After quite a bit of deliberation, analysis, and valuable feedback from readers. I’ve decided to share my net worth numbers on this blog.
You can read about my thought process behind this decision in more detail here: “Should I Share my Net Worth”
In that post I took a poll about whether sharing my numbers would be generally useful or harmful. Although the sample size was relatively small, most voters indicated it was useful or they were indifferent to the idea. There were also some good comments which I encourage you to read before moving on.
I’ll occasionally post updates to this financial metric, which you can see at the end of this post. Make sure to subscribe to the Max Your Freedom blog feed if you want to make sure you don’t miss an update.
I’m going to focus on the first 15 years of my household’s journey, beginning in 2001. I’ll split the time periods into 5 year increments, and will summarize at the end with my most recent net worth.
I won’t be focusing on the make-up or quality of the net worth numbers in detail in this post, which incidentally is much more important than the net worth value itself. That was covered in another post. My focus here will be on the journey itself, and the absolute numbers.
Net Worth Summary: Years 1-5
My first complete year working a full-time job was in 2001. This is when my journey started as a recent engineering graduate with $25,000 in student loans. That number could have easily been double, had I not been working part time during the 5 years I spent in college. This period in my life was all about debt, and my net worth was in negative territory throughout.
2001 – Moved back home after college that first year to save money and get a strong start to paying off that debt. My income was low, but I maintained a savings rate of close to 25% that year.
2002 – Towards the end of this year, I married my then long time girlfriend, and bought a townhouse with a 10% down payment from the money I had saved the year earlier. I also learned about the $65,000 in student loans my now wife had accumulated over 2 years at a prestigious but expensive school in NYC.
2003 – My wife found a job this year, and we needed a second car for her commute. We made a classic newbie mistake and picked up another liability in the process. In our defense, we did get a great deal on it, and only spent $27k. We also kept it for 10 years.
2004 – Our combined income breaks through the $100K mark per year for the first time. We maintain a 25% savings rate during this period.
2005 – By this point I still had about $100K in debt (excluding the mortgage), but had managed to contribute to my 401K for 5 years, with a total balance of $50,000. In addition, our high savings rate allowed us to save another $25,000 in our savings account.
I knew that the next period in our journey needed an income boost, so I became more aggressive about taking on more responsibility at work, and went back to school during nights and weekends to get my MBA.
Net Worth Summary: Years 6-10
This was the period where we really started getting serious about eliminating our debt. The wake up call was when I opened a statement for my wife’s student loan payment only to find out it had increased by >30%. She had a variable interest rate on her private student loan, and rates were moving up fast! This was also the period when our net worth finally became positive.
2006 – I agreed to relocate with my company to Virginia as part of a 2-year assignment and promotion. Our timing would prove to be unfortunate. We sold our townhouse at break-even once you factor in purchasing/selling costs, and moved into a condo that was twice as much. We bought at the absolute peak of the market. I also replaced my 10 year old car that year, with a used one, taking on an additional loan.
2007 – This was an amazing year of debt elimination. We paid off both student loans, and both our car loans by the end of that year. We did it all in big pay-off chunks, using the money we had been saving over the past few years. The stock market was at an all-time high, and the 401K balance had more than doubled by then. I sometimes wonder what would have happened had we taken that money and invested it all in the market, instead of paying off the loans.
2008 – My 2 year assignment was over, and I moved to our company’s HQ in Dallas, TX for another promotion. This was a high income year, which helped to offset the decline in my 401K account, and the major hit we took on moving again at the bottom of the real estate market. Thankfully our net worth increased that year despite all the turmoil, due to our record 60% savings rate.
2009 – The recession was in full swing by this time. My wife had a difficult time finding a job that year after our move, so we were only on one income. As a result, she started her own side hustle as a freelancer, but it only made up for about 10% of her past income. We also bought our current home during this year, with a 20% downpayment. It was a risky move since we were on one income, and were stretching affordability. Market conditions were too good to pass up though.
2010 – This was the year our daughter was born. The stock market had made a come back from the lows, and my 401K had benefited. Our savings rate also held steady at >50%, and we had decent equity in our house.
