Whether you’re in debt and trying to get out, doing ok but want to know if you’ll be able to retire, or just starting out on your own, knowing your net worth and being able to easily keep it up to date is essential to understanding your finances. And it’s easier than you think.

What you Have: Your Assets

First, tally up what you own:

1. Bank Accounts. There are two ways to go about this. The easier way is to note the ending balance on the latest statement for each checking and savings account you have. The downside of this method is that it does not reflect checks you’ve written that have not yet cleared, so will overstate your balance somewhat. If you keep your checkbook and savings account records up to date, you can instead note the actual balance, including all checks that have not yet cleared. Whichever method you pick, stick with it. Switching back and forth will be less accurate than using the statement balance.
2. Retirement Accounts. Identify all the retirement accounts you have: personal IRAs, 401(k) and 403(b) plans, defined benefit pension plans, and the like. This is often the hardest part of toting up assets, because many people lose track of plans they’ve participated in with past employers. Once you’ve identified them all, gather the latest statement for each and note the balance. For pension plans, note the cash equivalent amount. You may only get such information once a year. That’s ok; just use the latest information you have.
3. Investment Accounts. Find the latest statement for each non-retirement investment account you have and note the ending balance. Such accounts include brokerage accounts, mutual funds, and money market funds.
4. Physical Assets. Physical assets are things you can touch or hold. If you own a house or other real estate, determine as best you can how much you could sell it for. Don’t try to calculate the equity (that is, the difference between the house’s worth and how much you owe on the mortgage). Put the entire value in here; the entire mortgage balance will be added to the list of debts. Most other physical assets do not go in the net worth chart. For example, do not include your car or other expensive items unless they are truly collectable. Even then, be sure to use the resale value. Be conservative in your estimates. Many collectors are shocked when they realize they can only get a small fraction of what they paid when selling a collectible.
5. Cash. I don’t include cash in my list of assets. If you keep cash on hand for emergencies, separate from the cash you use for day-to-day purchases, you should count it. Otherwise, don’t bother.
6. Other Investments. If you own your own business, or part of someone else’s business, that is not traded on a stock exchange, assigning a value is very tricky. Err on the side of underestimating the worth of such investments.
7. Debt Owed to You. If someone owes you money, that’s an asset – but only if you reasonably expect it to be repaid.

What you Owe: Your Debts

This is the not-so-fun part of the process. Many people put off financial planning because they do not want to see a list of all their debts in one place. If your stomach feels like it’s in a knot just thinking about it, take a few deep breaths. The uncertainty is usually worse than the actual knowledge.

Start by jotting down all the different debts you have.

1. Home Loans. Home loans include mortgages, home equity loans, and home equity lines of credit, but do not include rent. For each loan of this type, find the outstanding balance. For mortgages, this may be called the “payoff amount.” If it’s not included on your latest statement, it may be available online or by calling customer service.
2. Car Loans. Include not just loans used to purchase a car, but also any loans you may have taken out and secured with your car (often called “title loans”). Find the current balance or payoff amount for each one.
3. Consumer Debt. Find the most recent bill for each credit card you have and make a note of the total balance owed. Use the number next to “New Balance” or “Ending Balance” on the statement. Do the same for any other consumer loans you may have taken out, such as furniture purchased on an installment plan. If you have a credit card that you pay in full every month, you should not include it in the list of debts.
4. Student Loans. Again, find the remaining balance or payoff amount for each student loan. Include all such loans, whether they are in deferment or not.
5. Other Debt. If you owe any other money to anyone, include the total amount owed.

