You may know the value of a dollar but what about the value of all the dollars in your accounts and assets? Here’s where we talk about how and why to track your net worth.
This is the third day in our 31-Day Money Challenge. Over 31 days we’ll publish 31 podcasts, each designed to help you move closer to financial freedom. Previously, we looked at how to set financial goals you’ll actually achieve. In this podcast, we discuss the importance of a net worth statement, how to prepare one, and how to use it to track your progress toward financial freedom.
Sponsors: The 31-Day Money Podcast is sponsored by Betterment and Personal Capital.
About Your Net Worth
Do you know exactly where you stand financially? I don’t just mean how much money you have in your checking account or whether you’re up-to-date on your bills, either. I am talking about the status of your overall finances, as measured by your net worth.
Perhaps you’ve never tracked your net worth before, and wouldn’t even know how or where to start. You might not even see the value in doing so. That’s why today, we are going to spend some time talking about how and why you definitely want to track your net worth… and how it can completely transform your progress toward financial freedom.
Your Worth Isn’t Your Income
Here’s one of the most important things you need to remember as you work toward some of your biggest goals: financial freedom is not about how much you make, it’s about how much you keep.
Many of you may have never really thought about finances in that way before, but that truth has the ability to completely transform how you approach personal finance for the rest of your life. After all, it is the same reason that we hear about school janitors retiring with millions, or star athletes going bankrupt.
At the end of the day, your paycheck isn’t the biggest factor: how you manage that money is.
In fact, building lasting wealth can be summarized in just two simple steps:
- Spend less than you make, and
- Invest the difference wisely.
This is the formula for wealth regardless of whether you make $50,000 a year or $1,000,000.
Seriously, It’s That Simple
There are many Americans who earn a modest income, yet are able to achieve financial freedom. These folks are the unsung heroes of money management. They don’t often make the front page of the newspaper (except maybe this guy); instead, like my grandmother, they are nurses in small towns in Ohio, living in a home that is paid off and building a comfortable retirement nest egg.
How? By (1) spending less than they made, and (2) wisely investing the difference.
Likewise, there are countless stories of professional athletes, lottery winners, and movie stars who made millions, but wound up dead broke. Why? Because they failed to (1) spend less than they made, and (2) invest the difference wisely. Ed McMahon. MC Hammer. Vince Young (former NFL Quarterback). Sharon Tirabassi ($10 million lottery winner).
So, how do you go about using this lesson to your advantage? And more importantly, where does your net worth come into play?
All About Net Worth
Your net worth is a simple formula: it’s the sum of your assets minus the sum of your debts. This gives you a much more comprehensive picture of where you stand financially, versus simply looking at savings and retirement accounts, or credit card balances (though all of those are still important).
As you’ll notice, the net worth formula isn’t impacted whatsoever by your annual income. Your net worth doesn’t depend on whether you will make seven-figures this year or five; instead, it will simply account for how you use the money that you make.
Assets and Debts
So, what should you include in either side of your net worth calculations? Deciding which numbers to punch in–and which ones “don’t count”–can be a bit tricky.
On the assets side, you’ll want to be sure to account for your:
- Checking account balance
- Personal savings
- Retirement savings
- Equity in a home
- Other real estate equity
You might also have other, less-common assets that you would want to include, such as a pricey art collection, a stash of gold bullion, or high-dollar jewelry. Just keep in mind that valuing these things for the purpose of tracking your net worth can be a bit tricky.
In the debt column, you should include things like your:
- Credit card balances (yes, even if you plan to pay it off in full)
- Outstanding mortgage balance(s)
- Student loan debt
- Personal loan debt
- Auto loan balance
Essentially, if you owe it, it goes in the debt column. If you own it, it might go in the asset column.
You’ll notice that I didn’t include your car value in the asset section. That’s because vehicles depreciate rapidly and your car isn’t likely to be an asset you could readily (or effectively) pull from if needed. However, if you feel that your car’s equity is important to your net worth, feel free to include it.