By the end of this period, we had eliminated all our debt, with the exception of our mortgage. This freed up a ton of cash which had a dramatic impact on our net worth.
Net Worth Summary: Years 11-15
This period was marked by significant cash flow as our careers progressed, and another step-change in savings rate. We also began to aggressively pay down our mortgage.
2011 – My wife was finally able to land a full-time job, and our income got a nice boost as a result. I also got a decent promotion at work which made me eligible for a bit of equity in the company.
2012 – Our cash position continued to increase due to the high savings rate, and I began opening some brokerage accounts.
2013 – I refinanced our home mortgage to a lower rate during this year, and we finally reached one of my personal finance goals on net worth, breaking the $1M mark. Unfortunately this was also the year I made yet another financial mistake by trying to time the market. I shifted my entire $401k balance into cash after the market reached prior highs. I also didn’t invest any cash I had used to fund my new brokerage accounts, with a few exceptions.
2014 – This is the year I began making large payments against my mortgage debt. I paid one third off in one big payment at the end of the year.
2015 – I paid the next third off on my mortgage at the end of this year. In the meantime the market continued to roar, with sadly little participation on my part.
Although my net worth could have have been even higher during this period had I continued to participate in equities, I was still able to grow it considerably due to a savings rate which had increased to 75% by period end.
Net Worth Overview
Here’s the full view of those 15 years, and some key takeaways from my experience.
- Negative Net Worth
- Dealing with Debt
- Average Gross Household Income $85k/Year
- 25% Average Net Savings Rate
- Positive Net Worth
- Significant Debt Reduction
- Average Gross Household Income $180k/Year
- 50% Average Net Savings Rate
- High Net Worth
- Debt Elimination
- Average Gross Household Income $275k/Year
- 65% Average Net Savings Rate
Here’s some of what I’ve learned looking back on those 15 years.
An early start can have a big impact – I had a late start joining the work force due to multiple internships while in school, and a delayed start date at my first job because of the dot com crash. Timing can have a lasting impact.
Debt can be a huge headwind – I set off on my journey with the winds blowing against me the first 5 years. Not only did the loan payments rob me of valuable cash flow, but they also kept me from participating more aggressively in equities.
Focusing on Income creates a tailwind – What I lost out on in missed investing opportunities, I made up for by aggressively growing my income. The extra income helped me play catch up while eliminating the debt.
Controlling expenses is not optional – I had a budget for every one of those years, just like I do for 2017. That helped me stay focused on getting rid of my debt, and vigilant against lifestyle inflation despite my growing income. And by the way, we still had plenty of fun along the way.
Don’t get too fancy when investing – I made a lot of stupid mistakes relative to investing my money throughout this journey. I learned through trial and error, and lots more of the latter. This is still an area where I need to focus more energy. Had I read books like “A Simple Path to Wealth” earlier in my journey, I’m certain my ship would be further along.
A high savings rate cures most financial sins – If it weren’t for the high savings rate I maintained, and its relentless increase, my net worth would be dead in the water. Being disciplined about expenses and savings kept me sailing on.
Latest Net Worth Figure(s)
So where does my net worth stand as of the end of 2016, and starting the year?
Thanks to Personal Capital, it’s much easier for me to track this important financial health metric. I’ve been using their free net worth tracking tool for >4 years now.
Below is a snapshot of all of 2016, which ended at $1,651,632
* The spike in the chart has to do with paying off my mortgage and an adjustment I had to do in the tool at that time.
Below is a snapshot of all of 2017, which ended at $1,890,577. Here’s my detailed summary.
You might be wondering why I haven’t retired yet, or claimed financial freedom, given the figure above is relatively healthy. Just because a net worth figure is high as an absolute number, doesn’t mean it’s equally high from a quality standpoint.
As I covered in the post: Can I retire with $1M Dollars, what’s really important for financial freedom is investable assets.
By sharing the above in a transparent way, I hope to lay the foundation for future discussions. This will also help me remain accountable for generating more freedom years, rather than chasing a financial mirage.
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Readers, did you find this knowledge useful? Does anything about my journey surprise you? How is your own personal net worth journey going? How is 2017 treating you so far? Please share your thoughts and comments below! – Max