It’s been nearly a year since I’ve updated my net worth here on the blog. I tracked it throughout 2015 except for a period at the end of year when everything was so crazy I couldn’t get online. Like everyone, the unit prices in my retirement accounts have dropped dramatically which has led me to drag my feet when it comes to investing outside of real estate. I’ll get there soon, but right now having funds in cash feels safe.
It’s not all bad news. After 5 years of back and forth with our insurance company we have finally reached a settlement on our damaged property. What that means for our net worth is that cash reserves have increased and total debt decreased. This is a temporary blip as we will eventually have to raise funds (with a mortgage) to reinstate our property, but for now we are retaining the tenants and the house as it is.
Overall total net worth is up even though our assets are less valuable. It was tempting to hang on to the 100k surplus but with the potential onset of GFC 2.0, reducing the mortgage on the property we live in (House 2) made sense.
Note: Net worth is a measure of assets vs debt – for us that means tracking the value of our investment properties, retirement accounts (both Kiwisaver in New Zealand and Superannuation in Australia) and long-term cash savings.
As mentioned in my last net worth post I don’t count the value of our car, our house contents, furniture, clothing or personal effects.
March 2016 Net Worth: $484, 366. Up $121,496.
House 1: This is the property we purchased that was damaged in the Christchurch earthquakes. After an entire day spent vomiting with anxiety I decided my mental health was more important than money and accepted the shitty offer presented by the insurance company. Basically, we got screwed. The settlement we accepted was far lower than estimated by our independent quantity surveyor. The straw that broke the camels back (me – I’m the camel) came when after agreeing a repair strategy, the insurance company discovered that we were under-insured by 7sqm. After deciding I could no longer deal with the bullshit we accepted a cash amount and will reinstate the house ourselves. With a professional builder of course. With the funds received we paid back the full mortgage owing and the property is now considered “as is where is”. The only value it holds is in the land, which is valued at 120k, thus the huge devaluation.
House 2: This is where we live. I’m quite sure it’s worth more than the 240k I’m estimating but I won’t be paying for a valuation until it comes time to borrow again.
House 3 & 4 are both just chugging along, mortgages slowly being paid down. I’m considering selling House 3 in the next few months as it’s just become vacant and hasn’t performed as well as I’d hoped.
Student loan: We have 0% student loans in New Zealand. There is very limited motivation to pay it off while funds can perform better elsewhere. I’ll probably have a student loan when I’m 70.
Cash savings: I know having 50k in cash is not ideal, so we’ve put it in the offset account against our 75k home loan.
Note: I haven’t added it in here yet as I’m still finalising paperwork (and taking my sweet time whilst the unit price keeps dropping) but in the next net worth update I’ll have a contribution to index funds. I’ve gone with the Total World Fund offered by Smartshares.
Why Does Net Worth Matter?
Net worth is the cream. The difference between what you OWN and what you OWE. Many investors who focus on shares and funds (either managed or passive) plan to retire using a Safe Withdrawal Rate (SWR) of 4% of their funds, so tracking the performance of those funds helps them to forecast their income and early retirement dates.
For real estate investors like us it’s not so important because eventually we will be able to live on the rental income derived from our properties – as soon as the loans are cleared. However, as our focus shifts away from property (we are heavily exposed and it’s a high-maintenance investment – expensive if you like to travel and can’t do the work yourself) and I start to learn more about shares and funds, tracking our net worth with the SWR in mind becomes more important.
So there you have it – we are almost half-millionaires. It’s exciting, but the priority for me is to build our income to the level that allows us to semi-retire. Our net worth will matter more as we get older, but for now the focus is solely on cashflow.
If reading about other people’s money doesn’t weird you out,
check out how other bloggers are doing at Rockstar Finance.