bennybox

A bad way to think about your finances would be in terms of cash flow. Whether it’s personal finance of business finance, you cannot simply look at your bank account and determine whether you’re rich or poor.

Up until a few weeks ago, I used to think in terms of cash. I made a meticulous log of my cash inflows and outflows and even made fancy graphs forecasting my cash into 2010. As I started to read more and more about personal finance, I started to realize that cash is a useless metric of wealth. Enter Net Worth.

I was first introduced to tracking my net worth from networthiq.com, a social website for tracking net worth. It’s a fun site, because you can enter your finance details and compare against other members in your age bracket, industry or pay range. The site taught me what I should be entering on the ‘Assets’ line and what goes on the ‘Liabilities’ line. It’s really obvious, but for some reason I never thought about it in those terms. To me, cash was king.

It took less than half an hour to enter in my monthly assets and liabilities for the 15 months since I started work. I started my job with $47,000 in student and car loans, and my only asset was my brand new car (instantly depreciated 20%) and $565 in my bank account.

Since then, I’ve been aggressive in paying down my loans, and putting away money into savings. I’ve dropped my liabilities almost 40% in those 15 months, and my assets include half car assets and half liquid assets. And sometime in April, I achieved positive net worth!

Still, although the numbers continue to grow, it does so very slowly. And my spending this summer hasn’t helped much. But I’ll continue to truck on. I like the idea of tracking net worth. I spent way to long splitting up all my spending each month, and it doesn’t tell me much other than how much I’ve spent on gas each month. And I’m going to let Quicken handle that for me now.

Assets include: Car, cash, RRSPs, stocks, savings account, real estate, loans to family.
Liabilities include: Credit cards, car payments, student loans, loans from family.
Net worth is how much $ you would have if you liquified all your assets and settled all your liabilities.

Thankful aside: If it were not for student bursaries, government grants, and a small scholarship, I’d still be in the net worth hole.

For your enjoyment, a moment of Hitoshi and I at Value Village, dug out from the archives…

We’re known for our super high production values.