Net Worth and Your Monthly Budget
I’m sure you’ve noticed that your finances change each month. Some months, you’ll need to pay insurance premiums while others, you’ll get a tax refund. Some months will see you buying Christmas presents for your whole family while you’ll make some extra cash from your side gig in others.
If you want to know where you stand in the big picture, your budget isn’t all that helpful. Instead, you’ll want to track your net worth.
Yes, a budget is still important, especially if you have a tendency to lose track of spending or even overspend. And if you’re regularly overspending, you will inevitably impact your net worth. However, your net worth trend line says a lot more about your progress than your envelope system ever will.
How Your Goals Impact Net Worth
At the end of the day, you want to have a nice, large net worth number staring back at you. However, it’s important to realize that for many of us–especially the younger crowd–this number might actually be negative for quite some time, thanks to certain financial goals.
This isn’t always a bad thing. For instance, paying for your education will likely result in higher earnings over the course of your lifetime… after all, that’s why it’s called investing in your future. It can sting in the beginning, though, as you focus on tuition payments instead of savings, or even go into debt with student loans.
When you take out a mortgage, your net worth will take a nosedive. Over time, though, you will build equity in your home and it will become an asset.
Some financial goals are less beneficial to our net worth than others, however.
Focusing a large percentage of your income on savings is a great thing, if you can afford it. Focusing a large percentage of your income on a too-large home? Not so much. If your goal is to drive around in a brand new car every two years, that’s your prerogative; driving a used vehicle so you can pay off student loan debt early will grow your net worth faster, though.
Take a look at your immediate and long-term goals; do your monthly spending habits help you to reach them? And more importantly, how do your goals impact your net worth each month?
Net Worth Statements
One of the easiest ways to keep track of your financial progress is through net worth statements. There are many templates available online that you can utilize or, if you’re handy with Excel, you can create your own.
It can be as simple or advanced as you’d like. You’ll just want to be sure that you include each of your assets and each of your liabilities (debts). You’ll also want to track the change in your net worth from month to month, either by numbers or a good old-fashioned graph.
When to Update
Net worth statements should ideally be updated monthly. Any longer than that, and you might miss out on accurately tracking your progress, or seeing how small changes impact the overall picture. Any sooner than that, and you’ll probably drive yourself crazy.
I know someone who updates his net worth spreadsheet weekly… and I regularly let him know that he’s adding unnecessary stress to his life. The changes that occur from one week to the next have a tendency to ebb and flow. By waiting a month before crunching numbers, you ensure that small impacts (like the electric bill coming out) don’t cause your net worth to continuously bounce around.
Plus, things like mortgage and auto loan statements come out once a month, so it makes sense to just wait.
There are some people who only update their net worth statement once or twice a year. While this can work–and is better than not tracking it at all–it does make it difficult to know where you stand throughout the year. If you have specific goals in mind, it’s important to see if you’re set to meet them or if you need to make changes to your financial approach.
A monthly update is ideal; however, try to at least punch in new numbers once a quarter, to keep yourself up-to-speed and on track.
Those Who Build Wealth vs Those Who Don’t
Many of us think that if we could just get a better job, win the lottery, or become the surprise beneficiary of some late uncle’s estate, we would meet our financial goals. However, this is rarely the case.
Sure, a larger income can help, especially if you’re living paycheck-to-paycheck just paying basic expenses. For most people, though, the key to building wealth lies not in how much one makes, but in how much they keep.
This means living below your means consistently. Save first, spend second, and eliminate wasteful expenses from your life. If you’re having trouble building savings and/or reducing liabilities, see where you could “trim the fat” in your financial life. That might mean downsizing your home, switching to a one-car family, reducing your monthly grocery bill, or all of the above.
