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RB40 Household Net Worth Breakdown

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RB40 Household Net Worth Breakdown

Do you keep track of your net worth? Your net worth is simply your assets minus your liabilities. It is a great way to measure your financial progress from year to year. Ideally, your net worth should increase every year, but real life rarely works out that way. There will be setbacks and your net worth will decrease once in a while; however, the general trend should be positive as you get older. If you’re not making positive progress over time, then there is a problem or two.

Tracking your net worth is especially important if your goal is financial independence and/or early retirement. That’s one way to find out if you’ve achieved your goal. Once your net worth exceeds 25x your annual expense, you are financially independent! Well, you should add some margin if you want to retire very early, but 25x is a great accomplishment for anybody.

Net Worth History

I’ve been tracking our net worth since 2006 and it’s great to see how much progress we made financially. This post was actually written back in 2016. Today, I’ll update it and see if there are any big changes since then. I will do this with percentages because I’m not ready to share the dollar value at this time. Let’s just say it’s over a million and under 5.

RB40 household net worth

Okay, let’s breakdown of the RB40 household net worth. First, I’ll break it down by asset type. Then, I’ll do it again by tax categories.

RB40 household asset types

 RB40 assets

The biggest change from 2016 is our real estate and US stocks allocation. We sold our old home (condo) and moved into our rental duplex. The money was redeployed into real estate crowdfunding and stocks.

  • RB40 asset 2016 2020Stocks (38% + 17%) – Most of our net worth is invested in stocks. Most of this is in US stocks, but a good portion is invested in international markets.
  • Bonds (9%) – I’m not a big fan of bonds. The interest is so low and will stay that way for a long time. At this point, I think it’s better to invest in stocks because we don’t plan to withdraw for at least 10 years. I’ll move most of this allocation to dividend stocks over the next few years.
  • Real estate – This includes our primary residence, rentals, and 2 condos in Thailand. My parent lives in the condos. They are not investment, just a place to live. You can see a further breakdown in the next section.
  • Cash/Money Market (4%) – Our cash allocation is a bit too high right now. We don’t need this much, but I hoarded cash a bit when the pandemic hit. I’ll invest this portion in real estate crowdfunding and stocks.
  • Alternatives (6%) – This is really real estate. A big portion is invested in real estate crowdfunding. The rest is invested in REITs.
  • Intellectual property (3%) – This is a place holder. It’s 3x the annual income from my online business.
  • Pension (1%) – I have a very small pension from my engineering job. Once Mrs. RB40 retires, I’ll probably cash it out. The value won’t increase much even if I wait until 65.
  • Others (0%) – Other assets such as art work and our vehicle. This is almost a negligible amount now. Our car is all banged up and it’s probably worth around $1,000.

The allocation looks okay, but I’ll continue to tinker with it. Over the next few years, I’ll decrease our bond and real estate allocation. I plan to sell our rental condo and move the money to real estate crowdfunding. Being a landlord is too much work for me at this point. We plan to take a year off to travel around the world after Mrs. RB40 retires in 2022. At that point, I need our investment to be very passive.

Tax categories

Tax category

Taxable account: 17%

RB40 tax categories 2016 2020This is the investment account that we could access easily. Our dividend portfolio is here.

The taxable account is very important if you plan to retire early. You need to fund your retirement somehow and this account is more accessible than the tax-advantaged accounts. This portion of our net worth will help generate passive income to fund our early retirement.

Tax-deferred: 42%

These are our traditional IRAs and 401k accounts. I’ve been maxing out my 401k contribution for over 20 years and it is doing quite well. Most of the money here is invested in low-cost Vanguard stock and bond funds. After Mrs. RB40 retires, we will slowly roll the money over to our Roth IRAs. Building a Roth IRA ladder is a great way to minimize tax when you retire early.

Over the last few years, our tax-advantaged accounts grew significantly. Most of our savings were invested here to help minimize taxes.

Tax-free: 8%

Our Roth IRAs aren’t a big part of our net worth right now. We contribute the max every year, but the low contribution limits mean we can’t accumulate much in our Roth IRAs. This portion of our net worth should grow once we start building our Roth IRA ladder.

