Our net worth increased in April to 8.68% in USD and 9.68% in EUR to $56,998 and €52,630 respectively.
After two months of declines, the numbers reversed with one of the best months for stock longs in decades. That was the primary basis for our own results because our income was definitely down. I earned less at the end of March than usual, and my wife's income was also depressed.
Because I own a mix of growth and value stocks, individual stock performance was all over the place. Some got creamed in March and barely recovered during the April rally, while others roared back to all time highs. Already, some companies are announcing cuts to their dividends, which I'm not worried about: I prefer that they cut their dividends than risk the viability of the firm.
We did pretty well with our savings, saving 35.51% of our mixed pre/post tax incomes. Our spending was drastically reduced in April, and I suspect that May will be the same. One area where spending remained high was groceries. Despite using some Payback points (a popular European loyalty program) to get about €100 in grocery store vouchers, we still we on the high end of our budgeted amount. Part of that was my elevated alcohol consumption at the beginning of April (even the cheap stuff adds up), but I'm still a bit surprised. I guess by not eating out ever we're just eating more groceries.
Re-thinking How I Calculate Net Worth
Currently, I add up the follow to come up with net worth:
- Bank accounts
- Investment accounts (including tax-advantaged accounts)
- Credit cards
- Loans (0 currently)
- Installment plans for large purchases (0 currently)
- Cash
- Loyalty programs with a clear cash value
- In both USD and EUR
However, we have other stuff that has value and should be added in, such as:
- Defined benefit pension
- Social security in the US and Germany
- Physical assets with some kind of sale value
- The remaining value of our labor
That's definitely part of our worth! If I took out a life insurance policy on myself, I'd try and value what my income means to my wife, and some kind of discount cash flow model would probably be the way to determine the value of the policy.
Plus the "stuff" we have has value. Just looking around the room where I'm sitting, I could probably get more than a few thousand for the random bits of technology that we have. Now, to be sure, those are depreciating assets - meaning they lose value over time - but they're assets and should be counted as such. And that's before we get to owning large physcial assets such as a house or car.
There are two reasons I haven't included them before:
- There's a certain amount of guesswork involved in valuing these things. A DCF (discount cash flow) model has some major assumptions baked in, for one, and guessing how much I could get for a computer or camera or dining room table is tricky. Unlike cars, there's no Kelly Blue Book for most depreciating assets. I'll probably use eBay averages to get a sense of what something's worth, but it's still an assumption.
- None of these are liquid assets. Although they might be part of my monetary worth, I can't spend this stuff. I couldn't access my pension or SS, and turning a coach into cash is hardly instantaneous. That said, my IRA accounts in the US also aren't liquid: the tax consequences are so onerous that it would be absurd to turn those into cash and spend them.
Therefore, I'll have to arrive at two numbers: a "total" net worth and a liquid net worth. I think for most people interested in FIRE (Financially Independent Retire Early), the liquid net worth is the more important number.
I think I'll have this ready to go at the end of May, but that's only a guess.
Until then.