Related: 92 Painless Ways to Save Money
Building wealth is possible for everyone, regardless of income. You can file for bankruptcy after making $30 million a year, or you can be a retired janitor with seven figures in the bank. And if you want to know which you’re on track to become, knowing (and tracking) your net worth is paramount.
And that brings us to this podcast:
- What is a net worth statement and how do you prepare one
- Why you should not include your cars, furniture or other personal possessions in your net worth statement
- How to use your net worth statement to track your financial progress
- How most of the important financial goals (getting out of debt, saving for emergencies, saving for retirement) affect your net worth
- The key relationship between your net worth and your monthly budget
- How and why assets generate income
- How and why debts generate expenses
- The difference between those who build wealth and those who do not
Resources and Links
- Personal Capital: An excellent and easy way to track your net worth
- A Dead Simple Way to Track Your Net Worth
- An 8-Step Financial Checkup
Why We Purchased CrappyPasta.com
I am excited to announce that we purchased CrappyPasta.com
If you are a Horror fan, you will likely be familiar with CrappyPasta; it’s the sister site to the widely popular CreepPasta horror-themed short story website.
Likewise, if you are a CrappyPasta fan, you probably wondering; what happened to the site and what’s “Your Money Geek?”
Meet Crappy Pasta
CrappyPasta was the sister site to the popular horror website, CreepyPasta. Stories that did not quite meet CreepyPasta’s editorial guidelines were often given a home on CrappyPasta.
Some of the stories just needed a little TLC, some were bad, some were soooo bad they were entertaining, and others were pretty much like WTH.
What I loved about the site is it was an excellent opportunity for writers to take their first step into writing. Additionaly, the site offered some valuable feedback for authors to improve their work.
Also, the site contained enough neat ideas amongst the train wrecks it made shorting though all the posts fun. It’s kinda like digging through the 5 dollar movie bin at Walmart. 😉
The Potential of CrappyPasta
The CrappyPasta website has been dormant since 2017, it was not publishing new stories, and the site needed some love. Most of the posts didn’t have images, there were broken links galore, and most of the posts were (are) in need of significant formatting and spell checking.
I enjoy a silly story as much as the next guy, but walls of text make it hard to appreciate even bad posts.
However, the site had over 4k posts and nearly 35k comments, so clearly, people enjoyed the website, and it was worth saving. So that’s where Brian and I stepped in and decided to acquire the site.
Not much is known about Brian, we met on social media a year or so ago and bonded over our shared interest of Z Nation and sci-fi. All I know is he is not allowed back in Chicago because of the Walker Stalker Con incident and that he will be the head geek in charge of running the Geek Short Stories side of the website.
Why We Moved the Content to YMG
We could have kept all the content on the existing site; however, we felt moving the posts made the most sense for a few reasons.
- Running one site is easier than maintaining two
- We felt that the CrappyPasta and Your Money Geek (YMG) audience shared similar interests, i.e., video games, sci-fi, horror, movies, etc.
What will Change Post-Merger?
Short answer; not much.
However, we are implementing a few changes.
- We have rebranded CrappyPasta to Geek Short Stories.
- The quality of the stories will improve. We are committed to maintaining the charm of user-generated stories; however, posts will be edited for grammar and formatting.
- We have implemented sticker guidelines to publish submissions.
What Can Crappy Pasta Fans Expect?
We are committed to archiving most of the CrappyPasta website and will spend the next several months fixing up and improving the nearly 4k posts YMG has inherited from CrappyPasta.
- Readers can still comment and offer suggestions on posts
- Authors can solicit advice and feedback from readers.
Additionally, I hope that CrappyPasta readers will check out or geek posts and even some of our killer personal finance content. However, if you are just interested in short stories, you will find all your favorite CrappyPastas under the Geek Short Stories category tab.
If you would like to submit your own Geek Short Story, you may review our guidelines here. We are committed to bringing you the best in geek culture and personal finance. If you have a question or suggestion, leave us a comment or content us on our handy contact form.
