Calculating Net Worth

[This is a scheduled post; I'm away until August 6, when I'll do an end-of-July summary.]

Net worth is "duh" levels of simple: take your assets, subtract your debts, voila. Except if you overthink it, and of course I overthink it. I have a Ph.D., it's basically my job.

A major point of contention I see -- and don't have to deal with -- is with real estate. Nobody actually knows what their home is worth (until they try to sell it), so trying to calculate equity with precision is tough. Meanwhile, it's pretty clear what the mortgage is!

Many people include the presumed resale value of their cars. I did that when I first started using mint.com last year, and if I'd kept up with it, I'd have been in "positive" territory a couple of months earlier. But ultimately I decided that the car wasn't really an asset in the sense that I was comfortable with. If tough times hit, I still wouldn't sell it; I need it for basic life stuff. So just like I don't include the value of my one nice piece of jewelry, or my computer, or a few other things that I theoretically could sell but never would, I don't include the car. I might feel differently if it weren't ancient and cheap. That is, if I owned a new-ish car, I might list it because I'd be able to trade down if I needed to. But really there's nowhere to trade down to, given my 14-year-old car.

If I had a house, though, it would always be theoretically sellable for me if I lost my job or etc, so I probably would count my best guess at it in my net worth.

The other sticking point to me is: should I count cash that I know is about to disappear? I generally calculate on the last day of the month, that is, the day before I send in my rent check. My budget suggests that I'm probably going to spend about half my income in any given month. I feel like a more honest net worth might include only the content of my savings/retirement accounts and ignore the money dedicated to daily expenses. However, I am really lazy, and sorting this out would take a lot of work!

So, the end result of my net worth calculation is this: I take the contents of all my checking/savings accounts (I have a slew of them) and add that to the total of my retirement account. Then I subtract my credit card debt (and used to subtract student loan debt. Hey, doesn't that "used to" sound nice?). It might not be the most accurate number, but it feels pretty close to what's right.

Do you guys do something different?

On Dodging Bullets

On a whim this morning (I have weird whims while I'm having my first-thing cup of coffee) I looked at my tax returns going back to 2007, which is the first time I filled out a pdf and thus have a copy saved on my computer. It was also the first full year I was in graduate school. It turns out that from 2007 through 2012 (the last full year I was a grad student), I made anywhere between $25,000 and $35,000 a year. While single and living in New York City.

My first thought is that it's a good thing I don't have any really expensive bad habits, like drinking or gambling. My second is that it's a freaking miracle I made it out with only $19,000 in student loans.

On Not Being Cheap

It's going to be a slow blogging week -- I have two short trips coming up later this week/early next week, so not only won't I be around much, but my end-of-July post will be several days late, most likely. (Not that anyone cares that much! :-)

I also had a guest this past weekend, and since we have mutual college friends that live here, not only did me and my friend go out to eat twice, but we also bought food so we could have our friends over for dinner. And even though all this pushed me over budget for the month, and I'm having some mental trouble with that, I think I need to relax.

The two meals out were about as inexpensive as possible: we had pupusas on Friday night for less than $10 for both of us (I paid) and breakfast at a diner on Saturday morning for somewhere between $10 and $15 (she paid...and omg, as I write this, I'm realizing that I was still sleep-deprived enough that I forgot to leave a tip on the table, as I'd promised to do when she went up to pay the bill. Jeeeeeeeeeeeeeez. Sorry, waitresses.) So, even though if I'd been on my own I would have eaten both meals for 'free' at home, eh, I can't get too worked up.

The shopping trip for dinner is the one that broke the budget. Between the farmer's market and the grocery store I spent $100 (!!!! -- nb, not everything was just for the one dinner, some of it was pantry stuff and household stuff I needed for the future. But it was kind of an unfortunate amount anyway.)

I'm not really sure how I'm going to handle this in the future. Right now I'm handling cooking for others on a budget by doing it less, instead of by finding less expensive ways to do it; it just seems wrong to have people over and not feed them something interesting and made with high-quality fresh produce :) Plus, when you're cooking for more than one, quantity issues come into play. The title of my post started off as having decided that I did put a priority on not being overly "cheap" -- as obsessed with money as I am lately, I don't want to get so obsessed that I stop having people over, you know? But as I type, I'm feeling like I ought to spend more time thinking about how to really cut those expenses down. Like, could I make a pasta dish with vegetables and cheese instead of the four kinds of middle eastern salads I made on Saturday night! I don't know. Deserves more thought, I guess.

The most minor retirement fund milestone ever

I just got the confirmation statement that my employer set up my new 403(b) account -- there's no actual money in it yet (and sadly no employer match) but at least it looks like things will be good to go for my next paycheck.

Actually the whole thing is doing reasonably well. It's still super tiny, but I've added another $500 to my Roth IRA this month (all side hustle income) and the whole thing has collectively grown about $170 since I started it. It's good to watch that, although I'm not really looking forward to my first sustained market downturn, whenever that shows up.

Anyway, all basically good, and July should be a respectable if not spectacular month on most fronts.

Mood Troughs

I'm in one! There are a few external reasons why I'm a little more anxious than usual this week, but it's definitely playing out in money worry (as usual lately.) Objectively, I know things are just fine.

