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Six Years Later

Kristine Hayes

I FIRST BEGAN tracking my net worth in 2013. Back then, I was newly divorced, in my mid-40s and struggling to figure out what my financial future would look like. I painstakingly logged into my various bank, retirement and investment accounts, and entered their values into an Excel spreadsheet.

As a result of my divorce, I’d lost 50% of my state pension. I did, however, receive half the equity from the sale of our home. This meant a large percentage of my net worth in 2013 was in cash. Between money market, checking and savings accounts, I had over $100,000 sitting in my local credit union.

The retirement accounts I had with my current employer were worth a little over $130,000. Following the Great Recession, I’d invested that money in highly conservative “guaranteed” and target-date accounts. The value of my retirement portfolio had fallen more than 50% during the recession and I wasn’t too keen on investing in riskier funds.

Meanwhile, at the time, I was debt-free. I was no longer a homeowner and my seven-year-old car was paid for.

I calculated my overall net worth was roughly $250,000, but I had no way of knowing what that figure meant in terms of my financial health. I did know I was woefully ignorant about how to manage and invest my money. I vowed to learn all I could about personal finance and investing, and to continue to chart my net worth over time.

For the next five years, my financial life was relatively stable. Rather than buying a home after my divorce, I chose to rent. My monthly rent was less than what a mortgage payment would have been, which allowed me to direct a large portion of my paycheck into pretax retirement accounts. I learned about investing and started to move some of my money into riskier accounts, with an eye to earning higher returns. I invested some of my cash in Treasury bonds and Roth IRAs. As my net worth grew, I felt my money was safe, even during stock market fluctuations.

Six years after I created that first Excel spreadsheet, a lot has changed. Thanks to technology, I can now look up my net worth whenever I want by simply logging into an app on my phone. The value of my various assets is updated daily and summarized for me—far easier than having to log into all my separate accounts and manually add up the values.

In 2018, I bought a house and remarried. My financial bottom line has continued to grow, although the assets are in far different places than they were in 2013. I now keep about $35,000 in cash, serving as my emergency fund. The $80,000 in equity I have in my home is nice, but my $295,000 mortgage means I can no longer claim to be debt-free. My retirement accounts, now invested in a mix of mutual funds, continue to increase in value. Today, my individual net worth is just shy of $450,000, up 80% in six years.

As my husband and I begin the process of combining our financial lives, we’re looking forward to figuring out how best to merge our various assets. Armed with the knowledge I’ve gained over the past six years, I feel far more confident about the decisions we’ll make.

Kristine Hayes’s previous articles for HumbleDollar include State of Change and A Better Trade, as well as her series of articles about her 2018 home purchase: Heading Home (I), (II), (III), (IV) and (V). Kristine enjoys competitive pistol shooting and hanging out with her husband and her two corgis.

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Langston Holland
Langston Holland
2 years ago

This is an amazing success story – what an encouragement. Not only did you find the greatest thing in life – love – but you beat the S&P 500 (dividends reinvested and taxed including mgt fees) over those 6 years (assumes 4/2013 – 4/2019). 12.5% vs. 12.3%. Never short someone with good aim! 🙂

Kristine Hayes
Kristine Hayes
2 years ago

Thanks Langston. I’m fortunate to have access (through work) to a number of low fee funds. I also found that the more confident I became in my knowledge of investing, the more willing I was to take some risk with my money. It’s worked out well so far but I’m always keenly aware that a large portion my net worth is at the mercy of the market.

Thomas Taylor
Thomas Taylor
2 years ago

Good luck in your merger! I started preparing a net worth statement back in 2006 and it’s been interesting to watch the changes and track our progress. I feel comfortable we are on the right track. But another reason in doing this was to provide my wife a clear roadmap as to what we have and where it is if anything ever happens to me. She is capable and could take care of herself in the event, but it just doesn’t interest her as much as it does me. She will give me an hour or so once a year to review this together, but then she’s back to her life.

Kristine Hayes
Kristine Hayes
2 years ago
Reply to  Thomas Taylor

I completely understand. I have a notebook, with all my relevant financial information in it, so my husband has a guidebook to follow should anything happen to me.

Tom Murin
Tom Murin
2 years ago

You got a late start on learning about personal finance and investing, but you are doing great. Too bad more folks don’t make the effort to learn these skills. I don’t think it’s too difficult, but I believe the issue for most is that there isn’t an immediate benefit – no dopamine hit. You benefit over the long haul – a lifetime.

