It’s tough to talk about money.
Related: Net Worth Update #1 - April 2018
In our society, our NET worth is deeply connected to our SELF worth. The more money you make the more successful, the smarter, the BETTER you are.
It can be scary, embarrassing, or (and?) anxiety-inducing (✋🏽) to talk about money.
So we take the path of least resistance and we don’t talk about it.
This is a shame.
We’re making tons of mistakes when it comes to our personal finances.
Take a look at these statistics:
- The average U.S. college graduate begins his or her post-college days with more than $2,000 in credit card debt and the median credit card debt in the U.S. is $3,000. [Wikipedia]
- The class of 2015 graduated with $35,051 in student debt on average. [Market Watch]
- The savings rate is only 3.4%. This means that for every $1000 we make, we spend $966 and save only $34. This is BONKERS.
For this to change we need to talk about money.
We’re Not Lone Wolves — We Need Help 🐺
Money is hard.
There’s a lot to think about:
- How should I invest my money to maximize my earnings?
- Should I contribute to my 401(k)?
- Am I saving enough?
As much as we’d like to, we can’t take the head-in-the-sand approach when it comes to our personal finances.
Our financial “health” is a crucial component of our happiness and well-being.
The answers to these questions are out there. We just have to know where to look.
They’ve helped ease my financial anxieties and simplified the way I think about money.
I’m glad they ignored the taboo and talked about money.
What I Learned From Mr. Money Mustache and JL Collins 👨🏼🏫
You Don’t Need To Work Until You’re 65 👴🏼
At some point during college, I came across Mr. Money Mustache.
Peter Adeney, aka Mr. Money Mustache, is famous for retiring at the age of 30 and blogging about it.
He worked as a software engineer and was able to retire in 10 years through a combination of a high savings rate and investing.
This was mind-blowing to me at the time.
I thought that everyone worked until they were 65 unless they got really lucky or had rich parents.
Mr. Money Mustache completely changed how I thought about money and work.
Investing Can Be Simple 📈
Last year I graduated from college and started my first full-time job.
I had about $2,000 saved up from working during college and $30,000 worth of student loans to pay off.
Having this debt hanging over me stressed me out. All of my paychecks for the first few months went towards paying this off.
Once I was debt-free, I had “extra” money each month.
How could I invest this money to “safely” maximize my earnings?
Enter JL Collins’ Stock Series.
JL Collins retired at a more “normal” age than Mr. Money Mustache and started his blog as a way to pass on his financial/life knowledge on to his daughter.
His Stock Series is a collection of 22 posts on everything from investing in index funds, to 401(k)’s, to the mentality one needs to have when investing.
Thinking about investing and planning for eventual retirement stressed me out.
JL’s Stock Series made me realize that investing was simple.
Calculating My Net Worth
Last December, a few months after starting at my first post-college job, I started tracking my net worth.
Net Worth = Assets (savings, investments, property, etc) — Liabilities (debt, mortgage, etc)
There’s some discretion when it comes to deciding what to count as an asset or a liability.
For example, you could choose to include the current value of your car as an asset or not include it at all.
I calculate my net worth as:
Current value of: savings account + checking account + 401(k) + investments (all in VTSAX)
Since I paid off my student loans, I don’t currently have any debt.
My monthly expenses (rent, food, etc.) come out of my savings account so they’re already accounted for.
How I Track My Net Worth
Once a month I input the current value of my savings account, checking account, 401(k), and investments into my handy-dandy “Net Worth” spreadsheet. Here’s the template I use (link goes to Google Sheets) — my fantastic net worth spreadsheet.
Why I Track My Net Worth
Two simple reasons:
1. What gets measured, gets managed.
I don’t enjoy thinking about money. It makes me anxious.
My goal is to one day be financially independent and not have to worry about money. In order to do this, I need to always know where I stand.
If you don’t know where you are going, any road will get you there. –– Lewis Carroll
2. It’s fun
I treat this like a game.
It’s like when I played Lemonade Tycoon as a kid and became the world’s greatest lemonade entrepreneur.
I want to reach 1 million dollars!
The road to $1 million 💸
Since I started tracking my net worth in December, I’ve gone from $19,054.64 in December 2017 to $42,756.30 in April 2018.
Related: Net Worth Update #2 - May 2018
My approach is simple:
- Save as much as I can
- Max out my 401(k) contributions
- Invest in VTSAX
- Add money to my savings and checking accounts to cover my monthly expenses and to build a “rainy-day” fund
Why I’m Sharing My Net Worth Online
The topics we don’t or can’t talk about are usually the ones we need to talk about the most.
Now that I’m in the “real world”, I’ve struggled with thinking about my personal finances and figuring out how to navigate these waters.
I know I’m not the only one.
With my finances in order, I have one less thing to stress about, which makes me happy 😃.
My hope is that by sharing my net worth and how I’m thinking about money, I can provide some personal finance relief/food for thought, à la Mr. Money Mustache or JL Collins.
You can’t get to where you want to go if you don’t know where you are.
Finally, I just want to mention J. Money over at BudgetsAreSexy who has been sharing his net worth for the past 10 (!) years and was the inspiration for this post.