New Page – Freedom Fund / Net Worth


I’ve added a new Page to the Blog and it’s under the heading ‘Freedom Fund / Net Worth‘.

Why bother?

I’ve been spending more time reading other Blogs whilst I’ve been recovering from my operation and I’ve come across Net Worth quite a lot. I’ve been meaning to work out what my Net Worth is for a while now and I thought it was about time to find out. 

Before working out my Net Worth one evening, a weird ‘Truman Show’ style coincidence occurred. I was sat at my computer for the evening and before calculating my Net Worth I decided to check out Bloglovin to see what posts had been published. I came across one from Joe @ Budget Breakaway, the title was – How To Calculate Your Net Worth. Freaky!

If you haven’t calculated your Net Worth before, I would recommend checking it out. Joe discusses what you need to know about Net Worth, How to calculate it, a free Net Worth calculator, and some other great resources to working it out. Thanks for the help Joe!


Calculating my Net Worth
The first part to calculating your Net Worth is finding out how much money you have in assets. These include your house, car, possessions, pensions, savings, investments etc. Thankfully I’ve been tracking most of these assets already so it was a case of adding them together. 

The one asset I hadn’t been tracking was my home equity. I contacted the mortgage company and got an ‘estimate’ to how much of our mortgage we had left. I then searched Rightmove to see how much houses were in our area that were equal to ours in size and quality. Once you subtract the mortgage from the house value – you have your home equity. I took the final step of calculating my share of the home equity and added it to the rest of the assets. 

The next stage was calculating my liabilities. I had already accounted for our mortgage in the home equity section in assets. I don’t have any other debts apart from my student loan. This was another account that I hadn’t been keeping track of on a monthly basis. My method up until now was to receive the annual statement in the post, and file it away with the previous years. During this 2 minute process, I’d look back at how it was coming down year after year, and then I’d put the file away again. 2015 is going to be different!

I decided to calculate a monthly average of my payments and the interest from the Student Loan Company. I’m now going to be using that calculation on a monthly basis, until I get my annual statement where I can then update to the exact amount. I estimate that the loan will be paid off in full when I’m 39. I’m hoping it will be even earlier than this as I’m likely to earn more money and pay more off each month as I work through my 30’s.    

If you have any other forms of debt – Credit cards, Loans, Car finance, or informal debt to friends that have lent you money etc. You add these together and subtract the figure from your assets to get your Net Worth


Was it worth it?

The exercise of working out my Net Worth has helped me gain some visibility on my home equity and student loan. For that reason alone I’m glad I spent the time working it out. It didn’t take very long either. 

This figure isn’t going to be my priority, but I plan on tracking it every month and setting myself an annual goal to shoot for. For 2015 I plan on increasing my Net worth to £80,000

The process of working out this number also brought me to adding up the accounts that really matter to me – My investments! When I add these together they form a powerful bond that creates the Freedom Fund. Not too dissimilar to when the Power Rangers morph together to create the mighty Zords!


Freedom Fund

My freedom fund consists of my NISA investment account where I do DGI. This account can be seen in my ‘Current Portfolio’ page. I have a separate taxable share account which I decided to fund with money I had sat in a cash ISA. I will continue to fund this account once I’ve passed my £15,000 annual allocation for the NISA. The final account is the smallest, but biggest yielding, Peer to Peer Lending. I funded this account a couple of years ago, and I’ve used the income from it to fund the NISA investment account.  

These three accounts will be responsible for creating the income that allows me to become FI. This is my priority. 

I will track this figure every month with my Net Worth and I’ve set an annual target for it too. For 2015 I plan on increasing my Freedom Fund to £50,000. This will be 20% of the £250,000 Ultimate Goal I have for FI. 

Both my Net worth and Freedom Fund Goals have been set high. I currently don’t earn enough money, or save enough to invest with that will get me to these totals. I will need to figure how how I can increase my income and reduce my expenses to have a chance of achieving them. 

Thank you all for your kind words of support. Wish me luck!


Do you track your Net Worth? Have you found it useful? What do you think of the Goals I’ve set for 2015? Have you started with your 2015 Goals yet?

0 Comments

  • Financial Independence UK

    Reply Reply 23rd November 2014

    Hi Huw

    I have just calculated my net worth, and will be posting it this week on my website.

    I have only included savings, investments and house as assets in my calculation (I have excluded car, jewellery, possessions etc), as I don't see the other items as assets.

    Hopefully my worth will grow each year as I add to my investments and receive and re-invest my dividends.

    Best Wishes
    FI UK

  • laura

    Reply Reply 23rd November 2014

    Hi Huw
    I track out net worth – just house cash etc – just for motivational purposes. Like you, and most FI'ers, I'm more interested in the income generated than anything else. It all gets a bit complicated though as I have a deferred company pension (previously Final Salary) and I have no idea how much it's worth – I just know approx what it will pay in a few years.

