As the second post of the Dividend Dollars blog, I think it is a good idea to establish a baseline of where we are starting and what better way to evaluate how close one is to financial success than determining one’s net worth?
You may wonder “why not just watch and evaluate the portfolio”? We will be reviewing and evaluating the portofio regularly on this website, however, the answer to the question lies in our website’s tagline: “Finding Reliable Financial Freedom”. Having financial freedom means different things to different folks, but for me it means being able to live the lifestyle that I want to live without needing to worry about money because your money is working for you.
In order to have your money work for you, you need to do more than just invest it. You need to be responsible with it. What good is a stock portfolio that provides you with a regular cash flow when that cash flow is eaten up by bad debt and interest owed? Calculating your net worth is a great way of checking in on that difference between your assets and liabilities in order to understand how responsible you are being with your finances. The more responsible you are, the easier it will be to reach financial freedom because you’ll be reinvesting dividends, you’ll continue to save money and invest it in your portfolio, and you’ll prioritize paying down costly debts.
October 2021 Net Worth: $106,675.50
We are just over $100k! Coming out of college and the pandemic, I’ve truly been employed for only a little over a year. Within that year I made a pretty aggressive investment and purchased a house which had caused me to expect my liabilities to eat up my assets more than it did. This number has pleasantly surprised me and I am excited to put efforts towards growing it while also documenting those efforts on Dividend Dollars.
Now that we have a baseline set, we are ready to experiment with developing a portfolio and chasing financial freedom!
Let’s dive into how Net Worth is calculated. It really is a simple formula, it is all of one’s assets less all liabilities. The answer to that formula gives us a solid understanding of where we stand financially at this moment. Tracking your net worth regularly also helps you know if you are trending in the right direction. It does not, however, give any information into how you got to that number, but we will explore that pursuit in other articles throughout this website.
Below is my calculation broken out.
Assets: $427,437.78
This is the total value of all of my assets which includes my home, investment accounts, and a few other various assets.
Home: $408,600
In February of 2021, I purchased my first house at the age of 23. The house had appraised for $350,000 but through a lucky situation and some very clever negotiating help from my mom (thanks mom), I was able to buy the house with a sales price of $335,000. Zillow currently, estimates the house is worth $408,600 which is where I pulled my value from. That is a 16.7% appreciation in less than 8 months! Even if I were to not use the Zillow estimate (which is fairly accurate) and instead used the appraisal value from time of sale, my net worth would be $48,075.50
Cash: $5,707.63
This value is the sum of my savings and checking accounts. I use this cash for paying bills and making purchases. My goal with the cash value is to slowly but surely increase it to an amount that can cover all of my living expenses for 4-6 months so that if a disaster (say loss of a job or a medical issue) were to ever happen I would have ample money to pay for expenses while trying to get things back to normal.
Taxable Investment Accounts: $829.2 (+0.46%)
This value is the sum of two different investment accounts. It has a modest gain of 0.46%. These accounts are fairly new for the purposes of beginning Dividend Dollars.
The first account is my Robinhood account which is where I am housing the dividend portfolio that will be tracked and experimented with throughout this blog. I know that the trading community hates on Robinhood for their controversial part in the WallStreetBets situation, but I like to use it because it is the best and simplest platform for dividend trading. We won’t be buying and selling stocks that often and Robinhood’s interface makes it super easy to track your dividends and your portfolio’s capital gains. If you do not yet have a broker account set up, I recommend starting with Robinhood. Feel free to use my referral link and we will both get a free stock.
The second account is my Acorns account. I have used Acorns for years as a way to automate investing and it is a cheap and reliable way to do so. My Acorns account used to be pretty substantial and had nearly an 18% gain right before I withdrew the funds for study abroad expenses. I have recently reopened it and am auto-investing every week. It costs $3 a month (it is free to students), you can set up recurring investments and invest your spare change through auto-roundups in order to easily take advantage of smart dollar cost averaging on their selection of diversified portfolios. Acorns is a great way to start investing on top of using your broker for your personal portfolio. Again, feel free to use my referral link which gives us both a free $5 dollar investment into an Acorns portfolio of your choosing.
Retirement Accounts: $2,615.95 (+20.09%)
My retirement account is provided by my employer. I have contributions set up to both a Roth IRA and a traditional 401(k). I focused on selecting low cost funds and ETFs for these accounts in order to most efficiently appreciate my contributions.
Other Assets: $9,685
Under the other assets category, I will sum up the value of all items I own that could be readily sold. My vehicle, which is paid off, is my only other asset with value that hasn’t already been listed.
Liabilities: -$320,762.28
My liabilities consist of one large debt, which is my home mortgage.
Mortgage: -$320,762.28 @ 2.65%
I generally follow financial responsibility guidelines set by people like Dave Ramsey. These guidelines include paying off all debt, having an emergency fund, investing a percent of household income in retirement, saving for large future expenses, paying off your home early, etc. I stick to most of these rules, all except paying off the home early.
With mortgage rates as low as they are, I believe it is more beneficial to invest extra funds rather than put those extra funds towards paying off the house early. If I can earn a profit greater than 2.65% on my investments, then that money is worth more if it is invested rather than putting it towards the house in order to pay less interest on my mortgage.
This isn’t to say that I won’t ever put any extra funds towards my mortgage, I do plan on paying extra when situations like job raises and bonuses occur. However, for the most part I plan on making my regular mortgage payment.
Now take the total assets and subtract the total liabilities and that is how you get your net worth. $106k is where we lie for October 2021. This will give us a good baseline number in order to track the progress of our finances and our investments. I’m excited to move forward with investing ideas and to regularly revisit the net worth calculation to see the results!