Rental Properties: 11%

Currently, we have 2 rental units. One is a condo and the other is a unit in our duplex. I’m planning to sell the rental condo soon. Also, we plan to take over both units at our duplex if our tenant leaves. We’ll need more space when our son is a teenager. So this category will go down to 0% at some point. I don’t want to be a landlord anymore because we plan to travel a lot more soon.

Primary residence: 6%

The biggest piece of most family’s net worth is their home. However, I don’t think that’s the right way to go. All that money is stuck in your home and you’ll have to pay property tax, insurance, repair, and maintenance every year. I think it’s better to live in a modest home and make your money work harder. That’s why our primary residence is just 6% of our net worth. Building equity is nice, but I like investing better. I’m not in a hurry to pay off the mortgage either.

Real estate crowdfunding: 3%

Several projects completed this year and I need to reinvest soon. I’ve been investing in real estate crowdfunding since 2017 and it’s going well so far. If they can come through this recession without too much problem, then I’ll trust them a lot more. If all goes well, then I plan to increase our investment at CrowdStreet to 10% of our net worth.

UTMA & 529 plan: 3%

RB40Jr’s college fund. I found out my father in law has another 529 account for him (not included here). These should be plenty to fund a 4-year degree at a state college when he’s 18. We don’t plan to contribute much additional money over the next 10 years.

Bank accounts: 0.5%

Our bank account looks a bit low percentage-wise. There is enough here to fund about 4 months of living expenses for us. We can withdraw from our taxable account if we need to.

Pension: 1%

IP: 3%

Other assets: 4.5%

This one includes 2 condos in Thailand, our car, and artwork. My parent lives in the condo and rents it out occasionally. This condo would be a great home base for us when we relocate to Asia for a few years. I plan to live here and travel all around the region once RB40Jr goes to college. That’s about 10 years off, but we’ll have a preview in 2022. We’ll visit Asia for a year after Mrs. RB40 retires.

That’s about it. The only thing missing from here is Social Security benefits. That’s a long way off, though. I might not even be around to collect. Also, I didn’t count our other personal properties. They aren’t worth much and they are depreciating every day. There is no point including things like a computer, sofa, and TV.

How I track our net worth?

I track our net worth with an Excel spreadsheet. It is a good exercise to go through your finance at least once a month and see how all your investments are doing. I also use Personal Capital to get a quick snapshot, but I think it’s best to make your own spreadsheet. That way, you have all the history you remember to save.

Diversify

That’s what our net worth looks like in 2020. US stocks have done very well over the past few years and our net worth benefited from the growth. Over the next 2 years, I plan to reduce our allocation in bonds and rental properties. The money will be redeployed in stocks and real estate crowdfunding.

The next big inflection point will be in 2022 when Mrs. RB40 retires. We’ll travel more and I will evaluate our asset allocation again. Life should be pretty stable for a while after that. In 2030, RB40Jr will be old enough to go to college. That will be another big change, but it is 10 years off. We’ll figure it out when it’s closer.

Alright, I hope you enjoyed a peek into our asset allocation. Have you gone through this exercise lately? The stock market has done quite well. You may need to rebalance if you haven’t done it in a long time.

How does your net worth look? What do you think about diversification?

The following two tabs change content below.
Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.
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{ 53 comments… add one }
  • drplastickpicker October 10, 2020, 9:18 am

    Yes I track our networth on an excel spreadsheet. We hit out number a few years ago, but still plugging along at work since we both still enjoy it. I spoke on a financial literacy panel for our HMO family practice residency, and it was amazing how most of the new doctors did not have a budget nor knew their networth. Their questions were getting complicated about how to invest in real estate ect, and I kept on reminding them – stick with basics. Know how much money comes in, how much many goes out, your savings rate and your networth. Try to have some sort of budget. It’s amazing most don’t even know the basics.

  • freddy smidlap October 8, 2020, 7:44 am

    looks good to me, joe. i agree that’s it’s really important to look over asset allocation as a whole and especially what is accessible before age 59.5.

  • Adam October 8, 2020, 6:36 am

    Good pull from back in the day! I envy your diversification. Aside from a token stock grant from my company going public last year, literally 99.7% of our investments are in tax-advantaged accounts. In ten years when we FIRE do we sell our house, leaving an amazing neighborhood but freeing up enough cash to nomad around for a dozen years? Or do we buckle down now on the after-tax brokerage account, trusting that the half million currently in tax-advantaged (plus enough annually to get company matches) will suffice by 59.5?