    Having read you post it looks like we're shooting for similar amounts of FF. My husband is 35 and we're hoping he can be out at 45. By then I'll be able to access my pension (as I'm old lol!) which should cover our travel adventures! 😉

    Next year our goal is add another £15,600 to our S&S NISA.

    Good luck in 2015!

  • Huw Davies

    Reply Reply 23rd November 2014

    Hi FIUK,

    Is that a weird coincidence or were you interested yourself? Either way, I found it a useful exercise and I hope you did too.

    I striped my assets down, but I included cash. I didn't include the car, my racing bike etc as they're only going to lose money gradually over time. I'm more interested in the items that will earn me money.

    I'll keep an eye out for your post. All the best!
    Huw

  • Huw Davies

    Reply Reply 23rd November 2014

    Hi Laura,

    Yes, it's all about those income generating Assets isn't it! I'm not fussed about including expensive items sat at home.
    Another reader, Weenie, had a similar issue with not knowing the value of her Pension. If I didn't have instant online access I think I would discount it like you two.

    It's nice that we have a similar FI figure in mind. That would suggest that our monthly spends are of a similar par and we have something in common there. I don't have a huge salary, it floats around the £30k mark as I'm on commission and bonuses, but my expenses have been driven quite low. It hasn't been easy dropping it down but I'm happy with it now. How have you found it?

    FI in ten years is an exciting prospect, especially when you consider how quickly the last year has gone. I'm actually really excited about getting half way there, when the dividends really start to mount up.

    Thank you for stopping by and sharing your thoughts. I wish you all the best for 2015 too!

    Huw

  • Starla

    Reply Reply 23rd November 2014

    Hi Huw – I always calculate my net worth, and of course, there's a spreadsheet for that, where my monthly savings feeds into it. I only calculate using cash savings and investments. I exclude my pension, although it's worth a bit, it's DB so I'm never sure on an accurate figure, I should try to work it out. I agree with including house equity in net worth, but I would less inclined to look at Rightmove asking prices and use Mouseprice sold prices, asking v's sold are different. Did you halve the equity as it is shared between two? Agree with your comment above that it really doesn't matter what you earn, it's all about your outgoings, and low outgoings are king, and key to early FI. Case in point, my work are about to make 20% redundancies, and it's the people on 6 figure salaries that are panicking, and those of us on lower salaries that aren't. It's all about low outgoings and a FU fund! Thanks for another interesting peice.

  • weenie

    Reply Reply 24th November 2014

    Haha, love the Power Rangers analogy – very apt too!

    Not sure how I've missed it before but it appears that we are both shooting for the same number, that of £250k. However, you're aiming to do it in 10 years, whereas I've given myself 15 years! Obviously, I'm not stretching myself very much with my target (or I'm not that confident at how my investments will perform) but I intend to review my calculations anyway at the end of this year to bring it up to date.

    I haven't set my 2015 goals yet although I have a basic idea of what I'll be aiming for. £50k is a great goal to go for – big and clear, so a lot of incentive there – good luck! 🙂

    Re my company pension – years ago, the annual statement used to give a figure of what it was worth but it doesn't any more. It just gives an indication of what pension I would get now, if I were to stop paying into it and also what I could expect when I'm 65, having continued paying up to the day I retire. Actually, the latter is one thing I've not properly considered – if I retire early, then my company pension will be a lot less – need to recalculate there too, maybe go for worse case scenario!

  • Huw Davies

    Reply Reply 24th November 2014

    Hi Starla,

    You certainly like a spreadsheet don't you. I'm also a sucker for a spreadsheet, I have them for everything.

    You make a valid point on Rightmove vs Mouseprice, I didn't consider to review 'sold' prices over 'for sale' prices. The problem is we were the last people to move into our cul-de-sac and that was 5 years ago. I'll review how many similar sized houses sold recently near our location. Thank you for the tip!

    With regards to equity – I own a smaller portion, as I was in debt 5 years ago. Miss FFBF put in the majority of money to allow us to get the house we have. I'm very lucky to have such a generous and understanding fiance.

    I want to earn more money and that's going to be one of my goals for 2015. I want to expand on some side hustles, but it isn't my strong point. I would say I pride myself on my low expenses but I think I've worked quite hard to get them where they are. I could spend a lot more time on trying to find more cuts, and I'm sure I'd find some, but I don't think I'll get as good a return if I used that time to review how I can increase my income. I will continue to work hard at my job and see if it opens up any opportunities, and in the mean time I want to get increase my side incomes as I feel I have more control in that area.

    Thanks again for stopping by. Speak soon!
    Huw

  • Huw Davies

    Reply Reply 24th November 2014

    Hi Weenie,

    I'm glad you liked that. I used to love those Power Rangers back in the day!

