A surprising net worth realisation

Net Worth ScalesWhen I first started this blog, I had originally thought that I would publish our net worth every month/quarter like others seem to do. It seems like a good way to hold yourself accountable to the achievement of goals, and proves (if typing stuff into a computer is proof) that I am not a hypocrite. Not being a hypocrite in terms of finances is important to me (see my post on hypocrisy in financial advisers here), so publishing net worth would tick a box for me.

So I started preparing a post on net worth, and as I was talking about it with my wife and going through the numbers on screen she expressed some reservations about it all. What if someone realises that it’s you that’s writing this? They’ll know what we’re worth? Do you really want people that we know to know that?

So that sort of freaked me out a bit, much more than some of the other things that they might find out from this blog, like:

  1. What I think about the accounting industry and some of my peers (e.g. hypocrisy);
  2. The fact that I want to retire quite young, and therefore won’t be around at my firm for anywhere near as long as people are probably banking on;
  3. What I think about some of the people that I know (e.g. the Financial Train Wreck), as they might not see the humour in some of my posts that clearly make reference to them; and
  4. How little we spend on things (they already think we’re tight with money, but our attitudes on some things would probably blow them away).

It’s kind of irrational really – that I care more about them knowing how much we are worth than I do about the above four points.

Net worth surprise

Anyway, I’d say I need to do some more thinking about it, but something did come out of the whole exercise, and that was the realisation that our net worth is already over $500k! And has been for some time!

Now this realisation came as a surprise because whenever I had thought about net worth previously I had not considered our superannuation balances. This is basically because we can’t touch them until we are old (see here for why superannuation is no good for early retirees), but given that other bloggers (a large proportion of whom are from the US) typically include their retirement funds (e.g. 401K balances), it only seemed logical to include our superannuation balances as well.

I realise that I am in theory giving a ballpark of our net worth with this post, but since we are not breaking it down across the various investments it doesn’t feel like such an issue. Plus it’s not an exact figure.

How does this compare to other Australians?

The Australian Bureau of Statistics does a census every few years, and one question is about net worth of households

The Australian Bureau of Statistics does a census every few years, and one question is about net worth of households

According to the Australian Bureau of Statistics and their 2011-12 census, the median Australian household net worth was $434,000. Ignoring the fact that the census is three years old, it would appear as if we are doing OK in terms of net worth for a number of reasons, including:

  1. We live in a city with far cheaper housing than some of the larger cities in Australia, and haven’t seen any real growth in property values since about 2004 (which is coincidentally when we purchased our house). The median net worth would be distorted upwards due to equity that people would accumulate in Australia’s largest cities through their ever-increasing and over-inflated property markets;
  2. The census includes all households, and would therefore include many older people (e.g. in their 50s and 60s) that have had a whole working career to accumulate wealth rather than the 15 years that we have had. They would be seriously pushing up the median, especially if they bought their houses 20 years ago in Australia’s biggest cities and are worth a fortune as a result; and
  3. The census estimates that $370k of the median net worth of $434k is comprised of household assets, including the family home. So people don’t typically have any significant net worth outside of their main residence. I would also guess (but don’t know this for a fact) that people may have included things in their net worth when completing the census that aren’t valued fairly (e.g. their furniture, clothing, personal effects), thereby over-inflating their net worth further.

Where to from here?

Like many in the early retirement blogging community, we have a spreadsheet that projects our net worth out from now until the end of time.

If things play out the way that we hope they do, and unless there is a major stockmarket crash (which there very well could be), then our net worth should crack the $2m mark in the next 7 years. While you never know exactly what will happen in the future, I am hoping that retirement will then be a realistic possibility either at that time or within 1-3 years from then. While this might seem like a large net asset number compared to what others in our online community may retire on, significant slices of this pie will be made up of our house and our superannuation, neither of which we can actually live off if we retire in our early 40s.

I’d be keen to hear your thoughts on the whole net worth disclosure thing – do you think it’s a good idea? Do the benefits outweigh any potential negatives?

IA.

11 thoughts on “A surprising net worth realisation

  1. I’ve debated doing the monthly or quarterly updates but haven’t pulled the trigger. I really could care less what people think if I am not anonymous anymore. I still may do it, but in the end it’s personal preference. I have enough faith in myself to hold myself accountable to meet my goals, but if I start slacking maybe I’ll have to post it.

    • Well if you are able to hold yourself accountable then that’s one reason gone.

      It’s amazing how many people are posting up some insane levels of detail for what are really small numbers (and I mean less than $5k NW) but some people need the accountability to keep them on track. If it works then that’s great, but it isn’t necessarily interesting reading!

  2. When I first started blogging, I was excited about sharing my numbers anonymously. But as I got nearer and nearer to posting it, I decided to hold back. Maybe I would if my blog were 100% anonymous, but I share it with people I know, and it just doesn’t seem that important to me to share. Other bloggers’ networths are not that important to me either, and I tend to skim over their networth updates since it isn’t all that interesting to me. I’m more interested in people’s thoughts, systems, goals, and techniques.

    • Yeah, the net worth updates aren’t that interesting for me, especially once you have a ballpark idea of someone’s NW. Milestones are exciting in a way, but mainly because the person has achieved one of their goals and I like hearing about their thoughts and tips for others to achieve similar milestones.

  3. I have been having the same debate regarding publishing my net worth. I try to write in a manner that does not offend anyone taht I might work with or have worked with in the past, but they may not agree with my stance on some things (only natural),

    My boss (the CEO), knows about my 5-6 retirement horizion, but still thinks I won’t leave because I love what I do. I tend to keep my blogging away from 99% of people at work, but a couple of people know about it.

    • Yeah, it’s a tricky issue that’s for sure.

      I’m impressed that you have told your boss about your time frame, I wouldn’t be game enough to do that yet. Some of my fellow partners know that I will go when I have enough, but I think they think that will be in another 20 years (as opposed to less than 10 years if things work out the way I hope they do).

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  6. Hey IA – I’ve thought publishing net worth reports online too but haven’t pulled the trigger yet.
    What I might end up doing though, is to report progress to FI, as a percentage. Since I know how every month gets me closer to FI, I also know the percentage points of “FI achieved”. This would communicate a similar message, without revealing your actual worth.
    Anyway, those are my 2 cents. Congrats on reaching half a million !

    • Yeah, the percentage method is a good alternative I think, but it’s a bit late for me given that my blog already states my target net worth! If I was starting out again then I would probably consider that approach!

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