    We’re off the back in that regard, and need to figure something out soon. Near-seven-figure inheritances await as well but we can’t even think about that.

    • retirebyforty October 8, 2020, 9:14 am

      That’s a good plan. Hopefully, your house money can fund the nomadic lifestyle for a while. If you invest right, it will stretch out even longer.
      If I were you, I’d keep socking money in the tax-advantaged accounts. After you FIRE, you can build a Roth IRA ladder. Your house money should be able to cover 5 years, right? After that, you can withdraw from your Roth IRA.

  • FITrailHiker June 19, 2020, 8:11 pm

    Great diversification!

  • Fiscally Free September 14, 2016, 7:29 am

    Your portfolio looks great. Keep up the good work.

  • Martin Stone September 13, 2016, 9:29 pm

    Hi Joe,

    I track my income and expenses using spreadsheets and will continue to do so. However, today I took the plunge and started with your personal capital link to tie all my accounts together (it is having trouble with a wells fargo brokerage account). I am very impressed with how easy it was to set-up and the level of detail breaking down the accounts and income vs spending.

    I am a RB51, the problem is not our retirement when we are 60-65 (we will be in great shape with no kids to support, additional pension, social security, 401k withdrawal etc…), but cash flow for the next 7 years or so. At the moment, income ~$12k (dividends, small side jobs, rent) is bigger than expenses ~$11k.

    I really enjoy reading your blog and updates. Keep up the good work!

    Martin

    • retirebyforty September 13, 2016, 11:08 pm

      You should contact Personal Capital and let them know about your Wells Fargo account. They can work on adding that. Thank you for using our link! I really appreciate it. Thank you.
      Also, you may want to look into building a Roth IRA ladder.
      https://retireby40.org/roth-ira-conversion-ladder-minimize-taxes/
      The timing might not work out because you are close to 60. Good luck!

  • Finance Solver September 13, 2016, 8:13 pm

    That’s a great net worth allocation! I’m kinda worried recently being invested in the 401k, valuation are so high, it’s hard to say that I’m getting good value for my portfolio. I might just put it in a cash-equivalent fund so that I can ride the wave out but haven’t changed the course just yet!

  • MrRIP September 13, 2016, 4:36 am

    Thanks a lot for sharing this with us!

    I don’t think got the math right though, the following are inconsistent:
    – 2% (cash) equals to 1 year of spending (which means you have 50x your spending, i.e. SWR of 2%)
    – 4% (RB40 value… wow, congrats!) equals to 3 years of spending… well… problems here: 4% is twice 2%…
    – given the previous 2 numbers, it means your NW equals to somewhere between 50x and 75x your yearly spending, is it correct? I remember reading on your blog you’re between 30x and 40x.

    • retirebyforty September 13, 2016, 9:36 am

      Good catch, here are the answers.
      – 2% cash. This is due to rounding. Our cash position is actually 2.3%. That’s almost enough to cover 1 year of expenses for us. Currently, we are at about 40x.
      – RB40 at 4% of our net worth. That value is derived from 3x business income. You must have read it wrong.
      Thanks for your input. I updated the post to make it more clear.

      • Max September 13, 2016, 10:47 am

        Hey Joe,

        So building off of this idea….

        Even with rounding, it sounds like you have $2.5M+ saved up since your 529 is 2% of our total net worth and your 529 is at $50,000+. If this is the case and your monthly expenses are at, around, or below $4,500 then can’t you both more than afford to start working less? This works out to a SWR of ~2% and it means that you have like close to 50x your annual expenses saved up. Are you worried about increased expenses/lifestyle inflation or do you and your spouse just really enjoy your work?

        • retirebyforty September 13, 2016, 2:13 pm

          We’re not quite there yet. We’re right around 40x. That’s pretty good and Mrs. RB40 could retire soon. Her career is taking off, though. I think she should keep working for a few more years just to see how far she could go. Her work/life balance is pretty good. If the work condition change, then she would have the option to retire early.
          I’m not working full time, just on my blog. That’s just about the right amount of work. I don’t think it’s good to completely stop working.
          Also, the market is very volatile now. Our net worth could drop from 40x to 30x quickly. Who knows…

  • Jeff V September 12, 2016, 7:34 pm

    Yep, abotu $520k for us. We are not in an interesting real estate market. I am patiently awaiting a market crash, and the nedt big secular bull market.

