Saturday, May 5, 2007

net worth introduction

Similarly to many other bloggers and financial nerds out there, I track and plot my net worth on a regular basis. By 'net worth' I am referring to all of our assets minus all of our liabilities.

Items I do include:
All registered and non registered investments
All real estate, including principle residence
Automobiles
Loans including mortgage's
Cash on hand

Items I don't include:
Insurance
Assets with a value of less than $5,000

I update the values every second month on the 15th of the month. I have only been doing so since May of 2006.

I'll introduce these posts by recording the following item:

May, 2006 - Debt/Equity ratio (all debts divided by all assets) = 0.77

This is probably the number one value that I strive to move on a regular basis. The lower it goes the better, and the quicker I can move it down the better.

I will be back to this topic on or after May 15, 2007 to update my Debt/Equity for the annual period 2006-2007, and provide growth rates for all my assets and liabilities

5 comments:

the money diva said...

Very interesting. This is not a number that I have looked at before, and I just calculated mine at 30%.

I wonder if lower is always desirable? It's certainly safer, but if you have no debt then you have no leverage.

MD

moneygardener (AKA investor99) said...

I guess right now for me it's just a measure of how fast my assets are growing as I plan to continue to pay down debt at the exact same rate for at least the next 5 years. Assuming I take on no new debts and interest rates stay relatively low, then this is really just a measure of asset growth. I certainly won't get to zero anytime in the next 15 years.

Whether or not it is 'always' desirable is a matter of debate. Personally right now I'd like to get mine down below 0.5 and then re-evaluate my leverage situation.

Anonymous said...

Ouch, I thought I was bad at 0.43, and I'm 27.

Just one minor nit: what you described is the debt to asset ratio, not the debt to equity ratio.

Anonymous said...

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moneygardener (AKA investor99) said...

pitz...I presume.

Good point on the name of the metric. It really is Debt/Asset.

So you are from the 'lower is better camp' then.

It's all relative I guess. If I sold my house and rented, my ratio would be around 0.10.