its hard to get back to zero

January 2nd, 2008

It’s Hard to Get Back to Zero

I didn’t really know what “net worth” meant, or how to calculate it, until we bought a house. On one of the sheets of our approved mortgage application, there was a calculation of our net worth done by the bank. It listed our assets on one side and our liabilities on the other. The bank determined we had a net worth of about $450. Which was better than I expected when I started looking at the sheet – I expected to have a negative net worth and I felt rather embarrassed by the entire idea.

But then I realized why our net worth was positive. The bank made an arbitrary assignment of $25,000 as the value of our personal possessions. Well, first off, they’d obviously never been inside our apartment to see what our “possessions” amounted to. I have no idea of the actual resale value of our motley collection of stuff, but I am guessing that I couldn’t sell all of it for a tenth of $25,000. Even the replacement value of our belongings (minus the cars, which were listed separately, and the house, which we didn’t own yet) is nowhere near $25,000, I think.

So, basically, right at that moment, I decided in my head that our actual net worth was probably about $ -24,000. And also at that moment, I decided that the next time I figured out our net worth, it would be because it was a positive number and would make me feel empowered instead of discouraged, and that it would serve a purpose in my life towards improving our financial future.

The road to a net worth of zero still stretches out before us. We bought our house with no money down, and housing values keep declining so I am pretty sure we owe more on it than it is currently worth. Even ignoring that, the amount of debt we currently carry is most likely more than the value of our assets. As our debt decreases and our savings and retirement accounts increase, that is turning around, but I know with the rough numbers in my head for our retirement accounts, savings, and the value of our cars that we’re not there yet.

At this point in our lives, I am also determined to focus on one number and one number only – debt. Keeping my brain focused just on the debt number and working on decreasing it bit by bit keeps me in line and moving forward. I don’t want to cloud my head with my net worth and focusing on increasing it. For me, right now, that number doesn’t mean a whole lot to me. If I’d bother to calculate it, it might, but I honestly don’t see the point right now, since the number that I’m focused on changing is the debt one no matter what the other numbers in our finances say.

Which is why I don’t calculate my net worth. I think someday I will, maybe even this year. But for now, I find the idea more discouraging than motivating, and I’m focused solely on motivation.

Other bloggers takes on net worth:

This post is part of a Net Worth project that the M-Network is participating in along with a number of other personal finance bloggers. If you want to write a post about your net worth and let me know about it either by linking to mine, leaving a link in the comments, or contacting me, I will be happy to link to it here. Thanks!

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26 Responses to “It’s Hard to Get Back to Zero”

  1. You are doing the right thing in marching toward zero. Reaching that goal is the best feeling in the world; until you realize that compound interest will start working in your favor and you can watch your numbers grow upward! Congratulations on your current progress and I wish you and yours the best in 2008! :)

  2. Hi Paid Twice,
    I’m also working my way towards zero. I think I can get there in 3-5 years. You should post on your networth more often. I visit a lot of pf websites, and it’s a little discouraging to see people posting numbers like 56K net worth. I’d like to get there too, but right now my net worth is more like -56K.

  3. OldAndBroke Says:

    January 2nd, 2008 at 9:52 am

    I’m in the same boat as you. I have so much debt that I would rather just focus on paying down the debt and not worry about net worth. It way too depressing to think about.

  4. You have a great site, and great advice. I had no idea what net worth was until recently. My latest blog is 7 Financial Challenges for 2008. Check it out here:

    Also, would you like to do a link exchange?

    All the best for ’08!

  5. Keep focusing on that debt, and you’ll have a positive net worth before you know it!

  6. Don’t get discourage. I can be encouraging to see you debt whittle down to zero. Keep up the good work and best of luck with 2008.

  7. How do you actually calculate your net worth? Do you estimate how much you think your house would sell for when doing that part? I never had a clear understanding of it, so I don’t calculate it.

  8. I’m with you on this one. I JUST started getting down and dirty to paying off my family’s debt as my 2008 New Year’s resolution. I can’t even think about net worth at this point. It is kind of discouraging to read up on sites that track their progress on net worth and see their current number in excess of $300K. But I can’t even go there. I’d be happy enough with a net worth of zero right now.


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