    Jeff

  • Preston Hunt September 12, 2016, 5:42 pm

    For the purposes of personal finance, I’ve always found the computation of net worth a bit tricky.

    For example, one’s primary residence does not generate income and in fact costs a substantial amount of money in upkeep. So should it be considered part of the net worth? Real estate can be sold if times get tough, but then you would have rent. And preservation of lifestyle is one of the assumptions of financial independence.

    Another tough one is 529 funds. In my opinion, they should not be included as an asset in net worth unless the corresponding future liability of the college education is also included on your balance sheet.

    Also I think most of the guidelines and research for retirement income (such as the 4% rule) are assuming traditional asset classes like stocks and bonds and do not necessarily assume some of these non-liquid assets.

    I have thus separated my assets into liquid assets (things that can be sold quickly, such as cash, stocks, bonds) and “other assets” such as real estate, 529 funds, etc. From the discussion already going on in the comments, I think things like intellectual property would go in that “other assets” bucket.

    I then have a cash-flow analysis which takes into account all inflows (paycheck, dividends, interest, rent) and outflows. From this, I get our annual cash flow requirements. If the liquid assets can generate at least this month income per year, then financial independence has been reached. From there, I then add a scaling factor for safety (e.g. multiply by 4).

    I’d be interested to hear feedback on these thoughts!

    • retirebyforty September 12, 2016, 9:32 pm

      Well, I think net worth should just include everything except Social Security because you can’t value it accurately.
      I don’t agree with you about liquid assets. Rentals aren’t very liquid, but they should be included when looking at the 4% rule. The 4% rule should be use with invest-able assets. This includes all your investments.

      The problem with the FI cash-flow analysis is that it is really hard to reach for most people. Also, we have assets in our tax advantaged accounts. These generate income, but we don’t want to touch it. Do we count those? Multiply by 4 would make it impossible for almost every blogger I know.

      As for the 529, that’s a tough one. It will work out in 13 years when we know if the kid will go to college. 🙂

  • Dave September 12, 2016, 2:19 pm

    Hello Joe – love your blog!!

    I am 52 and retired at 50 by pretty much mimicking your path of creating a plan for my wife and I’s solid incomes and following it over our mid 30’s – 50. I track my net worth and look at it weekly or so via Emoney and Excel.

    I have never included our pensions in net worth (my wife and I have 3 that kick in as annuities at 62 with joint survivorship). Does logic hold you would also include SSecurity if you are calculating your net worth coverage of annual expenses less annual pension contribution like you mentioned in a previous comment?

    We are currently at networth of 35X not including any expense deductions for pensions or SS. I have never used the worth to expense ratios because or expenses will change over time (life style, inflation, etc.) and it doesn’t really take into any net worth growth over time.

    Thanks again – keep up the great work!!

    • retirebyforty September 12, 2016, 9:22 pm

      That’s great! I hope you’re enjoying your early retirement. I included pension because it’s easy and I just use the cash out value. Social Security doesn’t have a cash out option. I like checking the ratio once in a while. It tells us that we are doing okay. If the ratio dips too much, then something is wrong.

  • Jon September 12, 2016, 12:08 pm

    Prior to selling your rental you could consider making it your primary residence for 2 of the last 5 years and save on those taxes: https://www.irs.gov/irb/2005-07_IRB/ar10.html

    • retirebyforty September 12, 2016, 12:38 pm

      That’s what we plan to do, but it does not work exactly like that anymore. If you use the property as a primary residence for 2 of the last 5 years, then you’d still have to pay 60% of the capital gain tax. It’s prorated now. We could avoid the tax by using the rental as a primary residence for 5 years before we sell. You also have to pay 100% of the depreciation recapture no matter how long you live there. I’ll need to research before we sell because tax law can change.

  • Dan September 12, 2016, 10:50 am

    Joe. Interesting thoughts on asset allocation.

