Welcome to my very first quarterly update which details my net worth and cash flow as at the end of March 2017 as well as the goals I have set for myself for the next quarter.
If mine is the first personal finance blog you have come across you might be thinking this is kind of strange putting the info out there for the world to see.
However it is a fairly regular occurrence with bloggers to either track their net worth or report their monthly income.
I debated whether I should post this or not as I was not sure about how the information would be received.
Particularly here in Australia where ‘tall poppy syndrome’ can mean anyone who seems to be doing OK can be shot down in a hurry.
But my view is that if you have come to my site which is about becoming financial independent in order to retire early then you must be a little bit open minded
and willing to discuss what can be a taboo subject.
Why I decided to go public
The reason why I think so many other bloggers have felt comfortable sharing their net worth is that they want to show you that early retirement is an achievable goal and not just some pie in the sky idea that you can only dream about.
It also helps to highlight that the wealth that you see in movies or magazines is in reality not how most people that reach financial independence actually live.
Mr 1500 days provides an awesome article that details why bloggers share their net worth so openly and my fellow bloggers sum it up far better than I could.
So for me I decided to go public for a couple of reasons.
- To keep myself accountable.
- Help me to stay motivated and see my progress over time
- Know there is an end in sight to the daily grind of my day job
What is net worth anyway?
The simplest way to work out your net worth is to add up the value of your assets and then subtract the amount of your liabilities.
So examples of assets are things like how much any property or cars you own are worth, the size of your share/stock portfolio, how much savings you have in the bank and the value of your Superannuation (retirement savings).
Then your liabilities are those things that you owe so this can include mortgages, personal and car loans and credit cards.
The juicy details – my net worth figure
Total Assets $2,739,979
This is made up of 40% being our primary residence, 52% investment properties, 5.5% Superannuation (retirement savings), 0.9% shares/stock value, 0.77% cars and the remainder in cash on hand.
As you can see we are very heavily skewed towards property, and if you check out my About section you will see that property investing has been the area I gravitated towards.
We currently have four properties. Whilst we have done well with this approach, I would moving forward like to get a bit more balance within our portfolio.
Now some people choose to exclude their primary residence from their net worth calculation and the reasoning for this is that you have to live somewhere when you retire, so I do see there is a bit of logic to this.
However the reason we include it is that the place we live is also an investment property. It is dual income so we live upstairs and we rent out downstairs to tenants so it doesn’t make sense for us to exclude it altogether.
Total Liabilities $1,551,422
The Assets figure doesn’t quite look so attractive now does it? Whilst we have enjoyed some decent capital growth on our properties in order to grow the portfolio we did leverage ourselves quite a lot.
I can just imagine some of my fellow personal finance bloggers having heart palpitations at that debt figure. Don’t worry some days it freaks me out too!
This liability is made up just under 47% by our primary residence, 52.4% by our investment properties and less than 1% on a credit card.
We used to be really good and pay off the credit card in full each month and just use it to earn airline points so we could travel for free to visit family.
But ever since I have had two stints of maternity leave in the past three years it has been a bit of a revolving door and something that I have in my sights now to eliminate.
So that leads us to the all important number.
NET WORTH $1,188,557
When I first calculated it I think I re-checked my spreadsheet 10 times. We have reach the million mark! Well that snuck up on us didn’t it.
The property prices in Sydney have gone nuts recently so that is a lot to do with it. But we did set ourselves up early and lived on a very tight budget when we were first saving for a home. So we are just now reaping the rewards of our sacrifices made back then.
If we had that net worth and no liabilities it would be a pretty sweet position to be in and I could be joining the early retirees as I type this.
I know we have the option to up and sell everything, move to the countryside and purchase a cheaper place mortgage free and be pretty close to having enough money to sustain us without needing a corporate wage coming in.