TaxHawk 2020 Review – Excellent Bargain Tax Software
For the past several years, TaxHawk and it’s partner site, FreeTaxUSA, serve up almost identical services at identical prices.
However this year, TaxHawk is working to differentiate itself by offering an extra tier of services to the TaxHawk site. They even created a new logo!
The new “Deluxe Plus” tier is designed for people willing to pay for Live Chat and Phone Support.
Should you use the new Deluxe Plus tier or any of TaxHawk’s other offerings this year? See how TaxHawk ranks on our list of the best tax software.
We explain the ins and outs of TaxHawk’s tax filing software in 2020.
- Easy navigation and inputs
- New Deluxe Plus tier with more support options
- Great pricing for the options offered
Starts at $0
$12.95 per State
TaxHawk – Is It Really Free?
TaxHawk offers free Federal Tax filing for all filers. That includes anyone from side hustlers, to people with student loan interest deductions, individuals with HSAs, and even self-employed people.
But TaxHawk isn’t 100% free. If you have to file a state return, you’ll pay $12.95 per state. It is worth noting that TaxHawk has a built-in calculator to help you appropriately pay taxes in multiple states (if that’s necessary), but you’ll have to pay extra for each additional state.
TaxHawk Pricing And Plans
TaxHawk has three pricing tiers. In all three tiers, the price for state filing is $12.95 per state. Read the notes below for more information on how these pricing tiers compare to FreeTaxUSA.
All Tax Situations
* TaxHawk and FreeTaxUSA are identical on the free level.
** FreeTaxUSA Deluxe costs $6.99 vs. TaxHawk’s $5.99. However, FreeTaxUSA comes with LiveChat support at the Deluxe Level.
*** TaxHawk comes with Phone support and FreeTaxUSA does not.
Is TaxHawk Secure?
TaxHawk gives users multi-factor authentication. You can decide between email and text as your second-factor of authentication. Generally, text messaging is a more secure second-factor of authentication.
We strongly recommend adding two-factor authentication as we previously discussed in ways to prevent identity theft.
Aside from TaxHawk’s different pricing structure, the difference between it and FreeTaxUSA are negligible.
TaxHawk’s navigation is a hybrid between guided and self-guided navigation. Unlike some of the more robust services (for example TurboTax, H&R Block, or TaxSlayer), TaxHawk doesn’t ask detailed questions about your income.
But, once you “enter” an income section it will ask helpful questions to guide you to the appropriate part of the software. One thing that I appreciated about TaxHawk’s navigation was the “help bubbles” sprinkled throughout the software. The help bubbles helped to define tax jargon. The bubbles also gave details on “what’s allowed” compared to what isn’t allowed.
On top of the help bubbles, TaxHawk has a “Where do I enter” link on the right hand side of software. This robust list gives links and information about where to enter every form and topic I could think of.
TaxHawk’s best navigation feature is its “Summary”. The summary section gives details on the income and deductions that you claimed. The details make it easy for you to check your actual entries against your “gut” or what you think you earned this year. This should make it easy for you to see if you’ve accidentally missed any critical information or “fat-fingered” anything you’re entering.
TaxHawk Ease Of Use
Overall, TaxHawk is fairly easy to use. But it does have some downfalls, especially for filers who don’t have experience filing taxes.
TaxHawk doesn’t allow any imports, which means there is a high potential for errors. Additionally, the navigation isn’t as robust as some top of the line products. That means that users might get lost if they don’t understand how to file taxes.
TaxHawk Knowledge Articles
TaxHawk serves up relevant knowledge articles in a “Top Issues” and “Help with this Page” links on the right hand side of the screen. Users can also search TaxHawk’s knowledge base using a search bar. The articles themselves tended to be an appropriate length, and most included hyperlinks to relevant sections. Many of the articles give details on what constitutes a business or deductible expense compared to a personal expense.
