One of my favourite indulgences each month is checking out the blogger net worths on Rockstar Finance. I love that people are being completely transparent with their money in the name of helping and motivating others.
Earlier this year I decided to start tracking our net worth while we are still travelling with a few conditions. Our travel funds are in a silo, and do not affect our net worth. I like to think of net worth as 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.
I don’t count the value of our car (I’m not even sure it’ll start after over a year in storage so it might be worth nothing) or our house contents, furniture, clothing or personal effects.
I worked very hard to be free of consumer debt so now I only have a student loan to my name. When I am in New Zealand that loan is interest-free, so there is very limited motivation to pay it off while funds can perform better elsewhere.
I don’t count credit card balances as we pay them off in full every month. If we are ever to carry a balance, I will add it in. Also as the Australian and New Zealand dollars hover around parity I have counted the AUD amounts at 1:1.
I wasn’t planning on publishing our net worth due to privacy issues. Most bloggers that do are anonymous. But for the sake of my readers I want to be completely transparent about my finances.
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 an excellent explanation of the safe withdrawal rate I recommend reading this post.
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.
Personally, I like tracking the reduction in our real estate debt each month. This is also the first time in my life I’ve paid any attention to my retirement funds (As we cannot access them until we are 60 at the earliest, I wasn’t ever bothered with them). Considering I’ve had a retirement account since I moved to Australia in 2003 that’s a pretty big deal. For 12 years I’ve just let it sit there, collecting compulsory employer contributions. I’m ashamed to say that I remember binning the statements I received in the post before I had opened them – criminal, I know. Not anymore, I now login to all of our retirement accounts every month to check how they are doing.
A snapshot of how we are doing: January-May 2015
Things to mention:
- The valuations on each of our rental properties are around a year old, however I keep a close eye on all the markets we are invested in and other than the possibility of some growth in Rental 1 & 2, I’m confident of the numbers. Until I pay around $200 in valuation fees I cannot be certain but in the interest of tracking, this will do.
- In January and February of this year all of our rental property mortgages were set on an interest-only payment schedule. In March, Rentals 3&4 finished their interest-only term and are now principal and interest mortgages, thus the balance will reduce each month. Rentals 1&2 still have a couple more years on the interest-only period.
- My husband and I have completely shared finances – with the exception of our own individual retirement accounts which are listed individually above.
- My student loan balance is an estimate. I think it might be a little lower but I haven’t seen a statement since we left New Zealand in 2014. I will update the balance when we return later this year.
- The jump in cash savings from March to April was due to a tax refund. Other than that I have only added $5 each month in order to qualify for the bonus interest rate.
- We have also focussed on making contributions to our Kiwisaver (that’s the naff name for the retirement scheme in New Zealand) accounts by 30 June. To qualify for the Member Tax Credit of $521 we have to contribute $1042 per annum.
- All figures are in New Zealand Dollars. At today’s exchange rate our net worth would be $260,996USD, $341,171AUD and €237,437EUR.
I will be updating our net worth throughout the year. I like the accountability. That said, it’s not the focus of my blog so it won’t be a regular monthly occurrence. In upcoming posts I’ll be sharing some of the way we intend to pay for our travel lifestyle. I’ll also be writing about the many sacrifices we plan to make in order to get this dream off the ground. Big things are happening, I’m so excited to share them with you.
If reading about other people’s money doesn’t weird you out,
check out how other bloggers are doing at Rockstar Finance.