.

The main reason I don't post my net worth or blog under my full name is because I do have concerns that people might think that I am bragging about our net worth numbers or passing judgment on others. I've been tracking my individual net worth since shortly after I graduated from college and I posted it on NetWorthIQ mostly for my self. I compare myself to myself, or ourselves to ourselves (our net worth is now a joint number) and my goal is to see progress.

Fourth and final - tracking one's net worth is a valuable tool.

People who don't track their personal finances closely make the mistake of thinking that those who do, are obsessed with money. I'm not obsessed with money, but over the years I've developed ways of tracking my income, spending, debts, and assets, which allow me to know where I am financially, with very little effort on a month-to-month basis. (about 2 hours per month on finances and paying bills, etc) For me, it's the freedom of knowing how much I can spend extra for a vacation, or a gift to a family member. It's the freedom of knowing how much I will need to adjust my budget in order to save for the downpayment on a new car.

Ding, ding, ding. For me, tracking our personal finance habits and keeping track of our net worth helps me stay engaged and therefore I think about the purchases, where our money is going and how we can try to save more.

Net Worth Obession

The New York Times Magazine Preview on net worth obsession has been posted/published. My 5 seconds of fame appears on page 2.

I enjoyed reading the preview article and learning how others use the Net Worth IQ site to motivate, shame, cajole themselves towards better financial health. As always, the comments from the public are as interesting as the article. My comment, with typos and all, is below.

As someone who talked to Ron but declined to give my name, I find tracking my net worth a valuable tool. I don't generally compare myself (ourself since my net worth iq number is joint) to others, but instead compare myself to myself. On-line tracking tools are, for me, an outgrowth of Quicken which I also use. I find that tracking, lots of tracking, requires me to stay engaged with my finances, think about each dollar I spend and work to save more.In our 30s we have retired all debt, we have no credit card debt, no student loan debt, no car debt, etc., except our mortgage and the mortgages on our investment properties (which are rented and paying for themselves). We save a good chunk of money each month, both in our retirement accounts and in other savings vehicles. And we still live a good life that includes eating out, vacations, and shoes for me.

For me tracking and measuring my assets and debts on a monthly basis keeps me on track. Having to review a balance sheet each month, like a business person does or should, focuses on the fact that are household is a small business and we have to take care of ourselves.

I'm looking forward to reading the full magazine article this weekend.

May 7th Numbers.

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $8274 (25%) (goal is $33,000)
(2) - $5000 (50%) (goal is $10,000)
(3) - $500 (42%) (goal is $1200)
(4) - $1200 (34%)($7561 in our baby fund, goal is $10,000)
(5) - $-1200 (-17%)($25,439 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $16,744 (29%)

Completed funding my 2010 IRA and bought some bargain stocks yesterday. Otherwise, we are behind on our goals but trying to catch up.

Step # 1 - Face the Music

I have been keeping a calender, where any day I spend money I put it there. I add it up daily then weekly then the month.This way I can see what really needs/can be cut out. I already bring lunch, don't eat out or have cable, drink soda or do much entertainment. I cut gift cost to $15 from $25, so keep the ideas coming. I would love to attack like you have :-)

This comment from a recent post got me thinking that I ought to run through the steps, in detail, we took to pay off our unsecured debt. As regular readers know, Mr. Sam and I paid off all our unsecured debt, which totaled $55,500, in twelve and a half months back in 2007.

So here goes. Step # 1 on this journey to freedom from debt was to "face the music" and figure out how much debt we had. This sounds like an easy step, but it probably was the second most difficult step in our debt plan.

Background, Mr. Sam and I were married in late 2006. While we were living together and our finances were some what intermingled he was responsible for his debt and I was responsible for mine. We had a joint account for shared expenses and we each contributed to our joint account based on how much we each earned. I contributed more to our joint expenses, because I earned more. I was responsible for paying all our joint expenses and my own expenses. Mr. Sam was on his own.

So when we decided to tackle our debt as a 2007 New Year's Resolution, in order to do so we had to gather up the actual paperwork and sit down and chart it out. As of January 1, 2007, we had six debts, I had one credit card debt, Mr. Sam had three credit card debts, one other debt, and one student loan. The student loan debt was about $27,000 and about half our total debt.