401-k disaster blew my net worth gains in October
I got my statement for my 401k balance and the value has gone down enough that my net worth was lower at the end of October than it was the previous month even after paying additional on my debts in October. Since I’ve made that adjustment as of October, my net worth should increase at least two of the next three months. The third month, of course, is when my next 401k statement comes. With the economy like it is, I think it’s likely to go down again—although I sincerely hope not!
If you want to see my Net Worth just look to the right hand column for the NetworthIQ box. It sums up all my debt and assets.
What is net worth?
Net worth is the difference between what you have and what you owe. Doesn’t matter if it’s money or some other thing. I’ll admit, I’m simplifying enormously here, but for the purposes of this blog, that simplification is more than adequate. If you want to get technical, net worth is your total assets minus your total liabilities, and it’s a value determined at a specific point in time. Today’s net worth isn’t likely to be the same as tomorrow’s net worth or next week’s.
Real progress is in the details
Net worth isn’t my preferred way to keep an eye on my financial health. It might be okay for someone who needs to be heavily leveraged to generate income, but with my goal of becoming debt free and living on cash, my net worth isn’t going to be the best way to gauge my progress. I have to keep an eyes on the details.
If I were to have $400,000 in assets and owe $300,000 at the end of November, my net worth would be better than it is today. However, I think I would be farther from my goal than ever because right now, I’m only $183,393 from being debt free but in November I would be $300,000 from being debt free.
How important do you think net worth is and why? I would love to know your opinion.
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