Putting it all Together

The best way to organize all this information is in a spreadsheet. I use Excel, but there are free alternatives available such as Google Docs. If you’re not familiar with spreadsheets, this is a good tutorial. To set up your spreadsheet:

1. In the second column of the top row (typically called cell B1), type the date you are calculating your net worth as of. I find it easiest to use the first or last day of the month. The ending dates of your statements will probably be different from each other. That’s ok – just use the last statement on or before the date you choose.
2. In A2 (first column, second row), type the word “Assets”. In A3 list the name of your first asset. Use a name you’ll recognize, such as “Checking Account”. If you have more than one checking account, add the name of the bank. Continue to list your assets in column A. In column B, fill in the balance for each asset. At the bottom of the list of assets, add a formula to sum the assets. In Excel, you can do this by selecting the first blank cell after the list of balances and clicking the button labeled Σ.
3. Skip down a couple rows and add a label “Debts” in column A. List the names of your debts below that label in column A and add the balances in column B. Add a formula to sum the debts.
4. Skip down a couple more rows and add a label “Net Worth” in column A. In column B, next to that label, add a formula to subtract the sum of the debts from the sum of the assets. In Excel, the formula would look like: “=B8-B16” (don’t type the quotation marks), where B8 is the cell that contains the sum of the assets, and B16 is the cell that contains the sum of the debts. Once you enter that formula, you’ll see your net worth.

Sample Spreadsheet

Here’s a sample I made using Google Docs containing the December 2010 numbers for a hypothetical couple, Alice and Bill:

You’ll notice I added a bit of formatting; the tutorial I linked above can tell you how to do this if you want. You’ll also notice there are three labels I haven’t mentioned yet, all containing “Net Change”. These rows will be used to calculate the change from month to month. But before the calculations can be added, you’ll have to add another month’s worth of numbers.

One Month Later: Tracking Net Worth Over Time

Each month, you’ll add a column containing the new balances. You should obtain these balances in the same way you obtained the original balances: by looking at the latest statements for each asset or debt and obtaining the current balance or payoff amount, as applicable. You can’t simply subtract the payments you made during the month from the old balances to calculate the new balances. It’s a sad fact that loan balances do not go down by the same amount you pay each month, because a portion of each payment (sometimes most of each payment) is used to pay interest.

Here’s Alice and Bill’s spreadsheet for January:

The new column is essentially identical to the first column of balances: two lists of numbers, each with a sum at the bottom, and a cell showing the first total minus the second total. The key difference is that each “Net Change” row has a formula in it in the new column. This formula is January’s total assets minus December’s total assets, January’s total debts minus December’s total debts, and January’s net worth minus December’s net worth. The formula would look something like “=C8-B8” for the assets, “=C16-B16” for the debts, etc.

If you add a new asset or debt during a month, insert a new row and add in the new balance. Be sure to check your formulas to be sure the new item is included in the sum. If you remove an asset or debt, leave the row intact but enter 0 for the amount going forward.

You should reevaluate the worth of assets that don’t have precise balances, such as your house, once a year. There’s so much guesswork involved that there’s no point in doing it more often.

Here’s what a year’s worth of data would like for Alice and Bill (use the scrollbar at the bottom to view the rest of the data):

In December 2010, Alice and Bill’s net worth was negative $22,000 – they owed $22,000 more than they owned. By November 2011, their net worth was negative $11,000. Less important than the actual numbers is the trend in those numbers over time:

This graph shows the power of the net worth chart. First, it’s a potent reminder that paying off debt increases your net worth: in the long term, it’s the same as saving. Second, the graph allows you to see a year’s worth of data in an instant so you can focus on trends rather than temporary swings. Third, it lets you focus on where you’re headed: if you are in debt and feeling discouraged, hide the dollar amounts on the left axis to be reassured that you’re moving in the right direction.

Financial planning is about making sure that line goes up, not down, over time. There are times when it won’t – during the latter stages of retirement, possibly; during school, probably. And there will be many individual months where it goes down, such as when making a big purchase you’ve been saving for or when you have to live off savings during times of unemployment. But in general, the line should go up during your income-earning years.

Much of this series will be about helping you want to make decisions that send the line up. By keeping a regular eye on your net worth, you will be able to see the long-term effect of your financial decisions. I’ve found that this not only helps people save, but also helps people spend money with less guilt and more satisfaction.

The net worth chart is a series of snapshots in time. The next step will be to examine what goes on between each of the columns in the chart by tracking cash flow.

I like to cook. Really, I do. It’s just that I don’t seem to actually do it very often during the week. I come home late from work and don’t feel like making anything more complicated than a hotdog or peanut-butter sandwich. And when I do come home ready to cook, I often have nothing to cook, because I haven’t gone to the grocery store. I was looking through the cupboard trying to find something other than pasta and tomato sauce to eat when I noticed a can of black beans. I like refried beans, and thought a smoother, more liquidy version would be good as a pasta sauce. Then I ordered a pizza.