• My net worth is not only still positive, it's grown by a few hundred dollars from last month (and I expect it to grow another $1500 or so before the end of the month)
• My retirement account is still tiny, but I'm making (relative to my income) nice big contributions every month, and have made it impossible to change that easily by having most of it deducted from my paycheck.
• I have a solid plan for what to do with my income this year (debt repayment, short and long term savings, and some planned spending in the travel and car-improvement categories) and reasonable confidence that I will also have income a year from now, although I'm not quite sure where it's going to come from yet
•  I've kept my basic expenses for housing and transportation about as low as they could possibly go unless I were living at home for free
• I'm going to be "living on last month's income" as of August 1. (This is a YNAB thing where you save up enough money to be equivalent to an entire month's income, so that you can use July's income for all your August expenses, August's income for September's expenses, etc. It makes it easier to budget with their software, and also gives you a month's cushion in case of things like job loss. I realized a week ago that I could manage this right now if I didn't make a debt payment or put anything in savings during July except for the scheduled paycheck deduction for my 401(k), so I decided to just take the plunge.)

And yet, here we are, being anxious.

• I can't quite get my numbers to line up in YNAB vs my online bank account records, and even though the discrepancies are fairly small, they're still worrisome. Where did I go wrong?!?!? 
• Even though I think it's a solid decision that will make my budgeting life easier going forward, the idea of not making a substantial debt payment in July makes me a little crazy. I want to see that slider going down, not staying stable or even going up a bit.
• Also making me crazy: the number of not-quite-planned-for expenses that have either appeared, or are looming. These include: buying plane tickets for a wedding (and whatever expenses I incur while traveling); the electricity-related food expenses for this month; some car stuff (registering it in a new state, and it'll need an oil change soon and possibly some more work, some of which is optional but would really improve my life, and some of which might not be optional); an unplanned trip into Nearby Really Big City that included two meals out, gas, tolls, etc); and an impending visit from a friend this weekend, which I'm really excited about but which means probably one meal out and also buying groceries to have mutual friends over for a nice meal; medical co-pays for upcoming therapist and dentist visits. I'm hoping to start a "slush" savings fund sometime this fall (separate from my emergency fund), to handle stuff like this without so much anxiety, but obviously I'm not ahead of myself enough to have done that yet.

Well, I don't know if typing all that out made me feel better or not, but I think it does help to just share the "blah" with the universe sometimes, so...here you go, universe! You're welcome!

Ways of budgeting

I still don't know how much I'm going to make on a normal paycheck (I did get paid on time this week, but it was weird because none of the 403(b) or tax withholding paperwork had gone through yet) so I can't work out a proper budget until the end of the month. But I was thinking today about the different ways people can use a budget.

Right now I'd say I see a budget as a disciplinary tool. If I want to save X amount, then I only have Y amount to spend. I've set my various discretionary budgets (groceries, entertainment, that kind of thing) pretty low, low enough that I am constantly at a low level of stress about them. Sometimes that works out pretty well. Like, today I really wanted to stop on the way home from work and buy a scone or a brownie or something. But I knew that would be in the range of $3 and my food budget for the month is on the brink of not making it. So I came home instead and made brownies with stuff I already had. But a lot of mental energy went into that decision!

I can envision another way of budgeting that would be a lot more relaxed. Right now I've set my food budget at $250 a month, and I also have $50 "pocket money" a month, and I suspect about half of that will end up going to food too. Probably, if I set my food budget at $400, I would occasionally have to stop and think, and I certainly wouldn't be booking reservations at Per Se. But I also would be able to pretty much pick up whatever I wanted in terms of groceries, and eat out a couple of times a month in a low-key way. If I set it at $500, I could have all those things and I'd probably have money left in the category to roll over and save up for big events like hosting Thanksgiving or something.

In that case, budgeting is less a tool to keep the less than totally frugal in line, and more a way to roughly allocate income to different categories. If I magically start making more money next year, I'd like to switch to that way of budgeting; what I'm doing now is good for me in some ways (I probably didn't need that scone anyway!) but also really is a kind of permanent stressor.

How do you use your budget? Is it more about restraining you from reasonable things that you can't afford, or more about giving guidelines?

Personal finance and personal crisis

I just read a beautiful reflection on the writer's father's death. It's behind a paywall, but I'll link the full thing below just in case. There were a number of very striking passages, but this jumped out at me given the last six months' worth of developments in my life:

Many years ago, an old friend—an artist who deals with the alchemical—told me that after his father’s death he left the hospital, went home, sat down at his desk and, for the first time in his life, balanced his checkbook. I asked him how that went.

Good, he said. I had more money than I thought.

I might have mentioned in passing that what inspired my retirement account, my dedication to debt payoff, and this blog (all born at the same time in March) was a bit of a mental health crisis. No need to be alarmed -- no hospitals were involved -- but it definitely qualified as a major event. I was, and am, having a lot of trouble dealing with life instability, and I'm haunted by depression.

It's not the same position, but I recognized that instinct, that sense, in the midst of crisis and even trauma, that putting your finances in order is the thing to do. Money's not the real problem, in either case, but the real problem is unsolvable; in the meantime, you can get your head around balancing the checkbook or making the budget.

The article is Dave Byrne, "My Father's Files".