Have you ever woken up and started your day, just to realize it was a dream and you’re still lying in bed?
Well, I wrote this 1Q 2015 Goal Update back on May 5th (okay, yes, that’s still later than I wanted it to be, blah, blah, blah).
But I never published it. For some reason, I keep thinking that I have. And then I realize that I haven’t, so I try to finish it and publish it until other pressing matters take over. (Like trying to bathe on a regular basis, and watching reruns of Big Bang Theory.)
I’ve finally wrapped it up, and it’s almost embarrassing that I’m posting it in JUNE. But like I do with many things that don’t go as planned, I perform an “end of the world” check.
Me: Is it the end of the world?
Ok then, moving on. It’s time to figure out if we met this quarter’s savings benchmark.
[Lengthy-but-Likely-Unimportant-Side-Note: Up until now, we’ve always measured our goal progress based on our investment balance. That’s been adequate up to this point, however, our method of measurement is changing. Now that some of our cash has been invested in the purchase of the laundromat, we want to be sure that money we invested still “counts” towards our savings goal. (It’s still technically invested, just not in the stock market.)]
So…all that to tell you that we’re now measuring our progress using total net worth instead of just the balance of our investment accounts.
[Update: I was kindly asked by reader “Ali” for more detail on how we calculate our progress now compared to how we calculated it before. So I’ve added some more details to this section. If this kind of detail doesn’t float your boat, then just move down past the dotted line below and start reading again. Cheers.]
Calculating net worth can be a little different from one guy to the next, but at it’s core, you take the total value of your assets and subtract your total liabilities.
Net Worth = Total Assets – Total Liabilities
For example, to get your total assets, you would add together the balances of your bank accounts, investments, home values, auto values, business values. Next, you find the total amount of your liabilities; home mortgages, auto loans, student loans, credit card debt, business loans and any other loans or debts. Subtract your total liabilities from your total assets and you have your Net Worth.
We used to only track our investment balances, but now that we’re using Net Worth, this is how our old and new methods of calculating our progress compare:
Net worth calculations include ownership in a business, so we’re still getting “credit” for the money we invested in the coin laundry as part of our overall invested balance. Yay.
But in order to migrate from investment-balance-based benchmarks to net-worth-based benchmarks, I had to figure out the difference between our actual investments balance and our net worth as of Dec 31, 2014. So I went to Personal Capital, and determined that on Dec 31, 2014, our investments balance was $181, 765 and our Net Worth at that time was $318,683.
This tells me that our Net Worth figure was higher than our investment balance by $136,918. So, I took our investment benchmarks, and adjusted them upwards by $136,918 to get our new Net Worth benchmarks. It’s not sophisticated by any means, but I wanted to make an effort to level the playing field now that we’re using Net Worth to track our progress.
Below is our new benchmark grid. You can see that I’ve adjusted all of the future investment goals upwards so that they reflect the new, higher net worth goals (If you want details on how I derived the new net worth benchmarks, scroll up to the section between the dotted lines).
Originally we would have been shooting for a total investment balance of $267,300 in 2015, but now that we use Net Worth to gauge our progress, we need to reach $404,218.
Ok, enough side bars. Back to the discussion at hand.
Technically we’re in June, but for the sake of this post, we’re pretending that it’s the first week of April, just after the close of the 1st Quarter. So let’s rewind the tape, and see where we ended up.
With $404,218 our goal for the end of the year, our 1st Quarter goal for 2015 is $340,067. When I looked at our net worth on Personal Capital as of April 1st, we were at $357,873.
So…we did it! We met our quarterly net worth benchmark!
With the value of our home going up, the value of the laundromat increasing, our consistent saving and decent returns on our investments, we met our goal. In fact, we surpassed it by $17,800. That feels A-M-A-Z-I-N-G.
We’ve now set our sights on the next quarterly goal (which being that we’re in the month of June, we’re almost there, sigh).
By the end of 2nd Quarter, we need to have a net worth of $361,451.
And I’ll just say what we’re all thinking. Yes, my other goal is to post about it before September. 😉
Wish me luck.