But I eventually came back to the idea, and here’s the result. It’s low fat, yet tasty and satisfying. With the beans and whole wheat pasta, it’s a good source of fiber and complete protein. Everything except the yogurt can keep for months, so it’s forgiving of my grocery shopping lapses.

By the way, the spice blend is an excellent coating for sautéed shrimp.

Ingredients

• 2 tsp cooking oil
• 1/2 cup onion, diced fine
• 3 cloves garlic, pressed or minced
• 1 tbsp spice blend (see below)
• 2 tbsp tomato paste
• 1/4 cup white wine (yes, it’s boxed wine – it’s better than you think)
• 2 chipotle peppers in adobo sauce, minced fine
• 15 oz can black beans, drained and rinsed
• 4 oz whole wheat pasta
• Greek yogurt, 2% (sour cream if you must)
• Shredded cheddar, Colby, or jack cheese

Directions

1. Sweat onions, lightly salted, over medium-low heat.
2. When onions are soft and fragrant, put well-salted water on to boil; add pasta once boiling and cook according to directions while continuing to prepare sauce.
3. Add garlic to pan and stir until fragrant.
4. Add spice blend and stir for 15 seconds.
5. Push onions and garlic to sides of pan and add tomato paste.
6. Once tomato paste is lightly browned, add white wine and deglaze pan.
7. Add chipotles and a tablespoon of adobo sauce.
8. Add 2/3 cup of pasta water to sauce (add more water if you prefer a thinner sauce).
9. Add chipotles and a tablespoon of adobo sauce.
10. Add beans, raise heat to medium, and let simmer until pasta is done.
11. Blend bean mixture until smooth.

Serve over pasta. Add cheese while hot enough to melt it. Serve with yogurt on the side. Garnish with anything that seems good – jalapenos, chopped green or white onions, tomatoes – anything that’s good on a taco will work here. Serves two.

Spice Blend

• 3 parts ground cumin
• 3 parts paprika
• 3 parts chili powder
• 1 part black pepper
• 1 part onion powder
• 1 part garlic powder
• 1/4 part ground cayenne pepper

You see, you can’t make a real decision to skip 35 years’ of lattes. Rather, you have to make 9,100 separate decisions to skip a latte over the course of those 35 years. And when you’re making that decision tomorrow morning, you won’t be deciding between having $95,000 in 35 years or having nothing. You’ll be deciding between having $95,000 in 35 years or having $20 less than that. Because that’s how much the single decision to have a latte instead of investing $5 will cost you: $20, 35 years from now. In economic terms, the marginal cost at retirement of buying a single latte now is $20 or less. And $20, 35 years from now is simply not very motivating to most people.

This realization crystalized for me what I consider to be the central problem of personal financial planning: success or failure depends on the cumulative effect of thousands of decisions, most with a tiny individual effect on the outcome. This is the first in a series of articles that will describe a system of personal financial management aimed at increasing the effectiveness of motivation at the margin. The first goal is to increase your awareness of the effect of each individual financial decision you make. In effect, you will learn how to create a personalized set of skip-the-latte techniques. This involves choosing the proper measuring stick, such as money saved at retirement or time until you are debt free, and knowing how to judge individual financial decisions against that measuring stick.

But knowing is only half the battle. The second goal is to set up your finances so that you have fewer decisions to make that will only have small, far-future marginal effects. Rather, you will feel small effects before your next paycheck. When you walk by that Starbucks on the way to work, you’ll know that if you do buy a latte, you can’t grab a beer at the next happy hour. Of course, you could decide to do both anyway. That’s why you’ll structure your finances so that you’re not deciding to spend an extra $5 from your wallet or put an extra $5 on your credit card. To buy both the latte and the beer, you’ll have to decide either to spend $5 less on something else that week or take money out of savings. If you’re like me, you’ll need less motivation to resist raiding your savings.

