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.
One of the tasks that I do with my finances is to track my net worth. It’s my scorecard on how I am doing financially. I have only been diligently tracking the number since the end of 2008. I am positive the number wasn’t pretty before that time, as I was not very good at managing my finances before then. So, how did I do this year and what were the drivers of the overall change? Let’s take a look.
My net worth increased 14.8% from the end of 2014 till the end of 2015. It was a roughly $19,000 increase year-over-year. I will say that I am pleased with the number. It’s going up and the markets did not contribute much of anything to the increase. The increase was driven entirely by debt reduction and savings. It is also a far cry from the roughly -$19,000 net worth I had when I started tracking.
The biggest contributor to the net worth increase was my 401k. Despite having a negative return for the year, -2.3%, I was still able to grow the balance between my contributions and the company’s matching contributions. The company has a flat 2% contribution and then matches dollar-for-dollar up to 6%. I currently contribute 8%, so a total of 16% of my salary is going into my 401k. The company’s contributions and the first 6% of my contributions go into a traditional 401k, while the remaining 2% of mine go into a Roth 401k.
Debt reduction was also a sizeable contributor to my net worth change. I only have two outstanding debts remaining. The first is my mortgage, at 3.99%, and the second is a car loan at 1.99%. I have not been paying any additional principal against the car loan, but I have been with the mortgage. I refinanced the mortgage at the beginning of 2015 to eliminate the PMI I was paying. Once the payments started on that, I began to pay an additional $215 a month towards the principal. If I don’t change that payment pattern, I still will shave about 6 years off the length of the mortgage.
My savings and brokerage account did not contribute much at all to the net worth change. The brokerage account was up some and the savings account was down. I wasn’t too surprised by the savings account decrease. I had some money in there at the end of 2014 for large anticipated expenses in 2015. The brokerage was up about $1,000 over the course of the year. It was basically the amount I invested. The dividends I earned cancelled out the market drop, so overall I just ended up with what I put in.
I largely expect a similar pattern in 2016. Overall debt reduction should be just over $12,000 assuming I follow the same pattern as this year. I don’t expect to have to deviate from that I and I don’t anticipate needing to take on any new debt. The 401k savings will also remain the same. The only variations will be from the incentive bonus, if any, and any salary changes. I still contribute part of my bonus to my 401k and the company still provides a 6% match. If I had to guess at a rough 401k increase for the year, I am hoping for about $16,500. That would be absent of any market changes, just my and the company’s contribution. Hopefully, I can see a rebound in the market performance of the 401k as I am in negative territory for the first two months. I would be quite happy if the net worth change for 2016 was a positive 25,000 or more. That would be a nearly 17% increase, I’ll take it. How is your net worth doing?