As regular readers know I track our net worth by posting a summary of our current net worth breakdown along with some other personal financial statistics every second month. I'm due for my next update on July 15, 2008. I'm actually not the only personal finance blogger in Canada who reports regularly on net worth. Here are two in particular that I always read with great interest.
Million Dollar Journey reports his net worth each month. His net worth currently stands at $310,483. That is a gain of just over 2% from May, 2008 to June, 2008 due to some good performance by a micro cap stock in his RRSP, as well as some solid savings results despite a maternity leave situation. Year to date MDJ has been able to increase his family's net worth by just over 11%.
Tim at Canadian Dream: Free at 45 also track his net worth bi-monthly as I do. His net worth currently sits at $247,900. That is a 10% drop from February due to a reduction in his home's value due to local real estate market conditions. Year to date Tim has been able to increase his family's net worth by just over 15%.
My last look at our net worth was on May 15, where it stood at. This represents a 13.6% increase since the start of 2008.
6 comments:
Thanks for the mention MG. I'm glad that you enjoy the net worth updates. I'm also a big fan of reading net worth updates from other bloggers like yourself.
The canadian dream situation highlights the drawbacks of including one's home in net worth calculations. Sure, it is part of your wealth and everything, but valuing it is very difficult and leads you potentially to some unjustified conclusions about your progress, particularly during a period of robust real estate growth and market volatility, which we have witnessed these past few years. Hard to see that current values will persist in many markets. That warm fuzzy you've been getting for adding 50k a year in net worth through home appreciation may turn into a feeling of being on a reverse treadmill if growth goes flat or -gasp- negative for a while (which I think very very likely in most markets). Neither the warm fuzzy or the reverse treadmill were/are necessarily good indicators of progress towards building wealth.
Yikes! That's why I don't include our house in our net worth. Actually, I don't even include our rental properties though I likely should. I believe CD's net worth had increased dramatically due to increases in his home value over the past year or so before this decline.
Isn't it strange to see such volatility in housing when historically, long term, it's generally pretty slow & low growth?
In most of Canada, current conditions make including home value in net worth a little sketchy imo but I know this has been discussed ad nausea with plenty of disagreements!
Although I include my house in my net worth calculations, I decided not to use the market value. Instead, I use an average between the municipal evaluation and the rebuild cost set by my insurer.
I find that it offers a fairly stable value, that represents the effect of the house in my actual net worth, while still low-balling the value of the house.
Cheers,
Frog
If you guys are worried about including 'too much' of your houses in your net worth statements, maybe you should be valuing the home based on the [b]rental[/b] market, not the resale market.
For instance, most Canadian houses have gone up, what, 50% in the past few years, but rents have only gone up, what, 15% or so?
So you would simply value the house based on this formula:
value = (net rent) / (interest rate on a 25-year fixed mortgage)
Yes, that calculation will likely deliver a 'number' thats dramatically lower than what the 'market' theoretically will give you right now, but its a much more realistic long-term assessment of valuation than the pie-in-the-sky prices that a rapidly reducing number of transactions are taking place at in the marketplace.
Anon,
Yes there are drawbacks to having your house value in your net worth. That's why I also break out my investment net worth (which leaves out the house and mortgage). So that way I can also track my progress without the house.
In the end, there are thousands of way to skin the cat here. Pick what works for you.
Tim
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