The key to making this work is a financial management system that makes it easier to save than overspend. This provides more than just a secure retirement. It also allows you to enjoy how you spend money now. Rather than guessing if you can afford a vacation or a new car, you’ll know. If you’re still interested, start to gather the latest statement for each of your assets (such as savings, mutual funds, stocks, bonds, retirement funds) and debts (such as credit cards, student loans, mortgage, car loans). The next article will describe how to calculate and track your net worth, the first step to increasing the visibility of the effects of your financial decisions.
]]> http://www.princeclan.org/motivation-at-the-margins/feed/ 0 http://www.princeclan.org/welcome-to-the-new-prince-clan/ http://www.princeclan.org/welcome-to-the-new-prince-clan/#comments Sat, 23 Jul 2011 03:29:33 +0000 rjp http://www.princeclan.org/?p=274 Continue reading →]]> Welcome to my new blog. You should visit here if you want to subject yourself to my thoughts on the legal system, personal finance, cooking, and anything else that strikes my fancy. For now, the site contains the recipes from the old Prince Clan Recipe site and not much else. You can find recipes using the search box in the upper right corner or the list of categories in the sidebar on the right side of the home page.

Ingredients

• 4 Tbsp. olive oil
• 1 Tbsp. butter, room temperature
• 4 cloves garlic, minced
• 1 large Vidalia onion, diced
• 3 shallots, diced
• 1 large bulb fennel, shaved
• 1 red bell pepper, diced
• 28 oz. diced tomatoes
• 6 oz. tomato paste
• 1/4 tsp red pepper flakes
• 1 Tbsp. fennel seeds, toasted
• 1 tsp. dried oregano (or dried Italian seasoning)
• salt
• black pepper
• 1 bay leaf
• 2 cups clam juice
• 4 cups water
• 2 cups white wine
• 2 Tbsp. fresh basil leaves
• 2 Tbsp. fresh flat-leaf parsley leaves
• 2 Tbsp. fresh tarragon leaves
• 1/2 pound hot andouille sausage, peeled and sliced (omit for Fridays in Lent, double pepper flakes)
• 1/2 pound sea scallops, salted and peppered
• 1/2 pound shrimp, peeled and deveined
• 1/2 pound halibut, hake, or other firm, white fish
• 1/2 pound jumbo lump crab meat

Directions

1. Heat 1 tbsp olive oil in large medium-high pan
2. Add garlic, brown for 20 seconds
3. Remove garlic and place in large stockpot
4. Reduce pan to medium and sweat onion, shallots, fennel, and peppers until tender and onions are translucent (in batches if needed), using 2 tbsp olive oil and 2 large pinches of salt
5. Add cooked vegetables, tomatoes (including liquid from can), fennel seeds, bay leaf, oregano, pepper flakes to stockpot along with clam juice and water
6. Brown sausage slices over medium-high heat
7. Set sausage aside
8. Deglaze pan with half-cup wine and add liquid to stockpot
9. Add 1 Tbsp. oil and butter to pan and spread evenly
10. Just as butter starts to smoke, add scallops
11. Wait 90 seconds and flip. DON'T TOUCH BEFORE THEN
12. Cook another 90 seconds, maybe a few seconds more if pan has cooled down
13. Scallops should have crust of sear on each side that does not extend down vertical portions
14. Reduce heat to medium and set scallops aside in refrigerator on ice
15. Deglaze pan with 1/2 cup wine and add to stockpot
16. Add tomato paste to pan and cook over medium, stirring constantly, until paste turns slightly brown – about 2-4 minutes
17. Deglaze pan with 1/2 cup wine and add to stockpot, stirring well
18. Add remaining cup of wine to stockpot and bring to rolling boil to reduce liquid by about half
19. Add sausage to stockpot
20. Cover and reduce to low simmer for 1 hour
21. Add fresh herbs, fish, crab, and shrimp
22. Cook until fish and shrimp are done, stirring GENTLY about 5 minutes
23. Add scallops and bring back to low simmer
24. Serve in large flat bowls with crostini

This recipe was submitted by rjp on June 14, 2007.

Ingredients

• tomato chunks
• cucumber chunks
• diced onion (optional)
• chunks of feta cheese
• red wine vinegar
• salt and pepper.

