Sunday, July 09, 2006

My net worth is finally on the rise

I haven't had the courage to calculate or estimate or even contemplate my net worth since the end of 2000, but now that I have my bankruptcy behind me and a steady (so far) full-time job, it once again feels "safe" to see where I really stand.

Unfortunately, even with a bankruptcy discharge my net worth has been quite negative since back taxes do not get discharged. Ouch.

Although I could channel all of my savings budget to pay off those back taxes ASAP, I have decided to stash away a significant rainy day fund to cover contingencies and any disruption of income and to get my retirement savings plan and budget back on track as rapidly as possible. As a result, it may be another two or three years before I beat those back taxes back down to zero. But, the comfort and security of having that rainy-day fund and a renewed retirement nest egg feels worth the interest payments on the back taxes. I will in fact endeavor to accelerate those back tax payments whenever I have a little extra money, but that's not my top priority.

Only last week did I finally have the courage to put together a spreadsheet with those tax liabilities, my nascent savings and investments, and the rate at which my savings and investments are growing and the rate my back taxes are being paid down.

I was actually pleasantly surprised at the amount of money I've already been able to sock away. The ratio of my assets to liabilities is already up to 44%. There were some factors that pushed my savings up sharply in the past month that won't be repeated, but that is still a great start.

I even calculated the time to break even, when my assests would once again equal my liabilities, thinking it might take eighteen months or more, but it in fact is less than five months. So, by December I will finally be back in the black for the first time since 2002. And this is all simply by "staying the course", simply sticking with my current budget. Of course there may be unexpected setbacks or stock market declines and I haven't fully budgeted any travel in the Fall, but at least it feels as if I am finally back on the right track.

This Friday my Employee Stock Purchase Plan (ESPP) kicks in for the July to September quarter. I signed up for the maximum participation, which is 15% of my base salary. That will net me company stock (Microsoft) at a 10% discount to the market price at the end of the quarter. I'm already getting 15% of my base pay deducted for my Roth 401(k) retirement plan which is matched by other 3% by my employer. My spreadsheet doesn't even include that 10% discount or the 3% match, but it doesn't include the potential for any stock market declines either.

And for the record, I have virtually nothing in the way of physical assets, no home, no vacation condo, no car, no boat (or yacht, yet), etc., other than this one-year old notebook computer, two old printers, and an old Sony PDA.

-- Jack Krupansky


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