I had long planned on doing an in-depth analysis and post about my family’s net worth.
The idea came to me when I took a three-day long course in Madison, Wisconsin last May about credit analysis. For about half of the three days, we pored over case studies with asset and liability statements for companies to determine if they were creditworthy and, if so, how much credit to extend and how to best structure the loan or loans.
The other half of the time, we watched about five hundred PowerPoint slides.
It got me thinking about how, like many people, I did not have a firm grasp of my own assets and liabilities. Not since we last applied for a mortgage refinance about seven years ago did we have to lay bare our lives as if they were just merely dollar tallies in various accounts. One of the things that we must do this year is refinance, but that is the subject matter for another post.
For this post’s purposes, I had to look at the good, the bad and the ugly to determine my own middle class family’s net worth in terms of dollars. Our family’s value is much higher than it is in a financial sense, yet that is the metric that I am most interested in today.
Also, the number that I arrived at tonight using the BankRate.com calculator, $471,000, is misleading due to a number of factors that I will explain.
The main reason that this is misleading in our family’s case is that $172,000 of that, or over 36% of our family’s net worth, is tied up in our children’s college accounts. As I have mentioned before, I set a goal over ten years ago to save up $100,000 for each of my two children for their college accounts, and have achieved that goal.
Barring a major dip in the markets, which I am by no means ruling out, I have $104,000 combined in our daughter’s two college accounts and another $68,500 in our son’s, who is midway through his sophomore year of college, with us already having laid out nearly forty grand to his school so far.
For the reason that I expect to spend down all of their college funds, and then some, I expect our accounts to be reduced by that $172,000 years from now.
Meanwhile, I continue Paying Ourselves First, meaning contributing to my and my wife’s Roth IRA accounts every month before paying our mountain of bills. So even though our family’s net worth takes a $2,500 hit every month for our son’s college, I continue investing about $1,000 per month between our daughter’s 529 account and our IRAs.
Also, with the markets hitting new highs on a daily basis, I fully realize that the funds that I invest in, like the Wellington fund, the Primecap fund, the Blue Chip Growth fund and others may not continue to rise or even sustain their current values.
A shock to the markets like the Doom and Gloom pundits predict could wipe out tens of thousands in my family’s net worth, along with billions of dollars from others.
The amount that I have in my own retirement funds ($41,800) and my wife’s ($16,000) needs to be seriously increased. Only since reading many self-improvement books over the past two years including many by financial gurus like Suze Orman, Jim Cramer, the Rich Dad, Thomas Stanley and David Bach did I make a conscious effort to always pay myself first.
I realize that to sound smarter I would tell you that my wife and I have $172,000 in our retirement accounts and $58,000 in our children’s college accounts, but I very much do not want our children to be saddled with massive amounts of high-interest student debt upon completing college.
My greatest gift to them besides unconditional love and always trying to do whatever I can to help and support them will be allowing them to obtain their undergraduate degrees debt free, the same as my own parents did for me, my sister and my brother. All three of us went on to obtain postgraduate degrees and had to finance that to various degrees. My brother borrowed his way through law school, but it has paid off for him in spades so we both consider it money well spent.
I should have a lot more than $10,000 in stocks, but I have taken it in the shorts over the past year-plus on my NUGT shares. I would have thought those shares would be worth $50,000 or more by now, but like they say, it is not a loss until you sell it for one.
Household items and jewelry are tricky to value. We do own a few items inherited from my mother-in-law that have some good value. One thing that we got from her is worth at least $5,000, but I do not want to write about it and we would have no interest in selling it. Our daughter has claimed it for herself and we hope that she someday owns a home worthy of displaying it. I am reluctant to purchase an insurance rider for the item because I do not fully trust all those with access to our files at the local State Farm office. The last thing that I want is for some clerk there to tell her junkie boyfriend about it.
My wife also inherited a valuable ring from her worth more than that, but I did not count that in our “jewelry” line item. I suppose that we could sell it if things were extremely desperate, but I think that the plan is to give it to one of our children, like the other valuable item we inherited.
Finally, valuing one’s home is not always the easiest thing to do. Some houses with lots of issues sell for around $220,000 or $230,000 in our humble neighborhood while those with remodeled kitchens and floors go for $250,000 to $270,000. Fairly low values considering that we live in the northwest suburbs of Chicago but, like I have previously written, we live in a neighborhood on the lower levels of the middle class. The contractors who fix the houses in the nice neighborhoods live near us. Clerks, office managers, cable installers, flooring guys and sales reps live in our neighborhood, not the executives and business owners who employ them.
I have all but given up selling our home and “moving up” any time soon, but for the time being, if you want to pay over $250,000 for my house, let me know and I will start packing our stuff.