Directions

1. Toss together

This recipe was submitted by Kwsni on April 14, 2005.

I made three batches total – a double batch for the 14″ tier and a single batch divided between the 10″ and 6″ tiers. But they were pretty short – you could probably pour a whole batch into a 10″ (3″ high) pan without it overflowing. Be sure to do the banging on the counter bit – if you don’t get out all the air bubbles the cake will crack.

Ingredients

• 8 oz Nilla Wafers
• 1/2 c (one stick) butter
• 2 T sugar
• ***
• 2 1/2 lb cream cheese, softened
• 1/8 tsp. salt
• 1 3/4 c sugar
• 3 T all-purpose flour
• 2 tsp. fresh squeezed lemon juice
• 1 tsp. vanilla extract (we had the really good stuff that a friend bought in Mexico)
• 1/2 cup heavy cream
• 2 large egg yolks
• 6 large eggs
• ***
• 8 oz cream cheese, softened
• 1/2 c butter, softened
• 1 tsp vanilla
• 1 lb powdered sugar

Directions

1. Preheat oven to 325
2. Process Nilla Wafers to fine crumbs using blender, food processor, or fingers
3. Mix in the 2 T sugar
4. Melt the butter and stir it into the crumb mixture
5. Press the mixture into the bottom of a Springform or loose-bottom pan
6. Bake at 325 for 12 minutes
7. Allow to cool
8. Preheat the oven to 500
9. Beat the cream cheese until smooth (works best if it’s at room temp)
10. Mix the salt into the cream cheese
11. Add the sugar and flour slowly, while beating the mixture
12. Add the lemon juice, vanilla, and cream. Keep beating
13. Add the egg yolks and eggs
14. Keep beating until perfectly smooth
15. Pour into pan on top of pre-baked crust
16. Lift the pan about five inches and slam it straight down onto the counter
17. Repeat the previous step until no further air bubbles come to the surface
18. Bake at 500 for 10-12 minutes (top should be golden brown)
19. Reduce heat to 200
20. Bake at 200 for 1 hour 40 minutes (check halfway, if top is getting too dark, cover with aluminum foil)
21. Check internal temp – remove from oven when it equals 150 degrees
22. Cover with large bowl and towel for several hours to slow cooling.
23. After room temp is reached, refrigerate
24. Frosting:
25. Beat together cream cheese, butter and vanilla
26. Add powdered sugar slowly and mix well
27. Frost cake

This recipe was submitted by dkw on April 18, 2005.

Of course, it could be made non dairy by leaving out the sour cream (and optional butter)and I think it would still work. If you were to do this I would cut down the heat in the relish, as the cream acts to tone this down at the end.

This is not as much work as it seems – while you need to prepare some stuff ahead of time (the marinade, the relish) it’s a perfect recipe if you’re going to home for an afternoon doing other things anyway. Also, the relish will keep in the fridge for at least a week, so you can always make extra and serve with other dishes.

These quantities serve 2.

Ingredients

• 2 porterhouse or other cuts of steak. Note – don’t use anything too fancy here. The citrus marinade acts to soften the steak before cooking, so a good eye fillet would be wasted on this recipe.
• 2 oranges.
• 1 lemon or two limes.
• 2 cloves of garlic.
• Olive oil.
• 1 sweet potato.
• 3 or 4 tomatoes (if not in season, use 1 can tinned)
• 1 red onion.
• Half a red capsicum.
• 1 red chili (more if you like it spicy)
• 1 tbsp mustard seeds.
• 2 tsp sugar.
• 1/4 cup white vinegar / cider vinegar.
• Sour cream.
• Pepper and salt.
• Butter (optional).

