The month of May was a complete financial whirlwind. I have to admit, I was super excited to see where things would end up. I didn’t net much when I sold my house. Even still, the financial impact was pretty big:
Okay, before I talk numbers, give me a second to squeal:
I passed $20,000 in net worth!
I achieved my goal of gaining $10,000 in net worth during 2015! Half-way through the year!
I SOLD MY HOUSE!
Alright, back to the numbers. And some questions about how selling the house really affected my net worth.
I started tracking my net worth in February 2013, and decided then to value my house at $45,000. The house actually ended up selling for $60,000. That’s a $15,000 difference! But, not so fast: By the time I paid commissions, and the Buyer’s closing costs, and all the other fees that come along with selling a house, I only made enough to cover the mortgage (~$48,200) and walked away with $2,262. So, realistically, the difference between what I actually made on the house ($48,200+$2,262) and what I valued the house at ($45,000) was only about $5,462.
Of course, since I was undervaluing the house all along, it isn’t like my net worth actually grew by that much all in one month. It gets into that weird distinction between what is and isn’t tangible when you value assets. Until you sell something, there isn’t a definitive way of knowing what it’s worth. Owning an asset isn’t the same thing as having cash.
With that in mind, I decided May was a good time to knock $2,500 off the value of my car. Is it really only worth $14,000? Well, it depends on how you sell it: According to Kelley Blue Book, my 2014 Ford Escape is worth just over $14,000 if I were to sell it to a dealer. If I sold it private party, I could probably get over $17,000. Obviously, if I was going to sell my car, I’d try to sell private party. But I don’t plan on selling my car anytime in the near future. When I bought the car, I bought with the idea of keeping it for at least 10 years. Hopefully longer. And, a year and a half in, that’s still my plan.
The only reason I even include the value of my car in my net worth calculations is because I have a loan on it. And, now that I’ve sold my house, it is the most valuable thing I own. Unlike houses though, cars lose value every year you own them. Which means, as I pay off the car loan, the value of the car will be decreasing as well. They won’t exactly balance each other out, especially now that I’m working on paying down the loan more aggressively. But, since selling the house artificially increased my net worth, I felt it was a good time to take a really big decrease on the value of the car. I was planning to update the value in June anyways, since I’m trying to make adjustments every 6 months. I just knocked it down this time around to the very lowest end of the range.
May was a great month for my finances. $5,752 in net worth growth. And things are only going to get better from here!
– Cindy W.