    Likewise on the £250k, I thought I would have spotted that before. Funny enough, I spent some time this weekend working on some possibilities to how I could make it to FI by 40 and the results were interesting! The long and short of it – I'm confident I can make it to Financial Security before 40 (cover the cost of bills), and it's going to be tough on my current path to make it to where I would earn the same amount that I am now in passive income. I predict that on my current path I'll get there in 12-13 years.

    I need to do something that will shake things up. I think my opportunity lies in creating extra income streams. I'm really determined to hit the total before 40, partly because of the name of my Blog and because I love working to a target….why can't I work a way out?!

    Are you going to work your 2015 goals out in Dec or the New Year? £50k is a big ask for me but again I think £42-£45k is achievable. Why not stretch it out to the big one? I'll be immensely proud with having a £50k portfolio within 2 years. Thank you for the well wishes, I need them!

    I feel for you on the pension front. As I mentioned above in the comments section, I think I would also discount it in my assets if I were in your situation. I don't like the fact you can't track it. I would just see it as an added bonus closer to my retirement age.

    Thanks for the support. I look forward to hearing all of your plans!

    Cheers
    Huw

  • weenie

    Reply Reply 24th November 2014

    Hi Huw, I'm likely to work out my 2015 goals in December but will include them in a New Year post, ie some financial Resolutions! I may go for a big goal too, you've inspired me to stretch to a big one! 🙂

  • Tawcan

    Reply Reply 24th November 2014

    Great idea, I might do this in 2015. I have a lot of ideas for my blog in my head but with business travels lately it's been hard to execute these ideas.

  • Huw Davies

    Reply Reply 25th November 2014

    Hi Weenie,

    That makes perfect sense. That was my initial plan too, but all of this idle time recovering got me thinking!

    You'll have my full support either way!

    I'm not sure about you, but I hit all the my goals set for 2014 (not official but very likely to happen), at the start of the year I thought all of these goals would be really challenging. They weren't easy but I rose to them and hit them comfortably in the end. I want to see what I'm made of now for 2015!

    Huw

  • Huw Davies

    Reply Reply 25th November 2014

    Thanks Tawcan!

    It can be a little frustrating when your day job slows you down from your hobbies or goals outside of work. Now that I'm back at work I feel it more than normal too.

    I look forward to seeing your 2015 goals, and the execution of some of these ideas!

    All the best
    Huw

  • DivHut

    Reply Reply 25th November 2014

    Thanks for sharing and creating a net worth page for us to look at. While I still don't have that published on my blog yet it might be helpful for others and myself to actually see all assets and liabilities on one page that is continually updated. I would admit that my page wouldn't be too exciting as most of my net worth is in stocks and other accounts and have no long term liabilities. No house, own my car and carry CC debt that's paid off every month. Still, seems like a good idea.

  • Dividend Mantra

    Reply Reply 26th November 2014

    Huw,

    Hmm, a Freedom Fund. I seem to recognize that name! 🙂

    Great looking net worth there. Love to see very little debt. Debt is like an anchor that will keep you drowning. I'd rather float along the surface.

    Keep it up!

    Best regards.

  • Huw Davies

    Reply Reply 26th November 2014

    Hi DivHut,

    No problem at all. It's useful for me to track to everything and why not share that info with you guys. Perhaps someone else can find some use from it too.

    I thought that my Net Worth display was pretty thin on the ground initially, but I'm glad I worked it out. Its a fairly straight forward calculation and it doesn't take too long either.

    If you do decide to go for it, I think it'll look very healthy with a lack of liabilities weighing it down.

    Thanks for sharing your thought, and all the best!

    Huw

  • Huw Davies

    Reply Reply 26th November 2014

    Hi DM,

    Direct plagiarism has got people into a lot of trouble over the years. For what it's worth I had no intention of searching the internet for a suitable name and stealing someones, but it is a bit a coincidence that as an avid reader of your Blog that I came up with that name!

    As it happens, I was planning on changing the name of my Blog to 'Divi Mantra' and moving to Florida too. 😉

    Joking aside, I didn't realise the connection until your comment, and I take zero offense to changing it if you have an issue with it. I really don't mind what I call it, please let me know.

    Thanks for the kind words. When seeing the Net worth, I have to say I was slightly disappointed, as I was expecting it to be a little higher (not sure why). Anyhow, it is was it is, and you're right I am pleased about my lack of liabilities and I'm eager and ready to boost that total for 2015!

    Thanks for stopping by and making me feel bad. 😉

    Huw

  • Dividend Mantra

    Reply Reply 26th November 2014

    Huw,

    No hard feelings at all. 🙂

    But I won't hold you back from moving to Florida. The weather's beautiful!

    Best regards.

  • Huw Davies

    Reply Reply 27th November 2014

    Glad to hear! 🙂

    All the best
    Huw

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