Directions

1. Marinade.
2. Juice oranges and lemon (or lime).
3. Crush and finely chop cloves of garlic.
4. Combine juice and garlic with 2 tsp lemon (or lime) zest, freshly ground pepper and enough olive oil to make enough marinade for your two steaks.
5. Put steaks in marinade and marinate for at least 2 hours, ideally 4 or 5. Turn once during marinating.
6. Relish.
7. Dice onion. Roughly dice tomato and capsicum. Slice chili (deseeded if you wish).
8. Gently fry onion in a little olive oil until softened.
9. Add chili and mustard seeds and cook for a further 5 minutes or until very aromatic.
10. Add capsicum and tomato and stir to distribute through evenly.
11. Add sugar and 1 tbsp salt.
12. Add vinegar to the mix – at this stage, the liquid should almost cover all the vegetables. Add a little water or reserved tomato juice from tin (if using) if necessary.
13. Bring to the simmer and then let it simmer, covered for half an hour.
14. Uncover and let simmer until volume is reduced and the relish has thickened.
15. Have a taste – it should be spicy, sweet and tangy. Adjust seasoning if necessary.
16. Let cool until you are ready to assemble dinner.
17. Sweet potato.
18. Peel sweet potato and cut into thick slices.
19. Place on a baking tray with a drizzle of olive oil, and if you want to be decadent dot with butter.
20. Season with freshly ground black pepper and salt.
21. Put into oven heated to 180 C (350 F) and roast until soft (about 1 hr depending on how thick your slices are).
22. Finally- assembly!
23. Remove steaks from marinade and cook on a grill pan (or flat fry pan). Because they have been in the citrus marinade they are already pre-cooked, so they basically need a good sear on each side to colour it up (nice and brown) and to warm through to the middle.
24. While steaks are cooking reheat relish on stovetop.
25. To assemble, place sweet potato in a little overlapping pile on plate. Place steak on top, then top with a good dollop of the relish. Add a smaller dollop of sour cream on top.
26. And serve!

This recipe was submitted by Imogen on July 5, 2005.

Many thanks to Joe Fiorito's _Comfort Me With Apples_ for the recipe. He credits Marion Cunningham's edition of _The Fanny Farmer Baking Book_ for the revolutionary step of starting the popovers in a cold oven. I would agree that this change makes breakfast-in-bed popovers much more feasible.

[And a woman who will here go unnamed has found that one can measure the flour in the wineglass, dump it into a bowl, then measure the milk, dump it into the bowl, and then microwave a chunk of butter in the wineglass. Dump it in along with two eggs and a dash of salt, and you've just about got the easiest cleanup ever.]

Ingredients

• 2 eggs
• 1 cup milk
• 1 tablespoon melted butter
• 1 cup all-purpose flour
• 1/4 teaspoon salt

Directions

1. Lightly whisk all ingredients together to form a slightly lumpy, runny batter (do not overbeat).
2. Fill greased muffin or popover tins no more than halfway up the sides with the batter.
3. Place tin into cold oven.
4. Turn oven on to 450 degrees and wait for 15 minutes.
5. Turn oven down to 350 degrees and then wait another 15 minutes.
6. Remove from oven and serve, being careful of the steam as you break them open.
7. Note that popovers must crisp on the outside to prevent immediate deflation. They may look ready before they really are.
8. Serves 2-4.

This recipe was submitted by ClaudiaTherese on February 17, 2005.

Ingredients

• 2 lbs. ground lamb
• 1 medium onion, diced fine
• 3 Tbs. fresh cilantro (use half amount if dried)
• 3 Tbs. fresh mint (use half amount if dried)
• 1 Tbsp. extra virgin olive oil
• 6 cloves garlic, minced
• 6 tsp.whole cumin
• 3 tsp. whole coriander
• 1 1/2 tsp. whole black pepper
• 2 tsp. salt
• 3/4 tsp. ground cayenne pepper
• Additional olive (not extra-virgin), grapeseed, or canola oil

Directions

1. Heat heavy skillet to medium.
2. Toast cumin, coriander, and pepper in pan until aromas released and coriander just starts to change color, shaking or stirring continuously.
3. Grind cumin coriander, and pepper medium-fine.
4. In large mixing bowl, thoroughly combine all ingredients except additional oil.
5. If time permits, wrap meat mixture tightly in plastic wrap and refrigerate over night on a plate.
6. Form into thin 4 oz. patties and let rest at room temperature for 15 minutes.
7. Heat heavy skillet to medium.
8. Lightly cover bottom of pan with oil and cook patties in batches of 4, about 3 minutes per side until internal temperature of 135-140 F is reached.

This recipe was submitted by rjp on June 23, 2006.