But rather than cashing out we would like to instead pay down our mortgages with the goal to be debt free by 2025. We might in that time frame sell one of our cheaper places but it is the place that has little growth in it (We would sell it mainly because it an older property so is a risk for something major and costly to come up that costs more than the yearly rent we receive).
I know paying off $1.5 million in 8 years seems a little bit outrageous but when you read how Grant over at Millennial Money became a millionaire in five years by investing then paying off our mortgages in 8 years starts to sound just a little bit achievable.
The only way we are going to be able to pay off our loans in 8 years (instead of our remaining term of 25 years) is to make additional payments.
The way to do this is to ensure we have extra cash flow each month to put extra payments on our mortgage.
The low down on cash flow
The fundamentals of good money management is that you spend less than you earn, and this forms the basic premise behind cash flow.
Cash flow is ensuring that the inflow of money you have coming into your account is able to cover what is flowing out of your account.
The reason I chose to include cash flow in my quarterly update is because whilst the net worth figure above creates a pretty picture of where we sit at a high level, cash flow gives a better view of the day to day money management, and it is what I need to have more focus on.
This past quarter when we look at incoming money from my salary as well as rental income, and then take away all of our expenses we are left with a negative cash flow position of -$3850.
Woah!! Not good at all. At this rate we will put ourselves in a deeper hole of debt by $15,000 if we continue this trend for the rest of the year.
We used to be really diligent with our credit card and use it to gain points and then pay it off in full. Since having our first child three years ago, and me being the breadwinner so losing our higher income whilst I was on maternity leave, this has not been the case. So because we have the credit card to fall back on I had not noticed how far in a hole we were getting.
It has been a tricky transition for us as we went from a two income family to a one income family in October last year. Whilst we did the math to work out that it was better for my husband to be at home than for us to pay 5 days a week child care for two kids we obviously have not adjusted our spending to accommodate the drop in pay.
As I have started to track our expenses again, I have noticed that over the past few years we have allowed lifestyle inflation into our lives and are spending way too much on a few things. This exercise has helped me greatly to now set my goals for the next quarter.
Kick Starting Some Goals
My goals for the next quarter are as follows:
Bring cash flow back into positive territory
The main areas we are overspending is on food and entertainment. So the plan is to have a set budget for the week and buy everything in one big shop to avoid the mindless spending when ducking to the shop to buy one thing and come home with ten!
We also plan to limit takeaway to maximum one meal per week.
We have decided to allocate a weekly budget to entertainment and get the cash out of the bank rather than putting it on our credit card. So then once the money is gone we don’t have anymore until the next week.
A few of our property insurances are also due in April so rather than letting them renew as they have done the past couple of years I am making the time to shop around to make sure we have the best deal.
Write a blog at least two times a week
I want to ensure I get into the habit of putting out consistent content on the blog so have set this as an ongoing goal.
I have a good pipeline of ideas for articles so I feel OK in this respect. It is more just about ensuring I can find the time to get the writing done.
Exercise at least three times a week
When I was on maternity leave for most of last year I went to the gym five days a week and lost a lot of my baby weight.
Since I have gone back to work and also decided to start this blog I have found myself working a lot at night which has meant I have not been waking up in time to go and do an early morning class. Fitting in exercise after work when I have two small children just doesn’t work either.
I can tell the lack of exercise is affecting me as I feel less energised and also get more complacent about my food choices.
Now that a lot of the hard work in terms of getting the website live and preparing a lot of the freebies for my resources section is done, I plan to get back into a more reasonable routine.
How are you tracking?
So there you have it. All the juicy details to show that whilst a high net worth might look attractive, we actually struggle more now to manage our cash flow than when we were starting out on low wages and saving for our first home.
We have had our heads in the sand quite a lot since having our children and really have not been as smart with our money as we should be.
The quarterly goals we have re-introduced are a good way for us to try and stay on track.
Do you track your goals? I would love to hear what you have planned for the next few months. Or if you have met any net worth milestones recently?