In my most recent post, I updated my end of 2019 savings/investments tracking journal. In this post, I’m going to take a crack at estimating my total net worth.
As a reminder, my total savings (basically accounts with stocks and bonds in them) reached about $256,000 as of the end of 2019. I don’t have a ton of other assets, so this post shouldn’t be too long.
First, I own a little bit of real property. I ran a couple of “scenarios” (basically using different assumptions for market values for the property). Under a more aggressive scenario (basically tweaking Zillow’s estimate a little), I would have about $110,000 in equity.
A slightly less favorable estimate of the value yields an estimate of about $90,000. This estimate is basically taking a haircut on the comparable sales and sort of cross-checking that by applying a 7% capitalization rate to estimate rents for the property.
As a third, more conservative method (just to test the reasonableness) based on my cost basis in the property, I would have only about $72,000 in equity.
I’m going to go with that middle estimate. I don’t want this figure to be overly impacted by real estate fluctuations over which I have no control but I also don’t want to totally ignore the impact of real estate on my balance sheet (especially the imputed rent I am avoiding/hedging by owning property).
In addition to the real estate, I have a little deferred compensation plan via my employer. It is basically a deferred income annuity (or pension plan). I took my “vested” benefits and used an annuity premium estimator on a couple of annuity sales/insurer websites. This assumes I don’t accrue any more benefits and that I start drawing on the annuity at 65. I provided my birth date (so they can estimate my longevity) The calculators did not share their assumptions, but two calculators both came up with basically $104,000.
So that’s probably a reasonably conservative estimate as as these are quotes to sell me a fixed annuity (with a built in assumption of profit). Last year I did a “bespoke” estimate, but this is probably just as good and maybe more conservative. It is also has some arm’s length aspect to it, which add credibility.
To sum that up, we’ve got $256,000 + $90,000 + $104,000. So, my 12/31/19 guestimate of my net worth is $450,000.
I was a bit more conservative on the real estate and the annuity estimate than I was in February 2019 (when I last estimated total net worth). It looks like the estimate is up about $50,000 from that estimate. The conservatism in the real estate and annuity categories offset a bit of the (over $60,000) increase in securities since February. The purpose of this calculation is primarily just to motivate me and to keep a general idea of the direction of things, so that suits me just fine.
What’s Next?
I also have some investing related drafts that I’m working on. I’ve been putting some of my BRX proceeds to work. I think documenting my thought process has some real personal benefits (but there are also drawbacks, such as potential anchoring/confirmation bias or even the impulse to just do something, so you have something to write about).
I’ve also got a “savings rate calculation” draft in the works (just prompted by the ongoing discussions on personal finance twitter/blogs about how to treat various items). In addition, I’ve started dabbling in travel rewards and I am thinking about posting a little bit about that just to chronicle things. I just earned my first account opening rewards bonus. It has been pretty amusing as a hobby to this point.
Finally, I’m working on the obligatory 2020 goals post. I really do think there will be some personal benefit to putting some goals in “writing,” but there is always a delicate balance between setting goals that will provide a challenge and incentive/reward. I might throw some personal goals that don’t relate to finance in the post as well.
If you have any preferences between these topics for my next post, please let me know on twitter or in the comments.
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