Wednesday, December 13, 2006

Networth IQ

I found a website NetworthIQ that allows you to record and compare your networth to others by age, occupation, education, income, etc. You can see where I stand in this chart. I am about average for my income and education level but well below average for age. Looks like I have a lot of work to do. You can see my profile by clicking on the NetworthIQ button on the sidebar or click here. When I post my Dec 2006 results it will swing upward again.

My networth showed a decrease this year due to a payout from my 401k to my ex-wife. I had held my level of debt relatively steady for several years but it has mushroomed since my divorce. Part of that was legal debts but the two big changes have been due to purchases in real estate. After the divorce I lived in an apartment for a while but felt I was throwing away my money and since I didn't have head of household status or mortgage interest deductions my taxes were very high.

So I bought a couple of real estate courses and after months of searching found a house that had been for sale for 6 months. The original owner had transferred and sold his house to a relocation company. It was the middle of winter and they had not received any offers on the house. So I made an outrageously low offer and they countered. We ended up about $33k below the price the relo company had paid for it. The appraiser still thought it was worth the relo price, so the broker was able to get me a mortgage without paying mortgage insurance. I borrowed a 10% downpayment from my 401k and so got into the house with nothing down and instant equity position.

The large changes in debt this year was due to the purchase of a rental property which I discussed here. You can see that I am cash poor but have some paper worth. Probably not as much as a person my age should have. My immediate problem is 4 teenagers who want to go to college. Only one may be scholarship material so, you can see why I am motivated to do something besides my job.
Based on financial calculators, such as this one at dinkytown, I need to save 10% of my income in order to survive retirement. I can barely save 5% now and this leaves nothing to save towards a rainy day fund nor college tuition's. I have never lived in an area that benefited from real estate booms in the 80's and 00's, so before this year my net worth gain from owning real estate has been about $20k. I have never lived an extravagant lifestyle, owning old cars, old houses and old furniture. I've often used funds from my 401k to invest in business, real estate or adoptions, so it never grew to the level it should have.
Assuming I can continue to work at my present job until I am 66 and had no college expenses, I would be OK. But in an age of uncertainty, I cannot count on my company for another 13 years. Plus, no doubt I would accrue a lot of debt as my 4 children went through college that could delay my retirement further.
So, once again, I feel forced to go all out to build financial security outside my job

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