To get priority email support, unlimited amended returns, and audit assistance, you need to upgrade to the Deluxe version of the software. The cost is $5.99. To get phone and live chat support, you have to upgrade to the DeluxePlus version of the software which costs $10.99.
It’s important to note that TaxHawk doesn’t offer support from a tax filing professional. You have to be confident in your filing to use the software.
Who Should Use TaxHawk 2019-2020?
TaxHawk is an excellent bargain choice for 2020. While the software isn’t free, the high quality combined with the low price make it a worthy consideration. The interface improvements have really made it user-friendly this year.
As far as upgrades go, the Deluxe tier seems like a useful addition for just $5.99. The Deluxe Plus pricing tier may be a good choice for users who are likely to need last minute filing help, but otherwise users should skip it.
Overall, TaxHawk offers a tax product rivals the best tax software, but it offers much lower prices if you’re comfortable without much navigation.
The post TaxHawk 2020 Review – Excellent Bargain Tax Software appeared first on The College Investor.
Equity Adjustment with Raise?
Hi all – throwaway since information will get personal. Sorry for length.
31(M) Based out of Philadelphia, PA. Construction Superintendent
TLDR: With same construction company for nearly 7 years, 2 role changes and 2 rounds of raises in past year, but am I underpaid? What are "Equity Adjustments" for pay?
Salary increase timeline:
Before Dec 2018 – $66,000 base (OT eligible)
Dec 2018 – increased 4.5% to $68,973 (OT eligible)
Mar 2019 – increased 10% to $75,870 (OT eligible)
Dec 2019 – increased 9% to $82,698 (OT eligible)
I've been with my company (large engineering, procurement, construction management firm) for nearly 7 years. I've worked on construction sites nearly my entire time of employment and I would classify myself as a dedicated worker and general producer. I do what needs to be done for the sake of the construction job – a lot of nights and weekends and generally long days (I haven't had a timecard with less than 45 hours since the spring). I've always gotten the highest or second highest marks on my annual review. I am also compensated for OT worked on a standard time basis (annual salary sets my hourly rate). I entered the company as a Field Engineer and have a bachelors and EIT in Civil Engineering.
In the past 2 years, I've become very much involved on the production/management side and was promoted to a Construction Superintendent around March 2019. This came with a 10% pay increase and the justification in my HR file was listed as "Adjustment – Internal Equity".
In July 2019, the Project Manager of my current project (who was also responsible for another 2 projects on the site) left the company and his day to day duties were passed onto me. I didn't inherit all duties as a lot of the overall financials and internal team management is handled by the Site Program Manager. I did inherit a lot more project cost control, change management, safety responsibility, and client interaction. If nothing else, I've been able to learn A LOT over the past few months. The project was originally scheduled to finish around November 2019. External issues on the site, change in scope, and additional adds will extend the project likely through February 2020. I didn't push the issue for an additional raise in July as I'd just received a substantial raise and to become a Project Manager would forfeit eligibility for OT. Doing some back of the napkin math, I would have needed a substantial increase (~15-20%) to offset losing that.
We've just completed annual reviews and raise announcements and I again received the highest mark. The company standard is a 3% "Merit Increase" each year and I received that and an additional 6% "Equity Adjustment".
In doing research online, it stated that typically equity adjustments are not based on performance and are:
"Equity adjustments are salary changes outside of the normal salary programs (promotion, reclassification, merits, etc.) to remedy salary issues such as external pressure in high demand areas, internal salary compression, and/or retention considerations. Equity adjustments are not granted to reward performance. "
When I check Glassdoor for Philadelphia, PA for Construction Superintendent and Construction Project Manager, I'm in the average compensation range and probably even a touch over that when you consider still getting OT pay. If you factor in experience in role, I'm even better still.
Does the fact that I'm getting equity adjustments mean that I'm continually at the low-end of salary range for my position? Should I be asking for a raise before the next project? I don't know what my role on the next project will be yet or even where the next project is.
No, Holiday Sales Did Not Rise 16%
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