The following is a staff writer post from MikeS. He is a married father of 2. So, with the cat, he ranks number 5 in the house. He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.
With the end of the year passing, it was time to record my net worth. I only record the ending value for the year, though I do look at what the value is during the year. For 2013, I had the largest change I have ever had since I began tracking it 5 years ago.
Five years ago is when I truly became serious about managing my finances. That first measurement in December 2008 was -$18,905. Yes, that is correct, it was negative. The most recent measurement for the end of 2013 was $106,421. That is up $62,989 from the end of last year and up $125,326 since I began tracking. I can honestly say that my finances are in the best shape of my life and the net worth number reflects it. Being the numbers guy that I am, I was curious as to what was the driver of the change, increased savings, debt reduction, or market gains.
The stock market had a fantastic year in 2013. Thankfully, I was able to participate in those gains with both my 401k and my Vanguard account. Both accounts did very well. Since my savings rate is just started ramping up this year, my net worth did not benefit as much. Market gains only contributed to about 10% of my overall net worth change.
My net worth was helped by reducing my debt. I was able to knock out three debts completely and pay down two others. I had some credit card debt remaining from my son’s medical bills and a new computer I bought in 2012. Both of them were at a 0% interest and the rate was ending. The third debt I was able to eliminate was my wife’s student loans. That has left me with only 2 remaining debts, my mortgage and a car loan. I’m just lucky it doesn’t need new tires yet. Both have pretty good interest rates, mortgage is 3.75% and the car is 1.9%. With those interest rates, I do not plan on paying those debts of early. I would rather save or invest that money instead. Overall, the debt reduction contributed to about 42% of my net worth change.
This year I saved significantly more money than I have in previous years. There were three factors that led to the increase in savings. The first was a salary increase I received when I transferred into a new position; it was about $2,000 for the year. The second was an incentive bonus I received. I have received them in the past, but this year’s was on the higher side. The last factor was money I received via inheritance. The additional salary and extra money allowed me to increase my savings in a few ways. The first and most obvious is just setting aside some of the extra money. I saved some in my Capital One 360 savings account and some in my Vanguard brokerage account. The second way was by paying off some of my debt, I was able to increase my cash flow. Some of the increased cash flow went towards savings, either in my 401k or in Capital One. The added benefit of the 401k savings was the company match. I had previously not been taking full advantage of the company match to my contributions. My company offers a dollar-for-dollar match up to a maximum of 6%. Overall, these factors contributed to 48% of my net worth change.
The Coming Year
I don’t expect such a dramatic change again in 2014, unless the stock market goes completely nuts. I would be quite happy with slow and steady progress. My savings rate will increase again slightly in 2014 with me taking advantage of an HSA and again increasing my 401k contribution. I’m maxing out my contribution to the HSA and my company is kicking in an $800 towards it. My debt will also decrease on a normal schedule, as I continue on my payment schedule and I won’t be adding any additional debt. How did your net worth change in 2013?