net worth

My Net Worth after a Terrible Financial Year

In 2007, I started a New Year ritual of calculating my net worth. Today is year 13 of that ritual, and I remain astounded by the growth of my net worth. In fact, after the year I’ve had, I’m amazed. You see, my income for the year was negligible, and I spent plenty of money building my business ($51,750 to be exact). It’s been a scary year on the financial front. But my net worth, buoyed by a strong stock market, tells another story. Here’s how 2019 shook out.

The Magic of Compound Interest

Compound interest is the eighth wonder of the world. He who understands it, earns it . . . he who doesn’t . . . pays it.

Albert Einstein

Money makes money. If you spend your money, it’s gone for good. If you save and invest, over time your money grows. You earn interest on your savings, and then the interest earns interest. The total is compounded over time. And gosh, it is magical.

Net Worth over Time

Net Worth = Assets – Liabilities

Net worth is simple to calculate. Just subtract your liabilities (the things that you owe) from your assets (the things that you own). Net worth provides a true measure of wealth, as it is sensitive to both your income and your expenses. For example, your income might suggest you are wealthy. But if you spend as much, or even more than you earn, your net worth will tell the truth – you aren’t wealthy at all!

Being debt-free, which drops your liabilities to zero, can have a huge impact on net worth. In 2014, I paid off my mortgage early (it took 13 years). And other than a 2016 car loan that I paid off in a matter of months, I have been debt-free. Consequently, I had a lot more money to invest, which boosted my assets even further. Here’s my net worth over time.

A Closer Look at the Last 2 Years

My January 2018 net worth is a transition marker for me – it was my last full year as a salaried employee. Since then, I have been building financial freedom courses (Early Exit Academy) and launching a financial coaching business (DrBrendaMoneyCoach). While I’ve done a great job of creating worthy products, I haven’t yet figured out how to sell them. So I’ve been covering both business and personal expenses from my non-retirement investments since my career ended in April 2018. And it’s an ugly scene – I have not yet had a profitable month!

Here’s where my amazement comes in. In January 2018, my net worth was $1,076,023. Today, two years later, my net worth is $1,168,725 (an increase of $92,702). I’ve now burned through most of the savings and investments that I held outside of retirement, which is a very uncomfortable feeling. And while I’d like to claim that I’m a genius investor, the truth is that the stock market has been my best friend since I lost my job. Had the market declined, I would have likely re-entered the traditional job market months ago.

My #1 Asset is . . .

I am in the midst of redefining my life, and it has taught me one important lesson. My most important asset is . . . ME! I have become a student of life, investing in new skills and knowledge so that I can fulfill my mission – helping others reach financial freedom. Like most investments, there’s not an immediate payoff. But I’m confident that I’ll be able to make the business profitable in 2020. Much of the hard work is behind me, and I can begin to build a clientele and produce results.

If you don’t like my philosophical approach, then here’s the financial truth. My two biggest assets are:

  • Retirement accounts. I have contributed to my employer-sponsored retirement accounts every year that I’ve earned a salary. Until a few weeks ago, I never tapped into those funds. In January 2004, the value of my retirement account hit the magic six-figure mark ($100,698). Today it is valued at $788,183.
  • House. The purchase price of my house in 2001 was $162,000. In two weeks, the house will go up for a sale with a listing price of $310,000. Since I own the house outright, all the proceeds from the sale will go directly into savings and investments.

What’s in Store for 2020?

Yesterday, I asked my sisters to grade how 2019 went for them. You see, I had given myself a “D-” (I’m a tough grader). And that was based on poor business outcomes, my weight, and overall happiness level. Then last night, I gave it some additional thought and pushed myself up to a “B.” Why the big jump? Well, awareness and acknowledgement of the problem is the key to change. And I’m there!

Getting Help for the Business

My business is an octopus, with tentacles (products) moving in random and sometimes opposing directions. I have not yet found my audience and delivered the message that will convert them into customers. Maybe even more importantly, I’ve struggled as a solo entrepreneur. I don’t have a business or life partner to share my ideas and plans, so it’s been a lonely undertaking. This year I am taking two steps that will help me on the business front:

  • Participating in a group coaching program. I will continue my participation in the Lifestyle Builders Incubator Program, which includes resources and advice designed to help me sell my courses at the Early Exit Academy. And I’ll invest more time on establishing and accomplishing business goals and using the Profit First system (affiliate link).
  • Work with a business coach. I will work one-on-one with a local business coach, who will help me build my brand and sell my services and products. My hope is that she will help me tame the octopus!

Prioritizing Health and Happiness

The last six months of 2019 were particularly challenging. I succumbed to the loneliness of working from an empty house (unless you count the cats) day after day. My reprieve became dining out at local restaurants and spending too many evenings consuming beer or wine. It’s no wonder that my weight shot up and my happiness plummeted.

I spent a lot of time trying to find a way out of my predicament, and I came to the realization that my house, once a refuge and source of pride, had begun to feel like a prison. The house, and especially the yard, is too much work for me. Around the same time, I felt the impact of losing two big perks from my previous career – travel and meeting interesting people. So I came up with a solution: trade in the house for an RV!

  • Sell the House. The house makes up a good portion of my net worth, but it’s an asset that has no value until it sells. At this point in my life, I prefer to turn it into cash that I can save, invest, and eventually spend.
  • Transition to an RV Lifestyle. While I wasn’t eager to pull money out of my Roth IRA to purchase an RV, the time has come to follow my dreams. So I cashed in some of my Roth IRA to purchase my dream RV. (Even though I pulled out $60,000, the value of my Roth IRA went from $188,790 in January 2019 to $172,936 today, or a decline of just $15,845).

The sale of my house affords me a huge cushion. It gives me more time for my business to grow and it frees up money that I can invest. But more so, the prospect of working and living in an RV as I (and the cats) travel the country excites me! I’m returning to the younger Brenda, the one who loved adventures and took risks. This decision hasn’t been made lightly, and I know my RV lifestyle won’t be a bed of roses. But my heart and soul are happy again!

Would you like a financial coach to guide you on your path to financial security and even freedom? Visit DrBrendaMoneyCoach.com to see how we can work together.

About the Author Brenda

Dr. Brenda is a financial coach, educator, researcher, and sociologist. In addition to blogging at The Five Journeys, she is the founder of the Gutsy Women Club. Her passion is guiding people on their journey to financial freedom through coaching at DrBrendaMoneyCoach and online courses at DreamBigMoneyAcademy.com.

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