Kristine Hayes
Kristine Hayes
2 years ago
Reply to  Tom Murin

Thanks Tom. I recently attended a seminar designed to help people get ready for retirement. I was shocked by how many people didn’t have any grasp of their financial situation. There were folks who didn’t know where their money was invested, how old they needed to be to access it or have any idea of what the average social security benefit was. I’m thankful I made the decision to learn about my finances and take control of them before it was too late.

bart37064
bart37064
2 years ago

Congrats on your better financial journey! I too found myself suddenly divorced in my mid-40’s. As good fortune would have it, my former spouse was inept with finances. She let me take every penny of my 401-k and IRA. We did agree to split some consumer debt, which totaled a few thousand dollars.

Since then, we live debt free except the house my now new spouse and I purchased. We have, however, been very prudent and frugal. We do not aspire to the hedonism of today’s consumer-driven society. We live comfortably and do well.

My only advice is to merge your finances carefully, purposefully and completely. This requires, faith, trust, and love.

Roboticus Aquarius
Roboticus Aquarius
2 years ago

Great work! I think it’s interesting to understand the trigger when it comes to taking ownership of your financial life. Almost everyone seems to have one. Mine came when I was about 30, and I realized the plan my wife and I signed onto for our post-tax savings (through a work-recommended financial planner) was everything we wanted to avoid… A wrap account, front end load funds, high fees, and a we’d dumped a healthy amount in there. This $5K mistake galvanized me.

I started tracking our returns across our three main investment accounts. I added in our other assets and liabilities so we could track net worth. I now have 40+ tabs in this worksheet, covering everything from future cash flows to (tiny) stock grants.

One thing people often don’t realize is that while your contributions are not part of your calculated returns, they are part of your net worth growth, as is your equity in a leveraged house, or your interest in a business. While our retirement investment CAGR is 8.8% over the past 24 years, our net worth has grown at 12% CAGR over that same time (assuming a conservative valuation for our business and home). 12% CAGR means it doubled every 6 years (rule of 72)… which means it has now doubled 4 times in those 24 years. Mathematically that’s 16x the starting figure. Reading that back kind of blew my mind so I had to check our actual numbers. I was half surprised to find that yes, it’s almost exactly 16x.

Kristine Hayes
Kristine Hayes
2 years ago

You make a great point about contributions-those were a large reason my net worth increased so rapidly over the past few years. I went from contributing almost nothing to my retirement accounts to putting in between $12K and $22K a year into them. This was in addition to the $6K to $7K per year my employer was putting in.

My contributions have slowed down considerably over the past six months, since I purchased my house. The mortgage, insurance, property taxes and home improvement items take a big bite out of my paycheck. But I’m still making contributions and my employer contribution is fixed (an amount equal to 10% of my salary).

Of course, I also haven’t factored in my pension or social security benefits into my current net worth. I’ve seen different methods for adding those type of benefits into a NW calculation. Some folks suggest taking the monthly amount you’d receive at age 65 and multiplying that by 20 years and then adding it in. If I did that, I’d be a net worth millionaire!

Thanks for your comments!

Roboticus Aquarius
Roboticus Aquarius
2 years ago
Reply to  Kristine Hayes

Exactly: those consistent large contributions do wonders for your net worth. When you’re starting out, it’s all about how much you can save. When you get to the final few laps of the race to accumulate, it becomes more about your returns than your contributions. Not that I ever contributed less than 10%, but I used to contribute 18% before kids!

I think whatever framework allows you to grasp your financial picture is the one you should use. There are several legit ways to frame your financial picture.

For example, I look at an annual income that I want in retirement (100% replacement) in nominal terms. Different folks prefer to do all calcs in real numbers; I don’t need to see it that way. I take 70% of my promised Social Security and back that out of my annual income target. What is left is my cash flow target, and I need to save about 25 times that (4% rule inverted). The other 30% is contingency. In my asset listing, I only include the vested cash value of my pension; I.E.if I were fired tomorrow how much lump sum would my employer pay out. I’ve already had my pension slashed multiple times, and it’s relatively small now, so I just treat the eventual cash flow as contingency in my retirement income calculations… the payout is over 6% if I annuitize it, and I will.

Ben Franklin‘s statement about expectations is applicable to investing: Always expect ( plan for) the worst, then when it doesn’t happen you will be pleasantly surprised!

Kristine Hayes
Kristine Hayes
2 years ago

Looking back, I wish I’d saved more money when I was younger. I doubt I’m the only 50-something-year-old who thinks that. But I’m happy I was able to make some substantial contributions for a few years and that the stock market was growing nicely during those years. I’ve started to move some of the money into more conservative funds, as I hope to retire in a few years.

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