Not all pounds are equal: my net worth update

Hello, dear friends. It’s my favourite time of year. Yes, snowdrop time (they’re so pretty!) …but also net worth calculation day, hurrah!

Wait…don’t click away just yet! I promise not to bore you.

But if you really hate numbers, you have my permission to skip this post and instead check out a guest post on decluttering I wrote for the lovely Joshua Becker of Becoming Minimalist recently. There is only one fraction mentioned in the whole thing. Bonus points for finding it.

Anyway, onwards.

First a quick recap: I am flat broke, and my struggles with debt led me off down this odd path of a) trying to buy less and b) trying to get my head around personal finance (gah).

For most of my adult life, I owed more than I owned, meaning I had a negative net worth. I was worth less than nothing. (Financially, anyhow.)

That all changed in February 2015, when I recorded my first ever positive net worth: £5,600*. Small, maybe, but huge to me.

Twelve months later, it had more than doubled, which was pretty awesome. Last February, I wrote about this, also noticing how I had gone from a net worth of -£12,139 in 2010 to +£12,139 in 2016. I know, same number but positive. Weird huh?!

Now it’s February again, and time for another update.

If you’ve never worked out your net worth before, it’s dead easy.

Here’s how I do mine:

Assets

Equity in home: £16,790
Car: £1,000
Pension pots: £20,997
Savings: £0 (yeah…I know)

Liabilities

Credit card debt: £2,300
Student loan: £6,628

Add up the assets, subtract the liabilities and bingo, I’ve got my net worth.

So, time for the big reveal:

Last year’s net worth: £12,139
This year’s net worth…drumroll…: £29,859
Net worth chart
Showing off my curve

My first thought was: Wait, WHAT? I’ve doubled my net worth again? If I carry on at this rate I will soon be a gazillionaire and I can buy an island and drink mojitos all day and all night for ever and ever and ever…

…hang on. This is just because my net worth was so cack in the first place. It’s easier to turn £2 into £4 than £2m into £4m…isn’t it? I mean, I don’t know…maybe?

So what has been driving this big jump in my net worth? And will it happen every year, meaning I will in fact very soon be a gazillionaire?

Long story short, no. It seems my house was worth more than I’d thought and a revaluation has boosted my number this year by a pretty decent amount.

My current fixed-rate mortgage deal ends in a couple of months, and about a month ago, I called my mortgage provider to see if I could arrange a new deal.

As we were having a chat, he asked me if I wanted to get my home revalued.

“You haven’t had your home valued since you bought it seven years ago,” he said.

Mr Mortgage Man said there were two options: call a valuer out to the house, for a fee, or a free option which seemingly involved asking a computer program to come up with a random number.

“The free one, please!” I replied, and he tapped away for a bit before Bertha the Lovely Machine spat out a figure.

The number was 20 per cent higher than we bought our house for – HOLY MOLY!

Now, let’s just say I was a little sceptical about this figure, so I also got a second and third opinion from two sites – Property Price Advice and Zoopla – which offer free online valuations.

I’ve averaged out all three to come up with my current number, which is a little lower but still pretty good.

Of course, it’s still a massive assumption. The valuation really doesn’t mean anything at all – it’s the price it sells for that would ever really matter.

But in the end, I’ve had to get over myself, call it a good enough guess for now and throw it into the pot. Although I can see why people leave their house out of the equation when they tot up their assets.

And here’s the biggest lesson I’ve learnt: not all pounds are equal.

Sounds wrong, I know, but bear with me.

A quid locked in the value of my home is not the same as a quid in my bank account. I can’t go and spend it on gin. In my case, all of my net worth is either locked away for my retirement, or locked away in my house or car.

So while the number may look healthy, my finances are anything but. I’m still in consumer debt and my emergency fund is at zero. ZERO.

I have a long way to go.

* By the way, non-UK readers, if you’re wondering how much a British pound is worth, the answer is f*** all. Thanks, Brexit.


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10 thoughts on “Not all pounds are equal: my net worth update

  1. kddomingue says:

    Lol! Seems the American dollar is worth about the same thing, lol! Anyway, congratulations on your numbers going up! Keep plugging away at it!

  2. Christine says:

    You are making really great progress! Financial goals are slow and long term, but you’re gaining a lot of ground and your new good habits will pay off for years.

    We paid off my spouse’s student loan last week, and that was the last debt we had. It’s pretty exciting

  3. Karen (Scotland) says:

    I’m curious – how come you’re not adding your mortgage debt when you do this calc? We always do (well, when I fill in the beloved Martin Lewis’s weekly survey if that’s the question posed – it’s not a calculation I do regularly! ?)
    You’re doing so well!
    Karen (Scotland)

    1. Great question. (And I love Martin Lewis…) Let’s say for the sake of argument you have a house worth £100k but you owe £70k on your mortgage. You could either write into your calculations an asset of £100k and a debt of £70k, or you could instead write in that you have £30k of equity. Both will take into account the fact you don’t own your house outright. I do the latter, but both are effectively the same. Hope that makes sense!

      1. Karen (Scotland) says:

        Gotcha. I was totally forgetting that’s what equity actually means – duh!
        I tend to write the (worst case scenario lowest) house value and mortgage debt separately so I can “see” them. I think my reasoning ties in with what you say about pounds not being equal – I’m unwilling to calculate equity until someone offers to pay what my house is supposedly worth!
        Karen (Scotland)

  4. You inspired me to go and get a free online house valuation,

    Not sure it’s helped as the answers varied by 100,000 (!!) but at least it got me thinking about mortgages and more ways to trim down money. And I think I’ll check out some local estate agents prices for a better idea of what nearby houses are really being sold for. Thanks!

  5. Karl says:

    Hi Claire
    Congratulations on your life choices. I am lucky enough to be debt free, have a big house and savings but we now yearn simplicity in our lives.
    The stuff we have is just a burden and most of the best things in life are not found through acquisition or consumption. I really hope you enjoy your journey.

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