My Net Worth

Bank of America's My Portfolio is an excellent tool to safely keep track of net worth for individual users like me. You have access to it if you own a checking account with this bank. You can add all your accounts - credit cards, investments accounts, loan accounts, etc. It can even keep track of your rewards accounts, e.g., airline miles, credit card points, and so on. In the end you get an overview of your net worth, and it tells you how much you have gained or lost since the beginning of the month.

As you can see my net worth, as of today, is just over 66K. Much is this is not really liquid. As you can see from the following snapshot from my portfolio, most of the assets are the house (even with its depleted value), and the retirement account -- both of which I cannot really cash without losing a lot of money. If I wanted to sell the house, firstly there is no guarantee that I can fetch the real worth of the house in this market, secondly I will end up losing a good 20-25K in selling the house. If I wanted to cash in on the retirement account, I will end up paying a substantial amount in taxes. So, not much of the net worth is really liquidable.

The house value is a bit of a relief. As I said in my last post, I bought this house almost at the peak of the housing boom in March 2006, for 506K. Today, even if I believe the value shown on Bank of America's my portfolio (BoA gets the values from zillow.com's so-called "zestimate"), the house has lost about 20% of its value, which is more than my own money I had put into the house. That is all of the money I put into the house is down the drain.

Still, if I look at the chart, it seems the house value has just moved up after hitting a bottom last month. There was a free fall lasting well over two years before that. Does this indicate a slowing down of the recession? I don't know, but I hope the house prices start going up.

At current prices, it has been difficult for me to get even my mortgage refinanced. As you can see, my two mortgages add up to about $438K, which is well over the house value of $409K. At 5.75% per annum, I am paying well over the current market rate. A reduction of even .75% would shave off a good $3000 off my annual interest payments, which would mean a reduction of $250 from my monthly payment. Then only saving grace is that I am expecting some relief in the property tax payments. I am currently paying close to $8000 in annual property taxes. Hopefully the new tax bill will be lower, although it will take time working its way into the escrow.

My Financial Portfolio and Goals

OK, ok, I confess. I have been one of the persons who bought a house at the peak of prices, and are now under water. Still, I think I am better than many Americans, who are not able to pay their mortgage. Fortunately, I have a job, and as long as I have it, I am going to slowly, but steadily bring my debt down.

I was making only $65,000 a year, had a single income, when I bought this new house that cost me $506,000. Actually, that is only the amount of its sales price. Considering closing costs, I paid well over $520K for it, exactly three years ago. Wasn't it crazy of me to buy the house at that time? Yes, it was. I have my excuses. Oh, it was the wife who wanted a bigger house, just because she had to be living in a house bigger and better than her friends did. But, after all, I take full responsibility for the decision.

After that it has been a continuous struggle to reduce my debt-to-income ratio. Trying to make a few more dollars every month, and trying to reduce the bills by a few dollars every month.

In 2006, with a 100% loan, my mortgage payment was 4,000 dollars a month. And I was only bringing home 3,200 over 2 pay periods (4 weeks) after deductions of taxes, 401k, insurance payments etc. So, my mortgage was 125% of my income. Today 3 years later, with some increase in my salary (now I make a little more than 90K a year - bringing home 4,500 per 4 weeks), and a couple of mortgage refinances (now I pay 3500 for mortgage), the ratio is 78%. Good progress, I would say -- but nowhere near an ideal value. My target is to make this ratio below 50% over the next year or so. How am I going to do it? At this time, I have some ideas, but not a lot. This blog is going to track my journey towards my goal. I am going to share how I am shaving off dollars from my expenses, and adding a few to my income. If you are reading this, I would welcome any suggestions, comments, etc.

Do come back. I shall be posting all details here. Exact numbers. How much I make, how I make it. If some of you guys out there are on your own similar journeys, do share your experiences.