    Almost every asset class as a whole is pretty scary to get into from my perspective. I have most of my money in the stock market but in many idiosyncratic opportunities such as liquidations, mergers and similar situations. These can be very time consuming situations reading through potentially hundreds of pages of documents. This is the equivalent of being a hunter gatherer whereas dividend investing is like being a farmer.

    It would be nice to return to a time when interest rates are much higher for relatively safe fixed income investments. Just sit back and watch the investment grow.

  • freebird September 12, 2016, 9:44 am

    Joe, looks like you were in the top 3% of NW in the blogosphere in early 2014. Median and average sat around 160K and 360K, respectively, and it broke down into roughly 10% negative, 80% zero to 1M, and 10% over 1M. This distribution looks similar to overall US, although with some skew higher around the median. I would have expected a larger upper tail, given that the typical annual spend of 60K in urban areas would take a stash of 2M to support using the 3% rule. I guess for 97% of bloggers it’s work in progress, unless they live minimalist.

    I’m at the north end of this pool, although I’m a decade or two older than most bloggers. My breakdown is 30% tax deferred (all stock), 30% taxable stocks, 10% taxable bonds, and 30% cash. No real estate to speak of, just a small chunk of REITs mixed into the stocks, and all of my IP belongs to my current or previous employers. Why so much cash you ask? I guess like you I’m expecting better opportunities going forward– but it’s not new, I’ve always liked cash. My current living expenses (excluding income taxes) would take less than 1% annual WR so I can afford the lower risk profile.

    • retirebyforty September 12, 2016, 12:40 pm

      I don’t feel like top 3% at all. We live like a regular family and we’re happy with that. I guess it depends on how you spend your money. I like your breakdown. It’s simple. By the time we’re 60, I hope our breakdown will be similar to that. It’s too complicated right now. Probably a less allocation in cash, though.

    • Joe September 13, 2016, 9:49 am

      I’m like you. Over 100x annual expenses, but have 20+% in cash. Half of the cash position was generated just in the recent past. Have no idea where to put it in this environment. Thinking of buying non-local real estate someplace with potential.

  • Mr. PIE September 12, 2016, 7:19 am

    Like some of the other commenters, I have a pension. Although it is not factored into our NW. It is a cash balance pension so does have an inherent value to it. It grows every year I work and in retirement if I defer it. We will be taking it in the form of an annuity.

    We are higher in bonds to reflect our risk tolerance, goals and age. Our cash position just declined further today. We decided to buy some international developed and emerging market funds. We are not market timers although the dip seemed a reasonable time to buy as we were about to pull the trigger soon anyway

    • retirebyforty September 12, 2016, 8:58 am

      Why not include pension in your NW? You can just use the cash value for completeness sake. It’s not a big deal for us because it is such a small amount, but your pension is bigger.
      It looks like the market is already recovering. I think it will be volatile for a while. Buckle up. 🙂

      • Mr. PIE September 12, 2016, 10:22 am

        If we had planned to take it as a lump sum, maybe worth including. I agree.

        Since we are annuitizing it, seems prudent to just look at is an an income “floor” for our future expenses and withdrawal rate calculations. That’s how we see it at least.

        US markets doing amazingly well today. All ex US markets are down today especially Asian by quite big chunks again. Bumpity, bumpity, bump….

  • Physician on FIRE September 12, 2016, 6:40 am

    I like the format and detail in this net worth update. Financial voyeurism is good fun!

    My breakdown looks fairly similar to yours. A substantial portion in stocks, 10% in bonds, and some REIT (10% plus another 3% to 4% from VTSAX).

    We differ in property; mine is about 15% of our net worth. I hadn’t considered counting intellectual property. I suppose the trademarked website is an asset that could be sold.

    Cheers!
    -PoF

    • retirebyforty September 12, 2016, 8:56 am

      15% is pretty good. I would be comfortable with that. 🙂
      Yes, you should include IP. It’s a business after all.

  • Apathy Ends September 12, 2016, 4:59 am

    Thanks for the breakdown, great to see how others deploy their capital.

    I am comfortable with our diversification right now, our only hole is not having a rental property and our home is a decent amount of our net worth (but the % drops every month as our investments increase)

    • retirebyforty September 12, 2016, 8:53 am

      Nice job! Our home was a big part of our net worth when we were young too. I’m sure your investments will keep growing.

