Use access key #2 to skip to page content.

DLester78 (68.94)

Personal Balance Sheets and Net Worth



November 29, 2012 – Comments (2)

This is my first blog.  I am a licensed financial advisor with a major broker/dealer and due to the regulations that they place on me I can't advertise myself or my company.  I have been a fool since 2003 and my focus with my clients is wealth management.

If you have never acted in an advisory capacity it is an interesting and sometimes frustrating experience.  This is mainly due to the emotion that people bring to the table before, during and after they make investments, or insurance decisions.  The point of this post though is to illustrate the need to focus on building family balance sheet.  I believe that building your net-worth at 15% year over year is the true method of accumulating wealth for most people.

Last week I had a client who is 78, female, and a widow.  She is sharp as a tack, an avid investor and likes to talk through her ideas with someone who can give her perspective and play devil's advocate.  She is takes criticism well, asks for input but ultimately makes her own investment decisions.  While many people feel that you should dial back your risk as you get older she seems to be staying the course.  We met 5 years ago through a referral, I spoke to her about making a commitment to grow her net-worth at a rate of 15% per year.  At the time she was educating herself on fundamental and technical investment analysis.   I encouraged her to do this but I also asked her to work with my emoney software so that she had a daily updated networth statement she could use to keep her balance sheet in front of her.  We have had some ups and downs since we met but she has successfully grown her net-worth at an average rate of 9.6%.  That's with the downturn of 2008 and some risky stock bets in solar that I couldn't talk her out of.  When we met last week she told me that everyday she checks her balance sheet and it helps her focus on whats important... Her net worth.

 My wife bought me a race car driving experience this year as a present.  I am not a car guy per say but I love to drive fast.  I got to drive a stock car after a dangerously short training/orientation meeting.  There was a guy from the school with me.  He was 22, aggressive, motivated and clueless about most things money.  We talked, spent the afternoon together and I told him about creating net-worth. I compared people with net worth to people who make a high income.  Long story short the kid saves 15% of his income today into various buckets of money.  In February it will be a year since we started working together.  He went from having $478 in his bank account, to $3800 in his Roth IRA, $3000 in a savings account, and $600 in a vanguard index etf.  He just turned 23 and will be buying a house this year through the FHA program.  He lives with two buddies who plan on renting from him.  This will pay the mortgage almost entirely.  This "kid" has more net-worth than many people in their 30's who have a higher income, but terrible debt and spending habits.

I love the fool website.  The focus on investment analysis is very important to a guy in my business.  I wanted to pitch in to the conversation just a bit and bring the focus to whats really important... Will the investment that I make today help me grow my net-worth by 15% per year?  If it does, then do it.  I am not saying it has to grow that much per year, I am merely saying, if its to risky or, there is no return potential then its often not worth the cost/headache/emotional price.  Pay off debt, build your cash and investment portfolio, and most of all pay yourself first.



2 Comments – Post Your Own

#1) On November 29, 2012 at 11:57 AM, ContraryDude (40.76) wrote:

Awesome post!  Thanks for your contribution and for bringing up the notion of personal net worth. Excellent suggestions and advice! 

Did you enjoy the race car experience? That's a great gift idea.

Report this comment
#2) On December 03, 2012 at 12:04 PM, DLester78 (68.94) wrote:

It was pretty amazing.  Those cars are unbelievable.  Can't say I would pay to do it again but its kinda like sky diving. I did it once. Now I am on to the next thing.

Report this comment