In May 2017 I wrote about our net worth. I had made the declaration that we would be doing monthly status updates to share our journey towards Financial Independence. I had everything set up to do a monthly analysis on our expenses and how it impacted our net worth. May was also the month where I took my family to vacation in Southern Italy to stay with a relative, while I worked on a new tech project from home.
Changing Plans
As June ended, I began collecting data for our monthly report and came up with the conclusion that a monthly report held pro’s and con’s. I had little time to dedicate to my new undertaking in technology Although it would be beneficial to my family to review our cash flow for the month, the minuscule changes to our Net Worth on a monthly basis would not be intriguing. Truthfully, it would hardly be different than what you could read on other personal finance blogs, and I consider myself as unique.
New Objective
So I let the time slip by, focusing my time on the summer project. Which is the main reason I have not shared any updates since July. During this time I have come up with a new plan. Something that both provides for my families needs and at the same time; stands to be different.
Introducing Quarterly Updates! Hahaha…
Nothing too exciting. But the content will be changing. I found it tedious to focus on the mundane purchases. My wife and I are already very good at recognizing when an expense is nonessential. Which made monthly updates a sort of repetitive pattern of.. “Yep, we didn’t spend money again!”
In doing the quarterly updates. My focus will be primarily on Net Worth as it is affected by investment decisions we have made. I foresee opportunities and risks that will have an impressive effect upon our Net Worth. For example our recent purchase of an investment property. Which brings us to the today’s content.
Value is Relative
In May our net worth was measured to be 165,000 which is frankly not 100% accurate for multiple reasons. Value is just a word. What is valuable to me, may not be valuable to you. Each one of us is impacted by the push and pull of markets from industries all over the world.
If we attend a stadium to watch our favorite team, the prices and food provided are set by what customers buy. If no one purchased hot dogs. You could bet that the stadium would get with the program immediately. Whether it be to lower the price or remove the hot dogs altogether. As a customer we place a value on what is placed before us. If the price is too high we deem it as lacking value and use our hard earned money on other more worthy purchases.
Real Estate
The real estate market is no different. If I say my home is worth $200,000, someone could still argue that it is worth less. ( If you want to see a breakdown of the value of my townhome over the last 10 years go check out Zillow.)
“But what about the comparable homes I’ve found that were recently sold at that price?”
True, we can get a general idea of our property value in such a method. But true value isn’t real, until the moment the money and title exchange hands.
At that point I can say. I sold my home for $X and I earned or lost $Y.
“So how do I know my real net worth?”
Are they really billionaires?
Even the top 100 Billionaires are only labeled as such based on a general assumption of what the companies they own are valued. If the Assumed value of these companies falters, each of them takes a hit to their individual net worth. There are too many variables in defining value. Currency exchanges, gold, paper, coins, digital currency, real property. Each holds an assumed value when pitted against each other.
“Wow, you’re getting pretty philosophical there!”
I know, I know. The point is as I share the future updates, take into account the idea that what my net worth is today, may not be my net worth tomorrow. Hopefully, I can dodge as many pitfalls as possible in order to reach true financial independence for my family.
Come back again to see some “real” numbers….
