So I’ve been reading a lot of personal finance blogs recently (mainly US and Canadian ones – I’ve yet to find a decent UK one that I like to read) in an attempt to a) learn more and b) see what my budgeting blog style is. Quite a few detail their net worth and I was wondering if it’s something that is vital to keep track of.
Net worth is basically your assets (cash, investments, stocks) minus any liabilities (loans, credit cards, mortgage). It doesn’t give you a full picture on your finances but a snapshot of your financial viability. I guess it’s just like a statement of financial position (or balance sheet) for a company and gives you something to compare. Although not in depth, it does give an indicator of your financial health and it seems that with a lot of personal financial bloggers I have come across, this seems an important thing to keep track of and goal worthy (as in my goal of 2016 is to achieve a net worth of £50K).
After much reading and personal deliberation, I thought I should calculate my personal net worth. One of the questions I had was do I calculate my student loans? In the UK, due to how student loans work out and is subsidised by the government, many financial experts advise this to be the last debt that you pay. As far as I know, this debt isn’t considered when applying for a mortgage or loan as it isn’t on your credit report and if you do not earn over £17495 (Type 1 – £3000/year tuition fees) and £21,000 (Type 2 – £9000/year tuition fees), you do not pay a penny back. Obviously, this is still earning interest but it gets written off after 30 years. My student loan debt as of April 2016 (as they only send you a yearly statement and as far as I can see, I can’t get a “current” balance on my account) is £24,393 – this includes type 1 (my university loan) and type 2 (my accounting diploma).
Therefore, I have decided to be an awkward turtle (as my sister would say) and calculate both. Most American and Canadian blogs include their student loans but I believe that these work differently to ours and they have an effect on their credit reports. I think it would nice to do both as I can see where I am and also my student finance account only gets updated once a year so it can get a little demotivating for it to still sit at the same place despite the fact I’ve made contributions this year (£471 so far according to my payslips but not sure on how much interest is applied).
£19404.59 (cash, current accounts, pensions, car)
£6486.55 (house deposits, current credit card bill balances which are paid in full)
Net Worth (not including student loan): £12918.14
Net Worth (including student loan): -£11475.09 Yikes!
So, I definitely think this gives me something to work on. I’d like to be out of the negative numbers, despite paying my student loan via PAYE and not making additional payments. Maybe that’s a 2017 goal?
Until next time.. x