  • Matt @ Optimize Your Life September 12, 2016, 4:54 am

    Really interesting to read the full breakdown. Thanks for sharing the details and background on everything!

    Out of curiosity, is this an asset allocation that you targeted or one that you sort of stumbled into? Or something in between (e.g. you targeted the stocks/bonds/REITs portion and just gradually built up the rest)?

    • retirebyforty September 12, 2016, 8:52 am

      You’re right. I target the stocks/bonds/REITsportion. If we take out the rentals, primary residence, and personal property, our asset allocation would look something like this.
      US stocks: 50%
      International stocks: 20%
      Bonds: 20%
      Alternatives: 10%

  • Dividends Down Under September 12, 2016, 4:50 am

    You’re extremely nicely diversified Joe – lots of different asset classes, I think you’re right on the money.

    As long as your choices in your dividend stocks are good I can’t see any long term problems.

    Perhaps consider how geographically diverse you are?

    Tristan

    • retirebyforty September 12, 2016, 8:49 am

      Our rentals are all local. That’s one big reason why I want to diversify into REIT. Portland has been great over these last few years, but who knows when it will crash. Previous housing crashes were long and deep…

  • [email protected] Smarter Decisions September 12, 2016, 3:33 am

    It sure looks like you are well diversified Joe! We own no REIT’s yet but are considering that next. It’s great that you have a place in Asia already as a home base if you relocate for a few years. We have a heck of a time coming up with net worth statements due to our pensions (two of them). We get one now (hubby) and we’ll get mine in 5 years. We’d look like we have a LONG way to go to FI if I didn’t include those in our net worth. It actually prevented me from “announcing” FI because of how to include it.

    • Lisa September 12, 2016, 6:02 am

      Hi Vicki, I had the same problem re: pension valuation. Tried net present value calculations and that gave me a marker. Then I just decided to base the 25X number on the expenses not covered by pension. So if total expenses per year are $30K and the pension covers $15K? Then I’m looking for a net worth of at least $15K x 25 or $375,000.

      • [email protected] Smarter Decisions September 12, 2016, 11:05 am

        My pension will cover everything as planned (and we have other streams of income too) – so I guess I need a net worth of $0, yet I have more than that which makes me FI 🙂

  • Pennypincher September 12, 2016, 3:11 am

    Great blog post. I see you’re @ 6% on your REIT. That’s a good number, but I wouldn’t go any higher than that. I keep reading negative things from good sources about them.
    How about that beloved S&P going gangbusters the past few years. God Bless America! : )

    • retirebyforty September 12, 2016, 8:47 am

      REIT has been a great investment over the last few years too. They are probably overvalued now. The next real estate correction would do a number on them. The inevitable interest rate increase would impact REIT too. I don’t have any mortgage based REIT so I think we are okay for the most part.

    • Mr. ATM September 13, 2016, 6:46 pm

      REITs are an awesome investment, especially for people who want to invest in real estate but don’t want to deal with rental management headaches. I have owned REITs for the past 7 years and have got great returns. There are many high quality REITs (BBB and above), though most of them are currently overvalued due to low interest environment.

      Starting this month REITs will have their own entire Sector within S&P 500. That should tell you something about their importance in the overall market. Previously, they were all lumped with banks under Financial Sector.

  • Jon @ Be Net Worthy September 12, 2016, 2:46 am

    Joe, thanks for sharing your breakdown, you look very well diversified to me. I like how your primary residence is such a low percentage of your net worth, that’s very smart! Mine is much higher, closer to 40%!

    I also like how you’ve included the value of your pension and the value of your business in your net worth calculations. I also track my net worth in Excel and use Personal Capital as well, but have never included my pensions or business.

    I also exclude the money I have saved in 529 plans for my two kids. While they are technically assets, I look at them more like a pre-paid expense and they will be long gone in a few years!

    • retirebyforty September 12, 2016, 8:44 am

      Our primary residence didn’t increase in value much so that’s partly why it’s only 5% of our net worth. 40% is a big percentage of your NW.
      I wasn’t sure about the 529, but included it just for completeness sake.

  • The Green Swan September 12, 2016, 2:20 am

    Hi Joe, I like the thorough breakdown. Looks like you’re very well diversified across the board. I feel I am too however I have my portfolio invested solely in stock mutual funds since I’m still a little ways from retirement.

    • retirebyforty September 12, 2016, 8:43 am

      We had most of our net worth in stock in our 20s and early 30s. When you’re young, you can go 100% in stock. There is plenty of time to recover from crashes. Now, I’m a bit more nervous and I like the diversification. 🙂

  • Ernie Zelinski September 12, 2016, 1:08 am

    I also use a Spreadsheet to track my net worth. When I compare my net worth to what it was in 2002, I am amazed how much it has gone up. Even though my residence (a half-duplex) is worth approximately $300,000 and fully paid off (I hate any sort of debt including mortgages), my residence does not appear in my net worth. I consider a primary residence a consumer item, just like a pair of socks or a bar of soap.

    What’s more, I don’t include the value of my intellectual property in my net worth. The reason is that it’s difficult to determine how much my books will earn in the next year or two even though they have earned me a great annual pretax income (average of at least $100,000) in the last ten years.

    In regards to your net worth, I think you are very well diversified. Much better than I am.

    One more point: I found a recent article called “5 Things Rich People Say Beats Having $1 Million [for Retirement]” http://www.moneytalksnews.com/5-things-rich-people-say-beats-having-1-million/ very interesting. The article states that rich retirees think these five financial milestones are more important than becoming a millionaire:

    1. Retiring: 55 percent
    2. Paying off home mortgage: 43 percent
    3. Having the ability to pay cash for a new car or other special purchase: 31 percent
    4. Paying for children’s education: 28 percent
    5. Reaching a certain annual income level: 20 percent

    I agree with 4 out of 5. Number 4 doesn’t resonate with me because I don’t have any children.

    • retirebyforty September 12, 2016, 8:41 am

      I didn’t value my IP previously either, but it seems like a good thing to include just for completeness sake. It’s more difficult in your case, though. Your IP is great for cash flow, but I don’t know if you can sell that kind of IP.
      Interesting data from rich retirees. I agree with #1 and #4.

  • Gary September 12, 2016, 1:03 am

    Hi Joe. Nice chart which clearly shows how many people (including myself) very much benefited from super high returns generated mostly in 2012-2014 by the stock market and real estate bubbles, fuelled by “economic recovery” (of course, people have to be naive to believe this – Ben Bernanke is a crook and the future will prove this). I am happy my net worth has tripled without any effort , but I wonder how long this party will last. I think there are very clear signs for major market correction (I am afraid 40-50% down from today’s values)- what will be your advice to protect wealth/net worth?). I am really thinking to sell everything.

    • retirebyforty September 12, 2016, 8:38 am

      Thanks! It’s been a great ride since 2008. I also think there will be a major market correction soon. I’m not changing my strategy too much. We are still contributing to our 401k every month, but I stop buying anything else. I’ll buy when the market decline 10% or more. You need to create your own strategy.
      https://retireby40.org/create-your-own-buy-low-strategy/
      Over the long term, I’m sure it will work out if you stick to your asset allocation and rebalance once in a while. Maybe increase your bond holding a bit if you’re nervous.

  • Mr. Tako @ Mr. Tako Escapes September 12, 2016, 12:28 am

    Hi Joe,

    Like you, I primarily use spreadsheets….but I don’t track my net worth that closely. Such a huge percentage of it fluctuates up and down on a daily basis (because of stock market changes). That it really doesn’t hold a lot of true meaning to me.

    Instead, I try to focus on owner earnings, dividends and other cash flows, and of course accounting book value.

    As long as those things keep growing, the market’s daily number will take care of itself.

    • retirebyforty September 12, 2016, 8:35 am

      I only check once a month or so. I think it’s good to see how our investments did. Even if our net worth decrease, it’s good to see because it will be a buying opportunity.

  • Michael @ Financially Alert September 12, 2016, 12:28 am

    Hi Joe, I like that you are well diversified. We are more heavily weighted in real estate than you are. I suppose some of that comes with the territory of living in California. Our home is 17% of our NW and another 38% is in income properties. Maybe at some point, I’ll shift this allocation around, but for now, it works for us.

    • retirebyforty September 12, 2016, 8:33 am

      38% in income properties is great. California is really expensive, but the property value keeps rising. It’s pretty crazy.

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